UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):                                     November 23, 2009
 
National American University Holdings, Inc.
 
(Exact name of registrant as specified in its charter)
 
Delaware
 
000-52919
 
83-0479936
  
 
  
   
(State or other jurisdiction of
incorporation)
 
( Commission File Number)
 
(IRS Employer
Identification No.)

5301 S. Highway 16, Suite 200
   
Rapid City, SD
 
57701
   
 
   
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code:                                       ( 605) 721-5220
 
Camden Learning Corporation
500 East Pratt Street, Suite 1200
Baltimore, MD 21202
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 

Item 1.01      Entry into a Material Definitive Agreement
 
On November 23, 2009, Camden Learning Corporation (“Camden”) and Dlorah, Inc., a South Dakota corporation (“Dlorah”) consummated the merger of Dlorah Subsidiary, Inc., a newly formed Delaware corporation and wholly-owned subsidiary of Camden (“Merger Sub”), with and into Dlorah, with Dlorah surviving as a wholly-owned subsidiary of Camden (the ‘‘Transaction’’), pursuant to the terms of an Agreement and Plan of Reorganization, dated August 7, 2009, as amended and restated in its entirety as of August 11, 2009, and as further amended by that certain Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, dated October 26, 2009, by and among Camden, Merger Sub and Dlorah (as amended, the “Merger Agreement”).  Camden, now known as National American University Holdings, Inc. (the “Company”), through its ownership and management of Dlorah, operates National American University, a for-profit university with multiple campuses in the United States, offering undergraduate and graduate programs, and also develops, leases and sells luxury condominiums, apartments and townhomes in Rapid City, South Dakota.

In connection with the approval of the Transaction, Camden’s stockholders adopted an amendment to Camden’s amended and restated certificate of incorporation (i) to change Camden’s corporate name to “National American University Holdings, Inc.”, (ii) to create a new class of Common Stock to be designated as Class A Common Stock, par value $0.0001 per share (the “Class A Stock”), (iii) to increase the authorized capital stock of Camden from 21,000,000 shares consisting of 20,000,000 shares of common stock, par value $0.0001 per share (the “Common Stock”), and 1,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”), to 51,100,000 shares, consisting of 50,000,000 shares of Common Stock, 100,000 shares of Class A Stock and 1,000,000 shares of Preferred Stock, and (iv) to remove the provisions related to Camden’s status as a blank check company, including, among other things, the classification of the board of directors, and to make Camden’s corporate existence perpetual.  Furthermore, Camden’s stockholders adopted the 2009 Stock Option and Compensation Plan (the “Incentive Plan”) pursuant to which Camden reserved 1,300,000 shares of Common Stock for issuance pursuant to the Incentive Plan.

As consideration for the Transaction, the security holders of Dlorah received: (i) 100,000 shares of Class A Stock, (ii) 2,800,000 newly issued Common Stock purchase warrants, which may be exercised on a “cashless basis” at an exercise price of $5.50 per share, and (iii) 250,000 shares of restricted Common Stock, par value $0.0001 per share (“Restricted Common Stock”), which would not be tradable until the Common Stock trades at or above $8.00 per share for 60 consecutive trading days.  The consideration for the Transaction had an approximate aggregate value of $142.7 million.

The holders of Class A Stock will be entitled to a quarterly accruing dividend equal to $0.11 per quarter (for a total of $0.44 per year) per share of the Common Stock into which such Class A Stock is convertible, paid when and if declared by the board of directors.  If a dividend is paid on the Class A Stock, there will also be a dividend paid to holders of Common Stock equal to one-fourth of the per share amount of any Class A Stock dividend paid.  The Class A Stock converts into 15,730,000 shares of Common Stock at a ratio of 157.3 shares of Common Stock for every 1 share of Class A Stock.

Pursuant to the terms of Camden’s amended and restated certificate of incorporation as in effect prior to the Transaction, public stockholders voting against the Transaction had the right to elect conversion of their shares of Common Stock into a pro rata portion of the trust fund established at the time of Camden’s initial public offering (“IPO”).  Holders of 1,877,418 shares of Common Stock elected to convert their Common Stock into their pro rata portion of the trust account, at a conversion price of $7.92 per share of Common Stock.  Cash in the amount of approximately $14,870,000 was paid to converting stockholders.

 
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In connection with the Transaction, the Company and Dlorah entered into the following agreements:
 
Common Stock Purchase Warrants .  On November 23, 2009 (the “Closing Date”), in accordance with the terms of the Merger Agreement, the Company issued Common Stock Purchase Warrants (the “Warrants”) to each of former Dlorah stockholders, H. & E. Buckingham Limited Partnership and Robert D. Buckingham Living Trust, in the amount of 2,166,360 warrant shares and 633,640 warrant shares, respectively.  The Warrants provide for the holder to subscribe for and purchase from the Company up to 2,800,000 shares of Common Stock, at a purchase price equal to the exercise price set forth in the Warrants, at any time during a two year period beginning on the Closing Date.  The Warrants are filed as exhibits 4.2 and 4.3 to this Current Report on Form 8-K.

Restricted Stock Agreements .  On the Closing Date, in accordance with the terms of the Merger Agreement, the Company entered into Restricted Stock Agreements (the “Restricted Stock Agreements”) with each of H.& E. Buckingham Limited Partnership, Robert D. Buckingham Living Trust and Camden Learning, LLC, whereby each such stockholder and the Company agreed to certain restrictions with respect to the ownership and transferability of the Common Stock they received as consideration under the Transaction (the “Shares”).  Under the Restricted Stock Agreements, each stockholder will be prohibited from selling, assigning, transferring, pledging, encumbering or otherwise disposing of the Shares, and the Shares will be subject to forfeiture, until such time as the Common Stock shall have traded at or above $8.00 per share for any sixty (60) consecutive trading day period occurring prior to November 23, 2014 (the “Restriction”).  In the event such trading price threshold is achieved, the Restriction will lapse and the Shares will no longer be subject to forfeiture.  If such trading price threshold is not achieved, the Shares will automatically be forfeited on November 23, 2014.  The Restricted Stock Agreements are filed as exhibits 10.9, 10.10 and 10.11 to this Current Report on Form 8-K.

Registration Rights Agreement .  On the Closing Date, former stockholders of Dlorah, H. & E. Buckingham Limited Partnership and Robert D. Buckingham Living Trust, entered into a registration rights agreement with the Company (the “Registration Rights Agreement”), pursuant to which the former Dlorah stockholders may, at any time on or after the effective date of the Registrant Rights Agreement, make a written demand for registration of all or part of the registrable securities, as defined in the Registration Rights Agreement, under the Securities Act (“Demand Registration”).  Within ten days of the receipt of the Demand Registration request, the Company must notify all holders of registrable securities and such holders of registrable securities are entitled to have their registrable securities included in the Demand Registration.  The Registration Rights Agreement is filed as exhibit 10.7 to this Current Report on Form 8-K.

Camden entered into a registration rights agreement with certain of its founding stockholders, as of November 29, 2007 (the “Camden Registration Rights Agreement”), which provided the founding stockholders with certain rights relating to the registration of shares of Common Stock and warrant securities held by them.

Lock Up Agreements .  On the Closing Date, each of the former stockholders of Dlorah, H. & E. Buckingham Limited Partnership and Robert D. Buckingham Living Trust, executed a lock-up agreement with the Company (the “Lock-up Agreements”).  The Lock-up Agreements provide that such stockholders may not sell, pledge, lend, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any portion of the consideration received from the Transaction, or engage in any hedging transaction with respect to the Common Stock issued to such stockholders as part of the Transaction for the period beginning with the closing date of the Transaction and ending on the date that is one hundred eighty (180) days following the closing date of the Transaction.  The Lock-up Agreements are filed as exhibits 10.5 and 10.6 to this Current Report on Form 8-K.

Employment Agreements .  Prior to the closing of the Transaction, Dlorah entered into employment agreement amendments with each of Mr. Robert D. Buckingham, the Company’s newly appointed chairman of the board of directors, and Dr. Jerry L. Gallentine, the Company’s newly appointed president and a member of the board of directors.  Dlorah also entered into an employment agreement with Dr. Ronald L. Shape, the Company’s newly appointed chief executive officer and interim chief financial officer.
 
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Mr. Buckingham’s employment agreement, as amended effective as of November 18, 2009 (the “Buckingham Employment Agreement”), has a term that will continue until his resignation or removal of his position as the chairman of the board of directors.  Under the Buckingham Employment Agreement, Mr. Buckingham is entitled to an annual base compensation of $250,000 per fiscal year, payable in twelve (12) equal monthly installments, which is subject to an annual cost of living adjustment.  In addition, the agreement provides for the payment to Mr. Buckingham of incentive compensation equal to seven percent of the net income of Dlorah for the fiscal year , as adjusted to remove certain expenses such as state and federal income taxes, dividends, director fees, damages from litigation and extraordinary items.  Notwithstanding these provisions, total compensation in any one fiscal year may not exceed the sum of One Million and 00/100 Dollars ($1,000,000.00).  Unless renewed or revised, the incentive compensation will expire as of December 31, 2011 and Mr. Buckingham’s annual salary will continue until his resignation or removal.  The Buckingham Employment Agreement provides for the continued payment of 12 months compensation in the event Mr. Buckingham terminates the Buckingham Employment Agreement, dies or becomes disabled.  The Buckingham Employment Agreement is filed as exhibit 10.14 to this Current Report on Form 8-K.
 
Dr. Gallentine’s employment agreement, amended effective as of November 18, 2009 (the “Gallentine Employment Agreement”), continues until April 14, 2010 and provides for an annual base compensation of $165,328.  Beginning April 15, 2010, Dr. Gallentine will be entitled to an annual base compensation of $150,000 per year and eligible for bonuses at the discretion of the Company’s board of directors.  In addition, the Gallentine Employment Agreement provides for Dr. Gallentine to participate in any equity-based incentive plan of Dlorah.  The Gallentine Employment Agreement provides for the continued payment of 12 months compensation in the event Dr. Gallentine dies and for the payment of 12 months compensation in the event Dlorah terminates Dr. Gallentine’s employment other than for cause.  The Gallentine Employment Agreement is filed as exhibit 10.13 to this Current Report on Form 8-K.

Dr. Shape’s employment agreement (the “Shape Employment Agreement”), which was effective as of November 18 2009, continues until termination of his employment pursuant to the terms of the Shape Employment Agreement.  The Shape Employment Agreement provides for an annual base compensation of $230,000, which is subject to an annual cost of living adjustment.   Dr. Shape is also entitled to receive merit pay for such fiscal year that he has been continuously employed by Dlorah and for each fiscal quarter that he remains continuously employed.  In the event Dr. Shape dies or becomes disabled, the Shape Employment Agreement provides for the continued payment of 12 months compensation plus a prorated share of compensation as determined for the year of disability or death.  The Shape Employment Agreement also provides for the payment of 24 months compensation in the event Dlorah terminates Dr. Shape’s employment other than for cause, payable monthly, or until he is employed by another employer, whichever occurs first.  The Shape Employment Agreement is filed as exhibit 10.15 to this Current Report on Form 8-K.

Amendment No. 1 to the Underwriting Agreement .  On October 26, 2009, Camden entered into an Amendment No. 1 to the Underwriting Agreement with Morgan Joseph & Co. to amend certain terms of its Underwriting Agreement, dated November 29, 2007 (the “Underwriting Agreement”).  The Amendment No. 1 to the Underwriting Agreement provides that Morgan Joseph would be entitled to a flat amount of $1,750,000 in deferred fees upon the consummation of a business combination.  The Amendment No. 1 to the Underwriting Agreement is filed as exhibit 1.2 to this Current Report on Form 8-K.

Amendment No. 1 to the Warrant Agreement .  On November 29, 2007, Camden entered into a warrant agreement (the “Warrant Agreement”) with Continental Stock Transfer and Trust Company which provided for, among other things, the form and provisions of Camden’s warrants and the manner in which the Camden warrants may be exercised.  Effective the Closing Date, the parties to the Warrant Agreement entered into an Amendment No. 1 to the Warrant Agreement, which required Camden to redeem all of the outstanding public warrants upon the consummation of the Transaction at a price of $0.50 per warrant.  The Amendment No. 1 the Warrant Agreement is filed as exhibit 10.2 to this Current Report on Form 8-K.
 
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Amendment No. 1 to the Securities Escrow Agreement .  Pursuant to the Securities Escrow Agreement dated November 29, 2007, by and among Camden, Continental Stock Transfer & Trust Company and certain of the founding stockholders of Camden, Camden’s initial stockholders placed the shares they owned into an escrow account, and with limited exceptions, such shares would not be transferable and would not be released from escrow until one year after consummation of a business combination.  On November 12, 2009, Camden Learning, LLC, Camden’s sponsor, agreed to transfer restricted shares of Common Stock it acquired prior to Camden’s IPO to Camden’s stockholders holding 50,000 or more shares of Common Stock as of November 5, 2009 who vote in favor of the Transaction.  In connection with this agreement to transfer Camden’s sponsor’s restricted stock, on the Closing Date, Camden, Continental Stock Transfer & Trust Company, Morgan Joseph and Camden’s sponsor entered into an Amendment No. 1 to the Securities Escrow Agreement to release an aggregate of 838,772 shares owned by Camden’s sponsor and held in escrow to certain stockholders of the Company who held 50,000 or more shares of Common Stock as of November 5, 2009 and who voted in favor of the Transaction.  Such stockholders also executed joinder agreements, as of the Closing Date (“Joinder Agreements”), a form of which is attached to this Current Report on Form 8-K as Exhibit 10.18, to become parties to the Camden Registration Rights Agreement with respect to those shares that were released to them.  The Amendment No. 1 to the Securities Escrow Agreement and the form of Joinder Agreements are filed as exhibits 10.4 and 10.18, respectively, to this Current Report on Form 8-K.

Stock Purchase Agreements .  As previously disclosed in Camden’s Current Report on Form 8-K filed on November 18 and November 20, 2009, Camden entered into stock purchase agreements with its stockholders, Bulldog Investors and Credit Suisse Securities USA, on November 13, 2009 and November 19, 2009, respectively, to provide for Camden’s purchase of an aggregate of 1,030,167 shares of its Common Stock from Bulldog Investors (the “Bulldog SPA”) and Credit Suisse (the “Credit Suisse SPA”).  Pursuant to the Bulldog SPA and the Credit Suisse SPA, in exchange for the purchase of their shares, the stockholders agreed to give Camden’s management proxy to vote their shares in favor of each of the stockholder proposals set forth in Camden’s definitive proxy statement, dated November 10, 2009.  The Bulldog SPA and the Credit Suisse SPA are filed as exhibits 10.16 and 10.17, respectively, to this Current Report on Form 8-K.

The descriptions of the Warrants, the Restricted Stock Agreements, the Registration Rights Agreements, the Camden Registration Rights Agreement, the Lock-up Agreements, the Buckingham Employment Agreement, the Gallentine Employment Agreement, the Shape Employment Agreement, the Underwriting Agreement, the Amendment No. 1 to the Underwriting Agreement, the Warrant Agreement, the Amendment No. 1. to the Warrant Agreement, the Securities Escrow Agreement, the Amendment No. 1 to the Securities Escrow Agreement, the Bulldog SPA and the Credit Suisse SPA do not purport to be complete and are qualified in their entirety by reference to the full text of such documents which are filed as exhibits to this Current Report on Form 8-K.
 
Item 2.01.      Completion of Acquisition or Disposition of Assets
 
Completion of Merger
 
See “Item 1.01 Entry into a Material Definitive Agreement” above.

The items referenced below are to the items reference in Form 10.  The use of terms “the Company”, “we”, “us”, “our” or similar words below refer to the combined operations of National American University Holdings, Inc. and its subsidiary and divisions, including National American University, following the closing of the Transaction.

 
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Item 1.  Business
 
Overview
 
National American University Holdings, Inc. was organized under the laws of the State of Delaware on April 10, 2007 as a blank check company to acquire, through a merger, capital stock exchange, asset acquisition or other similar business combination, one or more domestic or international assets of an operating business in the education industry.  On November 23, 2009, the Company acquired Dlorah through the consummation of the Transaction among the Company, Merger Sub and Dlorah, pursuant to the terms of the Merger Agreement.

Through National American University (“NAU”), a regionally accredited, for-profit, multi-campus institution of higher learning, we provide associate’s, bachelor’s and master’s degree programs in core academic disciplines of accounting, applied management, business administration, health care, and information technology.  We also develop, lease and sell luxury condominiums, apartments and townhomes in Rapid City, South Dakota.

National American University Division

Our mission is to prepare students of diverse interests, cultures and abilities for careers in our core fields in a caring and supportive environment.  We build learning partnerships with students and with other institutions and organizations locally, nationally and internationally through our private system of campuses and education centers by offering courses in traditional, accelerated and distance learning formats.  As a comprehensive technical and professional institution of higher learning, we are committed to responding to the changing needs of students, employers, and their communities by providing undergraduate and graduate programs, as well as continuing education opportunities, to serve the evolving global society.  We offer conveniently scheduled courses that lead to a degree on a convenient schedule appealing to employed, nontraditional students.  Implementation of night classes and the quarter system, as well as the engagement of faculty who are professionals in their respective fields, allows us to attract transfer students, veterans and active duty military personnel.

We currently operate 14 campuses, two education centers and one extension site located in seven states throughout the United States, as well as a distance learning campus serving students both domestically and in other parts of the world.  We offer online courses to more than 4,000 students worldwide, and to over 4,500 additional students through its partner services, in addition to supporting nearly 6,000 students at its campus locations.  As of November 23, 2009, we had approximately 1,000 faculty and staff at our locations throughout the southern, western and midwestern United States.  We operate primarily out of our 50,000 square-foot facility in Rapid City, South Dakota, which houses our distance learning campus and central administration offices.

Our predecessor, Dlorah, was founded in 1963 in South Dakota under the name National School of Business offering specialized business training to college students.  During the late 1960s and early 1970s, the university progressed from a two-year business school to a four-year senior college of business and embarked on a very aggressive recruitment of qualified and successful graduates of one- and two-year programs from accredited business schools in the eastern United States.  Such programs allowed the students to continue their education and receive appropriate transfer credit for their previous academic successes.  At the time, the university was one of only ten similar institutions in the country, and it was the only one of its kind west of Ohio.

In 1974, the university, then known as National College, added its first campus in Sioux Falls, South Dakota followed by campuses in Denver and Colorado Springs, Colorado and Minneapolis and St. Paul, Minnesota later that year.  The university offered conveniently scheduled courses that would lead to a degree which appealed to employed, nontraditional students.

 
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During the 1990s, the university expanded its locations, added an online campus and developed graduate degree programs.  It also enhanced its international presence in distance education through its partnerships with universities and colleges around the world.  As part of this educational venture, university faculty and instructional designers develop courses as a component of the university’s “Education Without Boundaries” program and distribute the courses over the Internet to the university’s international students.  Students from every part of the world benefit from our “Best of Both Worlds-IDPTM” format, which incorporates the university’s unique and progressive online instruction with the support and essential regional perspective provided by local institutions.

More recently, NAU experienced significant growth in enrollment, number of physical campuses, and net revenue and operating income.  NAU’s system-wide credit hour enrollment increased from 45,545.5 credit hours for the quarter ended May 31, 2008 to 59,095 credit hours for the quarter ended May 31, 2009, representing a quarterly growth rate of approximately 30 percent.  System wide total annual credit hour enrollment grew to 203,114 credit hours in fiscal year 2009 as compared to 169,670 and 167,366 in fiscal 2008 and 2007, respectively.  During the last ten years, NAU has more than doubled its system-wide enrollment from 98,058 credit hours in fiscal year 1999 to 203,114 credit hours in fiscal year 2009.  Total annual graduate studies credit hour enrollment was 6,444 in fiscal 2009, as compared to 4,558.5 and 3,636 in fiscal 2008 and 2007, respectively.

As measured by number of students enrolled, NAU’s enrollment for the fiscal years 2007, 2008 and 2009 was 4,867, 4,960 and 6,479 students, respectively, representing an average annual growth rate of approximately 16.27 percent.

In line with the increase in enrollment, the number of physical locations at which NAU’s programs or portions thereof are offered also increased.  The following new locations were added in the corresponding years indicated: Rio Rancho, New Mexico, in 1997; Brooklyn Center, Minnesota, in 2001; Overland Park, Kansas, in 2002; Zona Rosa, Kansas, in 2005; Watertown, South Dakota, in 2006; Austin, Texas, in 2007; and Wichita, Kansas, in 2008.  NAU also relocated to new facilities in the following locations: Albuquerque, New Mexico, and Colorado Springs, Colorado, in 1999; Roseville, Minnesota, in 2000; Independence, Missouri, in 2004; and Bloomington, Minnesota, in 2007.

We have two operating segments.  National American University, the university segment, is the larger of the two operating segments and generates approximately 90 percent of the Company’s revenue.  The other is the real estate segment.  For the year ended May 31, 2009, net revenue from the university segment was $60,910,000 as compared to $48,280,000 for the year ended May 31, 2008 and $43,543,000 for the year ended May 31, 2007, which represents an increase of 26.2 percent and 10.9 percent, from the year ended May 31, 2008 and May 31, 2007, respectively.  The operating income from the university segment for the year ended May 31, 2009 was $6,333,000 as compared to $1,341,000 for the year ended May 31, 2008 and a loss of $883,000 for the year ended May 31, 2007, which represents an increase of 372.3 percent and 251.9 percent from the years ended May 31, 2008 and May 31, 2007, respectively.  The value of the assets for the university segment for the year ended May 31, 2009 was $20,620,000 as compared to $19,737,000 for the year ended May 31, 2008 and $15,650,000 for the year ended May 31, 2007.

 
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Revenues from the real estate segment for the year ended May 31, 2009 were $1,674,000 as compared to $1,177,000 for the year ended May 31, 2008 and $906,000 for the year ended May 31, 2007.  The real estate segment experienced operating losses of $929,000 for the year ended May 31, 2009, as compared to a loss of $1,306,000 for the year ended May 31, 2008 and a loss of $1,438,000 for the year ended May 31, 2007.  The value of assets for the real estate segment for the year ended May 31, 2009 was $8,245,000 as compared to $8,425,000 for the year ended May 31, 2008 and $4,787,000 for the year ended May 31, 2007.

NAU’s growth has been characterized by a consistent, planned increase in enrollment through the timely addition of educational sites, an expansive distance delivery operation, new program offerings, an action-oriented assessment program, the adoption and implementation of a performance-based curriculum development model and the overall maturation and development of faculty, staff, administration and governing board.  Other factors we believe have contributed to NAU’s growth include an increase in reputation and name recognition of the university, addition of new programs, and the current downturn in the economic environment, which has led many working professionals to return to school to seek additional training.  We plan to achieve our continued growth in a manner that reinforces our reputation for providing  academically rigorous, career-oriented educational programs that advance the careers of our students.

Since opening its first campus, NAU has operated under the following core values:

•       offer high quality instructional programs and services;

•       provide a caring and supportive learning environment; and

•       offer technical and professional career programs.

These core values have remained the foundation of the university as we expanded it from a single campus offering specialized business training to students residing in the surrounding region to a system of 17 locations and a distance learning operation offering technical and professional career programs to undergraduate and graduate students across the United States and around the world.  Our decisions and activities continue to be guided by the core values, which form the basis for our mission and purpose.  Understanding and support of the university’s mission are promoted through participation of students, faculty, staff, administrators and the board of governors in governance and administrative structures of the university.   Policies and procedures adopted and implemented within these structures assure that the university adheres to the core values and operates with integrity as we fulfill our mission.

Our commitment to these core values is evidenced in the daily interactions between our students, faculty, staff and administrators.  The last two biennial comprehensive institutional student surveys conducted in 2005 and 2007 found that the four items receiving the highest student satisfaction rating cumulatively across the university system were:

•       the caring and supportive attitude by faculty toward students;

•       the caring and supportive attitude by staff toward students;

•       the quality of instruction in the major coursework; and

•       the caring and supportive attitude by administration toward students.

 
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Real Estate Division

In addition to NAU, we also operate a real estate division known as Fairway Hills Developments (“FWH”), which rents apartment units and develops and sells real estate in the Fairway Hills Planned Residential Development (“FWH PRD”) area of Rapid City, South Dakota.  FWH conducts business through various projects and associations, including FWH I, and II, Park West, Vista Park, Fairway Hills Park and Recreational Association, the Fairway Hills Party House, the Vista Park Homeowners’ Association and the Park West Homeowners’ Association.

Fairway Hills I and II

FWH I and FWH II are apartment buildings which consist of rental apartments.  FWH I consists of thirty-two (32) apartment units and FWH II consists of twenty (20) apartment units, of which approximately 92 percent are currently leased.

Park West

Park West consists of forty-eight (48) apartment units and is owned by a separate partnership which is fifty (50) percent owned by us and fifty (50) percent owned by members of the Buckingham family (the five children of Mr. Harold Buckingham, Chairman of our Board of Directors).  Park West apartment units are being converted to, and sold as, condominiums.  While the conversion of Park West building is not complete, as of November 2009, four (4) of the available units in Park West have been sold and one (1) more unit is under contract and is expected to close prior to December 1, 2009.  Prices for Park West condominium units start at $145,000.

Vista Park

In 2008, FWH began construction on a condominium development called Vista Park in the FWH PRD.  To date, FWH has completed its construction of a twenty-four (24) unit luxury condominium complex, which is known as Vista Park Phase I, and has sold four (4) of the available units.  Prices for Vista Park condominium units start at $149,000.  We currently have plans to build three (3) additional condominium complexes (Phases II, III and IV) in the Vista Park area of the FWH PRD, but construction of these additional phases will only begin following the sale of a substantial number of the currently available condominiums in Vista Park Phase I.  In total, and upon completion of all four (4) phases of development, the Vista Park condominium complexes would house ninety-six (96) condominium units.

Homeowners’ Associations

In connection with the development of Vista Park and the conversion of Park West apartments, FWH has created two new homeowners’ associations, the Vista Park Homeowner’s Association and the Park West Homeowner’s Association, to manage and sell the condominiums.   Each of these associations are non-profit corporations.  As a result of our controlling ownership interest in these associations, however (due to the number of condominiums not yet sold), these entities are consolidated for financial reporting purposes.

The Fairway Hills Park and Recreational Association (“FWH PR”) is operated as a homeowner’s association covering substantially all of the FWH PRD.  Although this entity is a non-profit corporation, as a result of our controlling ownership interest in the association (due to ownership of unsold condominium properties), FWH PR is consolidated for financial reporting purposes.

 
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The Fairway Hills Party House is a separate division of FWH and the Company has leased the Party House to FWH PR on a 99 year lease at a rate of $12.00 per month for each residential unit.

National American University Properties

In addition to the FWH properties, we own the facilities that comprise NAU’s physical campus near downtown Rapid City, South Dakota.  We lease the remainder of our campuses and education centers, and the distance learning and central administration offices located on south of downtown Rapid City, South Dakota.

Industry and Outlook

We believe the market for post-secondary education is substantial, growing and highly fragmented.  The U.S. Bureau of Labor Statistics has reported that as of 2008, approximately 61 million working adults in the United States did not have more than a high school education and approximately 33 million people had some college experience but no degree.  We believe the demand for post-secondary education will continue to increase during the next several years as a result of demographic, economic and social trends, including:

•       an increase in demand by employers for professional and skilled workers;

•       the significant and measurable income premium attributable to post-secondary education; and

•       budgetary constraints at traditional colleges and universities.

The adult education market is a significant and growing component of the post-secondary education market.  We believe the market for post-secondary adult education should continue to increase as working adults seek additional education to update and improve their skills.  We further believe many working adults will seek regionally accredited degree programs that provide flexibility to accommodate the schedules and time commitments associated with their professional, family and personal obligations.  We also believe continued expansion into international post-secondary education markets will supplement our university’s growth.

According to a 2008 survey by the Sloan Consortium, a trade group focused on online education, the number of students taking at least one online course during fall 2007 increased 12 percent over the prior year and fall 2007 online enrollments increased at a rate of 12.9 percent, compared to a 1.2 percent growth rate in total higher education student population.

Competition

The for-profit, post-secondary education industry is highly competitive and highly fragmented.  As of June 2009, there were more than 4,000 U.S. colleges and universities serving traditional and adult students.  Of these, there were several hundred not-for profit universities, public companies and smaller private companies that operate in the post-secondary education market in which NAU operates.

 
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NAU competes with both for-profit and not-for-profit, career-oriented schools, as well as public and private two-year junior and community colleges.  Competition is generally based on location, program offerings, modality, the quality of instruction, placement rates, selectivity of admissions, recruiting and tuition rates.  We seek to compete against community colleges by offering more frequent start dates, more flexible hours, better instructional resources, more hands on training, shorter program length and greater assistance with job placement.  We also seek to compete against other career schools by focusing on offering high demand, career-oriented programs, providing individual attention to students, hiring experienced executive management teams with strong operating histories, and focusing on flexible degrees for working adults.  We believe we are able to compete effectively in the respective local markets because of the diversity of our program offerings, quality of instruction, the strength of our NAU brand, our reputation and our success in placing students with employers.

NAU also competes with other institutions that are eligible to receive Title IV program funding.  This includes four-year, not-for-profit public and private colleges and universities, community colleges and all for-profit institutions, whether they offer programs that are four years, two years or less.  NAU’s competition differs in each market depending on the curriculum offered.  For example, a school offering automotive, allied health and skilled trades programs will have a different group of competitors than a school offering allied health, business/IT and skilled trades.  Also, because schools can add new programs in a relatively short period of time, typically within six to twelve months, new competitors can emerge quickly.

Certain institutions have competitive advantages over NAU.  Not-for-profit and public institutions receive substantial government subsidies, and have access to government and foundation grants, tax-deductible contributions and other financial resources generally not available to for-profit schools.  Accordingly, non-profit institutions may have instructional and support resources that are superior to those in the for-profit sector.  In addition, some of NAU’s for-profit competitors have a more extended or dense network of schools and campuses, which enables them to recruit students more efficiently from a wider geographic area.  Furthermore, some of the competitors, including both traditional colleges and universities and other for-profit schools, have substantially greater name recognition and financial and other resources than we have, which may enable them to compete more effectively for potential students.  We also expect to face increased competition as a result of new entrants to the online education market, including established colleges and universities that have not previously offered online education programs.

Competitive Strengths

The Company believes NAU has strengths which differentiate it from its competitors.  These include:

Commitment to high demand, career-oriented programs .  We are committed to offering quality, academically rigorous educational programs that today’s industries are demanding.  Our programs are designed to help our students achieve their career objectives in a competitive market.  Our programs are taught by qualified faculty, who often have practical experience in their respective fields, offering students their ‘‘real-world experience’’ perspective.  We require our online faculty to undergo training in the delivery of online programs before teaching their initial course and to participate as subject matter experts in the development of our online curricula.  We continually review and assess our programs and faculty to ensure our programs are current and up-to-date.  We understand that our programs need to continually evolve to meet the constantly changing demands of today’s industries.

 
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Focus on individual attention to students .  We believe in providing individual attention to our students for the best possible educational experience.  We provide extensive student support services, including administrative, library, career and technology support, to help maximize the success of our students.  We provide personal guidance to all of our students from the admissions and financing stages, academic advising assistance throughout the students’ enrollment periods, and finally career placement services.  We also assist our students in preparing resumes, preparing for job interviews and locating post-graduation employment.

Focus on flexible degrees for working adults .  We have designed our program offerings and our online delivery platform with flexible scheduling to meet the needs of today’s working adults.  We offer on-site day, evening and weekend classes, as well as online degree programs.  For even greater scheduling flexibility, we offer a blended model of learning that incorporates on-campus classes with online classes.  We believe working adults are attracted to the convenience and flexibility of our programs because they can study and interact with faculty and classmates during times and places that suit their needs.  We also believe working adults represent an attractive student population because they are better able to finance their education, more readily recognize the benefits of a postsecondary degree, and have higher persistence and completion rates than traditional college-aged students.

Experienced executive management team with strong operating history . Our executive management team possesses extensive experience in the management and operation of postsecondary education institutions.  The Company’s president, Dr. Jerry Gallentine, has worked in the education industry for over 44 years.  Throughout his career, Dr. Gallentine has taught various courses as a professor and also served as a president of various higher learning institutions before guiding the growth and development of NAU since 1993.  Dr. Ronald Shape, the Company’s chief executive officer and interim chief financial officer, began his career in higher education in 1991 with NAU.  He began teaching courses at NAU in accounting, auditing and finance in 1995.  Dr. Shape subsequently became NAU’s chief fiscal officer in 2002, and has served in his current role since the Transaction closed.  Dr. Samuel Kerr is the Company’s provost, secretary and general counsel.  Dr. Kerr began his career in the education industry in 1983 as a high school English/Journalism instructor.  He also taught education courses for a local college.  After graduating from law school, he started his legal practice in 1992, serving in the capacities of special assistant attorney general for South Dakota State University, special assistant attorney general for South Dakota Department of Transportation, and outside legal counsel for NAU.

Business Development and Expansion

Since the opening of our Sioux Falls, South Dakota campus in 1974, we have made it a central part of our growth strategy to develop branch campuses and educational centers in vibrant and growing communities with expanding workforce development needs.  Over the past three decades, we have continued the gradual expansion of educational sites as macroeconomic conditions and internal capacities supported such expansion.  Since 1998, we have continued the gradual expansion of education sites in the west and midwest regions of the United States.  In fall 2006, we opened two new education centers offering blended online and on-campus degree programs in Wichita, Kansas and Watertown, South Dakota.  Although smaller than our traditional campus locations, these education centers, in collaboration with the distance learning campus, offer complete programs and services to the students.  We believe our significant experience and success in expanding and supporting new education sites has positioned NAU well for continued growth and expansion.

 
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In addition to the expansion of education sites, our planned expansion of academic program offerings has also contributed to NAU’s growth.  In response to workforce and student demand, we have expanded NAU’s undergraduate healthcare-related programming, as well as its graduate programs in business and management.

Furthermore, we have developed a robust distance learning campus and student support system.  The distance learning campus serves students throughout the United States and other parts of the world, as well as providing additional course offerings, expanded, blended, degree-program options and support services for campus-based students throughout the university system.

Recognizing the impact of globalization on higher education now and into the future, we have worked diligently to reach out to international learners.  Throughout the late 1990s, NAU was very active in international collaborations with foreign colleges and universities.  Such collaborations have brought students from other countries to the university’s education sites in the United States to complete their studies.  Many academically capable and motivated students from developing countries desire to study in the United States but are not able to do so due to a myriad of factors, such as lack of adequate financial resources to fund study abroad, family and work obligations in their home countries and immigration restrictions.  We work with foreign colleges and universities to develop in-country solutions that meet the needs of these students.  The Best of Both Worlds — IDP TM strategic initiative was the result of this collaborative work.  Over 1,400 international students have graduated from the Best of Both Worlds — IDP TM programs over the past seven years.  NAU currently has affiliations with international institutions in Chile, Bolivia and Greece.  Additional international partnerships are being developed in the Czech Republic, Serbia, Brazil and China.  These affiliations represent a core component of our strategy to offer educational programs to students abroad.  NAU’s international academic affiliation agreements govern the terms of credit transfer, as well as a broad range of coordinated services undertaken by the parties.  The Higher Learning Commission’s international program best practices guidelines and best practices for electronically delivered degree programs have been incorporated into all affiliation agreements so that critical services to students are defined in each agreement.

We continue to position NAU to offer a variety of degree programs in multiple locations and delivery formats, both domestically and internationally.  On all levels, we consider changes in student demographics, demand for degree programs and employment outlook in its business development decision-making processes.  Long-range planning, feasibility studies, market research and a variety of other research projects involving changing job markets are among the methods we use as part of our planning process.  In that regard, we continue to position NAU as a successful, for-profit higher education institution by addressing societal and economic trends in the current markets and engaging in appropriate analysis and planning for the markets we seek to develop.

Going forward, we intend to pursue the following growth strategies for our NAU division:

Increase enrollment in existing programs .  We seek to increase enrollment in NAU’s core programs by identifying, enrolling and retaining students seeking careers in the disciplines offered.  We believe, due to the depth of NAU’s core programs, that the existing programs provide ample opportunity for NAU’s growth.

 
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Expand online program and degree offerings .  We develop and offer new programs we believe have attractive demand characteristics.  We launched three new online programs in 2008, including a criminal justice program, and two new online programs in the first six months of 2009, including a healthcare coding program.  NAU’s new program offerings typically build on existing programs and incorporate additional specialized courses, which offers students the opportunity to pursue programs that address their specific educational objectives while allowing us to expand NAU’s program offerings with only modest incremental investment.  We also seek to add new programs in additional targeted disciplines, such as NAU’s recently launched programs in criminal justice and healthcare coding.

Further enhance brand recognition .  We continue to enhance our NAU brand recognition by pursuing online and offline marketing campaigns, establishing strategic branding relationships with recognized industry leaders, and developing complementary resources in our core disciplines that increase overall awareness of our offerings.  In our marketing efforts, we emphasize the academic rigor and career orientation of our programs.  We seek to promote our NAU brand by establishing relationships with industry leaders who have recognizable identities with potential students and further validate the quality and relevance of our program offerings.

Expand relationships with private sector and government employers . We seek additional relationships with health care systems, businesses, higher education institutions and other employers through which we can market our offerings to their employees.  As evidence of our success in these initiatives to date, in 2008, NAU taught courses at a number of businesses covering programs being pursued by their employees.  NAU also established a national account with CuNet, a company consisting of professionals with significant sales and marketing experience that seeks to develop strategic relationships on a regional, national, and international basis.  These relationships provide leads for the university’s programs, build recognition among employers in our core disciplines, and enable us to identify new programs and degrees that are in demand from students and employers.

Leverage infrastructure and drive earnings growth.   We have made significant investments in our people, processes and technology infrastructure.  We believe these investments have prepared us to deliver our academic programs to a much larger student population with only modest incremental investment.  NAU’s current infrastructure is capable of supporting a significantly larger number of admissions representatives, and we intend to expand this group in order to continue to drive enrollment growth.  We continue to expand our learning management system to better serve the demands of our growing student population and have also expanded our student and technology support capabilities to support a larger student base.  We have also invested in administrative and management personnel and systems to prepare for our anticipated growth.  We intend to leverage our historical investments as we seek to increase enrollment, which we believe will allow us to increase our operating margins over time.

Programs and Areas of Study

NAU offers the Master of Business Administration, Master of Management, Bachelor of Science, Associate of Applied Science, and Associate of Science degrees, with a variety of program options leading to each of these degrees.  Many of the degree programs offer the opportunity to focus on one or more emphasis areas.  NAU also offers diploma programs, consisting of a series of courses focused on a particular area of study, for students who seek to enhance their skills and knowledge in the areas of healthcare coding, Microsoft system administrator, Microsoft system engineer, network and server engineer, practical nursing, therapeutic massage and veterinary assisting.

 
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We have adopted a performance-based curriculum development philosophy consistent with NAU’s historical focus on professional and technical career programs.  A standardized process for curriculum development facilitates the performance-based model built on learning cycles, active learning principles and constructivist learning theories.

In addition to the creation of a performance-based curricula, we began a parallel initiative to align this curricula with the creation of original instructional materials in lieu of textbooks.  We determined that original content would better aid students by providing more concise, relevant and current information delivered in a manner consistent with the technology orientation of NAU’s student population.  The scope of the initiative to develop curricula and original instructional support material spurred us to create a new department to oversee the creation of this material.

Our curriculum group employs instructional designers and also contracts with subject matter experts, authors, reviewers and editors to create curricula and related instructional materials from faculty-approved syllabi. Curricula and instructional materials, when appropriate, are developed by NAU’s faculty and program coordinators. After implementation of the instructional materials, students and faculty provide feedback through surveys, and adjustments are made as needed. Students are charged an instructional materials fee, in lieu of the more expensive fee for standard textbooks from publishers. We have invested significant human and financial resources in the implementation of this curricula development initiative with the primary objective of providing performance-based instructional materials to support faculty and students in the achievement of prescribed learning outcomes. We are committed to this ongoing and dynamic process, continued implementation of performance-based curricula and instruction across the university system.

Under the overall leadership of senior academic affairs personnel and the academic deans, as of November 23, 2009, NAU offered the following academic degree programs:

Graduate Studies
Master of Business Administration
 
Master of Management
Bachelor’s Degrees
Accounting
 
Applied Management
 
Athletic Training*
 
Business Administration:
 
• Emphasis Accounting*
 
• Emphasis Financial Management
 
• Emphasis Human Resource Management
 
• Emphasis Information Systems
 
• Emphasis International Business
 
• Emphasis Management
 
• Emphasis Marketing
 
• Emphasis Pre-Law*
 
• Emphasis Tourism Management
 
• Emphasis Hospitality Management
 
Criminal Justice
 
Health Care Management
 
Information Technology with Emphasis Internet Systems Development

 
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Information Technology with Emphasis Management Information Systems
 
Information Technology with Emphasis Network Administration/Microsoft*
 
Information Technology with Emphasis Network Management/Microsoft
 
Applied Information Technology
 
Bachelor of Science in Nursing*
 
Online Registered Nurse to Bachelor of Science in Nursing
 
Organizational Leadership*
 
Paralegal Studies*
Associate Degrees
Accounting
 
Applied Information Technology
 
Applied Management
 
Business Administration
 
Criminal Justice
 
General Education Studies
 
Health Information Technology
 
Information Technology
 
Medical Administrative Assistant*
 
Medical Assisting*
 
Medical Staff Services Management
 
Nursing*
 
Associate of Science Nursing Mobility Program*
 
Paralegal Studies*
 
Pharmacy Technician*
 
Therapeutic Massage*
 
Veterinary Technology*
Diplomas
Healthcare Coding
 
Practical Nursing*
 
Therapeutic Massage*
 
Veterinary Assisting*
  Information Technology
 
* Indicates programs offered on-campus only.

As an extension of our mission and historical foundations of offering business and business-related programming, we began offering our first campus-based Master of Business Administration (‘‘MBA’’) program at the Rapid City campus in 2000.  We expanded the MBA program through distance delivery upon Higher Learning Commission approval in 2001.  In 2004, NAU received Higher Learning Commission approval to offer the MBA program through its Best of Both Worlds-IDPTM program format in Malaysia, United Arab Emirates, India and Chile.  In 2006, NAU received Higher Learning Commission approval to begin offering the Master of Management (‘‘M.M.’’) degree to students abroad.  This growth is expected to continue through measured expansion of graduate programming.  The Higher Learning Commission has recently approved NAU to offer a Master of Science in Nursing degree program beginning in January 2010.  Our objective is to seek Higher Learning Commission approval to broaden our master’s degree programs and to begin a Doctor of Management degree program.

 
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We have made a concerted effort to expand NAU’s programming in healthcare-related fields.  The development of an undergraduate health care management program and an M.M. with emphasis in health care administration were developed to meet the health care industry’s need for health care professionals with strong business and management skills.  NAU developed an Associate of Science in Nursing degree at its Zona Rosa, Kansas, Denver, Colorado and Overland Park, Kansas, campuses to respond to the growing nationwide shortage of qualified nurses.  We plan to offer additional Bachelor of Science in Nursing degrees at the Bloomington, Minnesota, Austin Texas, and Albuquerque New Mexico, campuses over the next several years.  An online Registered Nurse to Bachelor of Science in Nursing program is offered through the distance learning campus.  Additional allied health programs at the associate degree level are offered throughout the university system based on local demand and workforce needs.  With the expansion of undergraduate enrollment in healthcare-related programs and the emerging demand observed from NAU’s alumni and other constituencies, we plan to expand NAU’s healthcare-related graduate programming.  The burgeoning national need for master’s qualified nursing administrators and nursing faculty, along with our successful experience in the development and delivery of nursing programs at the associate and bachelor’s degree levels, has led us to focus our resources on the development of a Master of Science in Nursing degree that is currently pending Higher Learning Commission approval.

NAU has been actively offering courses via the Internet since 1996.  NAU was one of the first regionally accredited universities to be approved by the Higher Learning Commission to offer full degree programs under a Web-based methodology.  Over the past thirteen years, we have invested heavily in the creation and evolution of a sophisticated and reliable delivery system that employs technological applications.  We have successfully served students from across North and South America, Asia, Europe and Africa.  Students residing in each of the 50 states and the District of Columbia have also received Web-based instruction through the university’s distance learning program.  The distance learning campus has grown as an organizational structure, providing a scope of service consistent with the university’s other campuses.  Careful consideration was afforded to preserving the student-centered philosophy of the university while capitalizing on the technological advancements in distance delivery.  The organization of the virtual campus continues to evolve in response to increasing enrollment and the expanding sphere of quality services available to students.

It is our vision and goal to have NAU be recognized as a model for distance education in all areas including development, program delivery, evaluation and student support services.  Therefore, in addition to exceeding the guidelines for distance education as set forth by the Higher Learning Commission in its Best Practices to electronically offered degree and certificate programs, we adhere to established institutional program guidelines to further ensure that accreditation and regulatory standards are satisfied and that our underlying quality goals are incorporated and maintained throughout the program.

Affiliation Partnerships

Associate to Bachelor’s Degree Completion Program.

Also called the 2 + 2 degree completion program, we have developed strategic partnerships with various higher education institutions throughout the United States.  This program allows students with an associate’s degree to seamlessly transfer into bachelor’s degree programs offered at NAU.

This unique partnership allows students to leap into the next phase of their educational goals.  With NAU’s online delivery format, students are able to set their class schedule so daily activities will be uninterrupted while students complete their bachelor’s degree program.

 
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Best of Both Worlds — Instructional Delivery Platform TM

NAU’s Best of Both Worlds — Instructional Delivery PlatformTM provides students residing outside of the Unites States with an option to combine the curricula of a qualified home country institution with that offered by NAU.

Under this blended instructional option, the host university facilitators work very closely with NAU’s online faculty and staff providing students with additional resources.  Through this unique partnership, students are able to remain in their home country and attend a local college or university while studying to earn an American degree from an accredited university.

We also work closely with local businesses and corporations in the areas where campuses are located and offer a variety of courses and schedule formats to assist busy professionals.  For certain programs, NAU offers customized courses and schedules, and on-site classes.  For example, for the nursing programs, NAU offers clinical courses on-site at hospitals and other healthcare centers with which NAU has relationships, and allows these students to complete their clinical work on-site.

Partnerships

We collaborate with a number of local and national entities on shared educational goals.  Examples of these collaborations include military memoranda of understanding, governmental partnerships and educational alliances.  With respect to military agreements, memoranda of understanding exist between the university and Ellsworth Air Force Base and Kirtland Air Force Base whereby NAU can teach classes at these two military facilities which are open to military members, civilian and contract employees and military family members.  These arrangements also include our affiliation with the Serviceman’s Opportunity College in responding to the special needs of adult continuing education for people in the armed forces.  We have also collaborated with a number of governmental partnerships, including several Colorado region law enforcement organizations.

In addition, we also assist a number of U.S. higher education institutions in the development and delivery of online courses and programming, and currently provide ongoing support services for students from these institutions.  Over 140 associate faculty members and 60 full-time employees support expanding online student participation in distance learning programs and work with international and domestic affiliates.

Campuses

NAU’s main campus is located near the center of Rapid City, South Dakota.  The Rapid City campus facilities currently consist of seven buildings, which include 31 classrooms, one lecture hall/theater, four student computer labs and an approximately 22,000 volume physical library.  The Rapid City campus has a dormitory with food services that can hold up to 275 students.

Campus Locations as of November 23 , 2009 :

Colorado Locations:
5125 North Academy Boulevard
 
Colorado Springs, Colorado 80918

 
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1325 South Colorado Boulevard, Suite 100
 
Denver, Colorado 80222
   
Kansas Locations:
10310 Mastin Street
 
Overland Park, Kansas 66212
   
 
7309 East 21st Street, Suite G-40
 
Wichita, Kansas 67206
   
Minnesota Locations:
7801 Metro Parkway, Suite 200
 
Bloomington, Minnesota 55425
   
 
6120 Earle Brown Drive, Suite 100
 
Brooklyn Center, Minnesota 55430
   
 
1550 West Highway 36
 
Roseville, Minnesota 55113
   
Missouri Locations:
3620 Arrowhead Avenue
 
Independence, Missouri 64057
   
 
7490 Northwest 87th Street
 
Kansas City, Missouri 64153
   
New Mexico Locations:
4775 Indian School Road, Northeast, Suite 200
 
Albuquerque, New Mexico 87110
   
 
1601 Rio Rancho Boulevard Southeast, Suite 200
 
Rio Rancho, New Mexico 87124
   
South Dakota Locations:
1000 Ellsworth Street, Suite 2400B
 
Ellsworth Air Force Base, South Dakota 57706
   
 
321 Kansas City Street
 
Rapid City, South Dakota 57701
   
 
2801 South Kiwanis Avenue, Suite 100
 
Sioux Falls, South Dakota 57105
   
 
925 29th Street Southeast
 
Watertown, South Dakota 57201
   
Texas Location:
13801 North Mo-Pac Expressway, Suite 300
 
Austin, Texas 78727

We believe our on-campus programs not only offer students, faculty and staff an opportunity to participate in a traditional college experience, but also provide the online students, faculty and staff with a sense of connection to the university.  Additionally, the on-campus faculty play an important role in integrating online faculty into the academic programs and ensuring the overall consistency and quality of the student learning experience.  We believe the mix of a growing online program, anchored by on-campus programs with a nearly 68-year history and heritage, differentiates the university from most other for-profit postsecondary education providers.

 
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Faculty

NAU’s faculty includes full-time faculty who teach under a nine-month teaching contract, as well as adjunct campus based and online faculty who teach on a course-by-course basis for a specified fee.  As of November 2009, the university employed approximately 82 full-time and 349 part-time faculty members.  Approximately 67 percent of NAU’s current faculty members hold at least a master’s degree in their respective field and approximately 24 percent of NAU’s faculty members hold a doctoral degree.  NAU’s faculty members bring a wealth of technical and professional knowledge to their classrooms.

We have been making retention and recruitment of quality associate faculty a priority.  Approximately 20 percent of the associate faculty have been with the university for over six years.  To promote continuity within this vital teaching core, we have undertaken a number of initiatives to recruit and retain associate faculty.  First, while NAU has made strides in the improvement of associate faculty pay over the last four years, we recognize that additional improvements must be made in order to attract and retain a solid faculty core.  Second, a pilot program is currently underway within distance learning to address the university’s goal of establishing a competitive associate faculty compensation plan that is also tied to performance metrics.  With the growth of the university’s online learning platform came the development of expectations for online learning pedagogy.  Resonating from contemporary research on the best practices of online learning, an associate faculty evaluation model was developed and geared specifically to the unique demands, expectations and requirements of online faculty.  This pilot associate online faculty compensation plan was designed to integrate multiple aspects of appraisal to create a comprehensive analysis of faculty and staff performance.

Faculty and staff are encouraged to actively participate in a variety of academic and non-academic organizations.  Faculty members participate in a wide variety of professional associations and activities at the local, state and regional level. We encourage the faculty members to stay current on changes and trends within higher education, as well as their respective industries.  Participation in professional organizations by faculty and staff bring fresh and current information relevant to the university’s mission and programming to students and the workplace.

The faculty hiring process optimizes the selection of appropriate candidates for on-campus and online positions.  Campus academic deans initiate the recruitment process for full-time faculty.  The faculty position description, which includes education, experience requirements and faculty duties, details the knowledge and skills required in successful candidates.  Part-time faculty are recruited through advertising available positions and comparing education and experience to the associate faculty position description and our faculty qualifications guidelines.  Our published standards for faculty appointments are based on state regulations and regional and specialized accrediting standards, such as those published by state boards of nursing, the Higher Learning Commission, the International Assembly of Collegiate Business Education and the American Bar Association.  We recruit qualified faculty through postings on the university’s web site, as well as placement of advertisements in local media and publications.  We review official transcripts to validate academic qualifications and faculty vitae to verify academic preparation consistent with the university’s qualification guidelines, as well as engagement in relevant professional activities.

 
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As NAU is a multi-campus institution, we recognize that most efforts to train, evaluate and recognize faculty must originate at the individual campus level.  The campus academic deans are responsible for local orientation and in-service programs for faculty, schedules for faculty appraisal, promotions and merit increase recommendations, as well as efforts (formal and informal) to retain faculty.  The system academics office and the campus academic deans establish and uphold the university’s policies and practices for faculty appraisal.  Ongoing and meaningful feedback on individual performance holds importance for the professional growth of
the faculty and for the continued advancement of the university.

NAU’s human resources department also identifies employee training initiatives in an online format.  The department recognizes the benefits of current technology recently acquired by the university for employee development initiatives.  The addition of this software will allow the human resources department to explore and incorporate this new tool in many system-wide training opportunities for employees.  The human resources department will continue to focus on employee training and development initiatives throughout 2009.

Student Services/Learner Services

Encouraging students to complete their degree programs is critical to the success of NAU.  We invest great effort on developing and providing resources that simplify the student enrollment process, and acclimate students to our programs and online environment and support the student educational experience.  Many of the university’s support services, including academic, administrative and library services, are accessible online, allowing users to access these services at a time and in a manner convenient for them.

The student support services NAU provides include:

Academic services .   NAU provides students with a variety of services designed to support their academic studies.  NAU offers new student orientation, academic advising, technical support, research services, writing services and other tutoring to the university’s online and on-campus students.

Administrative services.   NAU provides students with the ability to access a variety of administrative services both telephonically and via the Internet.  For example, students can review class schedules, apply for financial aid, pay tuition and access their unofficial transcripts online.  The university’s financial service representatives provide personalized online and telephonic support to the students.

Library services .   NAU provides a mix of online and on-campus resources, services and instruction to support the educational and research endeavors of all students, faculty and staff, including physical and online libraries and online library resources available 24/7 through the student portal to help faculty and students with research, teaching and library resource instruction.

Career services.   For those students seeking to change careers or explore new career opportunities, NAU offers career services support, including resume review and evaluation, career planning workshops and access to career services information for advice and support.

Technology support services.   NAU provides online technical support approximately twelve hours per day during the week and various hours of support on weekends to help students remedy technology-related issues.  Online tutorials and ‘‘Frequently Asked Questions’’ for students who are new to online coursework are also provided.

 
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In addition to the university faculty, as of November 23, 2009, NAU employed approximately 465 staff and administrative personnel in university services, academic advising and support, enrollment services, university administration, financial aid, information technology, human resources, corporate accounting, finance and other administrative functions. None of NAU’s employees is a party to any collective bargaining or similar agreement with the
university.

Marketing, Recruitment and Retention

Marketing.   We engage in a range of marketing activities designed to position the university as a provider of academically rigorous, career-oriented educational programs, by building strong brand recognition, differentiating the university from other educational providers, raising awareness among prospective students, generating enrollment inquiries and stimulating student and alumni referrals.  NAU’s online target market includes working adults focused on program quality, convenience and career advancement goals.  NAU’s on-campus target market includes traditional college students, working adults seeking a high quality education in a traditional college setting, and working adults seeking to take classes on-site at their employer’s facility.  In marketing the university’s programs to prospective students, we emphasize the value of the educational experience and the academic rigor and career orientation of the programs.

Our dedicated marketing and enrollment personnel team lead the university’s efforts to attract new students.  Marketing efforts include updating and enhancing the university’s web site on a regular basis, implementing regular updates and changes to improve the web site, sending enrollment postcard mailings and creating marketing materials to support the new programs.  Regional enrollment management employees, working in collaboration with key personnel from central administration, help to oversee the admissions training and monitoring for all of the campuses.  This includes training for new employees, as well as ongoing training for current employees as needed.  Monitoring is done centrally, regionally and at the campus level.  Areas that are overseen include enrollment goal tracking, call activity, lead flow and conversion and student acquisition cost.

To generate student leads, our marketing and enrollment personnel employ an integrated marketing approach that utilizes a variety of sources to identify prospective students.  These lead generation sources include:

 
•   Internet and affiliate advertising, which generates the majority of the leads and which includes purchasing leads from aggregators and engaging in targeted, direct email advertising campaigns and coordinated campaigns with various affiliates;

 
• search engine optimization techniques, through which we seek to obtain high placement in search engine results in response to key topic and word searches and drive traffic to the university’s Website;

 
• booths at school, health and other career fairs;

 
• radio and television advertising campaigns, which encourage potential students to contact the university;

 
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• seminar and event marketing, in which the marketing and enrollment personnel host group events at various venues, including community colleges, corporations and hospitals;

• referrals from existing students, alumni and employees;

 
• a national accounts program that seeks to develop relationships with employers in the university’s core disciplines, including healthcare providers, school districts, emergency services providers and large corporations, that may be interested in providing dedicated and customized online and on-site educational opportunities to their employees, and to encourage senior executives to participate in executive training programs; and

 
• print and direct mail advertising campaigns, and other public relations and communications efforts, including student and alumni events.

Recruitment.   Once a prospective student has indicated an interest in enrolling in one of the programs, the university’s lead management system identifies and directs an admissions representative to initiate immediate communication.  The admissions representative serves as the primary, direct contact for the prospective student and the representative’s goal is to help that individual gain sufficient knowledge and understanding of the university’s programs so he or she can assess whether there is a good match between the university’s offerings and the prospective student’s goals.  NAU’s admissions representatives typically have prior education industry or sales experience.  Each representative undergoes a standardized three-week training program that involves both classroom and supervised fieldwork which provides the employee with training in financial aid, regulatory requirements, general sales skills, student information system and the university’s academic programs, history and heritage and mission.  As of November 2009, NAU employed over 110 admissions representatives at existing locations, which we expect to be sufficient to handle the university’s growth plans through 2009.

Retention. We utilize a system retention team whose purpose is to support students in advancing from matriculation through attainment of educational goals.  The retention team members monitor risk factors, such as the failure to buy books for a registered course, lack of attendance or failure to participate in online orientation exercises, which signal that a student may be at-risk for dropping out.  Upon identifying an at-risk student, the university can proactively interact with the student to resolve any issues and encourage the student to continue with his or her program of study.

Admissions

Prospective students are required to complete an application to enroll in NAU’s programs.  Upon the prospective student’s submission of an application, the admissions representative, together with student services personnel, works with the applicant to gain acceptance, arrange financial aid by financial services representatives, if needed, and register for courses and prepare for matriculation.

Applicants to the university’s graduate programs must generally have an undergraduate degree from an accredited institution of higher learning in the United States or from an international institution of higher learning recognized by the ministry of education or other appropriate government agency, and

• a minimum grade point average of 2.75 achieved for all undergraduate work; or

 
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•   a minimum grade point average of 2.9 achieved for the last one-half of the credits earned toward a bachelor’s degree; or

• a minimum grade point average of 3.0 in two or more graduate level courses taken at a regionally-accredited institution of higher learning or recognized foreign equivalent.

Undergraduate applicants generally must have graduated from a recognized high school (or the Department of Education accepted equivalent) or submit an official transcript from an accredited U.S. higher education institution indicating completion of a post-secondary education program of at least two years in length that is acceptable for full credit toward a bachelor’s degree, with a minimum cumulative grade point average of 2.0.

Enrollment

NAU has experienced consistent enrollment growth since 1998, growing at an average annual rate of approximately 9.39 percent based on the number of students enrolled.  At May 31, 2009, NAU had 6,479 students enrolled in its courses, of which 1,355, or 21 percent, were enrolled in the online campus, and 5,124 or 79 percent, were enrolled on-campus.  Of the online students, which were geographically distributed throughout the United States as well as worldwide, the average age was 33 years.  The on-campus students were predominantly comprised of students from the central United States, and the average age was 35 years.

The following is a summary of NAU’s student enrollment at May 31, 2009 and May 31, 2008 by degree type and by instructional delivery method:
 
   
May 31, 2009
   
May 31, 2008
 
   
# of Students
   
% of Total
   
# of Students
   
% of Total
 
                         
Master’s
    255       3.94       173       3.49 %
Bachelor’s     6,224       96.06       4,787       96.51 %
Total     6,479       100.00       4,960       100.00 %
                                 
                                 
   
May 31, 2009
   
May 31, 2008
 
   
# of Students
   
% of Total
   
# of Students
   
% of Total
 
Online     1,355       20.91       1,150       23.19 %
On-Campus     5,124       79.09       3,810       76.81 %
Total     6,479       100.00       4,960       100.0 %
                                 
Tuition and Fees

NAU’s tuition rates vary by campus.  Total tuition varies based upon the number of credit hours for each program, the degree level of the program, geographic location and the discipline of the course.

The minimum number of credit hours required for a master’s degree and overall cost for such a degree varies by program.  The MBA degree may be earned under a non-thesis or a thesis plan.  Under the non-thesis option, the student must satisfy 31.5 hours of foundation requirements, and complete 40.5 hours of graduate-level core courses and 13.5 hours of electives.  Under the thesis option plan, the student must satisfy 31.5 hours of foundation requirements, and complete 40.5 hours of graduate-level core courses, 4.5 hours of
electives and 9 hours of thesis.

The M.M. degree provided by NAU consists of three requirements:  foundation courses, graduate core courses and elective courses.  The M.M. degree may be earned under a non-thesis or a thesis plan.  Under the non-thesis option, the student must satisfy 9 hours of foundation requirements, and complete 40.5 hours of graduate-level core courses and 13.5 hours of electives.  Under the thesis option plan, the student must satisfy 9 hours of foundation requirements, and complete 40.5 hours of graduate-level core courses, 4.5 hours of electives and 9 hours of thesis.

 
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NAU has a refund policy for tuition and fees based upon semester start dates.  If a student drops or withdraws from a course during the first week of classes, 100 percent of the charges for tuition and fees are refunded, while beyond the first week but during the first 60 percent of scheduled classes the percentage of tuition charges refunded is based on a daily proration based on a percent of the term completed.  If the last day of attendance is beyond 60 percent of the scheduled classes, tuition and fees are not refunded.  Fees charged include an application fee of $25 and specialty and program fees ranging from $45 to $100, depending on the program.  A $75 administrative fee is assessed against each prorated refund.  The return of Title IV funds and the tuition reduction is calculated based on the last day of attendance.  Refunds minus a $75 administrative fee are made within 45 days of when the withdrawal date is determined.  A prorated amount of Title IV funds must be returned to the financial aid programs for students not completing 60 percent of the period of enrollment if the student was a financial aid recipient.

Sources of Student Financing — Regulatory Environment

Students attending NAU typically finance their education through a combination of family contributions, individual resources, private loans and federal financial aid programs.  NAU’s domestic campuses participate in the federal programs of student financial aid typically referred to as the Title IV Programs, which are administered by the Department of Education.

The federal government provides a substantial part of its support for post-secondary education  through the Title IV programs, in the form of grants and loans to students who can use those funds at any institution that has been certified as eligible by the Department of Education.  Student financial aid funds are generally made available to students at prescribed intervals throughout their predetermined expected length of study.  Student financial aid under the Title IV programs is primarily awarded on the basis of a student’s financial need, which is generally defined as the difference between the cost of attending the institution and the amount the student and the student’s family can reasonably contribute to that cost.  All students receiving Title IV program funds must maintain satisfactory academic progress toward completion of their program of study.  In addition, each school must ensure that Title IV program funds are properly accounted for and disbursed in the correct amounts to eligible students.

NAU students receive loans and grants to fund their education under the following Title IV programs:  (1) the Federal Family Education Loan (“FFEL”) and Federal Direct Loan programs, and (2) the Federal Pell Grant, or Pell, program.  During the fiscal years ended May 31, 2009 and May 31, 2008 respectively, NAU derived approximately 71.6 percent and 67.7 percent of its revenues respectively (calculated on a cash basis in accordance with Department of Education standards) from tuition financed under the Title IV programs.

FFEL/Federal Direct Loan Programs .  Under the FFEL Program, banks and other lending institutions make loans to students.  The FFEL Program includes the Federal Stafford Loan Program, the Federal PLUS Program (which provides loans to graduate and professional studies students as well as parents of dependent undergraduate students) and the Federal Consolidation Loan Program.  If a student defaults on an FFEL loan, payment to the lender is guaranteed by a federally recognized guaranty agency, which is then reimbursed by the Department of Education.  Students who demonstrate financial need may qualify for a subsidized Stafford loan.  With a subsidized Stafford loan, the federal government pays the interest on the loan while the student is in school and during grace periods and any approved periods of deferment, until the student’s obligation to repay the loan begins.  Unsubsidized Stafford loans are not based on financial need and are available to students who do not qualify for a subsidized Stafford loan or, in some cases, in addition to a subsidized Stafford loan.  Under the Federal Direct Loan Program, the Department of Education rather than a private lender makes the loans to students.  The types of loans, the maximum annual loan amounts and other terms of the loans made under the Federal Direct Loan Program are similar to those for loans made under the FFEL Program.

 
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Effective July 1, 2008, under the Federal Stafford Loan Program, an independent undergraduate student can borrow up to $9,500 for the first academic year, $10,500 for the second academic year and $12,500 for each of the third and fourth academic years.  A dependent undergraduate student can borrow up to $5,500 for the first academic year, $6,500 for the second academic year, and $7,500 for the third and fourth academic years.  Students classified as dependent students whose parents were denied a parent loan for undergraduate students, can obtain up to an additional $6,000 for each of the first and second academic years and an additional $7,000 for each of the third and fourth academic years.  Students enrolled in graduate programs can borrow up to $20,500 per academic year.

Pell . Under the Pell Program, the Department of Education makes grants to undergraduate students who demonstrate financial need. Effective July 1, 2009, annual awards range from $609 to $5,350 per year.  Under the August 2008 reauthorization of the Higher Education Act of 1965, as amended, students may receive Pell Grant funds up to 200 percent of their scheduled annual award per financial aid award year for attendance on a year-round basis, which means that the amount a student can receive in a given year will be more than the traditionally defined maximum annual amount.

NAU’s students also receive funding under other Title IV programs, including the Federal Perkins Loan Program, the Federal Supplemental Educational Opportunity Grant Program, the Federal Work-Study Program, the National Science and Mathematics Access to Retain Talent Grant Program and the Academic Competitiveness Grant Program.

Other financial aid programs .  In addition to the Title IV programs listed above, eligible students may participate in several other financial aid programs or receive support from other governmental sources.  These include veterans educational benefits administered by the U.S. Department of Veterans Affairs and state financial aid programs.

Private loans .   Some of the students also use private loan programs to help finance their education.  Students can apply to a number of different lenders for private loans at current market interest rates.  Private loans are intended to fund a portion of students’ cost of education not covered by the Title IV programs and other financial aid.

Other sources .  We derived the remainder of our net revenue from tuition that is self-funded or attributable to employer tuition reimbursements.

The National American University Foundation, a separate not-for-profit company, provides scholarships for student achievement at the university.  Foundation funds are generated through a combination of alumni and employee donations, as well as through the collection of NAU accounts receivable previously charged to bad debt.  Through the use of foundation funds, each university campus can grant Foundation Academic Excellence Awards and Foundation Alumni Academic Excellence Awards annually.  Scholarship recipients are selected on the basis of financial need, academic achievement, participation in institutional activities or community involvement/service.  Since 2007, more than $208,000 in academic scholarships have been awarded to university students through the foundation.

 
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Accreditation and Program Approvals

We believe the quality of NAU’s academic programs is evidenced by the university and program specific accreditations and approvals NAU has obtained.  NAU obtained its initial accreditation from the Higher Learning Commission for the bachelor’s degree in 1985.  NAU has continued to grow and expand, leading it to seek accrediting commission approval for new geographic sites and new graduate degree programs in addition to the expansion of program delivery in international locations in cooperation with in-country institutions of higher learning.

In addition to institution-wide accreditation, there are numerous specialized accrediting commissions that accredit specific programs or schools within their jurisdiction, many of which are in healthcare and professional fields.  Accreditation of specific programs by one of these specialized accrediting commissions signifies that those programs have met the additional standards of those agencies.  In addition to being accredited by the Higher Learning Commission, NAU also has the following specialized accreditations:

 
• The Commission on Accreditation of Athletic Training Education (formerly the Commission on Accreditation of Allied Health Education Programs, Joint Review Committee on Education Programs in Athletic Training) accredits NAU’s athletic training education program (on probation, with status report due December 1, 2009).

 
• The Commission on Accreditation of Allied Health Education Programs, on the recommendation of the Curriculum Review Board of the American Association of Medical Assistants Endowment, accredits NAU’s medical assisting programs offered in Colorado Springs, Colorado, Denver, Colorado, Overland Park, Kansas, Bloomington, Minnesota, Roseville, Minnesota Albuquerque, New Mexico, and Sioux Falls, South Dakota.

 
• The Committee on Veterinary Technician Education and Activities of the American Veterinary Medical Association accredits NAU’s veterinary technology program.

 
• The International Assembly for Collegiate Business Education accredits NAU’s Master of Business Administration, Master of Management, Bachelor of Science in Applied Management, Bachelor of Science in Applied Management with an emphasis in Equine Management, Bachelor of Science in Accounting, Bachelor of Science in Business Administration, Bachelor of Science in Business Administration with an emphasis in Accounting, Financial Management, Hospitality Management, Human Resource Management, Information Systems, International Business, Management, Marketing, Pre-Law and Tourism Management, Associate of Applied Science in Applied Management, Associate of Applied Science in Business Administration and Associate of Applied Science in Accounting degree programs.

 
• The National League for Nursing Accrediting Commission accredits NAU’s Associate of Science in Nursing program for NAU’s location in Kansas City, Missouri, and has awarded candidate status for NAU’s Associate of Science in Nursing program for spring 2008 through fall 2009 for NAU’s locations in Denver, Colorado, and Overland Park, Kansas, and has awarded candidate status for NAU’s online Registered Nurse to Bachelor of Science in Nursing program for fall 2008 through spring 2010 for NAU’s location in Rapid City, South Dakota.

 
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• The Standing Committee on Paralegals of the American Bar Association approves NAU’s paralegal studies program offered in Rapid City, South Dakota.

NAU is approved for veteran’s training and for administering various educational programs sponsored by state and federal agencies, such as the Bureau of Indian Affairs, Social Security Administration and various state rehabilitation services.  We believe NAU’s regional accreditation with the Higher Learning Commission and its specialized accreditations and approvals for core programs not only reflect the quality of, and standards we set for NAU’s programs, but also enhances the marketability and improves the attractiveness of NAU’s graduates.

Intellectual Property

We publish intellectual property policies in NAU’s faculty handbook and the employee handbook that outline the ownership of creative works and inventions produced by employees within the scope of their employment at the university, compliance with copyright law, the use of the university’s copyrighted materials and related conflicts of interest.  When the university hires content experts to develop curriculum, the university enters into agreements to confirm that all materials created under the scope of the agreement become the university’s exclusive intellectual property.  The agreement also includes provisions that require the curriculum developer to comply with all laws or regulations related to copyright and the use of copyrighted materials and not to engage in activities that would constitute copyright infringement.  Curriculum designers also receive a copy of the university-developed Copyright Fundamentals for NAU Online Course Developers for review prior to project initiation.

We rely on a combination of copyrights, trademarks, service marks, trade secrets, domain names and agreements with third parties to protect our proprietary rights.  Through its extensive development of electronic instructional materials, on-campus and on-line courseware and related processes, we continue to accumulate copyrighted material and knowledge that has provided the basis for improving quality of instruction, programs and services to NAU’s students.  These assets continue to be leveraged by providing these products and services to multiple external constituents as well.  Our strategic plan calls for continued and extensive investment in maintaining and expanding these assets.

We rely on trademark and service mark protections in the United States and other countries for NAU’s name and distinctive logos, along with various other trademarks and service marks related to specific offerings.  We own or have filed the following trademark applications and registrations.

   
Country
 
Application
       
Mark
 
Number
 
Number
   
Registration
 
                     
NATIONAL AMERICAN UNIVERSITY
 
Bolivia
    108235       108235  
NATIONAL AMERICAN UNIVERSITY
 
Canada
    916679          
THE ONLINE INSTITUTE FOR EXCELLENCE
                   
AND SUCCESS
 
Canada
    1105540       609544  
TOIES
 
Canada
    1105539       597503  
NATIONAL AMERICAN UNIVERSITY
 
Chile
    718156       771228  
NATIONAL AMERICAN UNIVERSITY
 
European
    08230294          
   
Community
               
NAU
 
European
    08230336          
   
Community
               
NATIONAL AMERICAN UNIVERSITY
 
India
    1353648       1353648  
BEST OF BOTH WORLDS − IDP
 
US
    75/774,888       2,454,023  
NATIONAL AMERICAN UNIVERSITY
 
US
    75/249,751       2,220,866  
NAU
 
US
    75/249,753       2,202,126  
ONE DAY, ONE NIGHT, SATURDAY’S ALL
                   
RIGHT, ONLINE’S JUST FINE, NIGHTTIME,
                   
ANYTIME, GET YOUR DEGREE, SET
                   
YOURSELF FREE, NATIONAL AMERICAN
                   
UNIVERSITY
 
US
    76/595,599       3,047,681  
SUCCESSFUL COLLEGES
 
US
    78,745,253       3,239,049  
THE INSTITUTE OF EXCELLENCE AND
                   
SUCCESS
 
US
    78/745,249          
THE ONLINE INSTITUTE FOR EXCELLENCE
                   
AND SUCCESS
 
US
    76/190,984       2,622,131  
TOIES
 
US
    76/190,985       2,622,132  
 
 
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We also own domain name rights to ‘‘national.edu,’’ as well as to the following domain names.

• NAUONLINE.EDU
• DISTANCENAU.COM
• DISTANCENAU.INFO
• DISTANCENAU.NET
• DISTANCENAU.ORG
• DISTANCENAU.US
• ITJUSTFITS.COM
• NATIONALAMERICANONLINE.COM
• NATIONALAMERICANONLINE.INFO
• NATIONALAMERICANONLINE.NET
• NATIONALAMERICANONLINE.ORG
• NATIONALAMERICANONLINE.US
• NATIONALAMERICANUNIVERSITY.INFO
• NATIONALAMERICANUNIVERSITY.MOBI
• NATIONALAMERICANUNIVERSITY.US
• NATIONALAMERICANUNIVERSITYONLINE.INFO
• NATIONALAMERICANUNIVERSITYONLINE.NET
• NATIONALAMERICANUNIVERSITYONLINE.ORG
• NATIONALAMERICANUNIVERSITYONLINE.US
• NAUDISTANCE.COM
• NAUDISTANCE.INFO

 
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• NAUDISTANCE.NET
• NAUDISTANCE.ORG
• NAUDISTANCE.US
• NAUONLINE.INFO
• NAUONLINE.MOBI
• NAUONLINE.NET
• NAUONLINE.ORG
• NAUONLINE.US
• NAUPROGRAM.COM
• NAUPROGRAM.INFO
• ONEDAYONENIGHT.COM
• ONEDAYONENIGHT.INFO
• ONEDAYONENIGHT.NET
• ONEDAYONENIGHT.ORG
• WDT2NAU.COM

Environmental

NAU’s facilities and operations are subject to a variety of environmental laws and regulations governing, among other things, the use, storage and disposal of solid and hazardous substances and waste, and the clean-up of contamination at its facilities or off-site locations to which it sends or has sent waste for disposal.  NAU is also required to obtain permits for air emissions, and to meet operational and maintenance requirements.  In the event we do not maintain compliance with any of these laws and regulations, or are responsible for a spill or release of hazardous materials, we could incur significant costs for clean-up, damages, and fines or penalties.

Business Expansion and Development

We engage in an extensive planning and evaluation process to determine the manner in which we expand programs and services to NAU’s students.  We evaluate these developmental programs and initiatives with a long-term focus.  Long-range planning has included and may, in the future, include a calculated expansion of additional campuses and education centers, developing new forms of educational delivery systems and academic programs into current and new geographical regions in response to our management’s analyses of market and related trends.  New sites are only opened after extended analysis of regional markets and demand.

Our strategic plan includes a process whereby market evaluation is performed through outsourcing to outside experts as well as extensive internal analysis.  These market findings are subsequently evaluated and incorporated into the system strategic plan as part of the phased expansion of degree offerings and campus and education center locations.  Further, we incorporate an international perspective into our planning processes.  Other types of growth initiatives include developing internal programs to increase institutional effectiveness, expanding institutional assessment initiatives, developing processes to better serve online students and developing and maintaining a viable curriculum.  During the past two fiscal years, we spent approximately $8,045,000 on business expansion and development activities, including to support expansion of our distance learning operations, development of new education sites and expansion of academic program offerings.

 
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Approach to Academic Quality

Some of the key elements we focus on to promote a high level of academic quality include:

Academically rigorous, career-oriented curricula.   We create academically rigorous curricula designed to enable all students to gain the foundational knowledge, professional competencies and demonstrable skills required to be successful in their chosen fields.  NAU’s performance-based curriculum is designed and delivered by our faculty who are committed to delivering a high quality, rigorous education.  We design our curricula to address specific career-oriented objectives we believe working adult students are seeking.

Qualified faculty.   We are committed to providing high-quality education.  Therefore, we seek to hire and contract with qualified faculty with relevant practical experience.  A substantial percentage of NAU’s current faculty members hold graduate degrees.  Many of NAU’s faculty members are able to integrate relevant, practical experiences from their professional careers into the courses they teach.  We invest in the professional development of NAU’s faculty members by providing training in campus and online teaching techniques, hosting events and discussion forums that foster sharing of best practices and continually assessing teaching effectiveness through administrative reviews and student evaluations.

Standardized course design.   We employ a standardized curriculum development process to ensure consistent active learning experiences in NAU’s courses.  We thereafter continuously review our programs in an effort to ensure they remain consistent, up-to-date and effective in producing the desired student learning outcomes.  We also regularly review student survey data to identify opportunities for course modifications and upgrades.

Effective learner services. We establish teams comprised of academic and administrative personnel who act as the primary support for our students, beginning at the application stage and continuing through graduation.  In recent years, we have also concentrated on improving the technology used to support student learning, including enhancing our online learning platform and further improving learner services.  As a result, many of our support services, including academic, administrative, library and career services, are accessible online, generally allowing users to access these services at a time and in a manner convenient to them.

Continual academic oversight.   The academic oversight and assessment functions for all of NAU’s programs are conducted through the provost’s office and other academic offices, who continuously evaluate the academic content, delivery method, faculty performance and desired student learning outcomes for each of the programs.  We continuously assess outcomes data to determine whether the students graduate with the knowledge, competencies and skills necessary to succeed in the workplace.  The provost also initiates and manages periodic examinations of NAU’s curricula to evaluate and verify program quality and workplace applicability.  Based on these processes and student feedback, we determine whether to modify or discontinue programs that do not meet our standards or market needs, or to create new programs.  The provost also oversees regular reviews of the university’s programs conducted by accrediting commissions.

 
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Technology Systems

We remain focused on leveraging the use of technology to increase the effectiveness of our operations and ensuring that both students and employees are trained to use appropriate and relevant technologies and equipment.  This commitment translates not only into institutional expenditures that represent an important budgeting factor, but also appropriate orientation and training in the use of this technology.  In 2005, we migrated from an aging frame-relay WAN to an all-IP MPLS network with a standard LAN configuration.  We believe that this establishes a secure, reliable, scalable technology system that provides a high quality online educational environment and also gives the university the capability to substantially grow its online programs and enrollment.

In 2000, we implemented a student management system called CampusVue TM , a secure, windows-based application having multiple functions, including the support of daily operations and the collection of historical data.  The data housed within CampusVue TM is shared across all campuses.

Using Microsoft SharePoint® software as an operational framework, we created a secure intranet called MyNAU in 2006.  We believe MyNAU has improved organizational effectiveness by providing comprehensive content management with search capabilities that facilitates information sharing across the university’s system.  Moreover, the implementation of MyNAU also provided employees shared access to information needed for the university to run efficiently.

In July 2003, we purchased and implemented the Microsoft Dynamics GP® (formerly Great Plains) accounting software.  Microsoft Dynamics GP® is a business/accounting software program that has allowed the university to manage all of its accounting and human resources functions.  The program also collects and maintains historical data regarding the finances of the university and enables users to access historical data.  The software provides a broad range of flexible, customizable analytics, reporting and budgeting options to meet the university’s needs, from advanced analysis to the simplest reporting requests.

As part of a comprehensive IT upgrade, we purchased a software package in 2000 to assist in the management and support of the students’, faculty’s and staff’s interaction with technology.  HelpSTARTM addresses functions including problem management and workflow, knowledge management, asset management, data analysis and reporting.  HelpSTARTM’s logging, routing, scheduling and event-monitoring features ensure that technology issues are effectively tracked from creation to resolution.

WebCTTM is an Internet-based learning management system that allows the university to offer distance learning classes to students entirely over the Internet.  The features of this product include content organization and display, synchronous and asynchronous chat, private messaging, quizzing and assignment submission and student tracking and grading.  The system is used to present online courses to both international and domestic students.

As a supplement to the WebCTTM learning management system, we purchased secondary applications to support synchronous communications.  These systems are used primarily to allow faculty, staff and students to communicate in real-time as a required or optional component of an asynchronous WebCTTM course.  These applications are also used to communicate with international affiliate institutions.  The systems provide users with voice-over-IP and video capabilities for live discussions and lectures on course topics.  Additionally, the software allows users to share presentations, Web sites and other media as a part of live discussions.  These live sessions are recorded and may be played back at any time for learners who were not able to participate in the live session or for those who desire to review the materials at a later time.

 
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We have also developed and deployed a Web-based system called TEAMS to meet the growing needs of online course delivery.  TEAMS closely integrates with the WebCTTM learning management system to deliver midpoint and end-of-course surveys to students, allows for automated loading of students into WebCTTM courses, provides automated storage and delivery of research papers, and aggregates critique results and faculty and staff participation information.  The system is designed to utilize the storage capability of a relational database to provide historical and real time information.

Recognizing the need to manage content used in the WebCTTM learning management system, we developed an internal system to input, organize, manage and display course materials.  This system is known as a learning object repository.  This software provides a word processor-style, Web-based, content entry and editing interface that allows content experts to directly create and edit course content.  Additionally, it organizes text, images, documents and multimedia resources in a relational database, allowing the university to more easily identify and re-task existing content for new projects and courses.  Finally, the system is integrated with the learning management system and is used to display and deliver content seamlessly through WebCTTM to students.

Legal Proceedings

From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of its business.  We are not at this time a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition, or results of operation.

Compliance with Applicable Laws

We strive to comply with applicable local, state and federal laws and regulations under the oversight of our general counsel and the efforts of administrative staff who implement compliance policies and procedures, including the following activities:

Institutional Compliance Program .  Our comprehensive institutional compliance program integrates and coordinates all significant requirements with which the university must comply by law, regulation or other binding rule or agreement. Under the program, we have:

• Established and communicated institutional principles designed to deter wrongdoing and to promote honest and ethical conduct;

• Developed communication policies and procedures;

• Designated a university compliance officer;

• Created a university compliance committee made up of representatives of major internal departments and headed by the institutional compliance officer;

 
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• Implemented a program to monitor compliance and, when gaps or violations occur, to develop responses to correct deficiencies in a timely manner; and

• Ensured the appropriate university department/governing body has identified appropriate disciplinary sanctions and has applied those sanctions when infractions occur.

Audits .   Audits are periodically conducted to assure compliance with applicable laws, including the following:

• Federal Title IV student financial assistance program compliance attestation examinations are conducted annually to determine compliance and to identify any needed correction of any deficiencies;

• An audit of 401(k) retirement plans is conducted annually to assure compliance with applicable laws and to assure the university is fulfilling its fiduciary duties; and

• Annual financial audit to ensure compliance with generally accepted accounting principles (GAAP).

Regulatory Matters

We are subject to extensive regulation by state education agencies, accrediting commissions and the United States federal government through the Department of Education under the Higher Education Act.  The regulations, standards and policies of these agencies cover the vast majority of NAU’s operations, including the educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, finances, results of operations and financial condition.

As an institution of higher education that grants degrees and certificates, NAU is required to be authorized by appropriate state education authorities.  In addition, in order to participate in the federal programs of student financial assistance for our students, NAU is required to be accredited by an accrediting commission recognized by the Department of Education.  Accreditation is a non-governmental process through which an institution submits to qualitative review by an organization of peer institutions, based on the standards of the accrediting commission and the stated aims and purposes of the institution.  The Higher Education Act requires accrediting commissions recognized by the Department of Education to review and monitor many aspects of an institution’s operations and to take appropriate action if the institution fails to meet the accrediting commission’s standards.

NAU’s operations are also subject to regulation by the Department of Education due to its participation in federal student financial aid programs under Title IV of the Higher Education Act, referred to as the Title IV programs.  The Title IV programs include educational loans with below-market interest rates that are guaranteed by the federal government in the event of a student’s default on repaying the loan, educational loans provided directly by the federal government, and also grant programs for students with demonstrated financial need.  To participate in the Title IV programs, a school must receive and maintain authorization by the appropriate state education agency or agencies, be accredited by an accrediting commission recognized by the Department of Education, and be certified as an eligible institution by the Department of Education.

 
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We plan and implement NAU’s business activities to comply with the standards of these regulatory agencies.  Our chief financial officer, chief administrative officer and general counsel also provide oversight designed to ensure that NAU meets the requirements of this regulatory environment.

State Education Licensure and Regulation

NAU is required by the Higher Education Act to be authorized by applicable state educational agencies in South Dakota and other states where it is located in order to participate in the Title IV programs.  In South Dakota, where NAU’s operations are headquartered, the state does not specifically regulate or authorize the degrees or educational programs of private, regionally accredited institutions of higher education.  If South Dakota were to enact legislation or regulations to regulate private, regionally accredited institutions of higher education, including NAU, the failure by us to obtain and maintain any required authorization to operate and offer educational programs in South Dakota would cause NAU to lose its eligibility to participate in the Title IV programs.

In addition to South Dakota, we operate NAU’s physical facilities offering educational programs in Colorado, Kansas, Minnesota, Missouri, New Mexico and Texas.  In each of these states, we either maintain authorization or have received written confirmation that no express authorization is required from pertinent state educational agencies in order to offer our educational programs.  Where required under applicable law, these authorizations from state educational agencies are very important to us and the university.  To maintain requisite state authorizations, NAU is required to continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs and various operational and administrative procedures.  Failure to comply with applicable requirements of the state educational agencies in Colorado, Kansas, Minnesota, Missouri, New Mexico and Texas could result in NAU losing its authorization to offer educational programs in those state(s).  In this event, the state educational agency could force us to cease operations in such state(s).  Even if the state educational agency does not require the university to cease operations on an immediate basis, the loss of authorization by the state educational agency in such state(s) would then cause our campuses in such state(s) to lose eligibility to participate in the Title IV programs, and such loss of Title IV program eligibility could force us to cease operations in such state(s).  Alternatively, the state educational licensing agencies could restrict our ability to offer certain degree programs.

NAU’s activities in certain other states constitute a presence requiring licensure or authorization under the requirements of the state education agency in those states, even though NAU does not have a physical facility in such states.  Therefore, in addition to South Dakota, Colorado, Kansas, Minnesota, Missouri, New Mexico and Texas, each in which NAU does maintain physical facilities, we have obtained such approvals as we have determined to be necessary in connection with NAU’s activities in such states which we believe constitute a presence requiring licensure or authorization by the state educational agency.  We review the licensure requirements of other states when appropriate to determine whether NAU’s activities in those states constitute a presence or otherwise require licensure or authorization by the respective state education agencies.

 
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NAU is subject to extensive regulations by the states in which it is authorized or licensed to operate.  State laws and regulations typically establish standards in areas such as instruction, qualifications of faculty, administrative procedures, marketing, recruiting, financial operations, and other operational matters, which can be different than and conflict with the requirements of the Department of Education and other applicable regulatory bodies.  State laws and regulations may limit NAU’s ability to offer educational programs and offer certain degrees.  Some states may also prescribe financial regulations that are different from those of the Department of Education and many require the posting of surety bonds.  If NAU fails to comply with state licensing requirements, it may lose its state licensure or authorizations.  If NAU loses state licensure in a state in which it has a physical location, it would also lose Title IV eligibility in that state.

In addition, several states have sought to assert jurisdiction over educational institutions offering online degree programs that have no physical location or other presence in the state but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state.  State regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and can change frequently.  Because NAU enrolls students in all 50 states and the District of Columbia, it expects that other state regulatory authorities may request that we seek licensure or authorization in their states in the future.  New laws, regulations or interpretations related to doing business over the Internet could increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, negatively affect enrollments and revenues and have a material adverse effect on our business.

We believe NAU is licensed or authorized in those jurisdictions where a license or authorization is currently required, and we do not believe that any of the states in which NAU is currently licensed or authorized, other than South Dakota, Colorado, Kansas, Minnesota, Missouri, New Mexico and Texas, are individually material to our operations.  Although we believe that we will be able to comply with additional state licensing or authorization requirements that may arise or be asserted in the future, if we fail to comply with state licensing or authorization requirements for a state, or fail to obtain licenses or authorizations when required, NAU could lose its state licensure or authorization by that state, which could prohibit NAU from recruiting prospective students or offering services to current students in that state.  NAU could also be subject to other sanctions, including restrictions on activities in that state, fines, and penalties.  The loss of licensure or authorization in certain states could prohibit NAU from recruiting prospective students or offering services to current students in that state, which could significantly reduce NAU’s enrollments.

State Professional Licensure

Many states have specific licensure requirements that an individual must satisfy in order to be licensed as a professional in specified fields, including fields such as education and healthcare.  These requirements vary by state and by field.  A student’s success in obtaining licensure following graduation typically depends on several factors, including the background and qualifications of the individual graduate, as well as the following factors, among others:

• whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association;

• whether the program from which the student graduated meets all requirements for professional licensure in that state;

 
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• whether the institution and the program are accredited and, if so, by what accrediting commissions; and

• whether the institution’s degrees are recognized by other states in which a student may seek to work.

Many states also require that graduates pass a state test or examination as a prerequisite to becoming certified in certain fields, such as teaching and nursing.  Many states also may require a criminal background clearance before granting certain professional licensures or certifications.  NAU’s catalog informs students that it is incumbent upon the student to verify whether a specific criminal background clearance is required in their field of study prior to beginning course work.

Accreditation

NAU has been institutionally accredited since 1979 by the Higher Learning Commission of the North Central Association of Colleges and Schools (the “Higher Learning Commission”), a regional accrediting commission recognized by the Department of Education.  NAU’s accreditation was reaffirmed in 2008 for the maximum term of 10 years as part of a regularly scheduled reaffirmation process.  Accreditation is a private, non-governmental process for evaluating the quality of educational institutions and their programs in areas including student performance, governance, integrity, educational quality, faculty, physical resources, administrative capability and resources and financial stability.  To be recognized by the Department of Education, accrediting commissions must adopt specific standards for their review of educational institutions, conduct peer-review evaluations of institutions and publicly designate those institutions that meet their criteria.  An accredited school is subject to periodic review by its accrediting commissions to determine whether it continues to meet the performance, integrity and quality required for accreditation.

There are six regional accrediting commissions recognized by the Department of Education, each with a specified geographic scope of coverage, which together cover the entire United States.  Most traditional, public and private non-profit, degree-granting colleges and universities are accredited by one of these six regional accrediting commissions.  The Higher Learning Commission, which accredits NAU, is the same regional accrediting commission that accredits other degree-granting public and private colleges and universities in the states of Arizona, Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, West Virginia, Wisconsin, and Wyoming.

Accreditation by the Higher Learning Commission is important to NAU for several reasons, including the fact that it enables NAU’s students to receive Title IV financial aid.  Other colleges and universities depend, in part, on an institution’s accreditation in evaluating transfers of credit and applications to graduate schools.  Employers rely on the accredited status of institutions when evaluating candidates’ credentials, and students and corporate and government sponsors under tuition reimbursement programs look to accreditation for assurance that an institution maintains quality educational standards.  If NAU fails to satisfy the standards of the Higher Learning Commission, it could lose its accreditation by that agency, which would cause it to lose its eligibility to participate in the Title IV programs.

 
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The reauthorization of the Higher Education Act in 2008, and final regulations issued by the Department of Education, in October of 2009, which will be effective July 1, 2010, require accrediting commissions to monitor the growth of programs at institutions that are experiencing significant enrollment growth.  The Higher Learning Commission requires all affiliated institutions, including NAU, to complete an annual data report.  If the non-financial data, particularly enrollment information, and any other information submitted by the institution indicate problems, rapid change, or significant growth, the Higher Learning Commission staff may require that the institution address any concerns arising from the data report in the next self-study and visit process or may recommend additional monitoring.  In addition, the Department of Education has issued final regulations, which will take effect on July 1, 2010, that require the Higher Learning Commission to notify the Department of Education if an institution it accredits that offers distance learning programs, such as NAU, experiences an increase in its headcount enrollment of 50 percent or more in any fiscal year.  The Department of Education may consider that information in connection with its own regulatory oversight activities.

In addition to institution-wide accreditation, there are numerous specialized accrediting commissions that accredit specific programs or schools within their jurisdiction, many of which are in healthcare and professional fields.  Accreditation of specific programs by one of these specialized accrediting commissions signifies that those programs have met the additional standards of those agencies.  In addition to being accredited by the Higher Learning Commission, NAU also has the following specialized accreditations:

• The Commission on Accreditation of Athletic Training Education (formerly the Commission on Accreditation of Allied Health Education Programs, Joint Review Committee on Education Programs in Athletic Training) accredits NAU’s athletic training education program (on probation, with status report due December 1, 2009).

• The Commission on Accreditation of Allied Health Education Programs, on the recommendation of the Curriculum Review Board of the American Association of Medical Assistants Endowment, accredits NAU’s medical assisting programs offered in Colorado Springs, Colorado, Denver, Colorado, Overland Park, Kansas, Bloomington, Minnesota, Roseville, Minnesota, Albuquerque, New Mexico, and Sioux Falls, South Dakota.

• The Committee on Veterinary Technician Education and Activities of the American Veterinary Medical Association accredits NAU’s veterinary technology program.

• The International Assembly for Collegiate Business Education accredits NAU’s Master of Business Administration, Master of Management, Bachelor of Science in Applied Management, Bachelor of Science in Applied Management with an emphasis in Equine Management, Bachelor of Science in Accounting, Bachelor of Science in Business Administration, Bachelor of Science in Business Administration with an emphasis in Accounting, Financial Management, Hospitality Management, Human Resource Management, Information Systems, International Business, Management, Marketing, Pre-Law and Tourism Management, Associate of Applied Science in Applied Management, Associate of Applied Science in Business Administration and Associate of Applied Science in Accounting degree programs.

• The National League for Nursing Accrediting Commission accredits NAU’s Associate of Science in Nursing program for NAU’s location in Kansas City, Missouri, and has awarded candidate status for NAU’s Associate of Science in Nursing program for spring 2008 through fall 2009 for NAU’s locations in Denver, Colorado, and Overland Park, Kansas, and has awarded candidate status for NAU’s online Registered Nurse to Bachelor of Science in Nursing program for fall 2008 through spring 2010 for NAU’s location in Rapid City, South Dakota.

 
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• The Standing Committee on Paralegals of the American Bar Association approves NAU’s paralegal studies program offered in Rapid City, South Dakota.

If NAU fails to satisfy the standards of any of these specialized accrediting commissions, NAU could lose the specialized accreditation for the affected programs, which could result in materially reduced student enrollments in those programs.

Regulation of Federal Student Financial Aid Programs

To be eligible to participate in the Title IV programs, an institution must comply with specific requirements contained in the Higher Education Act and the regulations issued thereunder by the United States Department of Education.  An institution must, among other things, be licensed or authorized to offer its educational programs by the state or states in which it is physically located (in NAU’s case, South Dakota, Colorado, Kansas, Minnesota, Missouri, New Mexico and Texas) and maintain institutional accreditation by an accrediting commission recognized by the Department of Education.

The substantial amount of federal funds disbursed to schools through the Title IV programs, the large number of students and institutions participating in these programs, and allegations of fraud and abuse by certain for-profit educational institutions have caused Congress to require the Department of Education to exercise considerable regulatory oversight over for-profit educational institutions.  As a result, for-profit educational institutions, including NAU, are subject to extensive oversight and review.  Because the Department of Education periodically revises its regulations (as is currently underway in connection with the August 2008 reauthorization of the Higher Education Act described below) and changes its interpretations of existing laws and regulations, NAU cannot predict with certainty how the Title IV program requirements will be applied in all circumstances.

Significant factors relating to the Title IV programs that could adversely affect NAU include the following:

Congressional action .   Congress must reauthorize the Higher Education Act on a periodic basis, usually every five to six years, and the most recent reauthorization occurred in August 2008.  The reauthorized Higher Education Act reauthorized all of the Title IV programs in which NAU participates, but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to the relationships between institutions and lenders that make student loans, student loan default rates and the formula for revenue that institutions are permitted to derive from the Title IV programs.  Prior to the reauthorization, the College Cost Reduction and Access Act, enacted in September 2007, significantly reduced subsidies to the Federal Family Education Loan (“FFEL”) lenders and guarantors as an offset to increases in other Title IV programs.  This, in turn, reduced the profitability of the FFEL program for many lenders and also resulted in significant changes to the terms of loans that providers of alternative loans (i.e., non-governmental loans) to students were willing to make.  Lenders have experienced difficulty in securing funding through the debt markets for FFEL program loans; however, since the May 2008 enactment of the Ensuring Continued Access to Student Loans Act, the Department of Education has provided liquidity support to FFEL lenders by purchasing loans and providing long term financing for FFEL loans.  This program was designed to continue access by students and parents to FFEL loans in the future.  Congress is presently considering legislation to eliminate the FFEL program and administer all Title IV loans through the Federal Direct Loan program.  NAU is not in a position to predict with certainty whether any of the pending legislation will be enacted.  Further, on September 21, 2009, the U.S. Government Accountability Office publicly released an August 2009 report to Congress recommending stronger oversight by the Department of Education of certain aspects of the Title IV programs.  This report has lead to Congressional hearings, and it is possible that it could lead to revisions to the Higher Education Act or changes to Department of Education regulations.  The elimination of certain Title IV programs, material changes in the requirements for participation in such programs or the substitution of materially different programs could increase NAU’s costs of compliance and could reduce the ability of some students to finance their education at NAU.

 
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In addition, Congress must determine the funding levels for the Title IV programs on an annual basis through the budget and appropriations process.  A reduction in federal funding levels for the Title IV programs could reduce the ability of some students to finance their education.  The loss of or a significant reduction in Title IV program funds available to NAU’s students could reduce NAU’s enrollments and revenue and possibly have a material adverse effect on our business.

Eligibility and certification procedures.   Each institution must apply periodically to the Department of Education for continued certification to participate in the Title IV programs.  Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control.  An institution may also come under the Department of Education’s review when it expands its activities in certain ways, such as opening an additional location, adding a new educational program or modifying the academic credentials it offers.  The Department of Education may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control.  The basis for NAU’s provisional certification was its failure to meet the Department of Education’s standards of financial responsibility.  During the period of provisional certification, the institution must comply with any additional conditions included in the school’s program participation agreement with the Department of Education.  In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another school, or make any other significant change.  If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution’s certification to participate in the Title IV programs without advance notice or opportunity for the institution to challenge the action.  Students attending provisionally certified institutions remain eligible to receive Title IV program funds.

Since March 2008, NAU has been certified to participate in the Title IV programs on a provisional basis, with such certification extending through June 30, 2010. The Department of Education’s February 2008 recertification with provisional status required that NAU post a letter of credit in an amount representing 10% of the Title IV program funds received by NAU during its most recently completed fiscal year, receive Title IV program funds under the heightened cash monitoring payment method, and comply with certain other reporting requirements.  The Department has informed NAU that the letter of credit must be maintained following the Transaction, and that NAU will continue to receive Title IV program funds under the heightened cash monitoring payment method.

 
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Administrative capability.   Department of Education regulations specify extensive criteria by which an institution must establish that it has the requisite “administrative capability” to participate in the Title IV programs.  To meet the administrative capability standards, an institution must, among other things:

• comply with all applicable Title IV program requirements;

• have an adequate number of qualified personnel to administer the Title IV programs;

• have acceptable standards for measuring the satisfactory academic progress of its students;

• not have student loan cohort default rates above specified levels;

•   have various procedures in place for awarding, disbursing and safeguarding Title IV program funds and for maintaining required records;

• administer the Title IV programs with adequate checks and balances in its system of internal controls;

• not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;

• provide financial aid counseling to its students;

• refer to the Department of Education’s Office of Inspector General any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving the Title IV programs;

• submit all required reports and financial statements in a timely manner; and

• not otherwise appear to lack administrative capability.

If an institution fails to satisfy any of these criteria, the Department of Education may:

• require the institution to repay Title IV funds its students previously received;

• transfer the institution from the advance method of payment of Title IV funds to heightened cash monitoring status or the reimbursement method of payment;

• place the institution on provisional certification status; or

• commence a proceeding to impose a fine or to limit, suspend or terminate the institution’s participation in the Title IV programs.

If NAU is found not to have satisfied the Department of Education’s administrative capability requirements, then the students could lose, or be limited in their access to, Title IV program funding.

 
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Financial responsibility.   The Higher Education Act and Department of Education regulations establish extensive standards of financial responsibility that institutions such as NAU must satisfy in order to participate in the Title IV programs.  The Department of Education evaluates institutions for compliance with these standards on an annual basis based on the institution’s annual audited financial statements as well as when the institution applies to the Department of Education to have its eligibility to participate in the Title IV programs recertified.  The most significant financial responsibility standard is the institution’s composite score, which is derived from a formula established by the Department of Education based on three financial ratios:

• equity ratio, which measures the institution’s capital resources, financial viability and ability to borrow;

• primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and

• net income ratio, which measures the institution’s ability to operate at a profit or within its means.

The Department of Education assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength.  The Department of Education then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to produce a composite score for the institution.  The composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further Department of Education oversight.  In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations including required refunds to students and any Title IV liabilities and debts, be current in its debt payments and not receive an adverse, qualified or disclaimed opinion by its accountants in its audited financial statements.

If the Department of Education determines that an institution does not meet the financial responsibility standards due to a failure to meet the composite score or other factors, the institution should be able to establish financial responsibility on an alternative basis permitted by the Department of Education.  This alternative basis could include, in the Department’s discretion, posting a letter of credit, accepting provisional certification, complying with additional Department of Education monitoring requirements, agreeing to receive Title IV program funds under an arrangement other than the Department of Education’s standard advance
funding arrangement, such as the reimbursement method of payment or heightened cash monitoring or complying with or accepting other limitations on the institution’s ability to increase the number of programs it offers or the number of students it enrolls.

Based on NAU’s composite score for its fiscal year ending May 31, 2007 and continuing for NAU’s fiscal year ending May 31, 2008, the Department of Education determined that NAU failed to meet the standards of financial responsibility.  The Department therefore has required NAU to participate in the Title IV programs under an alternative basis of financial responsibility requiring provisional certification, the posting of a letter of credit representing 10% of the Title IV program funds received by NAU during its most recently completed fiscal year, the receipt of Title IV program funds under the heightened cash monitoring payment method and compliance with certain other reporting requirements.  The Department has informed NAU that this letter of credit must be maintained following the Transaction and that NAU will continue to receive Title IV program funds under the heightened cash monitoring payment method.

 
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The requirement to post or maintain a letter of credit or other sanctions imposed by the Department of Education has increased our cost of regulatory compliance and affected our cash flows.  If NAU is unable to meet the minimum composite score or comply with the other standards of financial responsibility, and could not post a required letter of credit or comply with the alternative bases for establishing financial responsibility, then NAU’s students could lose their access to Title IV program funding.

Return of Title IV funds for students who withdraw.   When a student who has received Title IV funds withdraws from school, the institution must determine the amount of Title IV program funds the student has “earned.”  If the student withdraws during the first 60% of any period of enrollment or payment period, the amount of Title IV program funds that the student has earned is equal to a pro rata portion of the funds the student received or for which the student would otherwise be eligible.  If the student withdraws after the 60% threshold, then the student is deemed to have earned 100% of the Title IV program funds he or she received.  The institution must then return the unearned Title IV program funds to the appropriate lender or the Department of Education in a timely manner, which is generally no later than 45 days after the date the institution determined that the student withdrew.  If such payments are not timely made, the institution will be required to submit a letter of credit to the Department of Education equal to 25% of the Title IV funds that the institution should have returned for withdrawn students in its most recently completed fiscal year.  Under Department of Education regulations, late returns of Title IV program funds for 5% or more of the withdrawn students in the audit sample in the institution’s annual Title IV compliance audit for either of the institution’s two most recent fiscal years or in a Department of Education program review triggers this letter of credit requirement.  NAU did not exceed this 5% threshold in its annual Title IV compliance audit for either of its two most recent fiscal years.

The “90/10 Rule.”   A requirement of the Higher Education Act commonly referred to as the “90/10 Rule” provides that an institution loses its eligibility to participate in the Title IV programs, if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenue, the institution derives more than 90% of its revenues for any fiscal year from Title IV program funds.  This rule applies only to for-profit postsecondary educational institutions, including NAU.  Prior to the August 2008 reauthorization of the Higher Education Act, an institution that violated the rule became ineligible to participate in the Title IV programs as of the first day of the fiscal year following the fiscal year in which it exceeded the 90% threshold, and it was unable to apply to regain its eligibility until the next fiscal year.  If an institution exceeded the 90% threshold for a fiscal year and it and its students had received Title IV funds for the next fiscal year, it was required to return those funds to the applicable lender or the Department of Education.  The August 2008 reauthorization of the Higher Education Act included significant revisions to the “90/10 Rule,” effective upon the date of the law’s enactment.  Under the revised law, an institution is subject to loss of eligibility to participate in the Title IV programs only if it exceeds the 90% threshold for two consecutive years, and an institution whose rate exceeds 90% for any single year will be placed on provisional certification.

 
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Using the Department of Education’s formula under the “90/10 Rule,” for NAU’s 2007 and 2008 fiscal years, as promulgated prior to regulatory revisions implementing the August 2008 reauthorization of the Higher Education Act, NAU derived approximately 62.9 percent and 67.65 percent, respectively, of its revenues (calculated on a cash basis) from Title IV program funds.  For NAU’s 2009 fiscal year, NAU derived approximately 71.6 percent of its revenues (calculated on a cash basis) from Title IV program funds.  Recent changes in federal law that increased Title IV grant and loan limits, and any additional increases in the future, may result in an increase in the revenues NAU receives from the Title IV programs, which could make it more difficult for NAU to satisfy the “90/10 Rule.”  In addition, economic downturns that adversely affect students’ employment circumstances could also increase their reliance on Title IV programs.  However, such effects may be mitigated by other provisions of the recent Higher Education Act reauthorization that allow institutions, when calculating their compliance with this revenue test, to exclude from their Title IV revenues through June 30, 2011 the additional federal student loan amounts that became available July 1, 2008 under the Ensuring Continued Access to Student Loans Act, and to include more non-Title IV revenues, such as revenues from institutional loans under certain circumstances.

Student loan defaults.   Under the Higher Education Act, an educational institution may lose its eligibility to participate in some or all of the Title IV programs if defaults by its students on the repayment of loans received through either the FFEL or the Federal Direct Loan (“Direct Loan”) programs exceed certain levels.  For each federal fiscal year, the Department of Education calculates a rate of student defaults on such loans for each institution, known as a “cohort default rate”.  An institution’s cohort default rate for a federal fiscal year is calculated by determining the rate at which borrowers who became subject to their repayment obligation in that federal fiscal year defaulted by the end of the following federal fiscal year.

If the Department of Education notifies an institution that its cohort default rates for each of the three most recent federal fiscal years are 25% or greater, the institution’s participation in the FFEL and Direct Loan programs, and the Pell Grant program, ends 30 days after that notification, unless the institution appeals that determination in a timely manner on specified grounds and according to specified procedures.  In addition, an institution’s participation in the FFEL and Direct Loan programs ends 30 days after notification by the Department of Education that its most recent cohort default rate is greater than 40%, unless the institution timely appeals that determination on specified grounds and according to specified procedures.  An institution whose participation ends under either of these provisions may not participate in the relevant programs for the remainder of the fiscal year in which the institution receives the notification and for the next two fiscal years.

If an institution’s FFEL and Direct Loan cohort default rate equals or exceeds 25% in any single year, the institution may be placed on provisional certification status.  Provisional certification does not limit an institution’s access to Title IV program funds, but an institution on provisional status is subject to closer review by the Department of Education if it applies for recertification or approval to open a new location, add an educational program, acquire another school, or make any other significant change, and the Department of Education may revoke such institution’s certification without advance notice if it determines that the institution is not fulfilling material Title IV program requirements.  NAU is approved to participate in both the FFEL and Direct Loan programs; however, its students to date have not borrowed through the Direct Loan program.  If NAU’s students begin taking out loans under the Direct Loan program, those loans will be combined with NAU’s FFEL loans in calculating NAU’s annual student loan cohort default rate.  In such case, the potential sanctions discussed in this section would be based on the combined cohort default rate.  NAU’s official cohort default rates for the 2005, 2006, and 2007 federal fiscal years (the most recent federal fiscal years for which official cohort default rates have been issued by the Department of Education) were 7.5%, 7.3% and 8.2%, respectively.

 
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The August 2008 reauthorization of the Higher Education Act included significant revisions to the requirements concerning FFEL and Direct Loan cohort default rates.  Under the revised law, the period for which students’ defaults on their loans are included in the calculation of an institution’s cohort default rate has been extended by one additional year, which is expected to increase the cohort default rates for most institutions.  That change will be effective with the calculation of institutions’ cohort default rates for federal fiscal year 2009, which are expected to be calculated and issued by the Department of Education in 2012.  The revised law also increased the threshold for ending an institution’s participation in the relevant Title IV programs from 25% to 30%, effective in 2012.

Incentive compensation rule.    An institution that participates in the Title IV programs may not provide any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruitment, admissions or financial aid awarding activity.  The Department of Education’s current regulations set forth 12 “safe harbors” which describe payments and arrangements that do not violate the incentive compensation rule.  The Department of Education’s regulations make clear that the safe harbors are not a complete list of permissible practices under this law.  One of these safe harbors permits adjustments to fixed salary for enrollment personnel provided that such adjustments are not made more than twice during any twelve month period, and that any adjustment is not based solely on the number of students recruited, admitted, enrolled or awarded financial aid.  While we believe that NAU’s compensation policies and practices have not been based on success in enrolling students in violation of applicable law, the Department of Education’s regulations and interpretations of the incentive compensation law do not establish clear criteria for compliance in all circumstances and, in a limited number of instances, NAU’s actions have not been within the scope of any specific safe harbor provided in the regulations.  In addition, such safe harbors do not address non-cash awards to enrollment personnel.  The restrictions of the incentive compensation rule also extend to any third-party companies that an educational institution contracts with for student recruitment, admissions or financial aid awarding services.  In May 2009, the Department of Education announced that it was initiating a rulemaking process focused on, among other things, reviewing its regulations on incentive compensation, including the “safe harbor” provisions.  We cannot predict with certainty whether such rulemaking will result in any changes to regulations, including the current “safe harbors.”  Any changes to the Department of Education’s regulations could require us to modify or suspend our current NAU’s compensation practices which could harm our ability to attract and retain qualified personnel and could increase our costs of compliance.

In recent years, several for-profit education companies have been faced with whistleblower lawsuits, known as “qui tam” cases, brought by current or former employees alleging that their institution’s compensation practices did not comply with the incentive compensation rule.  A qui tam case is a civil lawsuit brought by one or more individuals (a “relator”) on behalf of the federal government for an alleged submission to the government of a false claim for payment.  The relator, often a current or former employee, is entitled to a share of the government’s recovery in the case, including the possibility of treble damages.  A qui tam action is always filed under seal and remains under seal until the government decides whether to intervene in the case.  If the government intervenes, it takes over primary control of the litigation.  If the government declines to intervene in the case, the relator may nonetheless elect to continue to pursue the litigation at his or her own expense on behalf of the government.

 
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Compliance reviews.   NAU is subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department of Education, its Office of Inspector General, state licensing agencies, agencies that guarantee FFEL loans, various state approving agencies for financial assistance to veterans and accrediting commissions.  As part of the Department of Education’s ongoing monitoring of institutions’ administration of the Title IV programs, the Higher Education Act also requires institutions to annually submit to the Department of Education a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and Department of Education audit standards.  In addition, to enable the Department of Education to make a determination of an institution’s financial responsibility, each institution must annually submit audited financial statements prepared in accordance with Department of Education regulations.

Privacy of student records.   The Family Educational Rights and Privacy Act of 1974, or FERPA, and the Department of Education’s FERPA regulations require educational institutions to protect the privacy of students’ educational records by limiting an institution’s disclosure of a student’s personally identifiable information without the student’s prior written consent.  FERPA also requires institutions to allow students to review and request changes to their educational records maintained by the institution, to notify students at least annually of this inspection right, and to maintain records in each student’s file listing requests for access to and disclosures of personally identifiable information and the interest of such party in that information.  If an institution fails to comply with FERPA, the Department of Education may require corrective actions by the institution or may terminate an institution’s receipt of further federal funds.  In addition, educational institutions are obligated to safeguard student information pursuant to the Gramm-Leach-Bliley Act, or GLBA, a federal law designed to protect consumers’ personal financial information held by financial institutions and other entities that provide financial services to consumers.  GLBA and the applicable GLBA regulations require an institution to, among other things, develop and maintain a comprehensive, written information security program designed to protect against the unauthorized disclosure of personally identifiable financial information of students, parents or other individuals with whom such institution has a customer relationship.  If an institution fails to comply with the applicable GLBA requirements, it may be required to take corrective actions, be subject to monitoring and oversight by the Federal Trade Commission, or FTC, and be subject to fines or penalties imposed by the FTC . For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the FTC with respect to their collection, use and disclosure of student information.  The institution must also comply with the FTC Red Flags Rule, a section of the federal Fair Credit Reporting Act, that requires the establishment of guidelines and policies regarding identity theft related to student credit accounts.

Potential effect of regulatory violations.   If NAU fails to comply with the regulatory standards governing the Title IV programs, the Department of Education could impose one or more sanctions, including transferring NAU to the reimbursement or cash monitoring method of payment, requiring NAU to repay Title IV program funds, requiring NAU to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against NAU, initiating proceedings to impose a fine or to limit, suspend or terminate NAU’s participation in the Title IV programs or referring the matter for civil or criminal prosecution.  Because NAU is provisionally certified to participate in the Title IV programs, the Department of Education may revoke the institution’s certification without advance notice or advance opportunity for the institution to challenge that action.  In addition, the agencies that guarantee FFEL loans for NAU’s students could initiate proceedings to limit, suspend, or terminate NAU’s eligibility to provide FFEL loans in the event of certain regulatory violations.  If such sanctions or proceedings were imposed against NAU and resulted in a substantial curtailment or termination of its participation in the Title IV programs, NAU’s enrollments, revenues, and results of operations would be materially and adversely affected.

 
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In addition to the actions that may be brought against NAU as a result of its participation in the Title IV programs, NAU is also subject to complaints and lawsuits relating to regulatory compliance brought not only by its regulatory agencies, but also by other government agencies and third parties, such as present or former students or employees and other members of the public.

Uncertainties, increased oversight and regulation and changes in student loan environment.   Since 2007, student loan programs, including Title IV and private programs, have come under increased scrutiny by the Department of Education, Congress, state attorneys general and other parties.  Issues that have received extensive attention include allegations of conflicts of interest between some institutions and lenders that provide student loans, questionable incentives given by lenders to some schools and school employees, allegations of deceptive practices in the marketing of student loans and schools leading students to use certain lenders.  Several institutions and lenders have been cited for these problems and have paid several million dollars in the aggregate to settle those claims.  The practices of numerous other schools and lenders were or are being examined by government agencies at the federal and state level.  As a result of this scrutiny, Congress has passed new laws, the Department of Education and the Board of Governors of the Federal Reserve System have enacted or proposed stricter regulations and several states have adopted codes of conduct or enacted state laws that further regulate the conduct of lenders, schools, and school personnel.  These new laws and regulations, among other things, limit schools’ relationships with lenders, restrict the types of services that schools may receive from lenders, prohibit lenders from providing other types of funding to schools in exchange for Title IV loan volume, require schools and lenders to provide additional information to students concerning institutionally preferred lenders and significantly reduce the amount of federal payments to lenders who participate in the Title IV loan programs.  Adverse market conditions for consumer loans in general have affected the student lending marketplace.  In addition, Congress presently is considering legislation to significantly modify or eliminate the FFEL program in favor of the Direct Loan program.

The cumulative impact of these developments and conditions has caused some lenders to cease providing Title IV or private loans to students, including some lenders that have previously provided Title IV or private loans to NAU’s students.  Other lenders have reduced the benefits and increased the fees associated with the Title IV or private loans they do provide.  NAU and other schools have had to modify student loan practices in ways that result in higher administrative costs.   If the costs of their Title IV or private loans increase, some students may decide not to take out loans and not enroll in a postsecondary institution.  In May 2008, new federal legislation was enacted to attempt to ensure that all eligible students would be able to obtain Title IV loans in the future and that a sufficient number of lenders would continue to provide Title IV loans. Among other things, the legislation:

• authorized the Department of Education to purchase Title IV loans from lenders, thereby providing capital to the lenders to enable them to continue making Title IV loans to students; and

 
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•   permitted the Department of Education to designate institutions eligible to participate in a “lender of last resort program, under which federally recognized student loan guaranty agencies would be required to make Title IV loans to all otherwise eligible students at those institutions.

We cannot predict whether this legislation ultimately will be effective in ensuring students’ access to Title IV loan funding.  The environment surrounding access to and cost of student loans remains in a state of flux, with reviews of institutions and lenders still pending and with additional legislative and regulatory changes being actively considered at the federal and state levels.  The uncertainty surrounding these issues, and any resolution of these issues that increases loan costs or reduces students’ access to Title IV loans, may adversely affect NAU’s student enrollments.

Regulatory Standards that May Restrict Institutional Expansion or Other Changes

Many actions that we may wish to take in connection with expanding our operations or other changes are subject to review or approval by the applicable regulatory agencies.

Adding teaching locations, implementing new educational programs, and increasing enrollment.   The requirements and standards of state education agencies, accrediting commissions, and the Department of Education limit our ability in certain instances to establish additional teaching locations, implement new educational programs, or increase enrollment in certain programs.  Many states require review and approval before institutions can add new locations or programs.   The state educational agencies, the Higher Learning Commission, and the specialized accrediting commissions that authorize or accredit NAU and its programs generally require institutions to notify them in advance of adding new locations or implementing new programs, and upon notification may undertake a review of the quality of the facility or the program and the financial, academic, and other qualifications of the institution.

With respect to the Department of Education, if an institution participating in the Title IV programs plans to add a new location or educational program, the institution must generally apply to the Department of Education to have the additional location or educational program designated as within the scope of the institution’s Title IV eligibility.  However, a degree-granting institution generally is not required to obtain the Department of Education’s approval of additional programs that lead to an associate, bachelor’s, professional, or graduate degree at the same degree level as programs previously approved by the Department of Education.  Similarly, an institution is not required to obtain advance approval for new programs that prepare students for gainful employment in the same or a related recognized occupation as an educational program that has previously been designated by the Department of Education as an eligible program at that institution if it meets certain minimum-length requirements.  However, as a condition for an institution to participate in the Title IV programs on a provisional basis, as in the case of NAU, the Department of Education can require prior approval of such programs or otherwise restrict the number of programs an institution may add or the extent to which an institution can modify existing educational programs.  If an institution that is required to obtain the Department of Education’s advance approval for the addition of a new program or new location fails to do so, the institution may be liable for repayment of the Title IV program funds received by the institution or students in connection with that program or enrolled at that location.

 
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Provisional certification.   Each institution must apply to the Department of Education for continued certification to participate in the Title IV programs at least every six years, or when it undergoes a change in control, and an institution may come under the Department of Education’s review when it expands its activities in certain ways, such as opening an additional location, adding an educational program, or modifying the academic credentials that it offers.

The Department of Education may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards.  In addition, if a company acquires a school from another entity, the acquired school will automatically be placed on provisional certification when the Department of Education approves the transaction.  During the period of provisional certification, the institution must comply with any additional conditions or restrictions included in its program participation agreement with the Department of Education.  Students attending provisionally certified institutions remain eligible to receive Title IV program funds, but if the Department of Education finds that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution’s certification to participate in the Title IV programs without advance notice or advance opportunity for the institution to challenge that action.  In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another school, or make any other significant change.

NAU is currently provisionally certified to participate in the Title IV programs through June 30, 2010.  The Department of Education’s February 2008 recertification with provisional status required that NAU post a letter of credit in an amount representing 10% of the Title IV program funds received by NAU during its most recently completed fiscal year, receive Title IV program funds under the heightened cash monitoring payment method, and comply with certain other reporting requirements.  The Department has informed NAU that the letter of credit must be maintained following the Transaction, and that NAU will continue to receive Title IV program funds under the heightened cash monitoring payment method.  NAU is likely to remain on provisional certification at least through the expiration date of its current Department of Education approval, which is June 30, 2010.  NAU’s status beyond that point depends on whether the Department of Education determines at that time that NAU is not fully satisfying all of the Department of Education eligibility and certification standards.

Acquiring other schools. While we have not acquired any other schools in the past, we may seek to do so in the future.  The Department of Education and virtually all state education agencies and accrediting commissions require a company to seek their approval if it wishes to acquire another school.  The level of review varies by individual state and accrediting commission, with some requiring approval of such an acquisition before it occurs while others only consider approval after the acquisition has occurred.  The approval of the applicable state education agencies and accrediting commissions is a necessary prerequisite to the Department of Education certifying the acquired school to participate in the Title IV programs.  The restrictions imposed by any of the applicable regulatory agencies could delay or prevent our acquisition of other schools in some circumstances.

 
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Change in ownership resulting in a change in control.   Many states and accrediting commissions require institutions of higher education to report or obtain approval of certain changes in control and changes in other aspects of institutional organization or control.  The types of and thresholds for such reporting and approval vary among the states and accrediting commissions.  The Higher Learning Commission provides that an institution must obtain its approval in advance of a change in ownership in order for the institution to retain its accredited status.  In addition, in the event of a change in ownership, the Higher Learning Commission requires an onsite evaluation within six months in order to continue the institution’s accreditation.  Other specialized accrediting commissions also require an institution to obtain similar approval before or after the event that constitutes a change in control under their standards.

Many states include the transfer of a controlling interest of common stock in the definition of a change in control requiring approval, but their thresholds for determining a change in control vary widely.  A change in control under the definition of one state educational agency that regulates NAU might require NAU to obtain approval of the change in control in order to maintain authorization to operate in that state, and in some cases such states could require NAU to obtain advance approval of the change in control.

Under Department of Education regulations, an institution that undergoes a change in control loses its eligibility to participate in the Title IV programs and must apply to the Department of Education in order to reestablish such eligibility.  If an institution files the required application and follows other procedures, the Department of Education may temporarily certify the institution on a provisional basis following the change in control, so that the institution’s students retain access to Title IV program funds until the Department of Education completes its full review.  In addition, the Department of Education will extend such temporary provisional certification if the institution timely files other required materials, including the approval of the change in control by its state authorizing agency and accrediting commission and an audited balance sheet showing the financial condition of the institution or its parent corporation as of the date of the change in control.  If the institution fails to meet any of these application and other deadlines, its certification will expire and its students will not be eligible to receive Title IV program funds until the Department of Education completes its full review, which commonly takes several months and may take longer.  If the Department of Education approves the application after a change in control, it will certify the institution on a provisional basis for a period of up to approximately three years.

For corporations that are neither publicly traded nor closely held (such as Dlorah prior to the consummation of the Transaction), Department of Education regulations describe some transactions that constitute a change in control, including the transfer of a controlling interest in the voting stock of the corporation or its parent corporation.  For such a corporation, the Department of Education will generally find that a transaction results in a change in control if a person acquires ownership or control of 25% or more of the outstanding voting stock and control of the corporation, or a person who owns or controls 25% or more of the outstanding voting stock and controls the corporation ceases to own or control at least 25% of the outstanding voting stock or ceases to control the corporation.

 
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Prior to the closing of the Transaction, NAU submitted a description of the proposed merger to the Department of Education, the Higher Learning Commission, each of the state educational agencies which currently licenses NAU’s operations or authorizes NAU to offer educational programs, and each of the programmatic accreditors, requesting that the Transaction not be deemed to trigger a change of ownership or control under each agencies’ respective standards, and to determine what is required if any such agency does consider the Transaction to constitute a change in control.  The Department of Education has determined that the Transaction will trigger a change of ownership or control requiring the Department of Education’s approval under pertinent regulations.  Dlorah submitted an application for preacquisition review of the Transaction to the Department of Education on October 6, 2009.  The Department’s response to Dlorah’s application for preacquisition review, dated October 27, 2009, requires NAU to maintain its current letter of credit equal to 10% of the Title IV program funds utilized in its more recently completely fiscal year and advised Dlorah that NAU would continue to receive Title IV program funds under the heightened cash monitoring payment method.  An institution is required to file a materially complete application within ten business days after a change in ownership or control for its students to retain access to Title IV program funds. The preacquisition review application process provides a preliminary review of the application which the Company intends to submit post-closing in order to obtain comfort that the Department of Education would consider the application materially complete.  If we timely file a materially complete application, the Department of Education may grant NAU temporary provisional certification to participate in the Title IV programs while its application for approval of the change of ownership or control is pending, which commonly lasts several months and may be longer.  The Department of Education may impose restrictions on its approval of an institution's application after a change of control.  Such restrictions, if any, are difficult to predict since the Department of Education may or may not identify them in its response to Dlorah’s application for preacquisition review.  The Higher Learning Commission also has deemed the Transaction to trigger a change of ownership or control under its standards, and Dlorah has filed the necessary information to obtain the necessary approval from the Higher Learning Commission.  The Higher Learning Commission approved the change of ownership or control by letter dated November 5, 2009, with several conditions, consistent with its change of ownership procedures and requirements.  These conditions include: (i) that NAU file a progress report by week six of each semester providing its enrollment information by degree program and by location; (ii) that NAU file a contingency report if there is any decision to offer a follow-up or secondary stock offering at least 90 days prior to such an offering so that the Higher Learning Commission may assess whether there may be a subsequent change of control under the Higher Learning Commission’s policies; (iii) that NAU undergo an evaluation within six months of the closing of the Transaction focused on ascertaining the appropriateness of the approval of the change of control and of the institution’s compliance with any commitments made in the change of control application as well as with the applicable accreditation criteria; and (iv) that a stipulation be added to the affiliation status of NAU limiting the programs at the Master’s level to existing programs and requiring NAU to seek the Higher Learning Commission’s approval for the addition of any new Master’s degrees.  With respect to the progress report condition, the Higher Learning Commission approval provided that, if the pattern of enrollment growth calls into question the capacity of the institution to provide quality teaching and learning, then the Higher Learning Commission may schedule a focused evaluation regarding this issue.  With respect to the conduct of the focused evaluation related to the Transaction, the Higher Learning Commission directed the team conducting that evaluation to review the pattern of governance exercised at NAU and succession planning to prepare the institution for the divestiture of the family shares.  In addition, the Higher Learning Commission approval indicated that it was reasonable to assume that the evaluation team conducting the focused evaluation might recommend a shortened time frame before the next comprehensive evaluation visit but not to exceed five years from the date of that focused visit.  The approval confirmed that the Higher Learning Commission will not consider requests for approval of any additional educational programs until after the successful completion of the focused evaluation conducted subsequent to the close of the Transaction.  Any failure by us to comply with the requirements of the Department of Education, the Higher Learning Commission or the state educational agencies from which NAU has a license or authorization, or a failure to obtain their approval of the change in control, could result in loss of authorization, accreditation or eligibility to participate in the Title IV programs and cause a significant decline in NAU’s student enrollments.

 
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NAU also has notified other accrediting commissions and state agencies, as it deemed necessary, of the Transaction and the reasons why it believed the Transaction did not constitute a change in control under their respective standards, or to determine what is required if any such commission or agency does consider the Transaction to constitute a change in control.  If any of those agencies deem the Transaction to be a change in control, we would have to apply for and obtain approval from that agency according to its procedures or suspend offering the applicable programs or suspend our activities in that state until we receive the required approval.

A change in control also could occur as a result of future transactions in which NAU, as a subsidiary of a publicly traded corporation, is involved following the consummation of the Transaction.  Some corporate reorganizations and some changes in the board of directors are examples of such transactions.  In addition, Department of Education regulations provide that a change in control occurs for a publicly traded corporation if either: (i) there is an event that would obligate the corporation to file a Current Report on Form 8-K with the SEC disclosing a change in control, or (ii) the corporation has a stockholder that owns at least 25% of the total outstanding voting stock of the corporation and is the largest stockholder of the corporation, and that stockholder ceases to own at least 25% of such stock or ceases to be the largest stockholder.  These standards are subject to interpretation by the Department of Education.  A significant purchase or disposition of the voting stock of either NAU or the Company in the future, including a disposition of voting stock by Robert Buckingham, could be determined by the Department of Education to be a change in control under this standard.  The potential adverse effects of a change in control could influence future decisions by us, as NAU’s parent corporation, and our stockholders regarding the sale, purchase, transfer, issuance or redemption of stock.  In addition, the adverse regulatory effect of a change in control also could discourage bids for shares of the Company’s common stock and could have an adverse effect on the market price of the Company’s common stock.

Additional state regulation.   Most state education agencies impose regulatory requirements on educational institutions operating within their boundaries.  Some states have sought to assert jurisdiction over out-of-state educational institutions offering online degree programs that have no physical location or other presence in the state but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state, or advertising to or recruiting prospective students in the state.  State regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states, and can change frequently.  We have determined that NAU’s activities in certain states constitute a presence requiring licensure or authorization under the requirements of the state education agency in those states, and in other states we have obtained approvals as we have determined necessary in connection with our marketing and recruiting activities.  We review the licensure requirements of other states when appropriate to determine whether NAU’s activities in those states constitute a presence or otherwise require licensure or authorization by the respective state education agencies.  Because NAU enrolls students from all 50 states and the District of Columbia, we expect to have to seek licensure or authorization in additional states in the future.  If we fail to comply with state licensing or authorization requirements for any state, NAU may be subject to the loss of state licensure or authorization by that state, or be subject to other sanctions, including restrictions on NAU’s activities in that state, fines, and penalties.  The loss of licensure or authorization in a state could prohibit NAU from recruiting prospective students or offering services to current students in that state, which could significantly reduce enrollments.

 
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Item 1A.  Risks Factors

Investing in the Company’s securities involves a high degree of risk.  You should carefully consider the following risk factors, together with all of the other information included in this report before you decide to purchase any shares of our Common Stock.  The risks and uncertainties described below are not the only risks and uncertainties facing the Company in the future.  Additional risks and uncertainties not presently known or that are currently considered to be immaterial may also materially and adversely affect the Company’s business operations or stock price of the Company.  If any of the following risks or uncertainties occurs, the Company’s business, financial condition, operating results and future growth prospects could materially suffer.  In that event, the trading price of your securities could decline and you may lose all or part of your investment.

NAU has experienced losses and may not maintain profitability.

Although NAU has had profitable quarterly and annual periods, it has also experienced losses in the past and it is possible NAU will experience losses in the future.  In addition, we expect that NAU’s operating expenses and business development expenses will increase as it enrolls more students, opens new campuses and develops new programs.  As a result, there can be no assurance the Company will be able to generate sufficient revenues to maintain profitability.
 
If NAU or the Company fails to comply with extensive regulatory requirements, the Company could incur significant monetary liabilities, fines and penalties, including loss of access to federal student loans and grants for NAU’s students on which we are substantially dependent.

For its fiscal year ended May 31, 2009, NAU derived approximately 71.6% of its revenues (calculated on a cash basis) from Title IV programs administered by the U.S. Department of Education.  A significant percentage of NAU’s students rely on the availability of Title IV program funds to cover their cost of attending NAU.  To participate in the Title IV programs, a postsecondary institution must be authorized by the appropriate state education agency or agencies, be accredited by an accrediting commission recognized by the Department of Education, and be certified as an eligible institution by the Department of Education.  In addition, NAU’s operations and programs are regulated by other state education agencies and additional accrediting commissions.  As a result of these requirements, NAU and the Company are subject to extensive regulation by the education agencies of multiple states, the Higher Learning Commission of the North Central Association of Colleges and Schools (“the Higher Learning Commission”), which is NAU’s institutional accrediting commission, various specialized accrediting commissions, and the Department of Education.  These regulatory requirements cover the vast majority of NAU’s operations, including its educational programs, instructional and administrative staff, administrative procedures, marketing, recruiting, financial operations, and financial condition.  These regulatory requirements also affect NAU’s ability to open additional schools and locations, add new educational programs, change existing educational programs, and change its ownership structure.

 
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The agencies and commissions that regulate NAU’s operations periodically revise their requirements and modify their interpretations of existing requirements.  Regulatory requirements are not always precise and clear, and regulatory agencies may sometimes disagree with the way we interpret or apply these requirements.  Any misinterpretation by us of regulatory requirements could adversely affect our business, financial condition, results of operations and cash flows.  If we fail to comply with any of these regulatory requirements, we could suffer financial penalties, limitations on our operations, loss of accreditation, termination of or limitations on NAU’s ability to grant degrees and certificates, or limitations on or termination of NAU’s eligibility to participate in the Title IV programs, each of which could materially adversely affect our business, financial condition and results of operations.  In addition, if we are charged with regulatory violations, NAU’s and our reputation could be damaged, which could have a negative impact on NAU’s enrollments and materially adversely affect our business, financial condition and results of operations.  We cannot predict with certainty how all of these regulatory requirements will be applied, or whether we will be able to comply with all of the applicable requirements in the future.

If NAU loses its eligibility to participate in the Title IV programs for any reason, we would experience a dramatic and adverse decline in revenue, financial condition, results of operations and future growth prospects.  Furthermore, we would be unable to continue NAU’s business as it currently is conducted which can be expected to have a material adverse effect on our ability to continue as a going concern.

Congress may revise the laws governing the Title IV programs or reduce funding for those programs, either of which could reduce NAU’s enrollment and revenue, and increase costs of operation.

Political and budgetary concerns significantly affect the Title IV programs.  The Higher Education Act of 1965, as amended (the “Higher Education Act”), which is a federal law that governs Title IV programs, must be periodically reauthorized by Congress, and was most recently reauthorized in August 2008.  The Department of Education has been working since December 2008 to develop the numerous revisions to the Title IV program regulations required by this reauthorization.  In October 2009, the Department of Education published final regulations relating to, among other things, the “90/10 Rule,” student eligibility, disclosure requirements, the relationships between schools and lenders of both private and Title IV loans, and the approval and oversight of accrediting agencies.  These regulations take effect on July 1, 2010.  The Department is also expected in the near future to propose additional new regulations relating to a broad array of issues.  The issues addressed in the regulations that have been adopted or are expected to be proposed by the Department of Education in the future, are broad and complex and concern a number of significant aspects of the Title IV programs.  In addition, Congress must determine funding levels for the Title IV programs on an annual basis, and can change the laws governing the Title IV programs at any time.  On September 21, 2009, the U.S. Government Accountability Office publicly released an August 2009 report to Congress recommending stronger oversight by the Department of Education of certain aspects of the Title IV programs.  This report has already led to Congressional hearings, and it is possible that it could lead to revisions to the Higher Education Act or changes to Department of Education regulations.  We cannot predict future revisions to the law or funding levels for the Title IV programs.  Because a significant percentage of NAU’s revenue is, and a significant portion of the Company’s revenue will be, derived from the Title IV programs, any action by Congress that significantly reduces Title IV program funding or the ability of NAU or its students to participate in the Title IV programs could have a material adverse effect on our financial condition, results of operations and cash flows.  Congressional action may also require us to modify our practices in ways that could increase administrative costs and reduce profit margin, which could have a material adverse effect on our financial condition, results of operations and cash flows.

 
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If Congress significantly reduced the amount of available Title IV program funding, we would attempt to arrange for alternative sources of financial aid for NAU’s students, such as private sources.  We cannot provide assurance that one or more private organizations would be willing or able to provide sufficient loans to students attending one of NAU’s schools or programs, or that the interest rate and other terms of such loans would be as favorable as Title IV program loans or acceptable to NAU’s students or that such private sources would be adequate to replace the full amount of the reduction in Title IV program funding.  Therefore, even if some form of private financing sources become available, NAU’s enrollment could be materially adversely affected.  In addition, private organizations could require NAU and the Company to guarantee all or part of this assistance resulting in additional costs to us.  If NAU was to provide more direct financial assistance to its students, we would assume increased credit risks and incur additional costs, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

The August 2008 reauthorization of the Higher Education Act includes substantially increased reporting and other requirements which may impair NAU’s reputation and adversely affect NAU’s enrollments.  Our failure to comply with or accurately interpret the requirements of the Higher Education Act may subject NAU to penalties and other sanctions.

The most recent reauthorization of the Higher Education Act, in August 2008, contains numerous revisions to the requirements governing the Title IV programs.  Among other things, institutions participating in the Title IV programs are subject to extensive new reporting requirements.  Beginning July 1, 2011, the Department of Education will publish national lists disclosing various statistics including the top five percent in each of nine institutional categories with the highest college costs and largest percentage increases.  If NAU is highlighted negatively on one or more of these lists, NAU’s reputation may be impaired and enrollments may be adversely affected.  In addition, many of the law’s provisions will be further specified in regulations promulgated by the Department of Education.  The Department of Education’s regulatory process to implement the law’s new requirements is ongoing.  In the interim, there is uncertainty about how many of the new reporting requirements will be implemented and enforced.  Any failure by us to properly interpret these new requirements could subject NAU to limitation, suspension or termination of its eligibility to participate in Title IV programs, the imposition of conditions on its participation in the Title IV programs, monetary liabilities, fines and penalties or other sanctions imposed by the Department of Education, which could have a material adverse effect on our business, financial condition and results of operations.  The prospect of such sanctions may cause us to conservatively interpret the new requirements of the Title IV programs pending the issuance of interpretive guidance or implementing regulations by the Department of Education, which may limit our flexibility in operating our NAU business.

If any of the education regulatory agencies that regulate NAU do not approve or delay any required approvals of the Transaction, NAU’s ability to operate or participate in the Title IV programs may be impaired.

If NAU experiences a change in control under the standards of the Department of Education, the Higher Learning Commission, any applicable state educational licensing agency, or any specialized accrediting commission, it must notify or seek the approval of each such agency.  These agencies do not have uniform criteria for what constitutes a change in control.  Transactions or events that typically constitute a change in control include significant acquisitions or dispositions of the voting stock of an institution or its parent company, and significant changes in the composition of the board of directors of an institution or its parent company.  Some of these transactions or events may be beyond NAU’s control.  NAU’s failure to obtain, or a delay in receiving, approval of any change in control from the Department of Education, the Higher Learning Commission or its applicable state educational licensing agencies could impair its ability to operate or participate in the Title IV programs, which could have a material adverse effect on our business and financial condition.  Failure to obtain, or a delay in receiving, approval of any change in control from any state in which NAU is currently licensed or authorized, or from any of NAU’s specialized accrediting commissions, could require NAU to suspend its activities in that state or suspend offering the applicable programs until it receives the required approval, or could otherwise impair our operations.  The potential adverse effects of a change in control could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance, or redemption of our stock, which could discourage bids for your shares of Company stock and could have an adverse effect on the market price of your shares.

 
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Prior to the closing of the Transaction, NAU submitted a description of the Transaction to the Department of Education and each of the state educational agencies which currently licenses NAU’s operations or authorizes NAU to offer educational programs, requesting in some instances that such agency not deem the Transaction to trigger a change of ownership or control under its respective standards, and to determine what is required if any such agency does consider the Transaction to constitute a change of ownership or control.  The Department of Education has determined that the Transaction will trigger a change of ownership or control requiring the Department of Education’s approval under pertinent regulations.  Dlorah submitted an application for preacquisition review of the Transaction to the Department of Education on October 6, 2009.  An institution is required to file a materially complete application within ten business days after a change in ownership or control for its students to retain access to Title IV program funds.  The preacquisition review application process provides a preliminary review of the application which we intend to submit post-closing in order to obtain comfort that the Department of Education would consider the application materially complete.  If we timely file a materially complete application, the Department of Education may grant NAU temporary provisional certification to participate in the Title IV programs while our application for approval of the change of ownership or control is pending, which commonly lasts several months and may be longer.  The Department of Education may impose restrictions on its approval of an institution's application after a change of control.  Such restrictions, if any, are difficult to predict since the Department of Education may or may not identify them in its response to NAU’s application for preacquisition review.  The Higher Learning Commission also has deemed the Transaction to trigger a change of ownership or control under its standards and NAU filed the necessary information to obtain the necessary approval from the Higher Learning Commission.  The Higher Learning Commission approved the change of ownership or control by letter dated November 5, 2009, with several conditions, consistent with its change of ownership procedures and requirements.  These conditions include:  (i) that NAU file a progress report by week six of each semester providing its enrollment information by degree program and by location; (ii) that NAU file a contingency report if there is any decision to offer a follow-up or secondary stock offering at least 90 days prior to such an offering so that the Higher Learning Commission may assess whether there may be a subsequent change of control under the Higher Learning Commission’s policies; (iii) that NAU undergo an evaluation within six months of the closing of the Transaction focused on ascertaining the appropriateness of the approval of the change of control and of the institution’s compliance with any commitments made in the change of control application as well as with the applicable accreditation criteria and (iv) that a stipulation be added to the affiliation status of NAU limiting the programs at the Master’s level to existing programs and requiring NAU to seek the Higher Learning Commission’s approval for the addition of any new Master’s degrees.  With respect to the progress report condition, the Higher Learning Commission approval provided that, if the pattern of enrollment growth calls into question the capacity of the institution to provide quality teaching and learning, then the Higher Learning Commission may schedule a focused evaluation regarding this issue.  With respect to the conduct of the focused evaluation related to the Transaction, the Higher Learning Commission directed the team conducting that evaluation to review the pattern of governance exercised at NAU and succession planning to prepare the institution for the divestiture of the family shares.  In addition, the Higher Learning Commission approval indicated that it was reasonable to assume that the evaluation team conducting the focused evaluation might recommend a shortened time frame before the next comprehensive evaluation visit but not to exceed five years from the date of that focused visit.  The approval confirmed that the Higher Learning Commission will not consider requests for approval of any additional educational programs until after the successful completion of the focused evaluation conducted subsequent to the close of the Transaction.  As part of any change of ownership or control, the Department of Education may impose growth restrictions on NAU for a period of time following the Transaction and may require NAU to post a letter of credit in the amount of 25% or more of the Title IV program funds utilized by NAU in its most recently completed fiscal year, which would be an increase from the existing letter of credit NAU has in place in favor of the Department of Education.  Based on Dlorah’s May 31, 2009 audited financial statements, the principal amount of such a letter of credit would be approximately $9,969,351.  We estimate that it could cost $150,000 to $200,000 to obtain such a letter of credit.  The Department’s response to NAU’s application for preacquisition review, dated October 27, 2009, required NAU to maintain its current letter of credit equal to 10% of the Title IV program funds utilized in its most recently completed fiscal year.  In addition, based on the Department’s response, NAU will continue to receive Title IV program funds under the heightened cash monitoring payment method.

 
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Any failure by NAU to comply with the requirements of the Department of Education, the Higher Learning Commission or the state educational agencies from which it has a license or authorization, or a failure to obtain their approval of the change in control, could result in NAU’s loss of authorization, accreditation or eligibility to participate in the Title IV programs and cause a significant decline in NAU’s student enrollments, which would have a material adverse effect on our business and financial condition.

NAU also has notified other accrediting commissions and state agencies, as it believed necessary, of the Transaction and the reasons why it believed the Transaction did not constitute a change in control under their respective standards, or to determine what is required if any such commission or agency does consider the Transaction to constitute a change in control.  If any of those commissions or agencies deem the Transaction to be a change in control, we would have to apply for and obtain approval from such commission or agency according to its procedures or suspend offering the applicable programs or suspend NAU’s activities in that state until we receive the required approval.

We cannot offer new programs, expand our operations into certain states, or acquire additional schools if such actions are not timely approved by the applicable regulatory agencies, and NAU may have to repay Title IV funds disbursed to students enrolled in any such programs, schools, or states if we do not obtain prior approval.

Our expansion efforts include offering of new educational programs.  In addition, we may increase operations in additional states and seek to acquire existing schools from other companies.  If we are unable to obtain the necessary approvals for such new programs, operations, or acquisitions from the Department of Education, the Higher Learning Commission, or any applicable state educational licensing agency or accrediting commission, or if we are unable to obtain such approvals in a timely manner, our ability to consummate the planned actions and provide Title IV program funds to any affected NAU’s students would be impaired, which could have a material adverse effect on our expansion plans.  If we were to determine or have determined erroneously that any such action did not need approval or that we had obtained all required approvals, NAU could be liable for repayment of the Title IV program funds provided to students in that program or at that location.

 
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Additionally, the Department of Education may impose growth restrictions on NAU for a period of time following, and as a result of, the Transaction.  In numerous other transactions involving postsecondary education companies, the Department of Education has, as a condition of approving a change of ownership or control, prohibited the affected institution from adding to the scope of its Title IV program participation any new locations or educational programs, or from modifying existing educational programs.  The Department’s response to NAU’s application for preacquisition review, dated October 27, 2009, did not indicate that the Department would impose growth restrictions, but the Department could decide to impose such restrictions post-closing.  Where such restrictions have been imposed, the Department of Education has indicated that they may be removed after the Department of Education has received and accepted audited financial statements and an annual Title IV compliance audit from the institution covering one complete fiscal year under the new ownership or control, and if the Department of Education determines that the institution satisfies the regulatory standards of administrative capability and financial responsibility.  If such restrictions were to be imposed, we can provide no assurance as to when the Department of Education would remove them.  The imposition or continuation of such restrictions could have a material adverse effect on our business, prospects, financial condition and results of operations.

If the Department of Education does not recertify NAU to continue participating in the Title IV programs, its students would lose their access to Title IV program funds, or NAU could be recertified but required to accept significant limitations as a condition of its continued participation in the Title IV programs.

Department of Education certification to participate in the Title IV programs lasts a maximum of six years, and institutions are thus required to seek recertification from the Department of Education on a regular basis in order to continue their participation in the Title IV programs.  An institution must also apply for recertification by the Department of Education if it undergoes a change in control, as defined by Department of Education regulations, and may be subject to similar review if it expands its operations or educational programs in certain ways.  NAU’s current certification was effective in March 2008 and expires June 30, 2010.  However, this certification terminated on the closing of the Transaction and NAU will have to be recertified.  NAU’s current certification was issued on a provisional basis and NAU was required to post an irrevocable letter of credit to receive certain Title IV program funds under the heightened cash monitoring system of payment (pursuant to which an institution is required to credit students with Title IV program funds prior to obtaining those funds from the Department of Education) rather than by advance payment (pursuant to which an institution receives Title IV funds from the Department of Education in advance of disbursement to students).  Generally, the recertification process includes a review by the Department of Education of the institution’s educational programs and locations, administrative capability, financial responsibility, and other oversight categories.  The Department of Education could limit, suspend or terminate an institution’s participation in the Title IV programs for violations of the Higher Education Act or Title IV regulations.  There can be no assurance that the Department of Education will recertify NAU after its current period of certification or as a result of its review of the Transaction as a change of ownership or that it will not impose restrictions with respect to any future recertification.  If the Department of Education does not renew or withdraws NAU’s certification to participate in the Title IV programs at any time, NAU’s students would no longer be able to receive Title IV program funds.  Similarly, the Department of Education could renew NAU’s certification, but restrict or delay its students’ receipt of Title IV funds, limit the number of students to whom it could disburse such funds, or impose other restrictions.  Any of these outcomes would have a material adverse effect on NAU’s enrollments and our business, financial condition, and results of operations.

 
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NAU would lose its ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and its student enrollments could decline if it fails to maintain any of its accreditations or approvals.

An institution must be accredited by an accrediting commission recognized by the Department of Education in order to participate in the Title IV programs.  NAU has been granted institutional accreditation by the Higher Learning Commission, which is an accrediting commission recognized by the Department of Education.  To remain accredited, NAU must continuously meet accreditation standards relating to, among other things, performance, governance, institutional integrity, educational quality, faculty, administrative capability, resources, and financial stability.  NAU was reaccredited by the Higher Learning Commission in 2008 for the maximum term of 10 years.  If NAU fails to satisfy any of the Higher Learning Commission’s standards, it could lose its accreditation by the Higher Learning Commission, which would cause it to lose eligibility to participate in the Title IV programs and could cause a significant decline in total student enrollments.  In addition, many of NAU’s individual educational programs are also accredited by specialized accrediting commissions or approved by specialized state agencies.  If NAU fails to satisfy the standards of any of those specialized accrediting commissions or state agencies, it could lose the specialized accreditation or approval for the affected programs, which could result in materially reduced student enrollments in those programs and have a material adverse effect on our financial condition and results of operations.

If NAU fails to maintain any of its state authorizations, it would lose its ability to operate in that state and for campuses in the state to participate in the Title IV programs.

NAU is authorized to operate and to grant degrees or diplomas by the applicable state educational licensing agency of each state where NAU maintains a physical campus.  Such authorization by state educational licensing agencies is required for NAU’s students to be eligible to receive funding under the Title IV programs.  To maintain such state authorizations, NAU must continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs, and various operational and administrative procedures.  If NAU fails to satisfy any of these standards, it could lose its authorization from the applicable state educational agency to offer educational programs and could be forced to cease operations in such state.  Such a loss of authorization would also cause NAU’s physical campus in the state to lose eligibility to participate in the Title IV programs.  Either event would have a material adverse effect on our financial condition and results of operations.
 
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NAU also has been required to obtain authorization in certain other states where it does not maintain a physical campus because its activities in the state constitute a presence requiring licensure or authorization under the requirements of the applicable state education agency.  If NAU fails to comply with state licensing or authorization requirements for a state, or fails to obtain licenses or authorizations when required, it could lose its state licensure or authorization by that state or be subject to other sanctions, including restrictions on its activities in that state, fines, and penalties.  The loss of licensure or authorization in a state where NAU has no physical campus could prohibit NAU from recruiting prospective students or offering educational services to current students in that state, which could significantly reduce enrollments and revenues and materially adversely affect our financial condition and results of operations.  State laws and regulations are not always precise or clear, and state licensing agencies may sometimes disagree with the way NAU has interpreted or applied these requirements.  The increasing popularity and use of the Internet and other online services for the delivery of education has led and may lead to the adoption of new laws and regulatory practices by many states and new interpretations of existing laws and regulations by state educational agencies.  These new laws, regulations and interpretations may relate to issues such as the requirement that education institutions offering online programs be licensed in one or more jurisdictions where they have no physical location.  New laws, regulations or interpretations related to providing educational programs and services over the Internet could increase our cost of doing business and affect NAU’s ability to recruit students in particular states, which could, in turn, negatively affect enrollments and revenues and have a material adverse effect on our financial condition and results of operations.  Additionally, any misinterpretation by NAU of these regulatory requirements or adverse changes in regulations or interpretations thereof by state licensing agencies could have a material adverse effect on our financial condition and results of operations.

If NAU does not comply with the Department of Education’s “administrative capability” standards, it could suffer financial penalties, be required to accept other limitations in order to continue participating in the Title IV programs, or lose its eligibility to participate in the Title IV programs.

Department of Education regulations specify extensive criteria an institution must satisfy to establish that it has the requisite “administrative capability” to participate in the Title IV programs.  These criteria require, among other things, that the institution:

• comply with all applicable Title IV program regulations;

• have capable and sufficient personnel to administer the federal student financial aid programs;

• not have student loan cohort default rates in excess of specified levels;

• have acceptable methods of defining and measuring the satisfactory academic progress of its students;

• have various procedures in place for safeguarding federal funds;

• not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;

• provide financial aid counseling to its students;
 
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• refer to the Department of Education’s Office of Inspector General any credible information indicating that any applicant, student, employee or agent of the institution has been engaged in any fraud or other illegal conduct involving Title IV programs;

• submit in a timely manner all reports and financial statements required by the Title IV regulations; and

• not otherwise appear to lack administrative capability.

If an institution fails to satisfy any of these criteria or comply with any other Department of Education regulations, the Department of Education may:

• require the repayment of Title IV program funds;

• transfer the institution from the “advance” system of payment of Title IV program funds to cash monitoring status or to the “reimbursement” system of payment;

• place the institution on provisional certification status; or

• commence a proceeding to impose a fine or to limit, suspend or terminate the participation of the institution in the Title IV programs.

If NAU were found not to have satisfied the Department of Education’s “administrative capability” requirements, it could be limited in its access to, or lose, Title IV program funding, which would significantly reduce its enrollments and revenues and materially and adversely affect our results of operations.

If NAU does not meet specific financial responsibility standards established by the Department of Education, it may be required to post a letter of credit or accept other limitations in order to continue participating in the Title IV programs, or it could lose its eligibility to participate in the Title IV programs.

To participate in the Title IV programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by the Department of Education, or post a letter of credit in favor of the Department of Education and possibly accept other conditions on its participation in the Title IV programs.  These financial responsibility tests are applied to each institution on an annual basis based on the institution’s audited financial statements, and may be applied at other times, such as if the institution undergoes a change in control.  The Department of Education may also apply such measures of financial responsibility to the operating company and ownership entities of an eligible institution and, if such measures are not satisfied by the operating company or ownership entities, require the institution to post a letter of credit in favor of the Department of Education and possibly accept other conditions on its participation in the Title IV programs.  The operating restrictions that may be placed on an institution that does not meet the quantitative standards of financial responsibility include being transferred from the “advance payment” method of receiving Title IV program funds to either the “reimbursement” or the “heightened cash monitoring” system, which could result in a significant delay in the institution’s receipt of those funds.  Limitations on, or termination of, NAU’s participation in the Title IV programs as a result of its failure to demonstrate financial responsibility would limit its students’ access to Title IV program funds, which could significantly reduce enrollments and revenues and materially and adversely affect our results of operations and financial condition.

 
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When NAU was recertified by the Department of Education to participate in the Title IV programs, effective in March 2008, the Department of Education reviewed NAU’s audited financial statements for the fiscal year ended May 31, 2007 and advised NAU that its composite score, which is a standard of financial responsibility derived from a formula established by the Department of Education, reflected financial weakness because such statements indicated NAU’s composite score for such fiscal year was 0.2.  As a result of this determination, the Department of Education required NAU to post a letter of credit equal to 10 percent of the Title IV program funds it received during its most recently completed fiscal year.  Based on NAU’s audited financial statements for the fiscal year ended May 31, 2008, which indicated NAU’s composite score for such fiscal year was 0.5, NAU was required to maintain the letter of credit and increase its amount to reflect increased receipt of Title IV program funds by NAU during the fiscal year.  In the October 27, 2009 letter, the Department of Education has informed NAU that this letter of credit must be maintained following the Transaction, and could be increased or accompanied by additional conditions on NAU’s participation in the Title IV programs, until such time as the Department of Education determines that NAU satisfies the applicable financial responsibility standards.  NAU’s audited financial statements for the fiscal year ended May 31, 2009 indicate that NAU’s composite score for such fiscal year was 1.6.  Under applicable regulations, NAU must submit such audited financial statements to the Department of Education no later than November 30, 2009.  The Department of Education will then determine whether NAU must continue to maintain or increase the currently posted letter of credit.  Any obligation to maintain or increase the currently posted letter of credit, or to post a letter of credit in the future, could increase our costs of regulatory compliance.  If NAU is unable to secure any required letter of credit, it would lose its eligibility to participate in the Title IV programs, which can be expected to have a material adverse effect on our prospects, financial condition, results of operations and viability as a going concern.

NAU may lose its eligibility to participate in the federal student financial aid programs if the percentage of NAU’s revenues derived from the Title IV programs is too high.

A provision of the Higher Education Act (“HEA”) commonly referred to as the “90/10 Rule,” as amended in August 2008, provides that a for-profit educational institution such as NAU, loses its eligibility to participate in the Title IV programs if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenue, the institution derives more than 90% of its revenues from Title IV program funds for any two consecutive fiscal years.  An institution that derives more than 90% of its revenue (on a cash basis) from the Title IV programs for any single fiscal year will be placed on provisional certification for at least two fiscal years and may be subject to additional conditions or sanctions imposed by the Department of Education.  During the period of provisional certification, the institution must comply with any additional conditions included in the institution’s program participation agreement with the Department of Education.  In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another school or make any other significant change.  If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution’s certification to participate in the Title IV programs without advance notice or opportunity for the institution to challenge the action.  If NAU violates the 90/10 Rule, it will become ineligible to participate in the Title IV programs as of the first day of the fiscal year following the second consecutive fiscal year in which it exceeded the 90% threshold and will be unable to regain eligibility for two fiscal years thereafter.  Prior to the HEA amendment in August 2008, an institution was required to disclose in a footnote to its annual audited financial statements the percentage of its revenues derived from the Title IV program funds that the institution received during the fiscal year covered by such financial statements.  Under regulations that were published by the Department of Education in October 2009, a proprietary institution must continue to disclose in a footnote to its annual audited financial statements not only its 90/10 calculation, but also the amounts of the Federal and non-Federal revenues, by source, included in its 90/10 calculation.  The certified public accountant that prepares the institution’s audited financial statements will be required to review that information and test the institution’s calculation.  These regulations take effect on July 1, 2010, and also contain other modifications to the 90/10 Rule, including the means by which certain institutional loans may be considered in the calculation.  At this time, we cannot be certain whether and to what extent such regulations may affect NAU’s ability to remain eligible to participate in the Title IV programs or require us to incur additional costs in connection with NAU’s administration of the Title IV programs.  If NAU violates the 90/10 Rule, and continues to disburse Title IV program funds to students after the effective date of its loss of eligibility to participate in Title IV programs, it would be required to return those funds to the applicable lender or the Department of Education.

 
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In May 2008, the United States Congress increased the annual loan limits on federal unsubsidized student loans by $2,000 for certain students, and also increased the aggregate loan limits (over the course of a student’s education) on total federal student loans for certain students.  This increase in student loan limits also increased the amount of Title IV program funds used by students to satisfy tuition, fees and other costs incurred, which will increase the proportion of NAU’s revenue from Title IV programs.  However, the August 2008 reauthorization of the Higher Education Act provides that such additional loan amounts authorized in May 2008 and disbursed to students between July 1, 2008 and July 1, 2011 may be considered, for the purposes of the 90/10 Rule, as revenue from sources other than Title IV programs, providing temporary relief from any adverse impact of additional Title IV loan funds on institutions’ 90/10 percentages.  Absent any extension of this temporary relief, NAU’s 90/10 percentages are expected to increase when the additional Title IV loan funds, authorized in May 2008 and disbursed to students between July 1, 2008 and July 1, 2011, must be considered in the 90/10 calculation in the same manner as other Title IV loan funds.  In addition, recent changes in federal law also increased Title IV grant limits.  Increases in Title IV grant and loan limits now or in the future may result in an increase in the revenues NAU receives from the Title IV programs.  Further, a significant number of states in which NAU operates have faced budget constraints which have caused or may cause them to reduce state appropriations in a number of areas, including with respect to the amount of financial assistance provided to postsecondary students, which could further increase NAU’s percentage of revenues derived from Title IV program funds.  Also, the employment circumstances of NAU’s students or their parents could also increase reliance on Title IV program funds.  We expect NAU’s ratio under the 90/10 Rule to continue to increase in the future.  If NAU becomes ineligible to participate in Title IV federal student financial aid programs as a result of noncompliance with the 90/10 Rule, it can be expected to have a material adverse effect on the Company’s prospects, financial condition, results of operations and viability as a going concern.
 
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NAU may lose its eligibility to participate in the Title IV programs if its student loan default rates are too high.

An institution may lose its eligibility to participate in some or all of the Title IV programs if, for three consecutive years, 25% or more of its students who were required to begin repayment on their student loans in one year default on their payment by the end of the following year.  In addition, an institution may lose its eligibility to participate in some or all of the Title IV programs if the default rate of its students exceeds 40% for any single year.  The August 2008 reauthorization of the Higher Education Act extends by one year the period for which students’ defaults on their loans will be included in the calculation of an institution’s default rate, a change that is expected to increase most institutions’ default rates.  The new law also increases the threshold for an institution to lose its eligibility to participate in the relevant Title IV programs from 25% to 30%.  These changes to the law take effect for institutions’ cohort default rates for federal fiscal year 2009, which are expected to be calculated and issued by the Department of Education in 2012.  NAU’s cohort default rates have historically been significantly below these levels, including 8.2% for federal fiscal year 2007, 7.3% for federal fiscal year 2006 and 7.5% for federal fiscal year 2005, the last three years for which the Department of Education has issued official cohort default rates.  We cannot, however, provide any assurance that this will continue to be the case.  Any increase in interest rates or reliance on “self-pay” students, as well as declines in income or job losses for NAU students could contribute to higher default rates on student loans.  Exceeding the student loan default rate thresholds and losing eligibility to participate in the Title IV programs would have a material adverse effect on our business, prospects, financial condition, and results of operations.  Any future changes in the formula for calculating student loan default rates, economic conditions, or other factors that cause NAU’s default rates to increase, could place NAU in danger of losing its eligibility to participate in some or all of the Title IV programs.  If NAU loses its eligibility to participate in the Title IV programs because of high student loan cohort default rates, it would have a material adverse effect on the Company’s prospects, financial condition, results of operations and viability as a going concern.
 
NAU is subject to sanctions if it fails to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

An institution participating in the Title IV programs must calculate the amount of unearned Title IV program funds that it has disbursed to students who withdraw from their educational programs before completing such programs and must return those unearned funds to the appropriate lender or the Department of Education in a timely manner, generally within 45 days of the date the institution determines that the student has withdrawn.  If the unearned funds are not properly calculated and timely returned for a sufficient percentage of students, NAU may have to post a letter of credit in favor of the Department of Education equal to 25% of the Title IV program funds that should have been returned for such students in the prior fiscal year, and NAU could be fined or otherwise sanctioned by the Department of Education.  NAU’s annual Title IV compliance audit for the fiscal year ended May 31, 2006 included a finding of material noncompliance with respect to timely returns of unearned funds, resulting in a requirement that NAU post an irrevocable letter of credit equal to 25% of the total amount of unearned Title IV program funds NAU was required to return during its most recently completed fiscal year.  Such letter of credit requirement was subsequently superseded by the letter of credit requirement imposed by the Department of Education when NAU failed to satisfy the applicable standards of financial responsibility for participation in the Title IV programs.  In the event NAU does not correctly calculate and timely return unearned Title IV program funds, NAU may have to post further letters of credit in favor of the Department of Education, may be liable for repayment of Title IV funds and related interest and may otherwise be subject to adverse actions by the Department of Education, including termination of NAU’s participation in the Title IV programs, any of which could increase our cost of regulatory compliance and have a material adverse effect on our business, financial condition and results of operations.
 
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If a substantial number of NAU students cannot secure Title IV loans as a result of decreased lender participation in the Title IV programs, or if lenders increase the costs or reduce the benefits associated with the Title IV loans they provide, then we could be materially adversely affected.

The cumulative impact of recent regulatory and market developments and conditions has caused some lenders participating in the Federal Family Education Loan (“FFEL”) program to cease providing such Title IV loans to students.  Other lenders have reduced the benefits and increased the fees associated with the Title IV loans they provide.  NAU and other schools have had to modify student loan practices in ways that result in higher administrative costs.  If the cost of Title IV loans increases or availability decreases, some students may not be able to take out loans and may not enroll in a postsecondary institution.  In light of these concerns, federal legislation was enacted in May 2008 to attempt to ensure that all eligible students would be able to obtain Title IV loans in the future and that a sufficient number of lenders would continue to provide Title IV loans.  Among other things, the new legislation:

• authorized the Department of Education to purchase Title IV loans from lenders, thereby providing capital to the lenders to enable them to continue making Title IV loans to students; and

• permitted the Department of Education to designate institutions eligible to participate in a “lender of last resort” program, under which federally recognized student loan guaranty agencies would be required to make Title IV loans to all otherwise eligible students at those institutions.

We cannot predict if this legislation ultimately will be effective in ensuring students’ continued access to Title IV loans.  Additionally, the authorization granted to the Department of Education to purchase Title IV loans from lenders will expire on June 30, 2010 unless extended by new federal legislation.  If a substantial number of lenders cease to participate in the Title IV loan programs, increase the costs of student access to such programs, or reduce the benefits available under such programs, NAU’s students may not have access to such loans, which could cause NAU’s enrollments to decline, which would have a material adverse effect on us.  The environment surrounding access to and cost of student loans remains in a state of flux, with reviews of many institutions and lenders still pending and with additional legislative and regulatory changes being actively considered at the federal and state levels, including pending legislation to significantly modify or eliminate the FFEL program (in which private lenders originate Title IV loans) in favor of the Direct Loan program (in which the Department of Education originates Title IV loans).  Although NAU is approved by the Department of Education to participate in the Direct Loan program, any of the foregoing could have an adverse effect on NAU’s prospects, student enrollment and retention rate and, consequently, our results of operations and financial condition.
 
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A substantial decrease in private student financing options or a significant increase in financing costs for its students, could have a material adverse effect on us.

Some of NAU’s eligible students have used private (i.e., non-Title IV) loan programs to fund a portion of their education costs not covered by Title IV program funds and state financial aid sources.  Recent adverse market conditions for consumer and federally guaranteed student loans (including lenders’ increasing difficulties in reselling or syndicating student loan portfolios) have resulted, and could continue to result, in providers of private loans reducing the availability of or increasing the costs associated with providing private loans to postsecondary students.  In particular, loans to students with low credit scores who would not otherwise be eligible for credit-based private loans have become increasingly difficult to obtain.  Prospective students may find that these increased financing costs make borrowing prohibitively expensive and abandon or delay enrollment in postsecondary education programs.  Additionally, a significant number of states in which NAU operates have faced budget constraints which have caused or may cause them to reduce state appropriations for student financial assistance.  We cannot predict how significant any such future reductions in financial assistance may be or how long any such reductions will persist.  If any of these scenarios were to occur, NAU students’ ability to finance their education could be adversely affected and NAU’s student population could decrease, which could have a material adverse effect on NAU’s business and prospects, and, consequently, our financial condition and results of operations.

An increase in interest rates could adversely affect NAU’s ability to attract and retain students.

For the fiscal years ended May 31, 2009 and 2008, NAU derived cash receipts equal to approximately 71.6% and 67.7%, respectively, of its net revenue from tuition financed under the Title IV programs, which include student loans with interest rates subsidized by the federal government.  Additionally, some NAU students finance their education through private loans that are not subsidized.  If NAU students’ employment circumstances are adversely affected by regional or national economic downturns, they may be more heavily dependent on student loans.  Interest rates have reached relatively low levels in recent years, creating a favorable borrowing environment for students.  However, in the event interest rates increase or Congress decreases the amount available for Title IV funding, NAU’s students may have to pay higher interest rates on their loans.  Any future increase in interest rates will result in a corresponding increase in educational costs to NAU’s existing and prospective students, which could result in a significant reduction in NAU’s student population and revenues.  Higher interest rates could also contribute to higher default rates with respect to our students’ repayment of their education loans.  Higher default rates may in turn adversely impact NAU’s eligibility to participate in some or all of the Title IV programs, which could result in a material adverse effect on NAU’s enrollments, revenues and future growth prospects and, consequently, our results of operations and financial condition.

NAU is subject to sanctions if it pays impermissible commissions, bonuses or other incentive payments to individuals involved in certain recruiting, admission or financial aid activities.

A school participating in the Title IV programs may not provide, or contract with a third party that provides, any commission, bonus, or other incentive payment based on success in enrolling students or securing financial aid to any person involved in student recruiting or admission activities or in making decisions regarding the awarding of Title IV program funds.  The Department of Education’s current regulations set forth 12 “safe harbors” which describe payments and arrangements that do not violate the incentive compensation rule.  The Department of Education’s regulations make clear that the safe harbors are not a complete list of permissible practices under this law.  One of these safe harbors permits adjustments to fixed salary for enrollment personnel provided that such adjustments are not made more than twice during any twelve month period, and that any adjustment is not based solely on the number of students recruited, admitted, enrolled, or awarded financial aid.  While we believes that NAU’s compensation policies and practices have not been based on success in enrolling students in violation of applicable law, the Department of Education’s regulations and interpretations of the incentive compensation law do not establish clear criteria for compliance in all circumstances and, in a limited number of instances, NAU’s actions have not been within the scope of any specific safe harbor provided in the compensation regulations.  Such safe harbors also do not address non-cash awards to enrollment personnel.  In addition, in recent years, several for-profit education companies have been faced with whistleblower lawsuits, known as   “qui tam”   cases, by current or former employees alleging violations of this prohibition.  If the Department of Education were to determine that NAU violated this requirement of the Title IV programs, or NAU were to be found liable in a   qui tam   action alleging a violation of this law, or if any third parties NAU has engaged were to violate this law, NAU could be fined or sanctioned by the Department of Education, or subjected to other monetary liability or penalties that could be substantial, including the possibility of treble damages under a   qui tam   action, any of which could harm its reputation, impose significant costs and have a material adverse effect on NAU’s business and prospects, and, consequently, our financial condition and results of operations.

 
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In May 2009, the Department of Education announced that it was initiating a process to revise some of its regulations focused on, among other things, its regulations on incentive compensation, including the “safe harbors” provisions.  A rulemaking panel convened in November 2009 and will meet again in December 2009 and January 2010 to develop changes to such regulations.  We cannot predict with certainty whether such rulemaking will result in any changes to those regulations, including the current “safe harbors.”  Any changes to the Department of Education’s regulations could require NAU to modify or suspend its current compensation practices which could increase our costs of compliance.

If NAU cannot maintain student enrollments, its results of operations may be adversely affected.

Our strategy for NAU’s growth and profitability depends, in part, upon the retention of NAU’s students.  While NAU provides certain services to its students (e.g., tutoring) in an effort to aid in retaining students and lower attrition rates, many of NAU’s students face financial, personal, or family constraints that require them to withdraw within a term or at the end of a given term.  Additionally, some students may decide to continue their education at a different institution.  If for any reason, NAU is unable to attract qualified new students, or is unable to effectively predict and manage student attrition, overall enrollment levels are likely to decline.  If NAU cannot attract and retain its current students, its business and prospects, and, consequently, our financial condition and results of operations, may be adversely affected.

NAU’s financial performance depends on its ability to continue to develop awareness among, and attract and retain new students.

Building awareness of NAU and the programs it offers is critical to NAU’s ability to attract prospective students.  If NAU is unable to successfully market and advertise its educational programs, its ability to attract and enroll students could be adversely affected, and, consequently, NAU’s ability to increase revenue or maintain profitability could be impaired.  It is also critical to NAU’s success that NAU convert prospective students to enrolled students in a cost-effective manner and that these enrolled students remain active in NAU’s programs.  Some of the factors that could prevent NAU from successfully enrolling and retaining students include:

• the reduced availability of, or higher interest rates and other costs associated with, Title IV loan funds or other sources of financial aid;

• the emergence of more successful competitors;
 
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• factors related to NAU’s marketing, including the costs and effectiveness of Internet advertising and broad-based branding campaigns and recruiting efforts;

• performance problems with NAU’s online systems;

• failure to maintain institutional and specialized accreditations;

• failure to obtain and maintain required state authorizations;

• the requirements of the education agencies that regulate NAU which restrict the initiation of new locations, new programs and modification of existing programs;

• the requirements of the education agencies that regulate NAU which restrict the ways schools can compensate their recruitment personnel;

• increased regulation of online education, including in states in which NAU does not have a physical presence;

• restrictions that may be imposed on graduates of online programs that seek certification or licensure in certain states;

• student dissatisfaction with NAU’s services and programs;

• adverse publicity regarding NAU, its competitors, or online or for-profit education generally;

• price reductions by competitors that NAU is unwilling or unable to match;

• a decline in the acceptance of online education;

• an adverse economic or other development that affects job prospects in NAU’s core disciplines;

• a decrease in the perceived or actual economic benefits that students derive from NAU’s programs; and

• litigation or regulatory investigations that may damage NAU’s reputation.

If, for any reason or reasons, including those presented above, NAU is unable to maintain and increase its awareness of NAU among prospective students, recruit students and convert prospective students into actual students of NAU, its business and prospects, and, consequently, our financial condition and results of operations, may be materially and adversely affected.
 
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NAU operates in a highly competitive industry, and competitors with greater resources could harm its business, decrease market share and put downward pressure on NAU’s tuition rates.

The postsecondary education market is highly fragmented and competitive.  NAU competes for students with traditional public and private two-year and four-year colleges and universities, other for-profit schools, including those that offer online learning programs, and alternatives to higher education, such as employment and military service.  Many public and private schools, colleges, and universities, including most major colleges and universities, offer online programs.  We expect to experience additional competition for NAU in the future as more colleges, universities, and for-profit schools offer an increasing number of online programs.  Public institutions receive substantial government subsidies, and public and private non-profit institutions have access to government and foundation grants, tax-deductible contributions, and other financial resources generally not available to for-profit schools.  Accordingly, public and private nonprofit institutions may have instructional and support resources superior to those in the for-profit sector, and public institutions can offer substantially lower tuition prices.  Some of NAU’s competitors in both the public and private sectors also have substantially greater financial and other resources than NAU.  NAU may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect its business and prospects, and, consequently, our financial condition and results of operations.  These competitive factors could cause NAU’s enrollments, revenues, and profitability to significantly decrease.

NAU may not be able to sustain its growth rate or profitability.

NAU’s ability to sustain its current rate of growth or profitability depends on a number of factors, including its ability to obtain and maintain regulatory approvals, its ability to maintain operating margins, its ability to recruit and retain high quality academic faculty and administrative personnel and other competitive factors.  Over the past three years, a majority of NAU’s growth has resulted from an increase in students enrolling in its associate’s degree programs; however, we believe that future growth of NAU will be based upon an expansion of its current programs, the addition of new programs, an increase in its physical and online presence, affiliation agreements and increasing enrollments.  If NAU is not able to sustain or improve its growth rate, the Company’s business, financial condition and results of operations could be adversely affected.  Additionally, the growth and expansion of NAU’s domestic and international operations may place a significant strain on its resources and increase demands on its management information and reporting systems, financial management controls, and personnel.  Any failure to effectively manage or maintain growth could adversely affect the business, financial condition and results of operations of the Company.

If the proportion of students who are enrolled in NAU’s associate’s degree programs continues to increase, NAU may experience increased costs and reduced margins.

In recent years, the proportion of NAU’s enrollment composed of associate’s degree students has increased.  NAU has experienced certain effects from this shift, such as an increase in its student loan cohort default rate.  If this shift towards associate’s degree programs continues, NAU may experience additional consequences, such as higher cost per start, lower retention rates, higher student services costs, an increase in the percentage of NAU’s revenue derived from the Title IV programs under the 90/10 Rule, more limited ability to implement tuition price increases and other effects that may adversely affect the Company’s operating results and future growth prospects.
 
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If NAU’s graduates are unable to obtain professional licenses or certifications in their chosen field of study, NAU may face declining enrollments and revenues or student litigation against it.

Certain of NAU’s students, particularly in the healthcare programs, require or desire professional licenses or certifications after graduation in order to obtain employment in their chosen fields.  Their success in obtaining such licensure depends on several factors, including the individual merits of the student, whether the institution and the program were approved by the state or by a professional association, whether the program from which the student graduated meets all state requirements and whether the institution is accredited.  In the event that one or more states refuses to recognize NAU’s graduates for professional licensure in the future based on factors relating to NAU or its programs, the potential growth of NAU’s programs would be negatively impacted, which could have a material adverse effect on our results of operations.  In addition, we, including NAU, could be exposed to litigation that would force us to incur legal and other expenses that could have a material adverse effect on NAU’s reputation and our results of operations and financial condition.

Government and regulatory agencies and third parties may conduct compliance reviews, bring claims or initiate litigation against NAU and the Company.

Because NAU operates in a highly regulated industry, NAU and the Company are subject to compliance reviews and claims of non-compliance and lawsuits by government agencies, regulatory agencies and third parties, including claims brought by third parties on behalf of the federal government.  If the results of these reviews or proceedings are unfavorable to us, or if we are unable to defend successfully against lawsuits or claims, we may be required to pay money damages or be subject to fines, limitations, loss of eligibility for Title IV funding, injunctions or other penalties.  Even if we adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or to defend against those lawsuits or claims.  Claims and lawsuits brought against us or NAU may damage NAU’s reputation, even if such claims and lawsuits are without merit.

NAU’s reputation and the value of the Company’s stock after the Transaction may be negatively affected by the actions of other postsecondary educational institutions.

In recent years, regulatory proceedings and litigation have been commenced against various postsecondary educational institutions relating to, among other things, deceptive trade practices, false claims against the government, and non-compliance with Department of Education requirements, state education laws, and state consumer protection laws.  These proceedings have been brought by students, the Department of Education, the U.S. Department of Justice, the U.S. Securities and Exchange Commission, and state governmental agencies, among others.  These allegations have attracted adverse media coverage and have been the subject of legislative hearings and regulatory actions at both the federal and state levels, focusing not only on the individual schools but in some cases on the larger for-profit postsecondary education sector as a whole.  Adverse media coverage regarding other for-profit education companies or other educational institutions could damage NAU’s reputation, result in lower enrollments, revenues and results of operations, and have a negative impact on the value of the Company’s stock.  Such coverage could also result in increased scrutiny and regulation by the Department of Education, Congress, accrediting commissions, state legislatures, state attorneys general, state education agencies or other governmental authorities of all educational institutions, including NAU.
 
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NAU’s expansion into new markets outside the United States will subject it to risks inherent in international operations.

As part of our growth strategy, we intend to continue to establish markets for NAU outside the United States.  Furthermore, NAU currently has affiliations with international institutions in Chile, Bolivia and Greece and NAU is in the process of developing additional partnerships in the Czech Republic, Serbia, Brazil and China.  NAU’s operations in each of the relevant foreign jurisdictions may subject NAU to additional educational and other regulations of foreign jurisdictions, which may differ materially from the regulations applicable to its U.S. operations.  Additionally, neither the Company’s nor NAU’s management has significant experience in operating a business at the international level.  As a result, the Company may be unsuccessful in carrying out our plans for international expansion in a timely fashion, if at all, obtaining the necessary licensing, permits or market saturation, or in successfully navigating other challenges posed by operating an international business.  Such international expansion is expected to require a significant amount of start up costs, as well.  If we fail to execute this strategy, our growth may be limited.

If NAU does not maintain existing, and develop additional relationships with employers, its future growth may be impaired.

Currently, NAU has relationships with certain employers to provide their employees with an opportunity to enroll in classes and obtain degrees through NAU while maintaining their employment.  These relationships are an important part of our strategy as these employers provide NAU with a steady source of potential working adult students for particular programs and also serve to increase NAU’s reputation among employers.  If NAU is unable to develop new relationships or maintain its existing relationships, this source of potential students may be impaired and enrollments and revenue may decrease, any of which could materially and adversely affect the business, prospects, financial condition and results of operations of the Company.

If students fail to pay their outstanding balances, NAU’s business may be harmed.

From time to time, students may carry balances on portions of their education expense not covered by financial aid programs.  These balances are unsecured and not guaranteed.  Furthermore, disruptive economic events could adversely affect the ability or willingness of NAU’s former students to repay student loans, which may increase NAU’s student loan cohort default rate and require the devotion of increased time, attention and resources to manage these defaults.  As a result, losses related to unpaid student balances in excess of the amounts NAU has reserved for bad debts, or the failure of students to repay their debt obligations, could have a material adverse effect on the Company’s financial condition, risk-profile and results of operations.

NAU, with its online and distance learning programs, operates in a highly competitive market with rapid technological changes and it may not compete successfully.

Online education is a highly fragmented and competitive market subject to rapid technological change.  Competitors vary in size and organization from traditional colleges and universities, many of which offer some form of online education programs, to for-profit schools and software companies providing online education and training software.  We expect the online education and training market to be subject to rapid changes in delivery, interaction and other future innovation and advancement.  The success of NAU will depend, in part, on its ability to adapt to changing technologies in online and distance learning and offer an attractive online/distance education option while maintaining competitive pricing.  Furthermore, the expansion of NAU’s online programs and the development of new programs may not be accepted by the online education market.  In addition, a general decline in Internet use for any reason, including due to security or privacy concerns, the cost of Internet service or changes in government regulation of Internet use, may result in less demand for online educational services, in which case NAU may not be able to recruit and retain students and grow its online programs as planned.  Accordingly, if NAU is unable to keep pace with changes in technology or maintain technological relevance, the Company’s prospects, financial condition and results of operations may be harmed.
 
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Government regulations relating to the Internet could increase NAU’s cost of doing business and affect its ability to grow.

The increasing popularity and use of the Internet and other online services has led and may lead to the adoption of new laws and regulatory practices in the United States or foreign countries and to new interpretations of existing laws and regulations.  These new laws and interpretations may relate to issues such as online privacy, copyrights, trademarks and service marks, sales taxes, fair business practices and the requirement that online education institutions qualify to do business as foreign corporations or be licensed in one or more jurisdictions where they have no physical location.  As the proportion of NAU’s students who take online or distance-learning courses increases, new laws, regulations or interpretations related to doing business over the Internet could increase our costs of compliance or doing business and materially and adversely affect NAU’s ability to offer online/distance learning courses as well as adversely affect our business, financial condition and results of operations.

NAU’s financial performance depends, in part, on its ability to keep pace with changing market needs.

Increasingly, prospective employers of students who graduate from NAU schools demand that their new employees possess appropriate technological skills and interpersonal skills, such as communication, critical thinking and teamwork.  These skills evolve rapidly in a changing economic and technological environment.  Accordingly, it is important for NAU’s programs to evolve in response to those economic and technological changes.  The expansion of existing programs and the development of new programs may not be accepted by current or prospective students or the employers of NAU graduates.  Even if NAU schools are able to develop acceptable new programs, NAU schools may not be able to begin offering those new programs as quickly as required by prospective employers or as quickly as its competitors offer similar programs.  In addition, NAU may be unable to obtain specialized accreditations or licensures that may make certain programs desirable to students.  To offer a new academic program, NAU may be required to obtain appropriate federal, state and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect its growth plans.  In addition, to be eligible for Title IV programs, a new academic program may need to be approved by the Department of Education, the Higher Learning Commission and state educational agencies.  If NAU is unable to adequately respond to changes in market requirements due to regulatory or financial constraints, unusually rapid technological changes, or other factors, its ability to attract and retain students could be impaired, the rates at which NAU’s graduates obtain jobs involving their fields of study could suffer, and NAU’s reputation (among students, prospective students and employers) and our financial condition and results of operations could be adversely affected.
 
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Establishing new academic programs or modifying existing programs requires NAU to invest in management and business development, incur marketing expenses and reallocate other resources.  NAU may have limited experience with any courses in “new” areas and may need to modify its systems, strategy and delivery platform or enter into arrangements with other educational institutions to provide such programs effectively and profitably.  If NAU is unable to offer new courses and programs in a cost-effective manner, or is otherwise unable to effectively manage the operations of newly established academic programs, the Company’s business, financial condition and results of operations could be adversely affected.
 
Capacity constraints of NAU’s computer networks and changes to the acceptance and regulation of online programs could have a material adverse effect on student retention and growth.

If NAU is successful in increasing student enrollments, additional resources in the forms of human, intellectual and financial capital, as well as information technology resources will be necessary.  NAU has invested and continues to invest significant resources in information technology when such technology systems and tools become impaired or obsolete.  In an attempt to utilize recent technology, NAU could install new information technology systems without accurately assessing its costs or benefits or experience delayed or ineffective implementation of new information technology systems.  Similarly, NAU could fail to respond in a timely or sufficiently competitive way to future technological developments in its industry.  As a result, this growth may place a significant strain on the operational resources, including the computer networks and information technology infrastructure of NAU and its partners, thereby restricting NAU’s ability to enroll and retain students and grow its online programs and affecting the Company’s growth potential.

System disruptions and security threats to NAU’s computer networks could have a material adverse effect on its ability to attract and retain students.

The performance and reliability of NAU’s computer network infrastructure is critical to NAU’s reputation and ability to attract and retain students.  Any computer system error or failure, or a sudden and significant increase in traffic on NAU’s computer networks, including those that host its online programs, may cause network outages and may damage NAU’s reputation and disrupt its online and on-ground operations.

Additionally, NAU faces a number of threats to its computer systems, including unauthorized access, computer hackers, computer viruses and other security problems and system disruptions.  NAU has devoted and will continue to devote significant resources to the security of its computer systems, but they are still vulnerable to security threats, including those listed above.  A user or hacker who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations.  As a result, we expend significant resources to protect against the threat of these system disruptions and security breaches and may have to spend more to alleviate problems caused by these disruptions and breaches, which could have a material adverse effect on NAU’s reputation, ability to retain and store data, and our results of operations.
 
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A failure of NAU’s information systems to properly store, process and report relevant data may reduce management’s effectiveness, interfere with regulatory compliance and increase operating expenses.

NAU is heavily dependent on the integrity of its data management systems.  If these systems do not effectively collect, store, process and report relevant data for the operation of its business, whether due to equipment malfunction or constraints, software deficiencies, or human error, NAU’s ability to effectively plan, forecast and execute its business plan and comply with applicable laws and regulations, including the HEA and the regulations thereunder, will be impaired.  Any such impairment of NAU’s information systems could materially and adversely affect NAU’s reputation and its ability to provide student services or accurately budget or forecast operating activity, thereby affecting the Company’s financial condition and results of operations.

The personal information that NAU collects may be vulnerable to breach, theft or loss, which could subject it to liability or adversely affect its reputation and operations.

Possession and use of personal information in NAU operations subjects it to risks and costs that could harm NAU’s business and reputation.  NAU collects, uses and retains large amounts of personal information regarding its students and their families, including social security numbers, tax return information, personal and family financial data and credit card numbers.  NAU also collects and maintains personal information of its employees in the ordinary course of business.  Some of this personal information is held and managed by certain of NAU’s vendors.  Although NAU uses security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy.  In addition, errors in the storage, use or transmission of personal information could result in a breach of student or employee privacy.  Possession and use of personal information in NAU’s operations also subjects it to legislative and regulatory burdens that could require us to implement certain policies and procedures, such as the procedures we adopted to comply with the Red Flags Rule that was promulgated by the Federal Trade Commission, or FTC, under the federal Fair Credit Reporting Act and that requires the establishment of guidelines and policies regarding identity theft related to student credit accounts, and could require us to make certain notifications of data breaches and restrict NAU’s use of personal information.  A violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us.  As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches.  While we believe we take appropriate precautions and safety measures, there can be no assurances that a breach, loss or theft of any such personal information will not occur.  Any breach, theft or loss of such personal information could have a material adverse effect on NAU’s reputation, our financial condition and growth prospects, and result in liability under state and federal privacy statutes and legal actions by state attorneys general and private litigants.

NAU may incur liability for the unauthorized duplication or distribution of class materials posted online for class discussions.

In some instances, NAU faculty members or students may post various articles or other third-party content on class discussion boards.  NAU may incur liability for the unauthorized duplication or distribution of this material posted online for class discussions.  Third parties may raise claims against NAU for the unauthorized duplication of this material.  Any such claims could subject NAU to costly litigation and impose a significant strain on financial resources and management personnel regardless of whether the claims have merit.  NAU’s general liability insurance may not cover potential claims of this type adequately or at all, and NAU may be required to alter the content of its courses or pay monetary damages, which could have a material adverse affect on the Company’s business, financial condition, results of operations and cash flows.
 
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NAU relies on exclusive proprietary rights and intellectual property that may not be adequately protected under current laws.

Our success depends, in part, on our ability to protect our proprietary rights and intellectual property.  We rely on a combination of copyrights, trademarks, trade secrets, domain names and contractual agreements to protect our proprietary rights.  We rely on trademark protection in both the United States and certain foreign jurisdictions to protect our rights to various marks, as well as distinctive logos and other marks associated with it.  We also rely on agreements under which we obtain intellectual property or license rights to own or use content developed by faculty members, content experts and other third-parties.  We cannot assure you these measures are adequate, that we have secured, or will be able to secure, appropriate protections for all of our proprietary rights in the United States or any foreign jurisdictions, or that third parties will not terminate license rights or infringe upon or otherwise violate our proprietary rights.  Despite our efforts to protect these rights, unauthorized third parties may attempt to use, duplicate or copy the proprietary aspects of NAU’s student recruitment and educational delivery methods, curricula, online resource material and other content.  Our management’s attention may be diverted by these attempts and we may need to use funds in litigation to protect our proprietary rights against any infringement or violation, which could have a material adverse affect on the Company’s business, financial condition and results of operations.

We may be involved in disputes from time to time relating to our intellectual property and the intellectual property of third parties.

We may become parties to disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in these disputes.  Third parties may allege that we have not obtained sufficient rights in the content of a course or other intellectual property.  Third parties may also raise claims against us alleging infringement or violation of the intellectual property of that third party.  Some third party intellectual property rights may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid violating those intellectual property rights.  Any such intellectual property claim could subject us to costly litigation and impose a significant strain on our financial resources and management personnel regardless of whether such claim has merit.  Our general liability and cyber liability insurance, if any, may not cover potential claims of this type adequately or at all, and we may be required to alter the content of NAU’s courses or pay monetary damages or license fees to third parties, which could have a material adverse affect on the Company’s financial condition and results of operations.

Future financing arrangements may be dilutive to current investors and may increase restrictions on the Company.

We may need to raise additional funds in the future to grow our business internally, invest in new businesses, expand through acquisitions, enhance our current services or respond to changes in target markets.  If additional capital is raised through the sale of equity or equity derivative securities, the issuance of these securities could result in dilution to our existing stockholders.  If additional funds are raised through the issuance of debt securities, the terms of that debt could impose additional restrictions on our operations.  Furthermore, additional financing may be unavailable on acceptable terms, if at all.  As a result, future financing arrangements may have a material adverse effect on the price of the Company’s securities, as well as on the Company’s growth prospects and financial condition.
 
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We may not be able to retain key personnel or hire and retain the personnel we need to sustain and grow our business.

Our success depends largely on the skills, efforts and motivations of our executive officers, who have significant experience with NAU’s business and within the education industry.  Due to the nature of the education industry, we face significant competition in attracting and retaining personnel who possess the skills necessary to sustain and grow our business.  The loss of the services of any of key personnel, or failure to attract and retain other qualified and experienced personnel on acceptable terms could impair our ability to sustain and grow our business.

Our business may be affected by changing economic conditions.

The U.S. economy and the economies of other key industrialized countries currently are characterized by recessionary characteristics, including reduced economic activity, increased unemployment and substantial uncertainty about the financial markets.  In addition, homeowners in the U.S. have experienced an unprecedented reduction in wealth due to the decline in residential real estate values across much of the country.  Generally, the reduction in wealth, unavailability of credit and unwillingness of employers to sponsor non-traditional educational opportunities for their employees could have a material adverse effect on the Company’s growth prospects and results of operations.

The economic downturn may affect the real estate business and assets of the Company.

The downturn in the U.S. economy in general, and the real estate industry specifically, has negatively affected the Company’s real estate division, known as the Fairway Hills division, which develops, leases and sells private residential properties in Rapid City, South Dakota.  The Fairway Hills division is in the process of building and marketing two condominium developments.  The projects are being funded by a construction line of credit totaling $3,816,000.  Borrowings at May 31, 2009 and 2008 totaled $3,305,409 and $3,414,000, respectively.  To date only a small number of units have been sold.  Fairway Hills plans to build additional condominium buildings and units only upon the achievement of the sale of a substantial number of the currently available condominiums.  Unless the U.S. economy and the real estate market improve, we may be forced to sell the units at a loss or continue leasing them, which could adversely affect our financial condition, results of operations and cash flows and our ability to pay back the line of credit.

We may be exposed to potential risks relating to internal controls over financial reporting and our ability to have those controls attested to by our independent registered public accounting firm.

As a public company, we will be required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.  In addition, the independent registered public accounting firm auditing the Company’s financial statements must also attest to and report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting as well as the operating effectiveness of the Company’s internal controls.  Neither the Company nor Dlorah has ever been subject to these requirements and we will be required to evaluate our internal control systems in order to allow our management to report on, and the Company’s independent registered public accounting firm to attest to, our internal controls, as a required part of our Annual Report on Form 10-K beginning with the fiscal year ending May 31, 2011.

 
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As a result, we may be required to expend significant resources to develop the necessary documentation and testing procedures required by Section 404, and there is a risk that we will not comply with all of the requirements imposed thereby.  Accordingly, there can be no assurance that we will receive the required attestation from the independent registered public accounting firm.  In the event we identify material weaknesses in internal controls that cannot be remediated in a timely manner or we are unable to receive an attestation from the independent registered public accounting firm with respect to our internal controls, investors and others with whom we do business with may lose confidence in the reliability of the financial statements of the Company and our ability to obtain equity or debt financing could suffer.

Terrorist attacks and other acts of violence or war, natural disasters or breaches of security could have an adverse effect on NAU’s operations.

Terrorist attacks and other acts of violence or war, hurricanes, earthquakes, floods, tornados and other natural disasters or breaches of security at NAU’s physical campuses could disrupt NAU’s operations.  Terrorist attacks and other acts of violence or war, natural disasters or breaches of security that directly impact its physical facilities, online offerings or ability to recruit and retain students and employees could adversely affect NAU’s ability to deliver its programs to its students and, thereby, adversely affect NAU’s results of operations.  Furthermore, terrorist attacks and other acts of violence or war, natural disasters or breaches of security could adversely affect the economy and demographics of the affected region, which could cause significant declines in the number of students who attend NAU schools in that region and could have a material adverse effect on the reputation, financial condition, results of operations and viability of the Company.

Provisions in our charter documents and Delaware law may inhibit a takeover of us, which could limit the price potential investors might be willing to pay in the future for our common stock and could entrench management.

Our charter and bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.  Our Board of Directors has the ability to designate the terms of and issue new series of preferred stock which could be issued to create different or greater voting rights which may affect an acquiror’s ability to gain control of the Company.

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control.  Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
 
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Concentration of ownership of the Company may have the effect of delaying or preventing a change in control.

Immediately after the consummation of the Transaction, Robert Buckingham, our chairman of the board of directors, beneficial owned approximately 77.05% of the issued and outstanding Common Stock. Mr. Buckingham will have the ability to significantly influence the outcome of corporate actions requiring stockholder approval.  This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of the Common Stock.

Future sales of the Company’s shares may cause the market price of its securities to drop significantly, even if its business is doing well.

Neither Camden Learning, LLC nor our majority stockholders will be able to sell the shares of Restricted Common Stock they received in connection with the Transaction until the Common Stock trades at or above $8.00 per share for 60 consecutive trading days.  The founders of Camden will not be able to sell any of their founders’ shares until the first anniversary of the consummation of the Transaction, subject to certain exceptions.  In addition, certain of our stockholders, including Camden’s initial stockholders and our majority stockholders or their permitted transferees, are entitled to demand that the Company register the resale of their Common Stock at any time generally commencing nine months after consummation of the Transaction.  The presence of these additional securities trading in the public market may have an adverse effect on the market price of the Common Stock.  The sale by any of the foregoing could cause the market price of the Company’s securities to decline.

The exercise of Warrants issued as Transaction Consideration may have an effect on the value of your investment and control of the Company.

In connection with the Transaction, the Company issued warrants to purchase up to 2,800,000 shares of Common Stock to the former stockholders of Dlorah.  The shares of Common Stock underlying these warrants will have an exercise price of $5.50 per share and expiration date two years from the date of issuance.  Regardless of whether these warrants are exercised in full or in part, any exercise thereof will have a dilutive impact on the Common Stock and an adverse effect on your percentage ownership of the Company.  Furthermore, the additional Common Stock issuable upon the exercise of these warrants may affect the control and direction of the Company.

The Company may be unable to cause its securities to be listed on the NASDAQ Stock Market which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

The Company intends to continue to be listed on the OTC Bulletin Board until such time it satisfies the relevant listing requirements, including the requirement to have a specified minimum number of shareholders, to have its Common Stock listed on the NASDAQ Global Market or the NASDAQ Capital Market.  However, there can be no assurance we will ever be able to meet NASDAQ’s initial listing requirements, in which case our securities may continue to be listed on the OTC Bulletin Board indefinitely.

If we are unable to cause our securities to be listed on NASDAQ, the Company could face significant material adverse consequences, including:
 
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• a limited availability of market quotations for its securities;

• a determination that the Common Stock is a “penny stock” which will require brokers trading it to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the Common Stock;

• a limited amount of news and analyst coverage; and

• a decreased ability to issue additional securities or obtain additional financing in the future.

Our stock price will be subject to market factors, and your investment in our securities could decline in value.

Active trading market in our securities may not develop or be adequately maintained.  In addition, the overall market for securities in recent years has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies.  These fluctuations have been extremely volatile and are often unrelated or disproportionate to the operating performance of these companies.  These broad market fluctuations could result in extreme fluctuations in the price of our securities, which could cause a decline in the value of your securities.

Item 2.  Financial Information
 
  Forward-Looking Statement and Information
 
This item may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management.  The use of words such as “believe,” “anticipates,” “intends, “plans,” “estimates,” “should,” “likely,” or similar expressions, indicates a forward-looking statement.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance and underlying assumptions.  Future results may differ materially from those expressed in the forward-looking statements.  Many of the factors that will determine these results are beyond our ability to control or predict.  Stockholders are cautioned not to put undue reliance on any forward-looking statements.  We claim the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance and underlying assumptions, which are not statements of historical facts.  These statements are subject to uncertainties and risks including, but not limited to, changes in technology, economic conditions, competition and pricing, and government regulations.  We caution that assumptions, expectations, projections, intentions, or beliefs about the future events may, and often do, vary from actual results and the differences can be material.  Key factors which could cause actual results to vary from those the Company expects include those set forth under Item 1A “Risk Factors”.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following information relates solely to the operations of Dlorah, Inc.
 
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Dlorah Inc. has two operating segments.  The largest operating segment and the one which generates approximately 97% of the gross revenue is National American University.  The other is a real estate segment.
 
National American University (“NAU”) is a regionally accredited, for-profit, multi-campus higher-learning institution offering diploma, associate, bachelor’s and master’s degree programs in core academic disciplines of accounting, applied management, business administration, health care, and information technology, among others.  Courses are offered through physical campuses as well as via the Internet.  Operations include 17 locations in seven states located in the Central United States, with the distance learning operations and central administration offices located in Rapid City, South Dakota.
 
The university supports nearly 6,000 students at its physical campus locations, offers online courseware to more than 4,000 students worldwide, and offers courseware through partner services to approximately 4,500 additional students.  In total, the university serves approximately 11,000 students per academic term with more than 7,500 students being supported throughout its campus locations, with more than 55 percent of those students enrolled in at least one online course.
 
The real estate segment operates apartment facilities, condominiums, and other real estate holdings in Rapid City, South Dakota.  The operations of the real estate division are less significant to the overall operations of Dlorah.  As such, the following discussions are focused mainly on the operations of the university.
 
Key Financial Results Metrics
 
Revenue .  Approximately 91% of Dlorah’s revenue is generated from NAU’S academic income, which consists of tuition and fees assessed at the start of each term.  Tuition revenue is recognized on a daily basis over the length of the term.  The remainder of Dlorah’s revenue comes from NAU’s auxiliary revenue and the real estate segment’s rental income and condominium sales.  Tuition revenue is reported net of adjustments for refunds and scholarships.  Upon withdrawal, students are refunded tuition based on the uncompleted portion of the term.  Auxiliary revenue from other sources such as from the university’s food service, bookstore, dormitory and motel operations, are recognized when earned.
 
Factors affecting net revenue include:  (i) the number of students who are enrolled and who remain enrolled in courses throughout the term; (ii) the number of credit hours per student; (iii) the student’s degree and program mix; (iv) changes in tuition rates; (v) the number of affiliates that NAU is working with as well as the number of students at the affiliate; and (vi) the amount of scholarships for which students qualify.
 
Unearned tuition is recorded for academic services to be provided in future periods.  Similarly, a tuition receivable is recorded for the portion of the tuition which has not been paid.  Tuition receivable at the end of any calendar quarter largely represents student tuition due for the prior academic quarter.  Based upon past experience and judgment, an allowance for doubtful accounts has been established to recognize those receivables which are anticipated not to be paid.  Any uncollected account more than six months past due on students who have left NAU is charged against the allowance.  Bad debt expense as a percentage of revenues for years ended May 31, 2009, 2008, and 2007 was 2.6%, 2.7% and 2.6% respectively.
 
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Enrollments for a particular reporting period are defined as the number of students registered in a course on the last day of the reporting period.  Enrollments are a function of the number of continuing students registered and the number of new enrollments registered during the specified period.  Enrollment numbers are offset by inactive students, graduations and withdrawals occurring during the period.  Inactive students for a particular period are students who are not registered in a class and, therefore, are not generating net revenue for that period.
 
The principal factors affecting NAU’s enrollments and net revenue are the number and breadth of the programs being offered; the effectiveness of marketing, recruiting and retention efforts; the quality of the academic programs and student services; the convenience and flexibility of the online delivery platform; the availability and amount of federal and other funding sources for student financial assistance; and general economic conditions.
 
The following chart is a summary of student enrollment credit hours at May 31, 2009, 2008 and 2007 by degree type and by instructional delivery method:
 
   
May 31, 2009
 (Spring ’09 Qtr)
 
May 31, 2008
 (Spring ’08 Qtr)
 
May
 31, 2007
 (Spring ’07 Qtr)
  
 
Credit Hours
 
%
 
Credit Hours
 
%
 
Credit Hours
 
%
Graduate
   
1,750.5
     
3.1
% 
   
1,210.5
     
2.7
% 
   
1,120.5
     
2.5
% 
Undergraduate
   
57,344.5
     
96.9
% 
   
44,335.0
     
97.3
% 
   
44,328.5
     
97.5
% 
Total
   
59,095.0
     
100.0
% 
   
45,545.5
     
100.0
% 
   
45,449.0
     
100.0
% 
Online
   
25,471.5
     
40.6
% 
   
17,696.5
     
38.9
% 
   
16,641.0
     
36.6
% 
On-campus
   
33,623.5
     
59.4
% 
   
27,849.0
     
61.1
% 
   
28,808.0
     
63.4
% 
Total
   
59,095.0
     
100.0
% 
   
45,545.5
     
100.0
% 
   
45,449.0
     
100.0
% 

NAU experienced almost 30% growth in enrollment during fiscal year 2009.  This was a significant increase over the Company's recent historic growth experience, which has shown an annual average rate of growth of approximately 9.39% since 1998.  This unique growth can be attributed to three factors: (i) investment in the expansion and development of physical locations, (ii) investment in the expansion of current academic programs and development of new academic programs, and (iii) the effects of the economy.  Since 2005, NAU has invested approximately $20 million into the expansion and development of physical locations and academic programming.  With respect to the economy, NAU believes it has realized a significant increase in enrollments due to the desires of its target market to utilize education as a means of job attainment, job advancement, or job security during the economic downturn.
 
NAU plans to continue to expand, consistent with applicable regulatory requirements, by opening additional physical locations and by continuing to expand and develop its academic programming.  With these efforts, NAU anticipates its historic enrollment trends will continue, even though it is not likely to replicate its fiscal year 2009 growth rate.  The degree to which these enrollment trends will continue is directly correlated with the number of additional physical locations which are opened, the number of programs which are developed, and the number of programs expanded to other locations.  If NAU is not able to open new physical locations or develop or expand academic programming, whether as a result of regulatory limitations or other factors, then its growth rate will likely level off.  Also, to the extent the economic environment has stimulated enrollment growth, NAU's ability to maintain or increase that portion of its growth will depend on how economic factors are perceived by NAU's target market in relation to the advantages of pursuing higher education.
 
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Expenses .  Expenses consist of cost of educational services, selling, general and administrative, auxiliary expenses, the cost of condominium sales, the gain on legal settlement, and the loss on disposition of property and equipment.  Cost of educational services expenses contains expenditures attributable to the educational activity of the university.  This expense category includes salaries and benefits of faculty and academic administrators, costs of educational supplies, faculty reference and/or support material, and related academic costs.  Selling, general and administrative expenses include the salaries of the learner services positions (and other expenses related to support of students), salaries and benefits of admissions staff, marketing expenditures, salaries of other support and leadership services (including finance, human resources, compliance and other corporate functions), as well as depreciation, rent for campus facilities, bad debt expenses, and other related costs associated with student support functions.  Auxiliary expenses include expenses for the cost of goods sold, including costs associated with books, clothing, food, and textbook shrinkage.  The cost of the condominium sales is the expense related to the condominiums that sold during the reporting period.  On occasion Dlorah protects its interest(s) in certain operations through legal proceedings.  Consequently, depending on the outcome of those proceedings, the institution may record a gain on legal settlement as shown on the income statement.  The loss on disposition of property and equipment expense records the cost of discontinued assets that are no longer in use by Dlorah.
 
Factors affecting comparability
 
Set forth below are selected factors believed to have had, or which can be expected to have, a significant effect on the comparability of NAU’s recent or future results of operations:
 
Introduction of new programs and specializations .  Additional degree programs and specializations are planned for development over the next several years.  When introducing new programs and specializations, NAU invests in curriculum development, support infrastructure and marketing.  Revenues associated with these development(s) are dependent upon enrollments, which are initially lower during the periods of introduction.  During this period of introduction and development, the rate of growth in revenues and operating income has been, and may be, adversely affected, in part, due to these factors.  Historically, as the new programs and specializations develop, increases in enrollment are anticipated, cost-effective delivery of instructional and support services are gained, and more efficient marketing and promotional processes are realized.
 
Public company expenses .  Upon consummation of the merger with Camden, Dlorah will become a public company.  As a result, Dlorah will need to comply with laws, regulations and requirements that are not applicable to a private company, including certain provisions of the Sarbanes-Oxley Act of 2002, related SEC regulations, and listing requirements (such as those of Nasdaq).
 
Compliance with the requirements of being a public company will require an increase in general and administrative expenses to pay employees, legal counsel and accountants to assist in, among other things, external reporting, developing and monitoring a more comprehensive compliance oversight, enhancing board of governance functionality, establishing and maintaining internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, and preparing and distributing periodic public reports in compliance with obligations under the federal securities laws.  In addition, it is anticipated that there will be additional costs with the auditing firm due to quarterly reviews and additional auditing work required in a public arena.  It is also anticipated that being a public company will make it more expensive to obtain director and officer liability insurance.  It is estimated that the additional costs of being a public company will be between $1.0 million and $2.0 million annually.
 
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Critical Accounting Policies and Estimates

The discussion of the company’s financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures.  On an ongoing basis, management evaluates its estimates and judgments, including those discussed below.  These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  The results of Dlorah’s analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to the financial statements.  Dlorah believes the following critical accounting policies involve more significant judgments and estimates than that used in the preparation of its financial statements:
 
Revenue recognition .  Tuition revenue represented approximately 90.9%, 89.4% and 89.6% for the years ended May 31, 2009, 2008, and 2007, respectively.  Tuition is recognized on a daily basis over the length of the respective term.  Academic income also includes certain fees and charges assessed at the start of each term.  Deferred revenue and student deposits in any period represent the excess of tuition, fees, and other student payments received as compared to amounts recognized as revenue on the statement of operations and are reflected as current liabilities on the balance sheet.
 
Allowance for doubtful accounts .  An allowance for doubtful accounts is maintained for estimated losses resulting from the inability, failure or refusal of the students to make required payments.  The adequacy of the allowance for doubtful accounts is determined based on an analysis of aging of the accounts receivable and with regard to historical bad debt experience.  Accounts receivable balances are generally written off when deemed uncollectible at the time the account is returned by an outside collection agency.  However, accounts that are 180 days old are fully reserved and management continues collection efforts until it is determined that the possibility of collection is unlikely.  Bad debt expense is recorded as a selling, general and administrative expense.  As of May 31, 2009, 2008 and 2007, the allowance for doubtful accounts was approximately $115,000, $35,000 and $30,000, respectively.  During the years ended May 31, 2009, 2008, and 2007, bad debt expense was $1,638,000, $1,357,000 and $1,136,000, respectively.  The bad debt expense was 2.6%, 2.7%, and 2.6% of total revenue for the years ended May 31, 2009, 2008, and 2007.
 
Regulation of Federal Student Financial Aid Programs
 
For the fiscal years ended May 31, 2009, 2008, and 2007, NAU derived cash receipts equal to approximately 71.6%, 67.7% and 62.9%, respectively, of the net revenue from tuition provided by federal student financial aid programs authorized by Title IV of the Higher Education Act.
 
During the years ended May 31, 2009, 2008, and 2007, student loan programs, including the Title IV programs, have come under increased scrutiny by the Department of Education, Congress, state attorneys general and other parties.  The added scrutiny includes lending practices related to such programs and potential conflicts of interest between educational institutions and their lenders.  As a result, Congress has passed new laws, the Department of Education has enacted stricter regulations, and several states have adopted codes of conduct or enacted state laws that further regulate the conduct of lenders, schools, and school personnel.  The effect of such actions may result in increased costs of managing the Title IV programs and other student loan programs, although such impact is unable to be calculated or determined at this time.

 
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In addition, the recent disruptions in the credit markets and adverse market conditions for consumer loans in general have affected the student lending marketplace.  These disruptions have caused some lenders to cease providing Title IV loans to students and caused others to reduce the benefits and increase the fees for the Title IV loans they provide.  Some of the lenders NAU regularly engages with have announced decisions to stop participating in the Title IV loan market.  However, we believe, to date there have been no material disruptions in the availability of Title IV loans to the university’s students.  The university is approved by the Department of Education to participate in the Federal Direct Loan Program, under which the Department of Education rather than a private lender makes the loans to students, and we are prepared for our students to begin receiving loans under that program if it is determined that such lending is necessary to continue providing students access to Title IV loans.  The conditions in the market, including the effect of recent legislation aimed at broadening access to Title IV loans, are continuing to evolve and the ultimate impact of such market conditions on NAU’s business, if any, cannot be determined or predicted at this time.
 
Results of Operations — Dlorah
 
The following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated:
 
   
Q1 Ended August
31, 2009
In percentages
   
Q1 Ended August
31, 2008
In percentages
 
Net revenue
    100.0 %     100.0 %
Operating expenses
               
Cost of Educational Services
    19.7       22.5  
Selling, General, and Administrative
    64.8       77.5  
Auxiliary Expense
    2.5       3.0  
Cost of Condominium Sales
    0       1.5  
Gain on legal settlement
    0       0  
Loss on disposition of prop and equip
    0       0  
Total operating expenses
    87.0       104.4  
Operating income (loss)
    13.0       (4.4 )
Interest expense
    (0.9 )     (1.9 )
Interest income
    0.5       0.6  
Other Income
    0.1       0.2  
Income (loss) before income taxes
    12.8       (4.5 )
Income tax (expense) benefit
    (5.5 )     1.9  
Non-Controlling Interest
    0.1       (0.5 )
Net income (loss)
    7.3       (3.1 )
 
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For the three months ended August 31, 2009, Dlorah generated $17,264,000 in revenue, an increase of 42.5% compared to the same period in 2008, as a result of enrollment growth and a minor tuition increase.  Income from operations was $2,252,000 for the three months ended August 31, 2009, an increase of 539.4% compared to the same period in 2008.  Net income was $1,246,000 in the three months ended August 31, 2009, an increase of 456.9%, compared to the same period in 2008.
 
Three Months Ended August 31, 2009 Compared to Three Months Ended August 31, 2008
 
Net revenue .  Dlorah’s net revenue for the three months ended August 31, 2009 was $17,264,000, an increase of $5,147,000 or 42.5%, as compared to net revenue of $12,117,000 for the three months ended August 31, 2008.  The increase was primarily due to a 40% enrollment increase over the prior year.  Dlorah’s revenue for the three months ended August 31, 2009 consisted of $17,013,000 from Dlorah’s NAU segment and $251,000 from Dlorah’s other segment.
 
The academic revenue for the three months ended August 31, 2009 was $15,873,000, an increase of $5,091,000 or 47.2%, as compared to academic revenue of $10,782,000 for the three months ended August 31, 2008.  The increase was primarily due to the enrollment increase over the prior year.  The auxiliary revenue was $1,140,000, an increase of $254,000, or 28.7%, as compared to auxiliary revenue of $886,000 for the three months ended August 31, 2008.  This increase was primarily due to additional agreements entered into by the university pursuant to which the university receives compensation for services performed for other institutions.  The costs associated with the auxiliary revenue were $426,000 for the three months ended August 31, 2009, an increase of $68,000 or 19.0%, as compared to auxiliary costs of $358,000 for the three months ended August 31, 2008.
 
The rental income – apartments for the three months ended August 31, 2009 was $251,000, an increase of $13,000 or 5.5%, as compared to rental income – apartments of $238,000 for the three months ended August 31, 2008.  The condominium sales for the three months ended August 31, 2009 were $0, a decrease of $211,000 or 100.0%, as compared to $211,000 for the three months ended August 31, 2008.  This was due to the lack of sales of condominiums in 2009.  The cost of the condominium sales for the three months ended August 31, 2009 was $0, a decrease of $176,000, as compared to $176,000 for the three months ended August 31, 2008.  Again, as with the sales, the costs decreased due to the lack of sales in 2009.
 
Cost of educational services .  The educational services expense as a percentage of net revenue decreased by 2.8% for the three months ended August 31, 2009 to 19.7%, as compared to 22.5% for the three months ended August 31, 2008.  This decrease was a result of continued efficiencies gained by students being advised to take online courses, thereby leveraging instructional efforts by gaining greater student to instructor ratios.  The educational services expenses for the three months ended August 31, 2009 were $3,407,000, an increase of $679,000, or 24.9% as compared to educational expenses of $2,728,000 for the three months ended August 31, 2008.  This increase was primarily due to increases in instructional compensation and related expenses.  These increases are attributable to the increased headcount (both staff and faculty) needed to provide and maintain educational services to the increased student population.
 
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Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 12.7% for the three months ended August 31, 2009 to 64.8%, as compared to 77.5% for the three months ended August 31, 2008.  This decrease was primarily the result of the university’s ability to leverage fixed costs across an increasing revenue base.  The selling, general, and administrative expenses for the three months ended August 31, 2009 were $11,179,000, an increase of $1,791,000, or 19.1%, as compared to selling, general, and administrative expenses of $9,388,000 for the three months ended August 31, 2008.  The increase was attributed to additional support staff necessary to support the continued growth of the university, increased admissions staff, and larger marketing costs to generate additional leads.
 
In addition, the university tracks the “gross” expenditures associated with new campus and new program development as business expansion and development expense.  For the three months ended August 31, 2009, the total business expansion and development expenditures were $889,417.  Included in this total is $482,135 for continued expansion of the Austin, Texas campus and $356,997 for the expansion for the nursing programs in Denver, Colorado, and Bloomington, Minnesota.
 
Auxiliary .  Auxiliary expenses for the three months ended August 31, 2009 were $426,000, for an increase of $68,000, or 19.0%, as compared to the three months ended August 31, 2008.  This increase was primarily the result of the increased cost of books resulting from higher book sales.
 
Interest expense .  Interest expense for the three months ended August 31, 2009 was $157,000, a decrease of $76,000, or 32.6%, as compared to the three months ended August 31, 2008.  This decrease was consistent with the university’s plans to reduce advances on lines of credit to $0 with current operating resources.
 
Interest income .  Interest income for the three months ended August 31, 2009 was $86,000, an increase of $10,000, or 13.2%, as compared to the three months ended August 31, 2008.  This increase was reflective of the university’s plan to focus on capital preservation given the current economic environment.  In addition, the university’s ability to maximize interest income has been reduced by the availability of higher yielding investment instruments.
 
Income tax expense .  Income tax expense for the three months ended August 31, 2009 was $955,000, an increase of $1,183,000 from a tax benefit of $228,000 for the three months ended August 31, 2008.  This increase was attributable to the company increasing profits and recording an income in 2009 versus a loss in 2008.
 
Net income .  The net income for the three months ended August 31, 2009 was $1,259,000, an increase of $1,637,000, or 433.1%, as compared to a net loss of $378,000 for the three months ended August 31, 2008.
 
As stated earlier, revenue was up over $5,147,000 compared to the same period last year.  This increase was largely due to increased academic revenue and was consistent with the increased enrollments.  Expenses were 104.4% of net revenue for the three months ended August 31, 2008 and were 87.0% for the same period in 2009.  Selling, general, and administrative expenses were down a total of 12.7%.  Dlorah was able to capitalize on increased enrollments by maintaining expenses and gaining greater efficiencies.
 
Dlorah anticipates that in 2010, it will continue to invest in expansion and development by further supporting the development of the nursing programs in Denver, Colorado and Bloomington, Minnesota, as well as continuing to develop the Austin, Texas campus.
 
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Results of Operations — NAU
 
The following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated:
 
   
Q1 Ended August 31,
2009
In percentages
   
Q1 Ended August 31,
2008
In percentages
 
Net revenue
    100.0 %     100.0 %
Operating expenses
               
Cost of Educational Services
    19.7       22.5  
Selling, General, and Administrative
    62.5       74.3  
Auxiliary Expense
    2.5       3.0  
Cost of Condominium Sales
    0       0  
Gain on legal settlement
    0       0  
Loss on disposition of prop and equip
    0       0  
Total operating expenses
    84.7       99.7  
Operating income (loss)
    13.8       (3.4 )
Interest expense
    (0.2 )     (1.0 )
Interest income
    0.5       0.6  
Other Income
    0       0  
Income (loss) before income taxes
    14.1       (3.8 )
 
Three Months Ended August 31, 2009 Compared to Three Months Ended August 31, 2008
 
Net revenue .  NAU’s net revenue for the three months ended August 31, 2009 was $17,013,000, an increase of $5,345,000 or 45.8%, as compared to net revenue of $11,668,000 for the three months ended August 31, 2008.  The increase was primarily due to the enrollment increase over the prior year.
 
The academic revenue for the three months ended August 31, 2009 was $15,873,000, an increase of $5,091,000 or 47.2%, as compared to academic revenue of $10,782,000 for the three months ended August 31, 2008.  The increase was primarily due to the enrollment increase over the prior year.  The auxiliary revenue was $1,140,000, an increase of $254,000, or 28.7%, as compared to auxiliary revenue of $886,000 for the three months ended August 31, 2008.  This increase was primarily due to additional agreements entered into by the university pursuant to which the university is compensated for services it performs for other institutions.  The costs associated with the auxiliary revenue were $426,000 for the three months ended August 31, 2009, an increase of $68,000 or 19.0%, as compared to auxiliary costs of $358,000 for the three months ended August 31, 2008.
 
Cost of educational services .  The educational services expense as a percentage of net revenue decreased by 2.8% for the three months ended August 31, 2009 to 19.7%, as compared to 22.5% for the three months ended August 31, 2008.  This decrease was a result of continued efficiencies gained by students being advised to take online courses, thereby leveraging the instructional efforts by gaining greater student to instructor ratios.  The educational services expenses for the three months ended August 31, 2009 were $3,407,000, an increase of $679,000, or 24.9%, as compared to educational expenses of $2,728,000 for the three months ended August 31, 2008.  This increase was primarily due to increased instructional compensation and related expenses.  These increases were attributable to the increased headcount (both staff and faculty) needed to provide and maintain educational services to the increased student population.
 
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Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 11.8% for the three months ended August 31, 2009 to 62.5%, as compared to 74.3% for the three months ended August 31, 2008.  This decrease was primarily the result of the university’s ability to leverage fixed costs across an increasing revenue base.  The selling, general, and administrative expenses for the three months ended August 31, 2009 were $10,796,000, an increase of $1,798,000, or 20.0%, as compared to selling, general, and administrative expenses of $8,998,000 for the three months ended August 31, 2008.  The increase was attributed to additional support staff necessary to support the continued growth of the university, increased admissions staff, and larger marketing costs to generate additional leads.
 
In addition, the university tracks the “gross” expenditures associated with new campus and new program development as business expansion and development expense.  For the three months ended August 31, 2009, the total business expansion and development expenditures were $889,417.  Included in this total was $482,135 for continued expansion of the Austin, Texas campus and $356,997 for the expansion for the nursing programs in Denver, Colorado, and Bloomington, Minnesota.
 
Auxiliary .  Auxiliary expenses for the three months ended August 31, 2009 were $426,000, for an increase of $68,000, or 19.0%, as compared to the three months ended August 31, 2008.  This increase was primarily the result of the increased cost of books resulting from higher book sales.
 
Interest expense .  Interest expense for the three months ended August 31, 2009 was $33,000, a decrease of $91,000, or 73.4%, as compared to the three months ended August 31, 2008.  This decrease was consistent with the university’s plans to reduce advances on lines of credit to $0 with current operating resources.
 
Interest income .  Interest income for the three months ended August 31, 2009 was $86,000, an increase of $10,000, or 13.2%, as compared to the three months ended August 31, 2008.  This increase is reflective of the university’s plan to focus on capital preservation given the current economic environment.  In addition, the ability of the university to maximize interest income has been reduced by the availability of higher yielding investment instruments.
 
Income before taxes .  The income before taxes for the three months ended August 31, 2009 was $2,437,000, an increase of $2,892,000, as compared to a net loss of $455,000 for the three months ended August 31, 2008.
 
As stated earlier, revenue was up over $5,345,000 compared to the same time period last year.  This increase was largely due to increased academic revenue and was consistent with the increased enrollments.  Expenses were 99.7% of net revenue for the three month period ended August 31, 2008 and were 84.7% for the same period in 2009.  Selling, general, and administrative expenses were down a total of 11.8%.  The university was able to capitalize on increased enrollments by maintaining expenses and gaining greater efficiencies.
 
Dlorah anticipates that in 2010, it will continue to invest in expansion and development by further supporting the development of the nursing programs in Denver, Colorado and Bloomington, Minnesota, as well as continuing to develop the Austin, Texas campus.
 
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Results of Operations — Other
 
The following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated:
 
   
Q1 Ended August 31,
2009
In percentages
   
Q1 Ended August 31,
2008
In percentages
 
Net revenue
    100.0 %     100.0 %
Operating expenses
               
Cost of Educational Services
    0       0  
Selling, General, and Administrative
    2.2       3.2  
Auxiliary Expense
    0       0  
Cost of Condominium Sales
    0       1.5  
Gain on legal settlement
    0       0  
Loss on disposition of prop and equip
    0       0  
Total operating expenses
    2.2       4.7  
Operating income (loss)
    (0.8 )     (1.0 )
Interest expense
    (0.7 )     (0.9 )
Interest income
    0       0  
Other Income
    0.1       0.2  
Income (loss) before income taxes
    (1.3 )     (0.8 )
 
Three Months Ended August 31, 2009 Compared to Three Months Ended August 31, 2008
 
Net revenue .  Dlorah’s other segment’s net revenue for the three months ended August 31, 2009 was $251,000, a decrease of $198,000 or 44.1%, as compared to net revenue of $449,000 for the three months ended August 31, 2008.  The decrease was primarily due to the lack of sales of condominiums in 2009.
 
The rental income – apartments for the three months ended August 31, 2009 was $251,000, an increase of $13,000 or 5.5%, as compared to rental income – apartments of $238,000 for the three months ended August 31, 2008.  The condominium sales for the three months ended August 31, 2009 were $0, a decrease of $211,000 or 100.0%, as compared to $211,000 for the three months ended August 31, 2008.  This was due to the lack of sales of condominiums in 2009.  The cost of the condominium sales for the three months ended August 31, 2009 was $0, a decrease of $176,000, as compared to $176,000 for the three months ended August 31, 2008.  Again, as with the sales, the costs decreased due to the lack of sales in 2009.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 1.0% for the three months ended August 31, 2009 to 2.2%, as compared to 3.2% for the three months ended August 31, 2008.  The selling, general, and administrative expenses for the three months ended August 31, 2009 were $383,000, a decrease of $7,000, or 1.8%, as compared to selling, general, and administrative expenses of $390,000 for the three months ended August 31, 2008.
 
Interest expense .  Interest expense for the three months ended August 31, 2009 was $124,000, an increase of $15,000, or 13.8%, as compared to the three months ended August 31, 2008.
 
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Income before taxes .  The loss before taxes for the three months ended August 31, 2009 was $232,000, an increase of $141,000, as compared to a loss of $91,000 for the three months ended August 31, 2008.
 
Liquidity and Capital Resources
 
Liquidity .  At August 31, 2009, and August 31, 2008, cash, cash equivalents and marketable securities were $7,674,000 and $7,925,000, respectively.  The majority of the excess cash was and is invested in U.S. municipal securities directly or through money market funds, as well as in bank deposits and laddered certificate of deposits.  Of the amounts listed above, the marketable securities for August 31, 2009 and August 31, 2008 were $2,950,000 and $4,417,000, respectively, and were restricted.  The restriction requires the investment account to not be utilized until the note payable with Wells Fargo Bank matures.  Restrictions on investment balances have not affected the Company’s ability to fund daily operations.
 
Dlorah maintains two lines of credit to support ongoing operations.  From time to time, these lines of credit are accessed to support timing differences between inflows and outflows of cash.  For the first quarter of 2009, nothing was drawn on the lines of credit.
 
The company retains a $2,000,000 revolving line of credit with Great Western Bank.  Advances under the Great Western Bank line bear interest at a variable rate and are secured by substantially all of Dlorah’s assets and the personal guarantee of Robert Buckingham, Chairman of the Board.  Advances of $0 and $0 had been made on this credit line at August 31, 2009 and August 31, 2008, respectively.
 
The company also retains a $2,000,000 revolving line of credit with Wells Fargo.  Advances under the Wells Fargo line bear interest at a variable rate and are secured by checking, savings and investment accounts held by the bank.  Advances of $0 and $450,000 had been made against this line at August 31, 2009 and August 31, 2008, respectively.
 
During 2008, Dlorah’s real estate division began construction on a new condominium building.  The project was and is being funded by a construction line of credit totaling $3,816,000.  Borrowings at May 31 2009 and 2008 totaled $3,305,409 and $3,414,000, respectively.  The note is secured by real estate and the personal guarantee of Robert Buckingham, and bears interest at a variable rate.
 
Based on current operations and anticipated growth, the cash flows from operations and other sources of liquidity, are anticipated to provide adequate funds for ongoing operations and planned capital expenditures for the near future.  Also, the company is positioned to further supplement its liquidity position with debt, if needed.
 
Operating Activities .  Net cash provided by operating activities for the three months ended August 31, 2009 was $1,148,000 and net cash used by operating activities for the three months ended August 31, 2008 was $464,000.  These fluctuations were driven primarily by the changes in net income.
 
Investing Activities .  Net cash provided by investing activities was $687,000 for the three months ended August 31, 2009 as compared to the net cash used in investing activities of $1,620,000 for the three months ended August 31, 2008.  Cash used in investing activities is related to the purchase and selling of investments.  In the three months ended August 31, 2008, $1,449,000 was used to purchase investments while during the same period in 2009, Dlorah realized $1,149,000 in proceeds from the sale of investments that were not reinvested.  Dlorah’s investment committee is focused on capital preservation and due to the current economic environment decided to not reinvest at this time.
 
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Financing Activities .  Net cash provided by (used in) financing activities was ($616,000) and $77,000 for the three months ended August 31, 2009 and 2008, respectively.  The activities in this category consist of the use and repayments of lines of credit and long-term debt.  The university uses lines of credit to bridge the timing difference between cash inflows and cash outflows during the course of the year.  As mentioned earlier, the primary reason for the fluctuation in financing activities from 2008 to 2009 was the construction of the condominium unit in 2008 financed by the line of credit that was not utilized in 2009.
 
Off-Balance Sheet Arrangements
 
Other than operating leases, the company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
 
Impact of Inflation
 
The company believes inflation has had a minimal impact on results of operations for both the three month periods ended August 31, 2009 and August 31, 2008.  Consistent with Dlorah’s operating plan, a yearly salary increase in December (supported by evaluations and recommendations from supervisors) is considered to help alleviate the inflationary effects on staff.  Dlorah also increases tuition (usually once a year) to deal with inflation and help offset the inflationary impacts without creating a hardship for students.  There can be no assurance that future inflation will not have an adverse impact on operating results and financial condition.
 
Quantitative and Qualitative Disclosure About Risk
 
Market risk .  The company has no derivative financial instruments or derivative commodity instruments.  Cash in excess of current operating requirements is invested in short term certificates of deposit and money market instruments.
 
Interest rate risk .  Interest rate risk is managed by investing excess funds in cash equivalents and marketable securities bearing variable interest rates tied to various market indices.  As such, future investment income may fall short of expectations due to changes in interest rates or losses in principal may occur if securities are forced to be sold which have declined in market value due to changes in interest rates.  At August 31, 2009, a 10% increase or decrease in interest rates would not have a material impact on future earnings, fair values or cash flows.  All notes payable and capital lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates.
 
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Results of Operations — Dlorah
 
The following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated:
 
   
Year Ended
May 31, 2009
In percentages
   
Year Ended
May 31, 2008
In percentages
   
Year Ended
May 31, 2007
In percentages
 
Net revenue
    100.0 %     100.0 %     100.0 %
Operating expenses
                       
Cost of Educational Services
    20.5       22.0       23.0  
Selling, General, and Administrative
    67.4       74.6       77.8  
Auxiliary Expense
    2.5       3.1       4.1  
Cost of Condo Sales
    0.9       0.2       0  
Gain on legal settlement
    0       0       (0.8 )
Loss on disposition of prop and equip
    0       0       1.1  
Total operating expenses
    91.4       99.9       105.2  
Operating income (loss)
    8.6       0.1       (5.2 )
Interest expense
    (1.3 )     (2.1 )     (1.7 )
Interest income
    0.4       0.6       0.6  
Other Income
    0.1       0.2       0.2  
Income (loss) before income taxes
    7.8       (1.2 )     (6.1 )
Income tax (expense) benefit
    (2.9 )     0.5       1.9  
Non-Controlling Interest
    (0 )     (0.1 )     (0 )
Net income (loss)
    5.0       (0.8 )     (4.3 )
 
Year Ended May 31, 2009 Compared to Year Ended May 31, 2008
 
Net revenue .  Dlorah’s net revenue for the year ended May 31, 2009 was $62,584,000, an increase of $13,127,000 or 26.5%, as compared to net revenue of $49,457,000 for the year ended May 31, 2008.  The increase was primarily due to a 30% enrollment increase over the prior year.  Dlorah’s fiscal year 2009 revenue consisted of $60,910,000 from Dlorah’s NAU segment and $1,674,000 from Dlorah’s other segment.
 
The academic revenue for the year ended May 31, 2009 was $56,874,000, an increase of $12,656,000 or 28.6%, as compared to academic revenue of $44,218,000 for the year ended May 31, 2008.  The increase was primarily due to the enrollment increase over the prior year.  The auxiliary revenue was $4,036,000, a decrease of $26,000 or 0.6%, as compared to auxiliary revenue of $4,062,000 for the year ended May 31, 2008.  This decrease was primarily due to fewer sales in the foodservice area as the university continued to transition the Rapid City, South Dakota campus to a non-traditional campus.  The costs associated with the auxiliary revenue were $1,595,000 for the year ended May 31, 2009, an increase of $72,000 or 4.7%, as compared to auxiliary costs of $1,523,000 for the year ended May 31, 2008.
 
The rental income – apartments for the year ended May 31, 2009 was $890,000, an increase of $108,000 or 13.8%, as compared to rental income – apartments of $782,000 for the year ended May 31, 2008.  This was due to lower vacancies in 2009.  The condominium sales for the year ended May 31, 2009 were $784,000, an increase of $389,000 or 98.5%, as compared to $395,000 for the year ended May 31, 2008.  This was due to the additional sale of condos in 2009  The cost of the condominium sales for the year ended May 31, 2009 was $558,000, an increase of $436,000, as compared to $122,000 for the year ended May 31, 2008.  Again, as with the sales, the costs increased due to the increase in the condominium sales.
 
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Cost of educational services .  The educational services expense as a percentage of net revenue decreased by 1.5% for the year ended May 31, 2009 to 20.5%, as compared to 22.0% for the year ended May 31, 2008.  This decrease was a result of continued efficiencies gained by students being advised to take online courses thereby leveraging the instructional efforts by gaining greater student to instructor ratios.  NAU has the capacity to gain additional efficiencies by further utilizing its online delivery platform.  However, in doing so NAU must also continue to realize modest enrollment growth thereby producing a critical mass sufficient enough to support the course scheduling efficiencies.  In this context, it should also be noted that NAU ensures that students will receive the courses they need to graduate, regardless of the student-to-instructor ratio.  Likewise, NAU also realizes there are maximum student to instructor ratios which are driven by academic discipline and course content.  NAU seeks to balance these efforts within the context of gaining additional efficiencies, so it is unclear whether additional efficiencies can be obtained.  The educational services expenses for the year ended May 31, 2009 were $12,816,000, an increase of $1,945,000, or 17.9% as compared to educational expenses of $10,871,000 for the year ended May 31, 2008.  This increase was primarily due to increases in instructional compensation and related expenses.  These increases are attributable to the increased headcount (both staff and faculty) needed to provide and maintain educational services to the increased student population.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 7.2% for the year ended May 31, 2009 to 67.4%, as compared to 74.6% for the year ended May 31, 2008.  This decrease was primarily the result of the university’s ability to leverage fixed costs across an increasing revenue base.  The selling, general, and administrative expenses for the year ended May 31, 2009 were $42,208,000, an increase of $5,307,000, or 14.4%, as compared to selling, general, and administrative expenses of $36,901,000 for the year ended May 31, 2008.  The increase was attributed to additional support staff necessary to support the continued growth of the university, increased admissions staff, and larger marketing costs to generate additional leads.
 
In addition, the university tracks the “gross” expenditures associated with new campus and new program development as business expansion and development expense.  For the year ended May 31, 2009, the total business expansion and development expenditures were $3,287,749.  Included in this total is $1,598,696 for continued expansion of the Austin, Texas campus and $1,684,000 for the expansion for the nursing programs in Overland Park, Kansas, Denver, Colorado, and Bloomington, Minnesota.
 
For fiscal year ended May 31, 2008, the business expansion and development expenditures were $4,757,730.  Included in this total is $173,468 for continued expansion of the Distance Learning operations, $950,249 for the continued development of the Austin, Texas campus, $1,370,553 for the expansion for the nursing programs in Overland Park, Kansas, Denver, Colorado, and Bloomington, Minnesota, $1,155,625 for the development of an education center in Wichita, Kansas, and $754,942 for the development of an education center in Watertown, South Dakota.
 
Auxiliary .  Auxiliary expenses for the year ended May 31, 2009 were $1,595,000, for an increase of $72,000, or 4.7%, as compared to the year ended May 31, 2008.
 
Interest expense .  Interest expense for the year ended May 31, 2009 was $834,000, a decrease of $189,000, or 18.5%, as compared to the year ended May 31, 2008.  This decrease was consistent with the university’s plans to reduce advances on lines of credit to $0 with current operating resources.
 
Interest income .  Interest income for the year ended May 31, 2009 was $242,000, a decrease of $40,000, or 14.2%, as compared to the year ended May 31, 2008.  This decrease was reflective of Dlorah’s plan to focus on capital preservation given the current economic environment.  In addition, the ability of Dlorah to maximize interest income has been reduced by the availability of higher yielding investment instruments.
 
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Income tax expense .  Income tax expense for the year ended May 31, 2009 was $1,797,000, an increase of $2,028,000 from a tax benefit of $231,000 for the year ended May 31, 2008.  This increase was attributable to the company increasing profits and recording an income in 2009 versus a loss in 2008.
 
Net income .  The net income for the year ended May 31, 2009 was $3,121,000, an increase of $3,541,000, or 843.1%, as compared to a net loss of $420,000 for the year ended May 31, 2008.
 
As stated earlier, revenue was up over $13,127,000 compared to the same time period last year.  This increase was largely due to the increase in academic revenue and was consistent with the increased enrollments.  Expenses were 99.9% of net revenue for 2008 and were 91.4% for 2009.  Selling, general, and administrative expenses were down a total of 7.2%, of which business expansion and development was down  4.4% from 9.6% in 2008 to 5.3% in 2009.  The university was able to capitalize on increased enrollments by maintaining expenses and gaining greater efficiencies.

In 2009, the university continued to invest in expansion and development by further supporting the development of the nursing programs in Overland Park, Kansas, and Denver, Colorado, as well as continuing to develop the Austin, Texas campus.  In 2008, the university was expanding the nursing programs, developing the Austin, Texas campus, continuing to develop the education centers in Wichita, Kansas and Watertown, South Dakota and developing the curriculum group.  Furthermore, the university continued to utilize performance based curriculum and also continued to create electronic support materials for select courses.
 
Year Ended May 31, 2008 Compared to Year Ended May 31, 2007
 
Net revenue .  Net revenue for the year ended May 31, 2008 was $49,457,000, an increase of $5,008,000, or 11.3%, as compared to $44,449,000 for the year ended May 31, 2007.  This increase was supported by the continued expansion and development efforts to pursue new markets, increased student retention, growth of existing markets and expansion of the distance learning operations.  Of this increase, revenue from distance learning operations increased 11.9%, the Missouri region (consisting of the Independence, Overland Park, Wichita, and Zona Rosa campuses) increased revenues by 16.4%, the Minnesota region (consisting of Bloomington, Brooklyn Center, and Roseville) increased 25.9%, the Rapid City, South Dakota campus increased 5.4%, and the Ellsworth AFB campus increased 21%.  Dlorah’s fiscal year 2008 revenue consisted of $48,280,000 from Dlorah’s NAU segment and $1,177,000 from Dlorah’s other segment.
 
The academic revenue for the year ended May 31, 2008 was $44,218,000, an increase of $4,377,000 or 11.0%, as compared to academic revenue of $39,841,000 for the year ended May 31, 2007.  The increase was primarily due to the enrollment increase over the prior year.  The auxiliary revenue was $4,062,000, an increase of $360,000 or 9.7%, as compared to auxiliary revenue of $3,702,000 for the year ended May 31, 2007.  This increase was primarily due to sales of the electronic instructional materials that students were required to purchase from the university as they were not available elsewhere.  The costs associated with the auxiliary revenue were $1,523,000 for the year ended May 31, 2008, a decrease of $308,000 or 16.8%, as compared to auxiliary costs of $1,831,000 for the year ended May 31, 2007.  These costs were primarily associated with textbooks and the decrease was due to the fact that students were acquiring their textbooks elsewhere.
 
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The rental income – apartments for the year ended May 31, 2008 was $782,000, a decrease of $124,000 or 13.7%, as compared to rental income – apartments of $906,000 for the year ended May 31, 2007.  This was due to higher vacancies in 2008.  The condominium sales for the year ended May 31, 2008 were $395,000, an increase of $395,000 or 100%, as compared to $0 for the year ended May 31, 2007.  This was due to the additional sale of condos in 2008.  The cost of the condominium sales for the year ended May 31, 2008 was $122,000, an increase of $122,000 or 100%, as compared to $0 for the year ended May 31, 2007.  Again, as with the sales, the costs increased due to the increase in the condominium sales.

Cost of educational services .  Educational services expense as a percentage of net revenue decreased by 1.0% for the year ended May 31, 2008 to 22.0%, as compared to 23.0% for the year ended May 31, 2007.  As referenced earlier, this decrease was the result of continued efficiencies gained by students being advised to take online courses thereby leveraging the instructional efforts by gaining greater student to instructor ratios.  The educational services expenses for the year ended May 31, 2008 were $10,871,000, an increase of $669,000, or 6.6% as compared to $10,202,000 for the year ended May 31, 2007.  This increase was primarily due to increases in instructional compensation and related expenses.  These increases were attributable to the increased headcount (both staff and faculty) needed to provide and maintain educational services to the increased student population.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 3.2% for the year ended May 31, 2008 to 74.6%, as compared to 77.8% for the year ended May 31, 2007.  This decrease was primarily due to the Dlorah’s ability to leverage fixed costs across an increasing revenue base.  The selling, general, and administrative expenses for the year ended May 31, 2008 were $36,901,000, an increase of $2,319,000, or 6.7%, as compared to $34,582,000 for the year ended May 31, 2007.  The increase was reflective of the additional support staff necessary to support the continued growth of the university, increased admissions staff, and larger marketing costs to generate additional leads which in turn would increase enrollment potential.
 
In addition, the university tracks the “gross” expenditures associated with new campus development and new program development as business expansion and development.  For fiscal year ended May 31, 2008, the business expansion and development expenditures were $4,757,730.  Included in this total was $173,468 for continued expansion of the Distance Learning operations, $950,249 for the continued development of the Austin, Texas campus, $1,370,553 for the expansion for the nursing programs in Overland Park, Kansas, Denver, Colorado, and Bloomington, Minnesota, $1,155,625 for the development of an education center in Wichita, Kansas, and $754,942 for the development of an education center in Watertown, South Dakota.
 
For fiscal year ended May 31, 2007, the business expansion and development expenditures were $4,979,452.  Included in this total was $1,800,000 for continued expansion of the Distance Learning operations, $178,054 for the development of the Austin, Texas campus, $1,113,169 for the expansion for the nursing programs in Overland Park, Kansas, and Denver, Colorado, $762,909 for the development of an education center in Wichita, Kansas, $452,634 for the development of an education center in Watertown, South Dakota, and $414,373 for expanded curriculum development.
 
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Auxiliary .  Auxiliary expenses for the year ended May 31, 2008 were $1,523,000, a decrease of $308,000, or 16.8%, as compared to the year ended May 31, 2007.  This decrease was primarily the result of a decrease in cost of books resulting in lower book sales from 2007 to 2008.
 
Interest expense .  Interest expense for the year ended May 31, 2008 was $1,023,000, an increase of $267,000, or 35.3%, as compared to $756,000 for the year ended May 31, 2007.  This increase was reflective of the company’s plan to finance a portion of its capital through additional loan agreements.  Consistent with the plan, four new loans were obtained, one of which was for $1,000,000 for the build out of the Austin, Texas campus.  The four new loans were used to finance the purchases of capital assets to support the business expansion and development of new campuses, new programs, and program expansion.
 
Interest income .  Interest income for the year ended May 31, 2008 was $282,000, an increase of $4,000, or 1.4%, as compared to $278,000 for the year ended May 31, 2007.  This change was consistent with Dlorah’s plan to increase its level of reserves to maintain approximately 10% of its gross revenue in reserves.
 
Income tax benefit .  Income tax benefit for the year ended May 31, 2008 was $231,000, a decrease of $600,000 from a tax benefit of $831,000 for the year ended May 31, 2007.  This decrease was primarily attributable to the loss realized by Dlorah which was significantly less than the previous year.
 
Net loss .  The net loss for the year ended May 31, 2008 was $420,000, a decrease of $1,473,000, or 78%, as compared to a net loss of $1,893,000 for the year ended May 31, 2007.
 
As outlined earlier, revenue increased over $5,008,000 compared to the prior year.  This increase was largely due to the increased enrollments.  Expenses were 105.2% of net revenue in 2007 and 99.9% in 2008.  Selling, general, and administrative expenses were down a total of 3.2%, of which business expansion and development expense was down 1.6% from 11.2% in 2007 to 9.6% in 2008.  Dlorah was able to capitalize on increased enrollments by maintaining expenses and gaining greater efficiencies.
 
Results of Operations — NAU Segment
 
The following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated:
 
   
Year Ended
May 31, 2009
In percentages
   
Year Ended
May 31, 2008
In percentages
   
Year Ended
May 31, 2007
In percentages
 
Net revenue
    100.0 %     100.0 %     100.0 %
Operating expenses
                       
Cost of Educational Services
    20.5       22.0       23.0  
Selling, General, and Administrative
    64.2       69.8       72.5  
Auxiliary Expense
    2.5       3.1       4.1  
Cost of Condo Sales
    0       0       0  
Gain on legal settlement
    0       0       0  
Loss on disposition of prop and equip
    0       0       1.1  
Total operating expenses
    87.2       94.9       99.9  
Operating income (loss)
    10.1       2.7       (2.0 )
Interest expense
    (0.5 )     (1.4 )     (1.1 )
Interest income
    0.4       0.6       0.6  
Other Income
    0       0       0  
Income (loss) before income taxes
    10.1       1.9       (2.4 )
 
96
 
Year Ended May 31, 2009 Compared to Year Ended May 31, 2008
 
Net revenue .  The net revenue for the year ended May 31, 2009 was $60,910,000, an increase of $12,630,000 or 26.2%, as compared to net revenue of $48,280,000 for the year ended May 31, 2008.  The increase was primarily due to a 30% enrollment increase over the prior year.

The academic revenue for the year ended May 31, 2009 was $56,874,000, an increase of $12,656,000 or 28.6%, as compared to academic revenue of $44,218,000 for the year ended May 31, 2008.  The increase was primarily due to the enrollment increase over the prior year.  The auxiliary revenue was $4,036,000, a decrease of $26,000 or 0.6%, as compared to auxiliary revenue of $4,062,000 for the year ended May 31, 2008.  This decrease was primarily due to fewer sales in the foodservice area as the university continued to transition the Rapid City, South Dakota campus to a non-traditional campus.  The costs associated with the auxiliary revenue were $1,595,000 for the year ended May 31, 2009, an increase of $72,000 or 4.7%, as compared to auxiliary costs of $1,523,000 for the year ended May 31, 2008.
 
Cost of educational services   The educational services expense as a percentage of net revenue decreased by 1.5% for the year ended May 31, 2009 to 20.5%, as compared to 22.0% for the year ended May 31, 2008.  This decrease was a result of continued efficiencies gained by students being advised to take online courses thereby leveraging the instructional efforts by gaining greater student to instructor ratios.  The educational services expenses for the year ended May 31, 2009 were $12,816,000, an increase of $1,945,000, or 17.9% as compared to educational expenses of $10,871,000 for the year ended May 31, 2008.  This increase was primarily due to increases in instructional compensation and related expenses.  These increases were attributable to the increased headcount (both staff and faculty) needed to provide and maintain educational services to the increased student population.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 5.6% for the year ended May 31, 2009 to 64.2%, as compared to 69.8% for the year ended May 31, 2008.  This decrease was primarily the result of Dlorah’s ability to leverage fixed costs across an increasing revenue base.  The selling, general, and administrative expenses for the year ended May 31, 2009 were $40,163,000, an increase of $5,623,000, or 16.3%, as compared to selling, general, and administrative expenses of $34,540,000 for the year ended May 31, 2008.  The increase was attributed to additional support staff necessary to support the continued growth of the university, increased admissions staff, and larger marketing costs to generate additional leads.
 
In addition, the university tracks the “gross” expenditures associated with new campus and new program development as business expansion and development expense.  For the year ended May 31, 2009, the total business expansion and development expenditures were $3,287,749.  Included in this total was $1,598,696 for continued expansion of the Austin, Texas campus and $1,684,000 for the expansion for the nursing programs in Overland Park, Kansas, Denver, Colorado, and Bloomington, Minnesota.
 
97
 
For fiscal year ended May 31, 2008, the business expansion and development expenditures were $4,757,730.  Included in this total was $173,468 for continued expansion of the Distance Learning operations, $950,249 for the continued development of the Austin, Texas campus, $1,370,553 for the expansion for the nursing programs in Overland Park, Kansas, Denver, Colorado, and Bloomington, Minnesota, $1,155,625 for the development of an education center in Wichita, Kansas, and $754,942 for the development of an education center in Watertown, South Dakota.
 
Auxiliary .  Auxiliary expenses for the year ended May 31, 2009 were $1,595,000, for an increase of $72,000, or 4.7%, as compared to the year ended May 31, 2008.
 
Interest expense .  Interest expense for the year ended May 31, 2009 was $313,000, a decrease of $365,000, or 53.8%, as compared to the year ended May 31, 2008.  This decrease was consistent with Dlorah’s plans to reduce advances on lines of credit to $0 with current operating resources.
 
Interest income .  Interest income for the year ended May 31, 2009 was $242,000, a decrease of $40,000, or 14.2%, as compared to the year ended May 31, 2008.  This decrease was reflective of Dlorah’s plan to focus on capital preservation given the current economic environment.  In addition, Dlorah’s ability to maximize interest income has been reduced by the availability of higher yielding investment instruments.
 
As stated earlier, revenue was up over $12,656,000 compared to the same time period last year.  This increase was largely due to the increase in academic revenue and was consistent with the increased enrollments.  Expenses were 94.9% of net revenue for 2008 and were 87.2% for 2009.  Selling, general, and administrative expenses were down a total of 5.6%, of which business expansion and development was down 4.4% from 9.6% in 2008 to 5.3% in 2009.  Dlorah was able to capitalize on increased enrollments by maintaining expenses and gaining greater efficiencies.
 
In 2009, Dlorah continued to invest in expansion and development by further supporting the development of the nursing programs in Overland Park, Kansas, and Denver, Colorado, as well as continuing to develop the Austin, Texas campus.  In 2008, Dlorah expanded the nursing programs, developed the Austin, Texas campus, continued to develop the education centers in Wichita, Kansas and Watertown, South Dakota and developed the curriculum group.  Furthermore, Dlorah continued to utilize performance based curriculum and also continued to create electronic support materials for select courses.
 
Year Ended May 31, 2008 Compared to Year Ended May 31, 2007
 
Net revenue .  Net revenue for the year ended May 31, 2008 was $48,280,000, an increase of $4,737,000, or 10.9%, as compared to $43,543,000 for the year ended May 31, 2007.  This increase was supported by the continued expansion and development efforts to pursue new markets, increase student retention, grow existing markets and expand the distance learning operations.  Of this increase, revenue from distance learning operations increased 11.9%, the Missouri region (consisting of the Independence, Overland Park, Wichita, and Zona Rosa campuses) increased revenues by 16.4%, the Minnesota region (consisting of the Bloomington, Brooklyn Center, and Roseville campuses) increased 25.9%, the Rapid City, South Dakota campus increased 5.4%, and the Ellsworth AFB campus increased 21%.
 
98
 
The academic revenue for the year ended May 31, 2008 was $44,218,000, an increase of $4,377,000 or 11.0%, as compared to academic revenue of $39,841,000 for the year ended May 31, 2007.  The increase was primarily due to the enrollment increase over the prior year.  The auxiliary revenue was $4,062,000, an increase of $360,000 or 9.7%, as compared to auxiliary revenue of $3,702,000 for the year ended May 31, 2007.  This increase was primarily due to sales of the electronic instructional materials that students were required to purchase from the university as they were not available elsewhere.  The costs associated with the  auxiliary revenue were $1,523,000 for the year ended May 31, 2008, a decrease of $308,000 or 16.8%, as compared to auxiliary costs of $1,831,000 for the year ended May 31, 2007.  These costs were associated with textbooks and the fact that students were acquiring their textbooks elsewhere.
 
Cost of educational services .  Educational services expense as a percentage of net revenue decreased by 1.0% for the year ended May 31, 2008 to 22.0%, as compared to 23.0% for the year ended May 31, 2007.  As referenced earlier, this decrease was the result of continued efficiencies gained by students being advised to take online courses thereby leveraging the instructional efforts by gaining greater student to instructor ratios.  The educational services expenses for the year ended May 31, 2008 were $10,871,000, an increase of $669,000, or 6.6% as compared to $10,202,000 for the year ended May 31, 2007.  This increase was primarily due to increases in instructional compensation and related expenses.  These increases were attributable to the increased headcount (both staff and faculty) needed to provide and maintain educational services to the increased student population.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 2.7% for the year ended May 31, 2008 to 69.8%, as compared to 72.5% for the year ended May 31, 2007.  This decrease was primarily due to Dlorah’s ability to leverage fixed costs across an increasing revenue base.  The selling, general, and administrative expenses for the year ended May 31, 2008 were $34,540,000, an increase of $2,302,000, or 7.1%, as compared to $32,238,000 for the year ended May 31, 2007.  The increase was reflective of the additional support staff necessary to support the continued growth of the university, increased admissions staff, and larger marketing costs to generate additional leads which in turn would increase enrollment potential.
 
In addition, the Dlorah tracks the “gross” expenditures associated with new campus development and new program development as business expansion and development.  For fiscal year ended May 31, 2008, the business expansion and development expenditures were $4,757,730.  Included in this total was $173,468 for continued expansion of the Distance Learning operations, $950,249 for the continued development of the Austin, Texas campus, $1,370,553 for the expansion of the nursing programs in Overland Park, Kansas, Denver, Colorado, and Bloomington, Minnesota, $1,155,625 for the development of an education center in Wichita, Kansas, and $754,942 for the development of an education center in Watertown, South Dakota.
 
For fiscal year ended May 31, 2007, the business expansion and development expenditures were $4,979,452.  Included in this total was $1,800,000 for continued expansion of the Distance Learning operations, $178,054 for the development of the Austin, Texas campus, $1,113,169 for the expansion of the nursing programs in Overland Park, Kansas, and Denver, Colorado, $762,909 for the development of an education center in Wichita, Kansas, $452,634 for the development of an education center in Watertown, South Dakota, and $414,373 for expanded curriculum development.
 
Auxiliary .  Auxiliary expenses for the year ended May 31, 2008 were $1,523,000, a decrease of $308,000, or 16.8%, as compared to the year ended May 31, 2007.  This decrease was primarily the result of a decrease in cost of books resulting in lower book sales from 2007 to 2008.
 
99
 
Interest expense .  Interest expense for the year ended May 31, 2008 was $678,000, an increase of $192,000, or 39.5%, as compared to $486,000 for the year ended May 31, 2007.  This increase was reflective of Dlorah’s plan to finance a portion of its capital through additional loan agreements.  Consistent with the plan, four new loans were obtained, one of which was for $1,000,000 for the build out of the Austin, Texas campus.  The four new loans were used to finance the purchases of capital assets to support the business expansion and development of new campuses, new programs, and program expansion.
 
Interest income .  Interest income for the year ended May 31, 2008 was $282,000, an increase of $4,000, or 1.4%, as compared to $278,000 for the year ended May 31, 2007.  This change was consistent with Dlorah’s plan to increase its level of reserves to maintain approximately 10% of its gross revenue in reserves.
 
As outlined earlier, revenue increased over $4,377,000 compared to the prior year.  This increase was largely due to the increased enrollments.  Expenses were 99.9% of net revenue in 2007 and 94.9% in 2008.  Selling, general, and administrative expenses were down a total of 2.7%, of which business expansion and development expense was down 1.6% from 11.2% in 2007 to 9.6% in 2008.  Dlorah was able to capitalize on increased enrollments by maintaining expenses and gaining greater efficiencies.
 
Results of Operations — Other Segment
 
The following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated:
 
   
Year Ended
May 31, 2009
In percentages
   
Year Ended
May 31, 2008
In percentages
   
Year Ended
May 31, 2007
In percentages
 
Net revenue
    100.0 %     100.0 %     100.0 %
Operating expenses
                       
Cost of Educational Services
    0       0       0  
Selling, General, and Administrative
    3.3       4.8       5.3  
Auxiliary Expense
    0       0       0  
Cost of Condo Sales
    0.9       0.2       0  
Gain on legal settlement
    0       0       0  
Loss on disposition of prop and equip
    0       0       0  
Total operating expenses
    4.2       5.0       5.3  
Operating income (loss)
    (1.5 )     (2.6 )     (3.2 )
Interest expense
    (0.8 )     (0.7 )     (0.6 )
Interest income
    0       0       0  
Other Income
    0.1       0.2       0  
Income (loss) before income taxes
    (2.2 )     (3.2 )     (3.8 )
 
Year Ended May 31, 2009 Compared to Year Ended May 31, 2008
 
Net revenue .  The net revenue for the year ended May 31, 2009 was $1,674,000, an increase of $497,000 or 42.2%, as compared to net revenue of $1,177,000 for the year ended May 31, 2008.  The increase was primarily due to the sale of additional condominiums.
 
100
 
The rental income – apartments for the year ended May 31, 2009 was $890,000, an increase of $108,000 or 13.8%, as compared to rental income – apartments of $782,000 for the year ended May 31, 2008.  This was due to lower vacancies in 2009 and the sale of additional condominiums.  The condominium sales for the year ended May 31, 2009 were $784,000, an increase of $389,000 or 98.5%, as compared to $395,000 for the year ended May 31, 2008.  This was due to the additional sale of condos in 2009.  The cost of the condominium sales for the year ended May 31, 2009 was $558,000, an increase of $436,000, as compared to $122,000 for the year ended May 31, 2008.  Again, as with the sales, the costs increased due to the increase in the condominium sales.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 1.5% for the year ended May 31, 2009 to 3.3%, as compared to 4.8% for the year ended May 31, 2008.  This decrease was primarily the result of lower expenses for 2008.  The selling, general, and administrative expenses for the year ended May 31, 2009 were $2,045,000, a decrease of $316,000, or 13.4%, as compared to selling, general, and administrative expenses of $2,361,000 for the year ended May 31, 2008.
 
Cost of condominium sales .  The cost of the condominium sales for the year ended May 31, 2009 was $558,000, an increase of $436,000, as compared to $122,000 for the year ended May 31, 2008.  The costs increased due to the increase in the condominium sales.
 
Interest expense .  Interest expense for the year ended May 31, 2009 was $521,000, an increase of $176,000, or 51.0%, as compared to the year ended May 31, 2008.  This increase was a result of the operating line of credit used for the condominium project and the interest expense related to it.
 
Year Ended May 31, 2008 Compared to Year Ended May 31, 2007
 
Net revenue .  Net revenue for the year ended May 31, 2008 was $1,177,000, an increase of $271,000, or 29.9%, as compared to $906,000 for the year ended May 31, 2007.  Again, this increase was due to the sales of condominiums in 2008.
 
The rental income – apartments for the year ended May 31, 2008 was $782,000, a decrease of $124,000 or 13.7%, as compared to rental income – apartments of $906,000 for the year ended May 31, 2007.  This was due to lower vacancies in 2007.  The condominium sales for the year ended May 31, 2008 were $395,000, an increase of $395,000 or 100.0%, as compared to $0 for the year ended May 31, 2007.  This was due to the additional sale of condos in 2008.  The cost of the condominium sales for the year ended May 31, 2008 was $122,000, an increase of $122,000, as compared to $0 for the year ended May 31, 2007.  Again, as with the sales, the costs increased due to the increase in condominium sales.
 
Selling, general, and administrative expenses .  The selling, general, and administrative expense as a percentage of net revenue decreased by 0.5% for the year ended May 31, 2008 to 4.8%, as compared to 5.3% for the year ended May 31, 2007.  This decrease was primarily the result of lower expenses for 2008.  The selling, general, and administrative expenses for the year ended May 31, 2008 were $2,361,000, an increase of $17,000, or 0.7%, as compared to $2,344,000 for the year ended May 31, 2007.
 
Cost of condominium sales .  The cost of the condominium sales for the year ended May 31, 2008 was $122,000, an increase of $122,000, as compared to $0 for the year ended May 31, 2007.  The costs increased due to the increase in the condominium sales.
 
Interest expense .  Interest expense for the year ended May 31, 2008 was $345,000, an increase of $75,000, or 27.8%, as compared to $270,000 for the year ended May 31, 2007.  This increase was a result of the operating line of credit used for the condominium project and the interest expense related to it.
 
101
 
Liquidity and Capital Resources
 
Liquidity .  At May 31, 2009, 2008, and 2007, cash, cash equivalents and marketable securities were $7,925,000, $5,240,000 and $4,137,000, respectively.  The majority of the excess cash is invested in long-term, government-backed bonds and certificate of deposits.  Of the amounts listed above the marketable securities for May 31, 2009, 2008, and 2007 were $4,417,000, $3,132,000 and $3,979,000, respectively and are restricted.  The restriction requires the investment account to not be utilized until the note payable with Wells Fargo Bank matures.  Restrictions on investment balances have not affected the Company’s ability to fund daily operations.
 
The university maintains two lines of credit to support ongoing operations.  From time to time, these lines of credit are accessed to support timing differences between inflows and outflows of cash.
 
Dlorah retains a $2,000,000 revolving line of credit with Great Western Bank.  Advances under the line bear interest at a variable rate and are secured by substantially all assets of the university and the personal guarantee of Robert Buckingham, Chairman of the Board.  Advances of $0, $1,985,000 and $0 had been made on this credit line at May 31, 2009, 2008, and 2007, respectively.
 
Dlorah also retains a $2,000,000 revolving line of credit with Wells Fargo.  Advances under the line bear interest at a variable rate and are secured by checking, savings and investment accounts held by the bank.  Advances of $0, $600,000, and $650,000 had been made against this line at May 31, 2009, 2008, and 2007, respectively.
 
During 2008, construction started on a new condominium building in the real estate division.  The project is being funded by a construction line of credit totaling $3,816,000.  Borrowings at May 31, 2009 and 2008 totaled $3,305,409 and $3,414,000, respectively.  The note is secured by real estate and the personal guarantee of Robert Buckingham, and bears interest at a variable rate.  The basis and rational for the decision to construct the condominium is listed below:
 
The land that comprises the real estate division was originally purchased (by Harold Buckingham, the original founder of Dlorah) in the late 1950’s with the start of the original development in the 1970’s, when the single family housing and the first apartment complex was constructed.  In 1984, additional development of the real estate division resulted in the Fairway Hills Townhomes, and the Fairway Hills  Condominiums being constructed.  Eventually the remaining multi-family land was sold and developed into the Carmel Point townhomes leaving two parcels of land remaining from the original purchase.
 
One of the two remaining parcels of land consists of commercial land which is available for purchase, lease or a combination thereof.  Currently the land is appraised at $10.00 a square foot or $1.6 million dollars.  Several projects have been rejected to insure compatibility with the existing neighborhood.  The remaining parcel of land is being used to construct four condominium units called Vista Park with 24 units each or a total of 96 units.  Phase one is fully constructed with 24 units.
 
102
 
To facilitate the continued sale of the condominiums Dlorah believes that two things need to occur: continued low interest rates and in improvement in consumer confidence.  New and innovative methods to market the property are continuously reviewed without compromising prices.  Dlorah believes the real estate market in Rapid City, SD continues to be better positioned than most other markets in the United States.
 
Based on current operations and anticipated growth, the cash flows from operations and other sources of liquidity, are anticipated to provide adequate funds for ongoing operations and planned capital expenditures at least for the next 12 months.  Also, Dlorah is positioned to further supplement its liquidity position with debt, if needed.
 
Operating Activities .  Net cash provided by operating activities for the year ended May 31, 2009, 2008, and 2007 were $9,223,000, $2,708,000 and $343,000, respectively.  These fluctuations were driven primarily by the changes in net income.
 
A significant operating component which impacted the net income was expenditures related to expansion initiatives.  Business expansion and development expenses for the year ended May 31, 2009, 2008 and 2007 were $3,287,749, $4,757,730, and $4,979,452 respectively.  As noted by the trend, the university has managed these expenditures to allow the initiatives to mature and balance that against funding additional initiatives.
 
Investing Activities .  Net cash used in investing activities was $2,412,000, $6,172,000, and $3,285,000 for the years ended May 31, 2009, 2008, and 2007, respectively.  Cash used in investing activities is related to the purchase of property, equipment and leasehold improvements.  A majority of the historical capital expenditures are related to business expansion and development and the need to purchase furniture and equipment to support new campuses and new programming.  Likewise, NAU continues to invest in computer equipment and office furniture and fixtures that are needed to support increasing employee and student headcounts.
 
In addition, Dlorah has condominiums up for sale which were constructed in 2008 as described earlier in this document.  This construction was funded by a line of credit with Great Western Bank and is the primary reason for the fluctuation of $2,887,000 from 2007 to 2008 and the $3,760,000 fluctuation from 2008 to 2009.  This fluctuation is due to the draw on the line in 2008 that didn’t exist in 2007 and was not utilized in 2009.
 
Financing Activities .  Net cash provided by (used in) financing activities was ($5,411,000), $5,414,000, and $2,661,000 for the years ended May 31, 2009, 2008, and 2007, respectively.  The activities in this category consist of the use and repayments of lines of credit and long-term debt.  The university uses lines of credit to bridge the timing difference between cash inflows and cash outflows during the course of the year.  As mentioned earlier, the primary reason for the fluctuation of $2,753,000 in financing activities from 2007 to 2008 was the construction of the condominium unit in 2008 financed by the line of credit that was not utilized in 2009.  The primary reason for the fluctuation of $10,825,000 in financing activities from 2008 to 2009 was the borrowings and repayments on long-term debt and the lines of credit as well as the construction project of the condominiums.  The borrowings of long-term debt in 2009 were $0 compared to $3,151,000 in 2008.  The repayments on the lines of credit in 2009 were $5,796,000 compared to $1,514,000 in 2008.  The borrowings on the line of credit for the construction project were $452,000 in 2009 compared to $3,879,000 in 2008.
 
103
 
Contractual Obligations
 
The following table sets forth, as of May 31, 2009, the aggregate amounts of the significant contractual obligations and commitments with definitive payment terms due in each of the periods presented (in thousands):
 
       
Payments Due by Period
  
 
Total
 
Less than
 1 Year
 
Years
 2 – 3
 
Years
 4 – 5
 
More than
 5 Years
Long term debt obligations (1)
 
$
8,654
   
$
2,147
   
$
2,583
   
$
3,119
   
$
805
 
Capital lease obligations (1)
   
0
     
0
     
0
     
0
     
0
 
Operating lease obligations (1)
   
24,711
     
2,916
     
4,594
     
3,950
     
13,251
 
Purchase obligations
   
0
     
0
     
0
     
0
     
0
 
Other Long term Liabilities reflected on Balance Sheet under GAAP
   
0
     
0
     
0
     
0
     
0
 
Total contractual obligations
 
$
33,365
   
$
5,063
   
$
7,177
   
$
7,069
   
$
14,056
 
(1)
See Note 5 and 7 to the financial statements, which are included elsewhere in this proxy, for a discussion of long-term debt maturities and future minimum lease payments.
 
Off-Balance Sheet Arrangements
 
Other than operating leases, Dlorah does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
 
Impact of Inflation
 
Dlorah believes inflation has had a minimal impact on results of operations for the years ended May 31, 2009, 2008, or 2007.  Consistent with Dlorah’s operating plan, a yearly salary increase in December (supported by evaluations and recommendations from supervisors) is considered to help alleviate the inflationary effects on staff.  Dlorah also increases tuition (usually once a year) to deal with inflation and help offset the inflationary impacts without creating a hardship for students.  There can be no assurance that future inflation will not have an adverse impact on operating results and financial condition.
 
Recent Accounting Pronouncements
 
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements .  FASB Statement No. 157 established a framework for measuring fair value.  It does not require any new fair value measurements, but does require expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings.  The Company adopted FASB Statement No. 157 as of June 1, 2008.  It did not have a material impact on the consolidated financials statements.  In February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 157-2, Effective Date of FASB Statement No. 157.   FSP FAS No. 157-2 delayed the effective date of FASB Statement No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008.  The implementation of FASB Statement No. 157 for financial assets and financial liabilities did not have a material impact on Dlorah’s consolidated financial statements.  The additional disclosures required by FASB Statement No. 157 are included in Note 15 fair value measurements.
 
104
 
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115.   FASB Statement No. 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value.  Under FASB Statement No. 159, a company may elect to use fair value to measure various assets and liabilities, including accounts receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, and issued debt.  The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value.  Dlorah adopted FASB Statement No. 159 as of June 1, 2008; however, has elected not to use the fair value option.  As a result, there is no impact on the consolidated financial statements.
 
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.   FASB Statement No. 160 requires that a noncontrolling interest in a consolidated entity be reported in equity, but separate from the parent company’s equity, in the financial statements.  It also requires disclosure, on the face of the consolidated statements of operations, of the amounts of consolidated net income attributable to the parent and the noncontrolling interest.  FASB Statement No. 160 is effective for fiscal years beginning on or after December 15, 2008.  A noncontrolling interest exists in the Partnership.  When adopted for the year beginning June 1, 2009, this standard will require Dlorah to record the noncontrolling interest within stockholders’ equity, and separately present net income attributable to the non-controlling interest and net income attributable to the majority interest within the consolidated statements of operations.
 
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations .  FASB Statement No. 141(R) significantly changed the accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs.  In addition, under FASB Statement No. 141(R) changes in an acquired entity’s deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense.  FASB Statement No. 141(R) if effective for fiscal years beginning after December 15, 2008.  The Company has not yet adopted FASB Statement 141(R), but will change the accounting treatment for business combinations on a prospective basis.
 
On December 11, 2008, the FASB issued FSP FAS No. 140-4 and FIN No. 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.   FSP FAS No. 140-4 and FIN No. 46(R)-8 requires additional disclosures by public entities with continuing involvement in transfers of financial assets to special-purpose entities and with variable interests in VIEs, including sponsors that have a variable interest in a VIE.  FSP FAS No. 140-4 and FIN No. 46(R)-8 became effective for the first interim or annual reporting period that ends after December 15, 2008.  The implementation of FSP FAS No. 140-4 and FIN No. 46(R)-8 did not have a material impact on the Company’s consolidated financial statements.
 
In June 2009, the FASB issued FASB Statement No. 165, Subsequent Events. FASB Statement No. 165 established general standards of accounting for disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued.  FASB Statement No. 165 is effective for financial periods ending after June 20, 2009.  Dlorah has not yet adopted FASB Statement No. 165, but does not anticipate it will have a material effect on Dlorah’s consolidated results of operations, financial condition or required financial statement disclosures.
 
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In June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R).   FASB Statement No. 167 is intended to improve financial reporting by enterprises involved with VIEs.  The statement nullifies FSP FAS No. 140-4 and FIN No. 46(R)-8.  FASB Statement No. 167 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting period thereafter.  This will be effective for the Dlorah’s fiscal year beginning June 1, 2010.  Dlorah is still evaluating the impact of this statement on its consolidated financial statements.
 
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments,   which provide additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt securities.  FSP FAS 115-2 and FAS 124-2 does not amend existing guidance related to other-than-temporary impairments of equity securities.  FSP FAS 115-2 and FAS 124-2 is effective for fiscal years and interim periods ended after June 15, 2009, and will be effective for Dlorah in the first quarter of the fiscal year beginning June 1, 2009.  Dlorah is currently evaluating the impact that FSP FAS 115-2 and FAS 124-2 will have on its financial statements but does not anticipate it will have a material effect on consolidated results of operations, financial condition or required financial statement disclosures.
 
Item 3.  Properties
 
We own the facilities that comprise NAU’s physical campus near downtown Rapid City, South Dakota at 5301 South Highway 16, Suite 200, Rapid City, SD 57701.  We lease the remainder of our campuses and education centers, and the distance learning and central administration offices located on south of downtown Rapid City, South Dakota.

In addition to NAU, our FWH division rents apartment units and develops and sells real estate in the FWH PRD area of Rapid City, South Dakota.

Fairway Hills I and II

FWH I and FWH II are apartment buildings which consist of rental apartments.  FWH I consists of thirty-two (32) apartment units and FWH II consists of twenty (20) apartment units, of which approximately 92 percent are currently leased.

Park West

Park West consists of forty-eight (48) apartment units and is owned by a separate partnership which is fifty (50) percent owned by us and fifty (50) percent owned by members of the Buckingham family (the five children of Mr. Harold Buckingham, Chairman of our Board of Directors).  Park West apartment units are being converted to, and sold as, condominiums.  While the conversion of Park West building is not complete, as of November 2009, four (4) of the available units in Park West have been sold and one (1) more unit is under contract and is expected to close prior to December 1, 2009.  Prices for Park West condominium units start at $145,000.
 
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Vista Park

In 2008, FWH began construction on a condominium development called Vista Park in the FWH PRD.  To date, FWH has completed its construction of a twenty-four (24) unit luxury condominium complex, which is known as Vista Park Phase I, and has sold four (4) of the available units.  Prices for Vista Park condominium units start at $149,000.  We currently have plans to build three (3) additional condominium complexes (Phases II, III and IV) in the Vista Park area of the FWH PRD, but construction of these additional phases will only begin following the sale of a substantial number of the currently available condominiums in Vista Park Phase I.  In total, and upon completion of all four (4) phases of development, the Vista Park condominium complexes would house ninety-six (96) condominium units.

Item 4.  Security Ownership of Certain Beneficial Owners and Management
 
The following table sets forth certain information regarding the beneficial ownership of our Common Stock by each of our named officers, directors and all our named officers and directors as a group, and each person who is known by us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock, immediately following consummation of the Transaction.
 
Unless otherwise indicated, we believe all persons named in the table below have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them.
 
Name and Address of Beneficial Owner (1)
 
Amount   and   Nature   of
Beneficial   Ownership
   
Percentage
of   Class   (5)
 
David L. Warnock (2)(3) , Director
    2,092,773       8.59 %  
Robert D. Buckingham, Chairman of the Board of Directors
      18,780,000 (4)     77.05 %  
H. & E. Buckingham Limited Partnership
      14,460,600       59.33 %  
Robert D. Buckingham Living Trust
      4,319,400       17.72 %  
Dr. Jerry L. Gallentine, President and Director
      0         0 %  
Dr. Ronald L. Shape, Chief Executive Officer, interim Chief Fiscal Officer
      0         0 %  
Dr. Samuel D. Kerr, Provost, Secretary, General Counsel
      0         0 %  
Michelle Holland, Regional President for the East and Southeast Regions
      0         0 %  
Dr. Thomas D. Saban, Director
      0         0 %  
Dr. R. John Reynolds, Director
      0         0 %  
All directors and executive officers as a group (8 individuals)
    20,872,773 (6)     85.64 %  
 
(1)
Unless otherwise indicated, the business address of each of the individuals is c/o National American University Holdings, Inc., 5301 South Highway 16, Suite 200, Rapid City, SD 57701 and our telephone number is (605) 721-5200.
   
(2)
Includes 575,000 shares of restricted Common Stock received in exchange for 2,800,000 insider warrants upon consummation of the Transaction.
 
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(3)
Camden Learning, LLC was the sponsor of Camden. The sole owners and members of Camden Learning, LLC are Camden Partners Strategic Fund III, L.P. (96.01% ownership) and Camden Partners Strategic Fund III-A, L.P. (3.99% ownership). The general partner of each limited partnership is Camden Partners Strategic III, LLC and the managing member of such entity is Camden Partners Strategic Manager, LLC. David L. Warnock, Donald W. Hughes,  Richard M. Johnston and Richard M. Berkeley are the four managing members of Camden Partners Strategic Manager, LLC, which has sole power to direct the vote and disposition of our securities held by the sponsor. Each of Mr. Warnock and Mr. Hughes disclaims beneficial ownership of all shares owned by Camden Learning, LLC.
   
(4)
Consists of shares of Common Stock, restricted Common Stock, and Common Stock warrants owned by the H. & E. Buckingham Limited Partnership and the Robert D. Buckingham Living Trust. Assumes Common Stock warrants exercised not on a cashless basis. Mr. Buckingham is the general partner of the H. & E. Buckingham Limited Partnership and in this capacity has sole power to direct the vote and disposition of our securities held by the H. & E. Buckingham Limited Partnership. Accordingly, Mr. Buckingham is deemed to be the beneficial owner of all securities owned by the H. & E. Buckingham Limited Partnership. As the trustee for the Robert D. Buckingham Living Trust, Mr. Buckingham is deemed to have sole voting and dispositive power of our securities held by the trust and is deemed to be the beneficial owner of all securities owned by the Robert D. Buckingham Living Trust.
   
(5)
Based on 24,373,605 shares of Common Stock issued and outstanding immediately following the consummation of the Transaction, including the assumption of full conversion of all Class A Stock at a conversion ratio of 157.3 and the exercise of all issued and outstanding warrants not on a cashless basis.
 
Item 5.  Directors and Executive Officers
 
Effective as of the closing date of the Transaction, we appointed the following directors and officers.  Therese Kreig Crane, Ed. D, Ronald Tomalis, and Williams Jews resigned from their director positions, effective as of the closing date of the Transaction.
 
Name
 
Age
 
Position
         
Robert D. Buckingham
 
73
 
Chairman of the Board of Directors
         
David Warnock
 
51
 
Member of the Board of Directors
         
Dr. Jerry L. Gallentine
 
69
 
President and Member of the Board of Directors
         
Dr. Ronald L. Shape
 
42
 
Chief Executive Officer, interim Chief Financial Officer
         
Dr. Samuel D. Kerr
 
49
 
Provost, Secretary and General Counsel
         
Michael Buckingham
 
51
 
President, Real Estate Division
         
Dr. R. John Reynolds
 
73
 
Member of the Board of Directors
         
Dr. Thomas D. Saban
 
57
 
Member of the Board of Directors

Robert D. Buckingham became the chairman of our board of directors on the closing of the Transaction.  Mr. Buckingham has served as president of Dlorah since 1986 and chairman of the board of directors of Dlorah as well as chairman of the board of governors of NAU since 1991, and as chairman of the board of Fairway Hills, III, a division of Dlorah.  He is a member of the board of directors, and is treasurer, of Rapid City Defense Housing Corporation, which owns and leases the Dakota Ridge housing to Air Force personnel.  Mr. Buckingham is an active member of the Rapid City Chamber of Commerce and is involved in the Military Affairs Committee.  From 1960 to 1981 he worked in various executive and management positions in transportation and real estate development organizations.  Mr. Buckingham has a B.S. in Business Management from the University of Colorado.  Mr. Buckingham is the father of Michael Buckingham, who is the President of the Company’s real estate division.

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David L. Warnock is a member of our board of directors.  Mr. Warnock is also a partner with Camden Partners and co-founded the firm in 1995.  He has over 24 years of investment experience with focus on investments in the education and business and financial services sectors.  He also serves on the boards of directors of New Horizons Worldwide, Inc., one of the largest global IT training companies, Nobel Learning Communities, Inc., a nationwide provider of pre-K through 8 th grade private schools, CIBT Education Group, Inc., a post-secondary institution in China, and Questar Assessment, Inc., formerly Touchstone Applied Science Associates which provides testing and assessment services for standardized testing, all of which are Camden Partners’ portfolio companies.  Mr. Warnock served as the chairman of Nobel from September 2003 through February 2004.  Mr. Warnock has previously served on the boards of Concord Career Colleges from 1997 through 2006 and Children’s Comprehensive Services, Inc. from 1993 to 2000.  Previously, Mr. Warnock was President of T. Rowe Price Strategic Partners and T. Rowe Price Strategic Partners II.  He was also co-manager of the T. Rowe Price New Horizons Fund.  Mr. Warnock was employed by T. Rowe Price Associates from 1983 to 1995.  Upon forming Camden Partners (formerly known as Cahill, Warnock & Company) and until December 31, 1997, Mr. Warnock served as a consultant to the advisory committees of T. Rowe Price Strategic Partners and T. Rowe Price Strategic Partners II.

Mr. Warnock is also involved with numerous non-profit organizations.  He is the chairman of the Center For Urban Families, as well as former chairman of the board for Calvert Education Services, the nation’s largest non-sectarian home-schooling organization.  He also serves on the board of the University of Wisconsin Applied Security Analysis Program and is a trustee on the board of the Baltimore Museum of Art.  Mr. Warnock earned a B.A. degree from the University of Delaware and a M.S. (in Finance) from the University of Wisconsin.  Mr. Warnock is also a Chartered Financial Analyst Charterholder.

Dr. Jerry L. Gallentine joined our board of directors and was appointed as the Company’s president as of the closing of the Transaction.  Dr. Gallentine has served as university president of NAU since 1993 and was the chief executive officer of NAU from 1993 until April 2009.  Dr. Gallentine also currently serves on the board of directors of Salem International University.  Dr. Gallentine has over forty years of experience in the education industry.  He served as president of Western New Mexico University from 1990 to 1993 and was president of Peru State College in Nebraska from 1982 to 1990.  From 1979 to 1982, Dr. Gallentine was president at Labette Community College in Parsons, Kansas.  He was an assistant professor of biology at Midland Lutheran College in Fremont, Nebraska from 1965 through 1968.  Dr. Gallentine has served in many educational and cultural leadership roles, including past president of the Board of Directors of the Nebraska Educational Television Council for Higher Education, twice past chairman of the Council of Presidents of the Nebraska State College System, member of the Board of Directors of the Nebraska Humanities Council and founding member of the Nebraska Foundation for the Humanities.  Dr. Gallentine has a B.S. from Fort Hays (Kansas) State University, and a M.Ed., M.S. and Ph.D. from the University of Toledo.

 
109
 
 
Dr. Ronald L. Shape was appointed to the positions of chief executive officer and interim chief financial officer of the Company as of the date of the closing of the Transaction.  He served as the chief executive officer of NAU from April 2009 until the Transaction closed, and was the chief operating officer of NAU from 2006 until 2009.  Dr. Shape also served as the chief fiscal officer of NAU from 2002 until April 2009 and was the interim chief fiscal officer of NAU from April 2009 until the Transaction closed.  In 2001, Dr. Shape was selected as the assistant to the university president and CEO of NAU and served as regional president for the Minnesota region with NAU in 2000.  Dr. Shape worked in a number of different positions at NAU from 1991 to 2000, including system controller, assistant director of financial aid and student account specialist.  Dr. Shape served as executive vice president of NAU from 1998 to 2000.  Dr. Shape currently serves as vice president of finance on the board of directors of Fountain Springs Community Church and serves on the board of directors of the Quall Road District in Black Hawk, South Dakota.  Dr. Shape has a B.A. from Dakota Wesleyan University and a MBA and Ed. D. from the University of South Dakota.

Dr. Samuel D. Kerr was appointed to the positions of p rovost, secretary and general counsel of the Company on the day of the closing of the Transaction.  Dr. Kerr served as the provost/general counsel of NAU from 2008 until the closing of the Transaction and has served as an adjunct faculty member of NAU since 2002.  Dr. Kerr was the system vice president for administration and general counsel of NAU from 2004 to 2008 and served as vice president for human resources and general counsel from 2001 to 2004.  Dr. Kerr served as managing partner of Banks, Johnson, Colbath & Kerr, Prof. L.L.C. from 1995 to 2001, where he acted as outside legal counsel to NAU from 1999 to 2001.  Dr. Kerr was an associate attorney at Wallahan & Eicher from 1992 to 1995 and an English/Journalism teacher at several high schools in South Dakota from 1985 to 1989.  Dr. Kerr has a B.S. and B.S.Ed. from Black Hills State University, a M.Ed. from South Dakota State University, a J.D. from the University of Nebraska-Lincoln College of Law and a Ed. D. from the University of South Dakota.

Michael Buckingham was appointed to the position of the p resident of the Company’s real estate division as of the date of the closing of the Transaction.   Mr. Buckingham served as corporate vice president of Dlorah from 1992, and the president of the Fairway Hills, III division from 1988, until the Transaction closed.  Mr. Buckingham oversaw the maintenance of over sixteen campuses in the NAU system, as well as properties being developed by the Fairway Hills, III division.  Mr. Buckingham served as an elected official on the Rapid City School Board from June 1998 through December 2002 when he resigned after being elected to the South Dakota House of Representatives where he served until January 2009.  He continues to be active in local politics and advises NAU on issues that may impact the university by local and state legislative bodies.  Mr. Buckingham obtained a B.S. from the University of South Dakota in 1981 and an MBA from NAU in 2009.  Mr. Buckingham is the son of Robert D. Buckingham.

Dr. Thomas D. Saban joined our board of directors as of the date of the closing of the Transaction.  He has been serving as the vice president of administration and finance and chief financial officer of Rocky Vista University, College of Osteopathic Medicine since November 2008.  Dr. Saban has over 23 years of experience in the education industry.  He served as the vice president for finance and administration/chief financial officer at Texas A&M University from September 2007 to November 2008, associate vice president for planning, budgets and research at St. Petersburg College in Florida from October 2002 to September 2007 and as the vice president for administration and finance/chief financial officer at Worcester State College in Massachusetts from September 1996 to October 2002.  He also served as the Vice President for Finance and Administration/Chief Financial Officer of Chadron State College in Nebraska from July 1990 to September 1996.  Dr. Saban held a number of other educational and leadership roles from 1982 to 1990, including controller, director of finance and system coordinator/project leader.  Dr. Saban has a B.S. from the University of Wyoming, an MBA from the University of Miami and a Ph.D. from Barry University.
 
110
 
Dr. R. John Reynolds joined our board of directors as of the date of the closing of the Transaction.  He was the Chancellor/President of Salem International University from June 2005 to November 2006 and has been the president of Reynolds and Associates since June 2000.  He has over 41 years of experience in the education industry.  He has served in a number of leadership positions including interim president of Millikin University in Illinois from September 2002 to August 2003, president of Tri-State University in Indiana from March 1993 to June 2000, president of Huron University in South Dakota from July 1984 to March 1993 and president of National College, South Dakota from 1982 to 1984 (a predecessor to NAU).  Dr. Reynolds has also served in many other educational roles, including acting dean, associate dean, professor, adjunct professor, associate academic dean and vice president and education director.  Dr. Reynolds has a B. Ed. from the University of Wisconsin, an M.A. from Northern Michigan and a Ph. D. from Southern Illinois University.
 
Item 6.  Executive Compensation
 
Camden
 
No compensation of any kind, including finders and consulting fees, was paid to any of Camden’s officers and directors, or any of their respective affiliates, prior to, or for any services they rendered in order to effectuate, the consummation of the Transaction.  However, Camden’s executive officers and directors were reimbursed for out-of-pocket expenses incurred in connection with activities on Camden’s behalf such as identifying potential merger partners and performing due diligence on suitable business combinations.  As of November 23, 2009, an aggregate of $8,538.58 were reimbursed to them for such expenses.
 
Since our formation, we have not granted any stock options or stock appreciation rights or any awards under long-term incentive plans.
 
Dlorah
 
Summary Compensation Table
 
The following table sets forth the compensation earned during fiscal year 2009 by Dlorah’s president, Dlorah’s chief executive officer/interim chief fiscal officer and Dlorah’s three other most highly compensated officers who were serving as officers as of May 31, 2009.   All of these named officers continued as officers of the Company following the closing of the Transaction.  See Item 5.  Directors and Executive Officers.
 
Name and Principal Position
 
Year
 
Salary
 ($)
   
Bonus
 ($)
   
Nonequity
Incentive Plan
Compensation
($)
   
All Other
Compensation
 ($)
   
Total
 ($)
 
Dr. Jerry L. Gallentine, President
 
2009
    243,623       10,200       338,027       11,500
(1)(2)
    603,350  
Dr. Ronald L. Shape, Chief Executive Officer/Interim Chief Financial Officer
 
2009
    231,250       0       145,910       11,500
(1)(3)
    388,660  
Robert Buckingham, Chairman of the Board
 
2009
    165,328       0       709,076       42,000
(1)(4)
    916,404  
Dr. Samuel D. Kerr, Provost and General Counsel
 
2009
    182,367       0       33,300       10,253
(5)
    225,920  
Michelle Holland, Regional President for the East and Southeast Regions
 
2009
    157,859       0       150,069       10,256
(6)
    318,184  
(1) Each of Dr. Gallentine, Dr. Shape and Mr. Buckingham has use of a golf membership owned by Dlorah. All dues and expense of the membership are paid directly by these individuals.
(2) Consists of 401(k) match of $11,500.
(3) Consists of 401(k) match of $11,500.
 
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(4) Consists of Dlorah directors’ fees of $42,000.
(5) Consists of 401(k) match of $10,253.
(6) Consists of 401(k) match of $10,256.

Dlorah had three directors, Mr. Buckingham, Mary Ellen Buckingham and Linda Cooper, and each were paid directors’ fees of $42,000 for fiscal year 2009.

National American University Holdings, Inc.

Compensation Arrangements for Executive Officers

The Company will seek to provide total compensation packages that are competitive, tailored to the unique characteristics and needs of the Company within the education industry, and that will adequately reward our executives for their roles in creating value for the Company’s stockholders.  The compensation decisions regarding the Company’s executives will be based on the Company’s need to attract individuals with the skills necessary to achieve its business plan, to reward those individuals fairly over time, and to retain those individuals who continue to perform at or above our expectations.
 
We anticipate that our executives’ compensation will consist of three primary components:  salary, incentive bonus and stock-based awards issued under the Company’s 2009 Stock Option and Compensation Plan, or the Incentive Plan.  We anticipate determining the appropriate level for each compensation component based in part, but not exclusively, on our view of internal equity and consistency, individual performance, the Company’s performance and other information deemed relevant and timely.
 
Compensation Arrangements for Directors
 
Non-employee directors of the Company will receive varying levels of compensation for their services as directors and as members of the Company’s various committees.  We anticipate determining directors compensation in accordance with industry practice and standards.
 
Compensation Committee Information
 
As soon as practicable after the closing of the Transaction, our Board of Directors plan to establish a compensation committee, referred to herein as the Committee, that, among other duties set forth in its charter, will review and approve compensation paid to the Company’s and Dlorah’s executive officers and directors and to administer the Incentive Plan.  We anticipate the members of the Committee will be “non-employee directors” within the meaning of Rule 16b-3(b)(3) of the Securities Exchange Act of 1934, as amended.  Subject to the terms of the Incentive Plan, the Committee will have the power to determine, among other things, eligibility, the types and sizes of awards, the price and timing of awards, the terms and conditions of awards, any applicable vesting requirements or restrictions, and the acceleration or waiver of any such vesting requirements or restrictions.  The Committee will also have the authority to interpret the Incentive Plan and to prescribe, interpret and revoke rules and regulations relating to the Incentive Plan.  The Committee will have the discretion of delegating all of its powers and duties under the Incentive Plan to one or more directors or executive officers of the Company, or a committee of directors and executive officers, other than the power to grant an award to any person who is a “covered employee” within the meaning of Section 162(m) of the Internal Revenue Code or who is subject to Section 16 of the Securities Exchange Act of 1934, as amended.
 
112
 
The Committee will also be charged with performing an annual review of the Company’s executive officers’ cash compensation, bonus and equity holdings to determine whether they provide adequate incentives and motivation to executive officers and whether they adequately compensate the executive officers relative to comparable officers in other companies.
 
In addition to the guidance that the Committee provides, the Company may utilize the services of third parties from time to time in connection with the hiring and compensating executive employees.  This could include subscriptions to executive compensation surveys and other databases.
 
Incentive Plan
 
In connection with the approval of the Transaction, Camden’s stockholders approved the adoption of the Incentive Plan, which provides for the granting of options and other stock-based or stock-denominated awards.  The Incentive Plan is intended to aid the Company in recruiting and retaining employees, officers and directors capable of assuring the future success of the Company.  The Company expects that the awards of stock-based compensation under the Incentive Plan and opportunities for stock ownership in the Company will provide incentives to participants to exert their best efforts for the success of the Company and also align their interests with those of the Company’s stockholders.
 
The following is a summary of the material provisions of our Incentive Plan and is qualified in its entirety by reference to the complete text of our Incentive Plan, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.12.
 
Eligibility.   The Committee will determine which employees, officers, consultants and directors of the Company or its subsidiaries are eligible to participate in the Incentive Plan taking into account recommendations it receives from management.
 
Shares Authorized.   The Incentive Plan reserves a total of 1,300,000 shares of Common Stock for awards issued under the Incentive Plan, 100,000 of which may be granted as incentive stock options.  Shares that are subject to awards that terminate, lapse or are cancelled or forfeited will be available again for grant under the Incentive Plan.
 
Certain Limitations.   No participant may be granted in any calendar year an award or awards for more than 50,000 shares of Common Stock in the aggregate, or, in the case of cash awards, for more than $1,500,000.  The aggregate number of shares of Common Stock which may be issued under the Incentive Plan as restricted stock, restricted stock units, stock awards, dividend equivalents, or any other award for which the employee is entitled to receive the full value of the share upon satisfaction of the performance goal or goals, is 400,000.
 
Types of Awards.   The Incentive Plan authorizes the following types of awards:
 
·
Stock Options .  The grant of either non-qualified or incentive stock options to purchase shares of our common stock are permitted under the Incentive Plan.  Incentive stock options are intended to qualify for favorable tax treatment under the Internal Revenue Code to participants in the Incentive Plan.  The stock options will provide for the right to purchase shares of Common Stock at a specified price and will become exercisable after the grant date under the terms established by the Committee.  The per share option exercise price may not be less than 100% of the fair market value of a share of Common Stock on the grant date.
 
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·
Stock Appreciation Rights .  Awards of stock appreciation rights (“SARs”) are permitted under the Incentive Plan.  SARs provide the holder with a right to receive in cash or in shares of Common Stock upon exercise the excess of the fair market value of one share of our Common Stock on the date of exercise, over the grant price of the SARs.  The grant price of SARs may not be less than 100% of the fair market value of a share of Common Stock on the grant date.
 
·
Restricted Stock and Restricted Stock Units .  Awards of restricted stock and restricted stock units are permitted under the Incentive Plan, subject to any restrictions that the Committee determines to impose, such as satisfaction of performance measures or a performance period, or restrictions on the right to vote or receive dividends.  The minimum vesting period of such awards is one year from the grant date.
 
·
Performance Awards .  Performance awards, denominated in shares of Common Stock, are permitted under the Incentive Plan.  Performance awards must be contingent upon the attainment of one or more performance goals within a performance period designated by the Committee.  Performance awards may be settled or payable in shares of Common Stock or in cash.  The recipient of a performance award has no rights as a stockholder with respect to the shares of Common Stock subject to the award until the performance conditions have been satisfied.  For purposes of the Incentive Plan, performance goals must be based exclusively on one or more of the following corporate-wide or subsidiary, division or operating unit financial measures:  (1) pre-tax or after-tax income (before or after allocation of corporate overhead and bonus), (2) net income (before or after taxes), (3) reduction in expenses, (4) pre-tax or after-tax operating income, (5) earnings (including earnings before taxes, earnings before interest and taxes, or earnings before interest, taxes, depreciation and amortization), (6) gross revenue, (7) working capital, (8) profit margin or gross profits, (9) share price, (10) cash flow or cash flow per share (before or after dividends), (11) cash flow return on investment, (12) return on capital (including return on total capital or return on invested capital), (13) return on assets or net assets, (14) market share, (15) pre-tax or after-tax earnings per share, (16) pre-tax or after-tax operating earnings per share, (17) total stockholder return, (18) growth measures, including revenue growth, as compared with a peer group or other benchmark, (19) economic value-added models or equivalent metrics, (20) comparisons with various stock market indices, (21) improvement in or attainment of expense levels or working capital levels, (22) operating margins, gross margins or cash margins, (23) year-end cash, (24) debt reductions, (25) stockholder equity, (26) regulatory achievements, (27) implementation, completion or attainment of measurable objectives with respect to research, development, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel, (28) customer satisfaction, (29) operating efficiency, productivity ratios, or (30) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals (including accomplishing regulatory approval for projects), cost or cost savings targets, accomplishing critical milestones for projects, and goals relating to acquisitions or divestitures, or any combination thereof (in each case before or after such objective income and expense allocations or adjustments as the Committee may specify within the applicable period).
 
·
Stock Awards .  Awards of our Common Stock without restrictions are permitted under the Incentive Plan, but such grants may be subject to any terms and conditions the Committee may determine.
 
114
 
·
Other Stock-Based Awards .  Grants of other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock, subject to the terms and conditions established by the Committee, are permitted under the Incentive Plan.  Shares of Common Stock, or other securities delivered pursuant to a purchase right granted by such an award, must be purchased for consideration having a value equal to at least 100% of the fair market value of Common Stock on the date the purchase right is granted.
 
·
Cash Awards .  Grants of cash awards, subject to the terms and conditions established by the Committee, are permitted under the Incentive Plan.
 
·
Dividend Equivalents .  Awards of dividend equivalents pursuant to which the recipient is entitled to receive payments in cash, shares of Common Stock, other securities or other property as determined by the Committee based on the amount of cash dividends paid by the Company to holders of Common Stock are permitted under the Incentive Plan.  Dividend equivalents awards may also be subject to any terms and conditions established by the Committee.
 
Transfer Restrictions.   In general, awards under the Incentive Plan may not be transferred except upon death, by will or the laws of descent and distribution, or pursuant to a transfer to a family member that is expressly permitted by the Committee.
 
Adjustment for Certain Corporate Changes.   In the event of a stock split, stock dividend, recapitalization, reorganization, merger or similar event, which affects shares of Common Stock such that an adjustment is required to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Incentive Plan, then the Committee must, in such manner as it deems equitable, make appropriate adjustments to (1) the number of shares of Common Stock available for awards under the Incentive Plan, and subject to outstanding awards and (2) the purchase or exercise price of outstanding awards.  If the Company acquires or combines with another company with a pre-existing plan approved by shareholders and not adopted in contemplation of the acquisition or combination, the shares available for grant under the pre-existing plan may be used for awards under the Incentive Plan.  Such awards cannot be made after the date awards or grants could have been made under the pre-existing plan, absent the acquisition or combination, and can only be made to individuals who were not employees or directors of the Company or any affiliate prior to such acquisition or combination.
 
Change in Control.   If the Company is a party to a merger, exchange or reorganization, outstanding awards will be subject to the terms and conditions of any agreement of merger, exchange or reorganization which may include, without limitation, accelerating the vesting or exercise date of Awards and the cancellation of outstanding Awards in exchange for payment of their cash equivalent.
 
Amendment.   The Board may amend the Incentive Plan at any time, however, prior approval of the stockholders of the Company shall be required for any amendment to the plan which (1) requires stockholder approval under the rules or regulations of the Securities and Exchange Commission, the NASDAQ Stock Market LLC, or any other securities exchange that are applicable to the Company, (2) increases the number of shares authorized under the Incentive Plan; (3) increases the number of shares subject to the limitations contained in Section 4(d) of the Incentive Plan; (4) permits repricing of options or stock appreciation rights without prior shareholder approval; (5) permits the award of options or stock appreciation rights at a price less than 100% of the fair market value of a share on the date of grant contrary to the provisions of the Incentive Plan; or, (6) would cause section 162(m) to become unavailable with respect to the Incentive Plan.
 
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Term.   The term of the Incentive Plan expires ten years after the date of its adoption, unless earlier terminated by the Board.
 
Employment Agreements
 
In connection with the Transaction and as a condition to closing, Dlorah and each of Robert D. Buckingham, the Chairman of the Board, and Dr. Jerry L. Gallentine, President, negotiated amendments to their existing employment agreements with Dlorah.  National American University also entered into an employment agreement with Dr. Ronald L. Shape at closing.  See “Item 1.01 Entry into a Material Definitive Agreement” above.
 
Item 7.  Certain Relationships and Related Transactions, and Director Independence
 
Code of Business and Conduct
 
As soon as practicable after the closing of the Transaction, the Company plans to adopt a new Code of Business and Conduct, which will require its employees to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interest.  The employees will also have the responsibility to disclose to the Company’s compliance officer any actual or perceived conflict of interest.  Related party transactions with respect to companies like our are defined under the Securities and Exchange Commission rules as transactions in which (1) the aggregate amount involved will or may be expected to exceed the lesser of $120,000 or one percent of the average of the company’s total assets at year end for the last two completed years, (2) the company or any of its subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of Common Stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).  A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively.  Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
 
Camden Related Person Transactions
 
In April 2007, Camden issued 1,125,500 shares of Common Stock as set forth below for an aggregate amount of $25,000 in cash, at an average purchase price of approximately $0.02 per share, as follows:
 
Name
 
Number of
Shares
 
Relationship to Camden (before closing of the
Transaction)
Camden Learning, LLC
 
1,000,000
 
Sponsor. Donald W. Hughes and David L. Warnock are among the four managing members of the managing member of Camden Learning, LLC.
Jack L. Brozman
 
25,000
 
Director
Therese Kreig Crane, Ed.D
 
25,000
 
Director
Ronald Tomalis
 
25,000
 
Director
William Jews
 
25,000
 
Director
Harry T. Wilkins
 
25,000
 
Director
 
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On July 3, 2007, Mr. Wilkins resigned as a director of Camden and transferred, for a purchase price of $.02 per share, an aggregate of 25,000 shares of Common Stock to Camden Learning, LLC such that the share ownership is as reflected in Item 4.  Security Ownership of Certain Beneficial Owners and Management.

On August 27, 2007, Mr. Brozman resigned as a director of Camden and transferred, for a purchase price of $.02 per share, an aggregate of 25,000 shares of Common Stock to Camden Learning, LLC such that the share ownership is as reflected in Item 4.  Security Ownership of Certain Beneficial Owners and Management.

Effective November 20, 2007, Camden’s board of directors authorized a forward stock split in the form of a stock dividend of 0.3888888 shares of Common Stock for each outstanding share of Common Stock, effectively lowering the purchase price to approximately $0.016 per share.
 
The holders of the majority of these shares are entitled to require us, on up to two occasions, to register these shares pursuant to an agreement signed prior to Camden’s IPO.  The holders of the majority of these shares may elect to exercise these registration rights at any time after the date on which these shares of common stock are released from escrow, which, except in limited circumstances, is not before one year from the consummation of a business combination.  In addition, these stockholders have certain “piggy-back” registration rights on registration statements filed subsequent to the date on which these shares of common stock are released from escrow.  We will bear the expenses incurred in connection with the filing of any such registration statements.
 
Camden Learning, Camden’s sponsor, purchased 2,800,000 warrants from Camden at a purchase price of $1.00 per warrant in a private placement pursuant to Regulation D of the Securities Act.  As part of the Transaction, these warrants were exchanged for 575,000 shares of Common Stock, bearing the same restrictions as the Restricted Common Stock being issued as part of the consideration in the Transaction.
 
In order to protect the amounts held in the trust account, Camden Learning has agreed to indemnify us for claims of any vendors, service providers, prospective target businesses or creditors that have not executed a valid and binding waiver of any right or claim to the amounts in trust account.  As further assurance Camden Learning will have the necessary funds required to meet these indemnification obligations, (i) the Camden III Funds have agreed, under Camden’s sponsor’s limited liability company agreement, to make capital contributions to Camden Learning as and when required in order for the sponsor to fulfill its indemnification obligations and (ii) Camden Learning has agreed to take all such action reasonably necessary to request its members make such capital contributions.  Additionally, in the event either of the Camden III Funds undertakes a liquidating distribution while the indemnification obligations of the sponsor are outstanding, they have agreed, in Camden’s sponsor’s limited liability company agreement, to use reasonable efforts to set aside from such distribution, adequate reserves to cover the reasonably anticipated liabilities which may be incurred by our sponsor.  We and the representative of the underwriters are named as express third party beneficiaries in and with respect to the provisions of Camden’s sponsor’s limited liability company agreement which require the Camden III Funds to make such capital contributions and establish such reserves.  Although we have a fiduciary obligation to pursue the sponsor to enforce its indemnification obligations, and intend to pursue such actions as and when we deem appropriate, there can be no assurance it or the Camden III Funds will be able to satisfy those obligations, if required to do so.
 
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During 2007, Camden Learning loaned Camden a total of $200,000, which was used to pay a portion of the expenses of the IPO, such as SEC registration fees, FINRA registration fees, blue sky fees and certain legal and accounting fees and expenses. This loan was repaid, with interest, on December 5, 2007.
 
Camden reimbursed an aggregate of $8,538.58 to its officers and directors for reasonable out-of-pocket business expenses incurred by them in connection with certain activities on Camden’s behalf such as identifying and investigating possible target businesses and business combinations.  There was no limit on the amount of accountable out-of-pocket expenses reimbursable by Camden.
 
Dlorah Related Person Transactions
 
Two of Mr. Buckingham’s children were employed by Dlorah before the closing of the Transaction.  Michael Buckingham was the President of Dlorah’s real estate division and was also a Vice President of Dlorah.  Debbie Buckingham was a bookkeeper for Dlorah’s Fairway Hills, III real estate division.  Both Michael and Debbie Buckingham remain employed with Dlorah following the closing of the Transaction.
 
Pursuant to those certain Exclusive Listing Agreements, dated January 14, 2009, among Dlorah, Coldwell Banker and Lewis-Kirkeby-Hall Real Estate Inc., Bo Hauer, a nephew of Mr. Buckingham, has a listing agreement with Dlorah to market and sell the Vista Park condominiums being developed by Dlorah.  He will be paid 5% of each property sold through him.
 
Dlorah is a 50% partner in Fairway Hills Section III (the “Partnership”) with Mr. Buckingham and his four siblings or their estates (Donald Buckingham, Nancy Hauer, Susan Lein, and Linda Copper), each of whom has a 10% interest in the Partnership.  Dlorah made several capital contributions to the Partnership, in various forms, but the individual partners (other than Susan Lein) did not make any capital contributions to the Partnership, the result of which was that Dlorah had a substantial positive balance in its capital account, and each of the individual partners had a negative balance in his or her capital account. The negative capital account balances of Mr. Buckingham, Donald Buckingham’s Estate, Susan Lein, Nancy Hauer and Linda Copper were all brought back up to $0 at the closing of the Transaction.
 
Mr. Buckingham has personally guaranteed substantially all of Dlorah’s indebtedness prior to the consummation of the Transaction.
 
Director Independence
 
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates, including loans by our officers and directors, will be on terms believed by us to be no less favorable than are available from unaffiliated third parties and such transactions or loans, including any forgiveness of loans, will require prior approval in each instance by a majority of our uninterested “independent” directors or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel.
 
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Presently, we are not required to comply with the director independence requirements of any securities exchange.  In determining whether our directors are independent, however, we intend to be guided by the rules of the Nasdaq Stock Market LLC .  Our board of directors will also consult with counsel to ensure that the board’s determinations are consistent with Nasdaq rules and all relevant securities and other laws and regulations regarding the independence of directors, including those adopted under the Sarbanes-Oxley Act of 2002 with respect to the independence of audit committee members.
 
Item 8.  Legal Proceedings
 
From time to time, any of the Company, Dlorah or NAU may be a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business.  We are not at this time, a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition, or results of operation.
 
Item 9.  Market Price and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
 
Our Common Stock is quoted on the OTC Bulletin Board under the symbol “CAEL.”  Our Common Stock commenced public trading on December 21, 2007.
 
The table below sets forth, for the calendar quarter indicated, the high and low bid prices of Camden’s Common Stock as reported on the OTC Bulleting Board.
 
   
Common Stock
 
Quarter Ended
 
High
   
Low
 
August 31, 2009
    7.85       7.70  
May 31, 2009
    7.60       7.60  
February 28, 2009
    7.60       7.60  
November 30, 2008
    7.25       7.25  
August 31, 2008
    7.70       7.70  
May 31, 2008
    7.60       7.60  
February 29, 2008
    8.00       8.00  
 
Historical market price information regarding Dlorah’s common stock is not provided because there was no public market for Dlorah’s common stock or other securities.
 
As of November 5, 2009, the Company had approximately six stockholders of record.
 
Camden Dividend Policy
 
Camden did not pay any cash dividends on its Common Stock.
 
119
 
Dlorah Dividend Policy
 
Dlorah has traditionally paid annual dividends of $2.00 per share of its common stock to its shareholders.  Dlorah paid approximately $57,000 in dividends to its shareholders in each of fiscal years 2006 through 2009.
 
The Company’s Dividend Policy
 
The holders of Class A Stock will be entitled to a quarterly accruing dividend equal to $0.11 (for a total of $0.44 per year) per share of Common Stock into which such Class A Stock is convertible, paid when and if declared by the Company’s board of directors.  If a dividend is paid on the Class A Stock, there will also be a dividend paid to holders of Common Stock equal to one-fourth of the per share amount of any Class A Stock dividend paid.
 
Item 10.  Recent Sales of Unregistered Securities
 
Reference is made to the disclosure set forth under Item 3.02 of this Current Report on Form 8-K, which is incorporated herein by reference.
 
Item 11.  Description of Registrant’s Securities to be Registered
 
General
 
We are authorized to issue up to 50,000,000 shares of Common Stock, 100,000 shares of Class A Stock and 1,000,000 shares of preferred stock, par value $0.0001 (“Preferred Stock”). As of the date of this Current Report, 5,018,005 shares of Common Stock, 825,000 shares of Restricted Common Stock and 100,000 shares of Class A Stock were issued and outstanding.  No shares of Preferred Stock are currently outstanding.
 
Common Stock
 
Holders of our Common Stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders.  Holders of our Common Stock do not have cumulative voting rights.  In the event a dividend is paid on the Class A Stock, there will also be a dividend paid to the holders of Common Stock equal to one-fourth of the amount of the dividend paid to the Class A Stock.  In the event of our liquidation, dissolution or winding up, the holders of our Common Stock will be entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our Common Stock.  Holders of shares of our Common Stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our Common Stock.  The rights, preferences and privileges of holders of our Common Stock are subject to, and may be adversely affected by, the rights of any series of preferred stock that we may designate and issue in the future.
 
Preferred Stock
 
Our second amended and restated certificate of incorporation authorizes the issuance of 1,000,000 shares of blank check preferred stock, with such designation, rights and preferences as may be determined from time to time by our board of directors.  Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other rights of the holders of Common Stock.  In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control.  Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
 
120
 
Class A Stock
 
In connection with the Transaction, the board of directors created a class of Class A Common Stock.  The Class A Stock has the same rights, preferences and privileges as our current shares of Common Stock.  Holders of our Common Stock and Class A Stock will vote together as one class on all matters (including the election of directors) submitted to a vote of the stockholders.  The holders of Class A Stock will be entitled to receive an annual cumulative preferred dividend, paid quarterly, of $0.44 per share of Common Stock into which such Class A Stock are convertible.  The Class A Stock will automatically convert into 15,730,000 shares of Common Stock at a ratio of 157.3 shares of Common Stock for every 1 share of Class A Stock on the second anniversary of the closing of the Transaction.  In the event a dividend is paid on the Class A Stock, there will also be a dividend paid to the holders of Common Stock equal to one-fourth of the amount of the dividend paid to the Class A Stock.
 
Warrants
 
At the closing of the Transaction, the stockholders of Dlorah received 2,800,000 newly issued Common Stock purchase warrants as part of the consideration paid to them.  The warrants may be exercised at any time before the second anniversary of the closing date of the Transaction.  The warrants may be exercised on a “cashless basis” at an exercise price of $5.50 per share.  The warrants and the Common Shares issuable or issued upon exercise of the warrants are subject to the registration rights pursuant to the Registration Rights Agreements that are attached to this Current Report on Form 8-K as Exhibits 4.2 and 4.3.
 
Item 12.  Indemnification of Directors and Officers
 
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement, that are incurred in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action.  In order to be eligible for indemnification under Section 145, the director, officer, employee or other individual must have acted in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful.  A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation.  The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.
 
Our second amended and restated certificate of incorporation provides that we will indemnify and hold harmless, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, each person that such section grants us the power to indemnify.  The Company will not indemnify, however, for:
 
·             any breach of the director’s duty of loyalty to the Company or its stockholders;
 
121
 
·             acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
·             payments of unlawful dividends or unlawful stock repurchases or redemptions; or
 
·             any transaction from which the director derived an improper personal benefit.
 
Our second amended and restated certificate of incorporation further provides that any repeal or modification of the above provision will be prospective only and will not adversely affect any limitation, right or protection of a director of the Company existing at the time of such repeal or modification.
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors or officers pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable.
 
Item 13.  Financial Statements and Supplementary Data
 
The financial statements and exhibits are incorporated by reference from Item 9.01 of this Current Report on Form 8-K.
 
Item 14.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
Reference is made to the disclosure set forth under Item 4.01 of this Current Report on Form 8-K, which is incorporated herein by reference.
 
Item 15.  Financial Statements and Exhibits
 
The financial statements and exhibits are incorporated by reference from Item 9.01 of this Current Report on Form 8-K.
 
Item 3.02            Unregistered Sales of Equity Securities
 
Prior to the consummation of its IPO, Camden completed a private placement of an aggregate of 2,800,000 warrants to Camden Learning, LLC, a limited liability company indirectly controlled and partially owned by certain of Camden’s former officers and directors, generating gross proceeds of $2,800,000.  The warrants sold in the private placement contained substantially similar terms and conditions as the warrants sold in the IPO, except that the warrants sold in the private placement (i) were not subject to redemption, (ii) may be exercised on a cashless basis, in each case if held by Camden’s sponsor or its permitted assigns and (iii) may not be sold, assigned or transferred prior to the 90th day following Camden’s consummation of a business combination.  These warrants were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.  No underwriting discounts or commissions were paid with respect to such sales.  A private placement subscription agreement was entered into between Camden and its sponsor in connection with this purchase.    As part of the Transaction, these warrants were exchanged for 575,000 shares of Common Stock, bearing the same restrictions as the Restricted Common Stock being issued as part of the consideration in the Transaction.
 
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In April 2007, Camden issued 1,125,500 shares of Common Stock as set forth below for an aggregate amount of $25,000 in cash, at an average purchase price of approximately $0.02 per share, as follows:
 
Name
 
Number of
Shares
 
Relationship to Camden (before closing of the
Transaction)
Camden Learning, LLC
 
1,000,000
 
Sponsor. Donald W. Hughes and David L. Warnock are among the four managing members of the managing member of Camden Learning, LLC.
Jack L. Brozman
 
25,000
 
Director
Therese Kreig Crane, Ed.D
 
25,000
 
Director
Ronald Tomalis
 
25,000
 
Director
William Jews
 
25,000
 
Director
Harry T. Wilkins
 
25,000
 
Director

On July 3, 2007, Mr. Wilkins resigned as a director of Camden and transferred, for a purchase price of $.02 per share, an aggregate of 25,000 shares of Common Stock to Camden Learning, LLC such that the share ownership is as reflected in Item 4.  Security Ownership of Certain Beneficial Owners and Management.

On August 27, 2007, Mr. Brozman resigned as a director of Camden and transferred, for a purchase price of $.02 per share, an aggregate of 25,000 shares of Common Stock to Camden Learning, LLC such that the share ownership is as reflected in Item 4.  Security Ownership of Certain Beneficial Owners and Management.

Effective November 20, 2007, Camden’s board of directors authorized a forward stock split in the form of a stock dividend of 0.3888888 shares of Common Stock for each outstanding share of Common Stock, effectively lowering the purchase price to approximately $0.016 per share.
 
In connection with the Transaction, we issued to the stockholders of Dlorah an aggregate of (i) 100,000 shares of Class A Stock, (ii) 2,800,000 newly issued Common Stock purchase warrants, which may be exercised on a ‘‘cashless basis’’ at an exercise price of $5.50 per share, and (iii) 250,000 shares of Restricted Common Stock.  The Class A Stock converts into 15,730,000 shares of Common Stock at a ratio of 157.3 shares of Common Stock for every 1 share of Class A Stock.  We also issued 575,000 shares of Restricted Common Stock to Camden Learning, LLC in exchange for 2,800,000 insider warrants upon closing of the Transaction.  These securities were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, as a transaction by an issuer not involving any public offering.  Each of the stockholder of Dlorah receiving the securities was an accredited investor as defined by Rule 501 of Regulation D.  Each party delivered appropriate investment representations with respect to the issuance of the securities and consented to the imposition of a restrictive legend upon the certificates evidencing the securities.  
 
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Item 3.03 
Material Modification to Rights of Security Holders
 
On November 23, 2009, the stockholders of Camden voted to approve the adoption of the second amended and restated certificate of incorporation in connection with the Transaction.  The second amended and restated certificate of incorporation is attached to this Current Report on Form 8-K as Exhibit 3.1. The second amended and restated certificate of Incorporation modified the terms and rights of the holders of Common Stock as more specifically described in Camden’s definitive proxy statement, dated November 10, 2009 in the sections entitled “Proposal 2 – The Name Change Proposal,” “Proposal 3 – The Increase in Authorized Proposal,” “Proposal 4 – The Class A Stock Proposal,” and “Proposal 5 – The Elimination Proposal” beginning on pages 128, 129, 138 and 140, respectively and are incorporated herein by reference.
 
Item 4.01 
Changes in Registrant’s Certifying Accountant
 
In connection with the consummation of the Transaction, on November 30, 2009, the Company dismissed its independent registered public accounting firm McGladrey & Pullen, LLP, and appointed Deloitte & Touche LLP as its new independent registered public accounting firm.  Deloitte & Touche LLP acted as Dlorah’s independent accountant prior to the closing of the Transaction.  The decision to change accounting firms was approved by the Company’s board of directors.
 
McGladrey & Pullen, LLP’s report on the financial statements of Camden for fiscal years 2008 and 2009 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles with the exception of a qualification with respect to uncertainty as to our ability to continue as a going concern.
 
During fiscal years 2008 and 2009, and the subsequent interim period through August 31, 2009, there were no disagreements with McGladrey & Pullen, LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope and procedures which, if not resolved to the satisfaction of McGladrey & Pullen, LLP would have caused McGladrey & Pullen, LLP to make reference to the subject matter of the disagreement(s) in connection with their report, and there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.
 
The Company has provided McGladrey & Pullen, LLP with a copy of this Current Report on Form 8-K and has requested McGladrey & Pullen, LLP to furnish the Company with a letter addressed to the U.S. Securities and Exchange Commission stating whether it agrees with the above statements and, if not, to state the respects in which it does not agree with such statements.  McGladrey & Pullen, LLP’s response letter, dated November 30, 2009, is filed as Exhibit 16.1 to this current report on Form 8-K.
 
Item 5.01 
Change in Control of the Registrant
 
Upon consummation of the Transaction on November 23, 2009, the Company experienced a change in control, with the former stockholders of Dlorah acquiring approximately 77.05% ownership of the Company.  Additionally, as a result of the Transaction, the Company ceased being a shell company.  In accordance with the terms of the Merger Agreement, new members of the board of directors and officers were appointed as of the date of the closing of the Transaction.  Reference is made to the disclosures made under Items 2.01 and 5.02 of this Current Report on Form 8-K, which is incorporated herein by reference.
 
Item 5.02 
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers
 
Effective as of the closing of the Transaction and in accordance with the terms of the Merger Agreement, the following members of the board of directors of Camden resigned:  Therese Kreig Crane, Ed. D, Ronald Tomalis and William Jews.  David L. Warnock, Camden’s president, chief executive officer and chairman, and Donald W. Hughes, Camden’s chief financial officer and secretary, also resigned from their positions.
 
In connection with the closing of the Transaction:
 
·
Robert D. Buckingham was appointed as the Company’s chairman of the board of directors;
 
·
Dr. Jerry L. Gallentine was appointed to the positions of president and member of the board of directors;
 
124
 
·
Dr. Ronald L. Shape was appointed to the positions of chief executive officer and interim chief financial officer;
 
·
Dr. Samuel D. Kerr was appointed as the Company’s provost, secretary and general counsel;
 
·
Michael Buckingham was appointed as president of the Company’s real estate division;
 
·
Dr. R. John Reynolds was appointed as a member of the board of directors; and
 
·
Dr. Thomas D. Saban was appointed as a member of the board of directors.
 
See section titled “Item 5.  Directors and Executive Officers” under Item 2.01 of this Current Report on Form 8-K.
 
Item 5.03 
Amendments to Articles of Incorporation or Bylaws
 
Reference is made to the disclosure made under Item 3.03 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
 
Item 5.06 
Change in Shell Company Status
 
Pursuant to the Transaction disclosed in Item 2.01 of this Current Report on Form 8-K, the Company ceased being a shell company as of November 23, 2009.  Reference is made to the disclosure set forth in Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

Item 9.01. 
Financial Statements and Exhibits.

(a)         Financial statements of business acquired
 
Filed with this Current Report on Form 8-K are the following:
 
1.
Audited Financial Statements of Dlorah for the fiscal years ended May 31, 2009 and 2008
 
2.
Unaudited Interim Financial Statements of Dlorah for the three months ended August 31, 2009 and 2008
 
(b)        Pro Forma Financial Information
 
Filed with this Current Report on Form 8-K is the unaudited pro forma financial information combining the operations of Camden Learning Corporation and Dlorah, Inc.
 
(d)        Exhibits
 
125
Exhibit No.
 
Description
     
Exhibit No.
 
Description
     
1.1
 
Underwriting Agreement, dated November 29, 2007, by and between Camden Learning Corporation and Morgan Joseph & Co., Inc. (previously filed with the SEC on the registrant’s Current Report on Form 8-K on December 5, 2007)
     
1.2
 
Amendment No. 1 to the Underwriting Agreement, dated October 26, 2009, by and between Camden Learning Corporation and Morgan Joseph & Co., Inc.
     
2.1
 
Agreement and Plan of Reorganization, dated August 7, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc. and Dlorah, Inc. (previously filed with the SEC on the registrant’s Current Report on Form 8-K on August 11, 2009 as Exhibit 2.1)
     
2.2
 
Amended and Restated Agreement and Plan of Reorganization, dated August 11, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc. and Dlorah, Inc. (previously filed with the SEC on the registrant’s Current Report on Form 8-K on August 11, 2009 as Exhibit 2.2)
     
2.3
 
Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, dated October 26, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc., and Dlorah, Inc.  (previously filed with the SEC on the registrant’s Current Report on Form 8-K on October 27, 2009 as Exhibit 10.1)
     
3.1
 
Second Amended and Restated Certificate of Incorporation
     
3.2
 
Amended and Restated Bylaws
     
4.1
 
Specimen Common Stock Certificate
     
4.2
 
Common Stock Purchase Warrant issued by Camden Learning Corporation to H. & E. Buckingham Limited Partnership on November 23, 2009 in the amount of 2,166,360 warrant shares
     
4.3
 
Common Stock Purchase Warrant issued by Camden Learning Corporation to Robert D. Buckingham Living Trust on November 23, 2009 in the amount of 633,640 warrant shares
     
10.1
 
Warrant Agreement, dated November 29, 2007, between Camden Learning Corporation and Continental Stock Transfer & Trust Company (form previously filed with the SEC on the registrant’s Registration Statement on Form S-1/A on November 27, 2007 as Exhibit 4.4)
     
10.2
 
Amendment No. 1 to the Warrant Agreement, dated November 23, 2009, between Camden Learning Corporation and Continental Stock Transfer & Trust Company
     
10.3
 
Securities Escrow Agreement, dated November 29, 2007, among Camden Learning Corporation, Continental Stock Transfer & Trust Company and certain of the founding stockholders of Camden Learning Corporation  (previously filed with the SEC on the registrant’s Current Report on Form 8-K on December 5, 2007, as Exhibit 10.3)
     
10.4
 
Amendment No. 1 to the Securities Escrow Agreement, dated as of November 23, 2009, by and among Camden Learning Corporation, Continental Stock Transfer & Trust Company and certain of the founding stockholders of Camden Learning Corporation
     
10.5
 
Lock Up Agreement, effective as of November 23, 2009, by and between H. & E. Buckingham Limited Partnership and Camden Learning Corporation
     
10.6
 
Lock Up Agreement, effective as of November 23, 2009, by and between Robert D. Buckingham Living Trust and Camden Learning Corporation
 
126
 
10.7
 
Registration Rights Agreement, dated as of November 23, 2009, by and among Camden Learning Corporation and each of H. & E. Buckingham Limited Partnership and Robert D. Buckingham Living Trust
     
10.8
 
Registration Rights Agreement, dated as of November 29, 2007, by and among Camden Learning Corporation and certain of the founding stockholders of Camden Learning Corporation (previously filed with the SEC on the registrant’s Current Report on Form 8-K on December 5, 2007, as Exhibit 10.4)
     
10.9
 
Restricted Stock Agreement, effective as of November 23, 2009, between Camden Learning Corporation and H. & E. Buckingham Limited Partnership
     
10.10
 
Restricted Stock Agreement, effective as of November 23, 2009, between Camden Learning Corporation and Robert D. Buckingham Living Trust
     
10.11
 
Restricted Stock Agreement, effective as of November 23, 2009, between Camden Learning Corporation and Camden Learning, LLC
     
10.12
 
National American University Holdings, Inc. 2009 Stock Option and Compensation Plan
     
10.13
 
Employment Agreement between Dlorah, Inc. and Jerry L. Gallentine, amended and restated September 9, 2003, and further amended by the First Amendment to Employment Agreement, dated November 18, 2009
     
10.14
 
Employment Agreement between Dlorah, Inc. and Robert D. Buckingham, dated January 3, 1995, as amended by the Employment Agreement Amendment, dated November 18, 2009
     
10.15
 
Employment Agreement between Dlorah, Inc. and Ronald Shape, dated November 18, 2009
     
10.16
 
Stock Purchase Agreement, dated November 13, 2009, between Camden Learning Corporation and Bulldog Investors
     
10.17
 
Stock Purchase Agreement, dated November 19, 2009, between Camden Learning Corporation and Credit Suisse Securities
     
10.18
 
Form of Joinder to Registration Rights Agreement
     
16.1
 
Letter from McGladrey & Pullen, LLC
 
127
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
 
   
By: /s/ Dr. Ronald Shape
 
Dr. Ronald Shape, Chief Executive Officer
 

Date: November 30, 2009
 
128
 
INDEX TO FINANCIAL STATEMENTS OF DLORAH, INC. AND THE PRO FORMA FINANCIAL INFORMATION OF DLORAH, INC. AND CAMDEN LEARNING CORPORATION
 
Report of Independent Registered Public Accounting Firm
 
F-2
 
Consolidated Balance Sheets of Dlorah, Inc. as of May 31, 2009 and 2008
 
F-3
 
Consolidated Statements of Operations of Dlorah, Inc. for the years ended May 31, 2009, 2008 and 2007
 
F-4
 
Consolidated Statements of Stockholders’ Equity of Dlorah, Inc. for the years ended May 31, 2009, 2008 and 2007
  F-5  
Consolidated Statements of Cash Flows of Dlorah, Inc. for the years ended May 31, 2009, 2008 and 2007
  F-6  
Dlorah, Inc. Notes to Consolidated Financial Statements
  F-7  
Unaudited Condensed Consolidated Balance Sheets of Dlorah, Inc. as of August 31, 2009 and May 31, 2009
  F-25  
Unaudited Condensed Consolidated Statements of Operations of Dlorah, Inc. for the three months ended August 31, 2009 and 2008
  F-26  
Unaudited Condensed Consolidated Statements of Stockholder’s Equity of Dlorah, Inc. for the three months ended August 31, 2009 and 2008
  F-27  
Unaudited Condensed Consolidated Statements of Cash Flows of Dlorah, Inc. for the three months ended August 31, 2009 and 2008
  F-28  
Dlorah, Inc. Notes to Unaudited Condensed Consolidated Financial Statements
  F-29  
Selected Unaudited Pro Forma Financial Information as of August 31, 2009:  Combining the operations of Camden Learning Corporation and Dlorah, Inc.
  F-35  
 
F-1
 
   
Deloitte & Touche LLP
 50 South Sixth Street
 Suite 2800
 Minneapolis, MN 55402-1538
 USA
   
 Tel: +1 612 397 4000
 Fax: +1 612 397 4450
 www.deloitte.com
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Dlorah, Inc.
Rapid City, South Dakota
 
We have audited the accompanying consolidated balance sheets of Dlorah, Inc. (the “Company”) as of May 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2009.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
 
 
Minneapolis, Minnesota
July 29, 2009 (October 2, 2009 as to the effects of
the adoption of SFAS 160 described in Note 2)
 
F-2
 
DLORAH, INC.
   
 CONSOLIDATED BALANCE SHEETS
 As of May 31, 2009 and 2008
 (In Thousands, Except Share Amounts)

   
2009
 
2008
ASSETS
   
  
     
  
 
Current Assets:
   
  
     
  
 
Cash and cash equivalents
 
$
3,508
   
$
2,108
 
Investments (Note 1)
   
4,417
     
3,132
 
Student receivables – net of allowance of $115 and $35 at May 31, 2009 and 2008, respectively
   
1,207
     
1,229
 
Institutional receivables
   
173
     
120
 
Student notes receivable – current portion – net of allowance (Note 4)
   
30
     
24
 
Bookstore inventory
   
604
     
549
 
Deferred income taxes (Note 8)
   
1,090
     
839
 
Income tax receivable
   
—
     
801
 
Prepaid assets
   
410
     
597
 
Total current assets
   
11,439
     
9,399
 
Property and Equipment:
   
  
     
  
 
                 
Land
   
718
     
720
 
Land improvements
   
374
     
359
 
Buildings and building improvements
   
16,147
     
16,252
 
Furniture, vehicles, and equipment
   
14,564
     
14,192
 
Total gross property and equipment
   
31,803
     
31,523
 
Less accumulated depreciation
   
(19,651
) 
   
(18,296
) 
Total net property and equipment
   
12,152
     
13,227
 
Other Assets:
   
  
     
  
 
                 
Student notes receivable – net of current portion and allowance (Note 4)
   
105
     
133
 
Land held for future development
   
312
     
312
 
Condominium inventory
   
3,802
     
  
 
Development property (Note 13)
   
  
     
3,879
 
Course development – net of accumulated amortization of $804 and $428 at May 31, 2009 and 2008, respectively
   
767
     
923
 
Other
   
288
     
289
 
  
   
5,274
     
5,536
 
Total
 
$
28,865
   
$
28,162
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
   
  
     
  
 
                 
Current Liabilities:
   
  
     
  
 
                 
Long-term debt – current portion (Note 5)
 
$
2,147
   
$
2,252
 
Lines of credit (Note 6)
   
3,305
     
5,999
 
Accounts payable
   
3,564
     
3,593
 
Student accounts payable
   
314
     
314
 
Deferred income
   
367
     
264
 
Income tax payable
   
551
     
—
 
Accrued payroll and vacation
   
2,816
     
1,847
 
Accrued bonuses
   
821
     
357
 
Other accrued liabilities
   
1,263
     
987
 
Total current liabilities
   
15,148
     
15,613
 
Long-term Debt – Net of current portion (Note 5)
   
6,507
     
9,062
 
Deferred Income Taxes (Note 8)
   
1,503
     
1,016
 
Other Long-term Liabilities
   
815
     
711
 
Commitments and Contingencies (Note 10)
   
  
     
  
 
                 
Stockholders’ Equity:
   
  
     
  
 
                 
Common stock, $10 par value – authorized, 100,000 shares; issued, 50,000 shares; and outstanding, 28,572 shares at May 31, 2009 and 2008, respectively
   
281
     
281
 
Additional paid-in capital
   
104
     
104
 
Retained earnings
   
7,251
     
4,187
 
Accumulated other comprehensive income
   
109
     
28
 
  
   
7,745
     
4,600
 
Less treasury stock at cost 21,428 shares at May 31, 2009 and 2008, respectively
   
(1,869
) 
   
(1,869
) 
Total Dlorah, Inc. stockholder’s equity
   
5,876
     
2,731
 
Non-controlling Interest (Note 1)
   
(984
) 
   
(971
) 
Total Equity
   
4,892
     
1,760
 
Total
 
$
28,865
   
$
28,162
 
 
 See notes to consolidated financial statements
 
F-3
 
DLORAH, INC.
   
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended May 31, 2009, 2008, and 2007
 (In Thousands)

   
2009
 
2008
 
2007
Revenue:
   
  
     
  
     
  
 
                         
Academic revenue
 
$
56,874
   
$
44,218
   
$
39,841
 
Auxiliary revenue
   
4,036
     
4,062
     
3,702
 
Rental income – apartments
   
890
     
782
     
906
 
Condominium sales (Note 13)
   
784
     
395
     
—
 
Total revenue
   
62,584
     
49,457
     
44,449
 
Operating Expenses:
   
  
     
  
     
  
 
                         
Cost of educational services
   
12,816
     
10,871
     
10,202
 
Selling, general, and administrative
   
42,208
     
36,901
     
34,582
 
Auxiliary expense
   
1,595
     
1,523
     
1,831
 
Cost of condominium sales (Note 13)
   
558
     
122
     
—
 
Gain on legal settlement (Note 10)
   
—
     
—
     
(340
) 
Loss on disposition of property and equipment
   
3
     
5
     
495
 
Total operating expenses
   
57,180
     
49,422
     
46,770
 
Income (Loss) from Operations
   
5,404
     
35
     
(2,321
) 
Other Income (Expense):
   
  
     
  
     
  
 
                         
Interest income
   
242
     
282
     
278
 
Interest expense (Note 5)
   
(834
) 
   
(1,023
) 
   
(756
) 
Other income – net
   
93
     
92
     
80
 
Total other expense
   
(499
) 
   
(649
) 
   
(398
) 
Income (Loss) Before Income Taxes
   
4,905
     
(614
) 
   
(2,719
) 
Income Tax (Provision) Benefit (Note 8)
   
(1,797
) 
   
231
     
831
 
Income (Loss)
   
3,108
     
(383
) 
   
(1,888
) 
Net Loss (Income) Attributable to Non-Controlling Interest
   
13
     
(37
) 
   
(5
) 
Net Income (Loss) Attributable to Dlorah, Inc.
 
$
3,121
   
$
(420
) 
 
$
(1,893
) 
  
 See notes to consolidated financial statements.
 
F-4
 
 
DLORAH, INC.    
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
 For the Years Ended May 31, 2009, 2008, AND 2007
 (In Thousands, Except Share Amounts)

   
Equity Attributable to Dlorah, Inc.
             
     
Common Stock
     
Additional
Paid-In
     
Retained
   
Accumulated
Other
Comprehensive  
     
Treasury
   
Equity Attributable to
Non-Controlling
   
Total
Stockholders
 
    Shares     Amount     Capital     Earnings     Income (Loss)     Stock     Interest     Equity   
Balance – May 31, 2006
   
28,580
   
$
281
   
$
104
   
$
6,614
   
$
(130
) 
 
$
(1,669
) 
 
$
(1,013
) 
 
$
4,187
 
Purchase of treasury stock
   
(8
) 
   
—
     
—
     
—
     
—
     
(200
) 
   
—
     
(200
) 
Dividends paid
   
—
     
—
     
—
     
(57
) 
   
—
     
—
     
—
     
(57
) 
Comprehensive loss:
   
  
     
  
     
  
     
  
     
  
     
  
     
  
     
  
 
                                                                 
Net (loss) income
   
—
     
—
     
—
     
(1,893
) 
   
—
     
—
     
5
     
(1,888
) 
Unrealized gain on investments
   
—
     
—
     
—
     
—
     
41
     
—
     
—
     
41
 
Total comprehensive loss
                                                           
(1,847
) 
Balance – May 31, 2007
   
28,572
     
281
     
104
     
4,664
     
(89
) 
   
(1,869
) 
   
(1,008
) 
   
2,083
 
Dividends paid
   
—
     
—
     
—
     
(57
) 
   
—
     
—
     
—
     
(57
) 
Comprehensive loss:
   
  
     
  
     
  
     
  
     
  
     
  
     
  
     
  
 
                                                                 
Net (loss) income
   
—
     
—
     
—
     
(420
) 
   
—
     
—
     
37
     
(383
) 
Unrealized gain on investments
   
—
     
—
     
—
     
—
     
117
     
—
     
—
     
117
 
Total comprehensive loss
                                                           
(266
) 
Balance – May 31, 2008
   
28,572
     
281
     
104
     
4,187
     
28
     
(1,869
) 
   
(971
) 
   
1,760
 
Dividends paid
   
—
     
—
     
—
     
(57
) 
   
—
     
—
     
—
     
(57
) 
Comprehensive income:
   
  
     
  
     
  
     
  
     
  
     
  
     
  
     
  
 
                                                                 
Net income (loss)
   
—
     
—
     
—
     
3,121
     
—
     
—
     
(13
) 
   
3,108
 
Unrealized gain on investments
   
—
     
—
     
—
     
—
     
81
     
—
     
—
     
81
 
Total comprehensive income
                                                           
3,189
 
Balance – May 31, 2009
   
28,572
   
$
281
   
$
104
   
$
7,251
   
$
109
   
$
(1,869
) 
 
$
(984
) 
 
$
4,892
 
 
 See notes to consolidated financial statements.

 
F-5
 

DLORAH, INC.
   
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended May 31, 2009, 2008, AND 2007
 (In Thousands)

   
2009
   
2008
   
2007
 
Cash Flows from Operating Activities:
   
  
     
  
     
  
 
                         
Income (loss)
 
$
3,108
   
$
(383
) 
 
$
(1,888
) 
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
   
  
     
  
     
  
 
                         
Depreciation and amortization
   
2,165
     
2,114
     
1,687
 
(Gain) loss on disposition of property and equipment
   
(110
) 
   
(268
) 
   
495
 
Gain on sale of investments
   
—
     
(1
) 
   
(9
) 
Provision for uncollectable tuition
   
1,638
     
1,357
     
1,136
 
Course development write-off
   
—
     
1
     
47
 
Deferred income taxes
   
192
     
(342
) 
   
(296
) 
Changes in assets and liabilities:
   
  
     
  
     
  
 
                         
Accounts and other receivables
   
(1,670
) 
   
(1,547
) 
   
(886
) 
Bookstore inventory
   
(54
) 
   
(164
) 
   
98
 
Prepaid assets
   
187
     
(164
) 
   
26
 
Condominium inventory
   
529
     
—
     
—
 
Accounts payable
   
(29
) 
   
1,509
     
604
 
Deferred income
   
103
     
71
     
(42
) 
Other long-term liabilities
   
103
     
129
     
119
 
Income tax payable (receivable)
   
1,352
     
(39
) 
   
(559
) 
Accrued and other liabilities
   
1,709
     
435
     
(189
) 
Net cash flows provided by operating activities
   
9,223
     
2,708
     
343
 
Cash Flows from Investing Activities:
   
  
     
  
     
  
 
                         
Purchases of investments
   
(2,100
) 
   
(549
) 
   
(533
) 
Proceeds from sale of investments
   
941
     
1,579
     
379
 
Purchases of property and equipment
   
(815
) 
   
(3,511
) 
   
(2,478
) 
Proceeds from sale of property and equipment
   
211
     
396
     
2
 
Payments (issuances) of student notes
   
22
     
(19
) 
   
(13
) 
Purchase of land held for future development
   
—
     
—
     
(118
) 
Course development
   
(220
) 
   
(188
) 
   
(637
) 
Construction of development property financed with line of credit borrowings
   
(452
) 
   
(3,879
) 
   
—
 
Other
   
1
     
(1
) 
   
113
 
Net cash flows used in investing activities
   
(2,412
) 
   
(6,172
) 
   
(3,285
) 
Cash Flows from Financing Activities:
   
  
     
  
     
  
 
                         
Borrowings on lines of credit
   
2,650
     
2,985
     
8,350
 
Repayments on lines of credit
   
(5,796
) 
   
(1,514
) 
   
(7,700
) 
(Decrease) increase in outstanding checks in excess of book balance
   
—
     
(1,040
) 
   
1,040
 
Borrowings of long-term debt
   
—
     
3,151
     
2,396
 
Repayments of long-term debt
   
(2,660
) 
   
(1,990
) 
   
(1,168
) 
Purchase of treasury stock
   
—
     
—
     
(200
) 
Construction of development property financed with line of credit borrowings
   
452
     
3,879
     
—
 
Dividends paid
   
(57
) 
   
(57
) 
   
(57
) 
Net cash flows (used in) provided by financing activities
   
(5,411
) 
   
5,414
     
2,661
 
Net Increase (Decrease) in Cash and Cash Equivalents
 
$
1,400
   
$
1,950
   
$
(281
) 
Cash and Cash Equivalents – Beginning of year
   
2,108
     
158
     
439
 
Cash and Cash Equivalents – End of year
 
$
3,508
   
$
2,108
   
$
158
 
Supplemental Disclosures of Cash Flow Information:
   
  
     
  
     
  
 
                         
Cash paid during the year for interest – net of $38, $76, and $0 capitalized during the years ended May 31, 2009, 2008, and 2007, respectively
 
$
848
   
$
1,008
   
$
745
 
Cash paid during the year for income taxes
 
$
254
   
$
150
   
$
24
 

See notes to consolidated financial statements.

 
F-6
 

DLORAH, INC.
   
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of May 31, 2009 and 2008, and for the Years Ended May 31, 2009, 2008, and 2007
 (Dollar Amounts in Thousands)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Nature of Operations  — Dlorah, Inc. (the “Company”) operates National American University (the “University”).  The University operates at 17 campuses within the states of South Dakota, Colorado, Kansas, Missouri, Minnesota, New Mexico, and Texas, including its headquarters in Rapid City, South Dakota, and offers distant learning curriculum via online classes.  A substantial portion of the University’s academic income is dependent upon federal student financial aid programs, company tuition assistance, distance learning programs, and contracts to provide instruction and course materials to other educational institutions.  To maintain eligibility for financial aid programs, the University must comply with Department of Education (DOE) requirements, which include, among other items, the maintenance of certain financial ratios (see Note 3).  Approximately 90% of the Company’s total revenues for the years ended May 31, 2009, 2008, and 2007, were derived from the University’s academic income.
 
In addition, the Company operates luxury apartment units and develops real estate in the Rapid City, South Dakota area.
 
Principles of Consolidation  — The Company consolidates the accounts of all wholly owned divisions, including the University, the Fairway Hills Park and Recreational Association, the Park West Owners’ Association, the Vista Park Owners’ Association, and the Company’s interest in Fairway Hills Section III Partnership (the “Partnership”).  The Partnership is 50% owned by the Company and 50% owned by individual family members, most of whom are also either direct or indirect shareholders of the Company.  All material intercompany transactions and balances have been eliminated in consolidation.
 
The Partnership is deemed to be a variable interest entity (VIE) under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810-10,   Consolidation .  An enterprise is required to consolidate a VIE if that enterprise is the primary beneficiary.  An enterprise is considered the primary beneficiary if it has a variable interest that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both.
 
The Company has determined that the Partnership qualifies as a VIE and that the Company is the primary beneficiary of the Partnership.  Accordingly, the Company consolidated assets, liabilities, and net income of the Partnership within its consolidated balance sheets and statements of operations.  As of May 31, 2009 and 2008, the consolidated balance sheets included Partnership assets of $1,230 and $1,370, respectively, and Partnership liabilities of $1,022 and $1,138, respectively.  The consolidated statements of operations included Partnership net (loss) income of $(26), $75, and $11 for the years ended May 31 2009, 2008, and 2007, respectively.

 
F-7
 

Estimates  — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements.  On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to revenue recognition, bad debts, fixed assets, income taxes, benefit plans, and certain accruals.  Actual results could differ from those estimates.  Significant estimates in the accompanying financial statements include allowances for uncollectable accounts against student accounts receivable and student notes receivable totaling $176 and $96, at May 31, 2009 and 2008, respectively.  Management estimates the allowance for uncollectible accounts based on an analysis of collection history and individual account detail; however, it is reasonably possible the accounts written-off in the future could vary significantly from this estimate.
 
Cash and Cash Equivalents  — The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.  Cash is held in bank accounts that periodically exceed insured limits; however, no losses have occurred, and the Company feels the risk of loss is not significant.
 
Investments  — The Company’s investments consist of long-term, government-backed bonds and certificates of deposit.  The bonds are classified as “available-for-sale.”  Available-for-sale securities represent securities carried at fair value in the accompanying consolidated balance sheets.  Unrealized gains and losses on these securities are excluded from earnings and are reported net of taxes as a separate component of stockholders’ equity.  For purposes of calculating gross realized gains and losses on sales of investments, the amortized cost of each investment sold is used.  The net realized gains and losses on sales of investments totaled $0 for the fiscal year ended May 31, 2009, approximately $2 and $1 for the fiscal year ended May 31, 2008, and approximately $9 and $0 for the fiscal year ended May 31, 2007.  The net realized gain or loss is included in other income — net in the accompanying consolidated statements of operations.
 
The Company’s investments were comprised at May 31, 2009 and 2008, respectively, of the following (in thousands):
 
   
2009
   
2008
 
  
 
Fair Value
 
 
Gross
Unrealized
Holding
Gains
 
 
Gross Unrealized
Holding Losses
 
 
Fair Value
 
 
Gross Unrealized
Holding Gains
 
 
Gross Unrealized
Holding Losses
 
U.S. Treasury debt securities
 
$
2,373
   
$
143
   
$
—
   
$
2,253
   
$
34
   
$
—
 
Certificates of deposit
   
1,934
     
17
     
—
     
180
     
—
     
—
 
Other debt securities
   
110
     
10
     
—
     
699
     
9
     
—
 
Total
 
$
4,417
   
$
170
   
$
—
   
$
3,132
   
$
43
   
$
—
 
As of May 31, 2009, the Company’s investment maturity dates are as follows (in thousands):
 
   
Amortized
Cost
 
 
Gross
Unrealized
Holding Gains
 
 
Gross Unrealized
Holding Losses
 < 1 Year
 
 
Gross Unrealized
Holding Losses
 < 1 Year
 
 
Fair Value
 
Less than one year
 
$
1,927
   
$
7
   
$
     
$
     
$
1,934
 
One to five years
   
2,320
     
163
     
—
     
—
     
2,483
 
Total
 
$
4,247
   
$
170
   
$
—
   
$
—
   
$
4,417
 
 
 
F-8
 
 
Declines in the fair value of individual securities classified as available-for-sale below their amortized cost that are determined to be other than temporary result in write-downs of the individual securities to their fair value, with the resulting write-downs included in current earnings as realized losses.  Unrealized losses that may occur are generally due to changes in interest rates and, as such, are considered by the Company to be temporary.  Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investments in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
 
As discussed in Note 5, the Company’s note payable to Wells Fargo Bank is secured by the Company’s investment account, requiring the funds not be utilized until the note payable matures.  Restrictions on investment balances have not affected the Company’s ability to fund daily operations. 
 
Student Accounts Receivable  — Student accounts receivable are recorded at estimated net realizable value and are revised periodically based on estimated future collections.  Interest and service charges are applied to all past due student accounts receivable; however, collections are first applied to principal balances until such time that the entire principal balance has been received.  Student accounts are charged off only when reasonable collection means are exhausted.  The University has determined that most accounts with an outstanding balance of 180 days after the start of the term are uncollectable.  Bad debt expense is included in cost of educational services on the consolidated statements of operations.
 
Institutional Accounts Receivable  — Institutional accounts receivable are amounts due from other educational institutions to which the University provides instruction and course materials and are stated at net realizable value.
 
Bookstore Inventory  — Inventories consist mainly of textbooks and supplies.  Inventories are stated at the lower of cost or market.  Cost is determined by the first-in, first-out method.
 
Property and Equipment  — Property and equipment are stated at cost.  Renewals and improvements are capitalized, while repairs and maintenance are expensed when incurred.  Upon the retirement, sale or disposition of assets, costs, and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in operating income.  For financial statement purposes, depreciation is computed using the straight-line method over the following estimated useful lives:
 
   
Years
 
Buildings and building improvements
   
19 – 40
 
Land improvements
   
10 – 20
 
Furniture, vehicles, and equipment
   
5 – 15
 
 
For tax purposes, depreciation is computed using the straight-line and accelerated methods.
 
Capitalized Course Development Costs  — The University internally develops curriculum and electronic instructional materials for certain courses.  The curriculum is primarily developed by employees and contractors.  The curriculum is integral to the learning system.  Customers do not acquire the curriculum or future rights to it.

 
F-9
 

The Company capitalizes course development costs.  Costs that qualify for capitalization are external direct costs, payroll, and payroll-related costs.  Costs related to general and administrative functions are not capitalizable and are expensed as incurred.  Capitalization ends at such time that the course and/or material is available for general use by faculty and students.  After becoming available for general use, the costs are amortized on a course-by-course basis over a period of three to five years.  After the amortization period commences, the cost of maintenance and support is expensed as incurred.  If it is determined that the curriculum will not be used, the capitalized curriculum costs are written off and expensed in the period of this determination.
 
Land Held for Future Development  — Land held for future development is stated at cost.  The Company evaluates all land held for future development to determine whether the Company expects to proceed with the development of the land as originally contemplated.  The Company then further determines whether costs that have been capitalized are recoverable or should be written off.  The write-off would be charged to cost of sales in the period that the need for the write-off is determined.  The Company had no write-offs in 2009, 2008, or 2007.
 
Impairment of Long-Lived Assets  — Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable.  For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value.  If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.  Fair values are determined based on quoted market values, discounted cash flows, or internal and external appraisals, as applicable.  Assets to be held for sale are carried at the lower of carrying value or fair value, less cost to sell.
 
Perkins Deposits  — The Perkins Deposits represent the University’s cumulative statutory matching funds deposited to the Perkins Student Loan Trust Fund.  Perkins Deposits are included in other assets on the accompanying consolidated balance sheets.
 
Condominium Inventory  — Condominium inventory is stated at cost (including capitalized interest), net of impairment.  Condominium construction costs are accumulated on a specific identification basis.  Under the specific identification basis, cost of revenues includes all applicable land acquisition, land development and specific construction costs (including direct and indirect costs) of each condominium paid to third parties.  Land acquisition, land development and condominium construction costs do not include employee related benefit costs.  The specific construction and allocated land costs of each condominium, including models, are included in direct construction.  Allocated land acquisition and development costs are estimated based on the total costs expected in a project.  Direct construction also includes amounts paid through the closing date of the condominium for construction materials and contractor costs.  Condominium inventory is recorded as a long term asset due to the normal operating cycle being greater than one year.
 
Unamortized Loan Costs  — The Company has capitalized costs incurred to refinance certain portions of its debt.  These costs are being amortized over the terms of the refinanced loans based on the effective interest rate method.

 
F-10
 

Deferred Income Taxes  — Deferred income taxes are provided using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
 
Non-Controlling Interest  — The non-controlling interest presented on the consolidated statements of operations represents the individual owners’ share of the Partnership’s income or loss.  The consolidated balance sheet amount “Non-Controlling Interest” represents the owners’ share of the Partnership obligations in excess of Partnership assets.  The Company has determined the non-controlling owners to have a legal obligation to fund such deficits and believes it is fully collectable at May 31, 2009.
 
Financial Instruments  — As of May 31, 2009 and 2008, the Company’s financial instruments consisted of cash equivalents, investments, accounts receivable, accounts payable, and long-term liabilities.  The fair value of fixed-rate liabilities is estimated based on current rates offered to the Company for instruments with similar ratings and maturities.  The difference between the carrying value of these financial instruments and their fair value was not material as of May 31, 2009 and 2008.
 
Academic Revenue Recognition  — Academic revenue represents tuition revenue.  Tuition revenue is recorded ratably over the length of respective courses.  Academic revenue also includes certain fees and charges assessed at the start of each term.  The portion of tuition and registration fees payments received but not earned is recorded as student accounts payable and reflected as a current liability on the accompanying consolidated balance sheets, as such amount represents revenue that the Company expects to earn within the next year.  Academic revenue is reported net of adjustments for refunds and scholarships.  If a student withdraws prior to the completion of the academic term, students are refunded the portion of tuition and registration fees already paid, that pursuant to the Company’s refund policy and applicable federal and state law and accrediting agency standards, the Company is not entitled to.  Refunds and scholarships are recorded during the respective terms.
 
Auxiliary Revenue  — Auxiliary revenue represents revenues from the University’s food service, bookstore, and dormitory operations.  Revenue is recognized as items are sold and services are performed.
 
Rental Income  — Rental income is primarily obtained from tenants of three apartment complexes under short-term operating leases.  Tenants are required to pay rent on a monthly basis.  Rent not paid by the end of the month is considered past due, while rent paid in advance is included in deferred income on the accompanying consolidated balance sheets.  If a tenant becomes 60 days past due, eviction procedures are started.
 
Rental Expense  — The University accounts for rent expense under its long-term operating leases using the straight-line method.  Certain of the University’s operating leases contain rent escalator provisions.  Accordingly, a $663 and $569, deferred rent liability at May 31, 2009 and 2008, respectively, is recorded in other long-term liabilities on the accompanying consolidated balance sheets.
 
Advertising  — The University follows the policy of expensing the cost of advertising as incurred.  Advertising costs of $6,151, $5,339, and $6,239 for 2009, 2008, and 2007, respectively, are included in selling, general, and administrative expenses on the accompanying consolidated statements of operations.

 
F-11
 

Business Expansion and Development  — On an ongoing basis, the University commits resources to the development of new branch campuses and new programs, as well as the expansion of existing programs into new markets.  During the year ended May 31, 2009, the University continued to develop an additional campus in the state of Texas and continued to develop and expand the nursing and distance learning programs.  Business expansion and development costs include salaries, marketing and advertising, and other third-party expenses incurred to support such development and expansion.  The amounts are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations and totaled $3,241, $4,758, and $4,980 in 2009, 2008, and 2007, respectively.
 
Professional Fees  — In 2009 management signed a letter of intent related to a potential merger that resulted in incremental costs of $447 that are recorded in the 2009 financial statements as selling, general, and administrative expenses.
 
2.  NEW ACCOUNTING PRONOUNCEMENTS
 
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (codified in FASB ASC Topic 820,   Fair Value Measurements and Disclosures ).  FASB Statement No. 157 establishes a framework for measuring fair value.  It does not require any new fair value measurements, but does require expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings.  The Company adopted FASB Statement No. 157 as of June 1, 2008.  It did not have a material impact on the consolidated financial statements.  In February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 157-2,   Effective Date of FASB Statement No. 157 (codified in FASB ASC Topic 820).  FSP FAS No. 157-2 delayed the effective date of FASB Statement No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008.  The implementation of FASB Statement No. 157 for financial assets and financial liabilities did not have a material impact on the Company’s consolidated financial statements.  The additional disclosures required by FASB Statement No. 157 are included in Note 15 fair value measurements.
 
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  —  Including an amendment of FASB Statement No. 115 (codified in FASB ASC Topic 825, Financial Instruments ).  FASB Statement No. 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value.  Under FASB Statement No. 159, a company may elect to use fair value to measure various assets and liabilities, including accounts receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, and issued debt.  The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value.  The Company adopted FASB Statement No. 159 as of June 1, 2008; however, has elected not to use the fair value option.  As a result, there is no impact on the consolidated financial statements.

 
F-12
 

In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements  —  an amendment of ARB No. 51 (codified in FASB ASC Topic 810).  FASB Statement No. 160 requires that a noncontrolling interest in a consolidated entity be reported in equity, but separate from the parent company’s equity, in the financial statements.  It also requires disclosure, on the face of the consolidated statements of operations, of the amounts of consolidated net income attributable to the parent and the noncontrolling interest.  FASB Statement No. 160 is effective for fiscal years beginning on or after December 15, 2008.  A noncontrolling interest exists in the Partnership.  We adopted this guidance for our year that began on June 1, 2009.  As this guidance requires all periods presented to conform to this standard, and we adopted this guidance during our first quarter, we have now revised the presentation of the accompanying annual financial statements to record the noncontrolling interest within stockholders' equity, and to separately present net income attributable to the noncontrolling interest and net income attributable to the majority interest within the consolidated statements of operations.
 
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations (codified in FASB ASC Topic 805,   Business Combinations ).  FASB Statement No. 141(R) significantly changes the accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs.  In addition, under FASB Statement No. 141(R) changes in an acquired entity’s deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense.  FASB Statement No. 141(R) is effective for fiscal years beginning after December 15, 2008.  The Company has not yet adopted FASB Statement No. 141(R), but it will change the accounting treatment for business combinations on a prospective basis.
 
On December 11, 2008, the FASB issued FSP FAS No. 140-4 and FIN No. 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities   (both codified in FASB ASC Topic 860,   Transfers and Servicing ).  FSP FAS No. 140-4 and FIN No. 46(R)-8 requires additional disclosures by public entities with continuing involvement in transfers of financial assets to special-purpose entities and with variable interests in VIEs, including sponsors that have a variable interest in a VIE. FSP FAS No. 140-4 and FIN No. 46(R)-8 became effective for the first interim or annual reporting period that ends after December 15, 2008.  The implementation of FSP FAS No. 140-4 and FIN No. 46(R)-8 did not have a material impact on the Company’s consolidated financial statements.
 
In June 2009, the FASB issued FASB Statement No. 165, Subsequent Events (codified in FASB ASC Topic 855, Subsequent Events ).  FASB Statement No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued.  FASB Statement No. 165 is effective for financial periods ending after June 30, 2009.  The Company has not yet adopted FASB Statement No. 165, but does not anticipate it will have a material effect on the Company’s consolidated results of operations, financial condition, or required financial statement disclosures.
 
In June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) (codified in FASB ASC Topic 810).  FASB Statement No. 167 is intended to improve financial reporting by enterprises involved with VIEs.  This statement nullifies FSP FAS No. 140-4 and FIN No. 46(R)-8.  FASB Statement No. 167 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  This will be effective for the Company’s fiscal year beginning June 1, 2010.  The Company is still evaluating the impact of this statement on its consolidated financial statements.

 
F-13
 

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments   (both codified in FASB ASC Topic 320,   Investments ), provides additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt securities.  FSP FAS 115-2 and FAS 124-2 does not amend existing guidance related to other-than-temporary impairments of equity securities.  FSP FAS 115-2 and FAS 124-2 is effective for fiscal years and interim periods ended after June 15, 2009, and will be effective for the Company in the first quarter of the fiscal year beginning June 1, 2009.  The Company is currently evaluating the impact that FSP FAS 115-2 and FAS 124-2 will have on its financial statements but does not anticipate it will have a material effect on consolidated results of operations, financial condition, or required financial statement disclosures.
 
3.  DEPARTMENT OF EDUCATION REQUIREMENTS
 
The University extends unsecured credit to a portion of the students who are enrolled throughout the campuses for tuition and other educational costs.  A substantial portion of credit extended to students is repaid through the students’ participation in various federal financial aid programs authorized by Title IV Higher Education Act of 1965, as amended (HEA).  The University is required under 34 CFR 600.5(d) to maintain at least 10% of its revenues from non-Title IV HEA program funds.  The University believes they are in compliance with this requirement for the years ended May 31, 2009, 2008, and 2007, as shown in the underlying calculation:
 
   
2009
         
2008
         
2007
       
Title IV HEA funds received
  $ 39,877,405           $ 30,016,817           $ 26,144,193        
Academic revenue (cash basis)
    55,733,845    
=71.55
%     44,371,114    
=67.65
%     41,565,323    
=62.90
%
                                                 
To participate in Title IV Programs, a school must be authorized to offer its programs of instruction by relevant state education agencies, be accredited by an accrediting commission recognized by the DOE, and be certified as an eligible institution by the DOE.  For this reason, the schools are subject to extensive regulatory requirements imposed by all of these entities.  After the schools receive the required certifications by the appropriate entities, the schools must demonstrate their compliance with the DOE regulations of the Title IV Programs on an ongoing basis.  Included in these regulations is the requirement that the Company must satisfy specific standards of financial responsibility.  The DOE evaluates institutions for compliance with these standards each year, based upon the institution’s annual audited financial statements, as well as following a change in ownership of the institution.  Under regulations which took effect July 1, 1998, the DOE calculates the institution’s composite score for financial responsibility based on its (i) equity ratio, which measures the institution’s capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and (iii) net income ratio, which measures the institution’s ability to operate at a profit.  This composite score can range from -1 to +3.
 
An institution that does not meet the DOE’s minimum composite score requirements of 1.5 may establish its financial responsibility by posting a letter of credit or complying with additional monitoring procedures as defined by the DOE.  Based on the consolidated financial statements for the 2009, 2008, and 2007 fiscal years, the University’s calculations result in a composite score of 1.6, 0.5, and 0.2, respectively.  Although the University currently meets the minimum composite score requirement as most recently required by the DOE, for previous years not in compliance the University has obtained an irrevocable letter of credit in the amount of $3,845,480 to guarantee performance under the federal financial aid programs.  The letter of credit has not been utilized, and the requirement will be reevaluated by the DOE along with its next annual review.

 
F-14
 

4.  STUDENT NOTES RECEIVABLE
 
At May 31, 2009 and 2008, student notes receivable consisted of the following:
 
   
2009
   
2008
 
Unsecured student notes receivable, under various monthly payment terms, interest at an average of 9% per annum
 
$
196
   
$
218
 
Less allowance for uncollectable accounts
   
61
     
61
 
  
   
135
     
157
 
Less current portion
   
30
     
24
 
Noncurrent portion
 
$
105
   
$
133
 
 
5.  LONG-TERM DEBT
 
At May 31, 2009 and 2008, long-term debt consisted of the following:
 
Notes Payable
 
2009
   
2008
 
Note payable to Great Western Bank; net of loan costs of $0 and $1 at May 31, 2009 and 2008, respectively; matures February 2014; requires monthly payments of $42, including principal and interest; accrues interest at 6.45% at May 31, 2009; secured by real estate and personally guaranteed by a Company shareholder
  $ 3,582     $ 3,868  
Note payable to Wells Fargo Bank; matures June 1, 2011; requires monthly payments of $30; accrues interest at 6%; secured by cash, savings, and investment accounts held at Wells Fargo Bank.
    714       1,000  
Note payable to VFS Financing, Inc.; matures April 2014; requires an initial monthly payment of $19 and monthly payments of $15 thereafter, including principal and interest; accrues interest at a fixed rate of 6.89% per annum; secured by airplane.
    751       885  
Note payable to Great Western Bank; matures March 26, 2012; requires monthly payments of $19, including principal and interest; accrues interest at a variable rate (b) (3.25% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder.
    611       809  
Note payable to Great Western Bank; matures November 28, 2012; requires monthly payments of $13, including principal and interest; accrues interest at a variable rate (b) (4% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    499       631  
 
F-15
 
Note payable to Great Western Bank; matures August 17, 2011; requires monthly payments of $15, including principal and interest; accrues interest at a variable rate (b) (5% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    364       521  
Note payable to Great Western Bank; matures on May 18, 2011; requires monthly payments of $13, including principal and interest; accrues interest at a variable rate (b) (3.25% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    264       397  
Note payable to Great Western Bank; matures on May 18, 2010; requires monthly payments of $16, including principal and interest; accrues interest at a variable rate (b) (3.25% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    175       352  
Note payable to Great Western Bank; matures on August 27, 2009; requires monthly payments of $18, including principal and interest; accrues interest at a variable rate (b) (3.50% at May 31, 2009); secured by certain University real estate and personally guaranteed by a Company shareholder
    77       281  
                 
Note payable to Great Western Bank; matures on December 8, 2010; requires monthly payments of $10, including principal and interest; accrues interest at a variable rate (b) (4% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
  $ 177     $ 278  
Note payable to Great Western Bank; matures on December 22, 2009; requires monthly payments of $14, including principal and interest; accrues interest at a variable rate (b) (3.25% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    99       254  
Note payable to Great Western Bank; matures on September 25, 2010; requires monthly payments of $9, including principal and interest; accrues interest at a variable rate (b) (5% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    137       239  
Note payable to Great Western Bank; matures on September 27, 2009; requires monthly payments of $7, including principal and interest; accrues interest at a variable rate (b) (5.25% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    33       114  
 
F-16
 
Note payable to Great Western Bank; matures on June 2, 2010; requires monthly payments of $2, including principal and interest; accrues interest at a variable rate (b) (3.25% at May 31, 2009); secured by substantially all assets of the University and personally guaranteed by a Company shareholder
    24       46  
Notes paid in full in 2008
    —       410  
Total notes payable
    7,507       10,085  
Due to stockholders and related parties:
               
Unsecured notes payable with accrued interest (5.27% at May 31, 2009). (a)
    805       812  
Note payable for the purchase of treasury stock; payable in monthly installments of $9, including principal and interest at 6% until paid in full, secured by stock. (a)
    342       417  
Total due to stockholders and related parties
    1,147       1,229  
Total long-term debt
    8,654       11,314  
Less current portion
    2,147       2,252  
Long-term portion
  $ 6,507     $ 9,062  
 
(a)
Interest expense on these related-party notes was approximately $64 and $69 for the years ended May 31, 2009 and 2008, respectively.  No formal maturity schedule exists for the unsecured notes payable, and, therefore, they are included with the long-term portion of debt.
 
(b)
Variable rates are based on prime rate plus an adjustment, which is specific to each note payable agreement.
 
Future maturities of long-term debt for the five years ending May 31 are as follows:
 
2010
 
$
2,147
 
2011
   
1,644
 
2012
   
939
 
2013
   
591
 
2014
   
2,528
 
Thereafter
   
805
 
  
 
$
8,654
 
 
The Company was in compliance with all debt covenants at May 31, 2009 and 2008.
 
6.  LINES OF CREDIT
 
The University maintains a $2,000 revolving line of credit with Great Western Bank that matures in October 2009.  Advances under the line bear interest at a variable rate based on prime (5% at May 31, 2009) and are secured by substantially all assets of the University and the personal guarantee of a Company shareholder.  Advances of $0 and $1,985 had been made on this line of credit at May 31, 2009 and 2008, respectively.
 
The University also has available an additional $1,900 line of credit with Wells Fargo Bank that matures in January 2010.  Advances under the line bear interest at a variable rate based on prime (6% at May 31, 2009) and are secured by checking, savings, and investment accounts held by Wells Fargo Bank.  At May 31, 2009 and 2008, advances totaling $0 and $600, respectively, had been made on the line of credit.

 
F-17
 

During 2009, the Company completed construction of a new building (see Note 13).  The project is funded by a construction line of credit totaling $3,816 with Great Western Bank.  Borrowings at May 31, 2009 and 2008, totaled $3,305 and $3,414, respectively.  The note is secured by Company real estate and the personal guarantee of a Company shareholder, matures in October 2009, and bears interest at a variable rate based on prime (5% at May 31, 2009).
 
7.  LEASES
 
The University leases building facilities for branch operations and equipment for classroom operations under operating leases with various terms and conditions.  Total rent expense for the years ended May 31, 2009, 2008, and 2007, was $3,506, $3,542, and $3,317, respectively.
 
Future minimum lease payments on noncancelable operating leases for the five years ending May 31 are as follows:
 
2010
 
$
2,916
 
2011
   
2,412
 
2012
   
2,182
 
2013
   
1,992
 
2014
   
1,958
 
Thereafter
   
13,251
 

8.  INCOME TAXES
 
Components of the provision for income taxes for the years ended May 31, 2009, 2008, and 2007, were as follows:
 
   
2009
   
2008
   
2007
 
Current tax expense (benefit):
   
  
     
  
     
  
 
                         
Federal
 
$
1,562
   
$
108
   
$
(532
) 
State
   
43
     
3
     
(3
) 
  
   
1,605
     
111
     
(535
) 
Deferred tax expense (benefit):
   
  
     
  
     
  
 
                         
Federal
   
162
     
(320
) 
   
(253
) 
State
   
30
     
(22
) 
   
(43
) 
  
   
192
     
(342
) 
   
(296
) 
Total tax expense (benefit)
 
$
1,797
   
$
(231
) 
 
$
(831
) 
 
 
F-18
 

The effective tax rate varies from the statutory federal income tax rate for the following reasons:
 
   
2009
   
2008
   
2007
 
Statutory
   
34.0
% 
   
34.0
% 
   
34.0
% 
State income taxes – net of federal benefit
   
1.5
     
3.0
     
1.9
 
Permanent differences and other
   
1.1
     
0.6
     
(5.3
) 
Effective income tax rate
   
36.6
% 
   
37.6
% 
   
30.6
% 
 
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of the Company’s deferred assets (liabilities) as of May 31 were as follows:
 
   
2009
   
2008
 
Deferred income tax assets:
   
  
     
  
 
                 
Account receivable allowances
 
$
63
   
$
33
 
Bad debt write-offs
   
411
     
312
 
Charitable contributions
   
135
     
304
 
Accrued salaries
   
619
     
197
 
Net operating loss carryforwards
   
—
     
561
 
Deferred rent
   
239
     
136
 
Total deferred income tax assets
   
1,467
     
1,543
 
Deferred income tax liabilities:
   
  
     
  
 
                 
Fixed assets and course development
   
(1,680
) 
   
(1,490
) 
Prepaid expenses
   
(139
) 
   
(214
) 
Other
   
(61
) 
   
(16
) 
Total deferred income tax liabilities
   
(1,880
) 
   
(1,720
) 
Net deferred income tax liabilities
 
$
(413
) 
 
$
(177
) 

At May 31, 2009, the Company had utilized all federal and state net operating loss carryforwards.
 
Effective for its fiscal year ended May 31, 2009, the Company has complied with FIN No. 48, Accounting for Uncertainty in Income Taxes  —  an interpretation of FASB Statement No. 109   (codified in FASB ASC Topic 740, Income Taxes ), which requires that income tax positions must be more likely than not to be sustained based solely on their technical merits in order to be recognized.  The Company has recorded no liability for uncertain tax positions.  The Company has elected to record interest and penalties from unrecognized tax benefits in the tax provision.
 
The Company files income tax returns in the U.S. federal jurisdiction and various states.  Because of closure of an Internal Revenue Service examination, the Company is no longer subject to U.S. federal income tax examinations for years before 2007 and, generally, is no longer subject to state and local income tax examinations by tax authorities for years before 2003.

 
F-19
 

9.  EMPLOYEE COMPENSATION PLANS
 
Employee Benefit Plan Payable  — The Company sponsors a 401(k) plan for its University employees, which provides for a discretionary match, net of forfeitures, of up to 5%.  The University uses certain consistently applied operating ratios to determine contributions.  The University’s contributions were $364, $207, and $0 for the years ended May 31, 2009, 2008, and 2007, respectively.
 
Compensation Plans  — The Company has entered into an employment agreement with its President through December 2011.  The agreement requires, among other things, an annual incentive payment of 10% of the Company’s annual income as defined in the agreement, which is paid out annually.  For the years ended May 31, 2009, 2008, and 2007, the Company has recorded $709, $193, and $160, respectively, as an expense in selling, general, and administrative expenses and the related liability, which is included in accrued expenses and other in the accompanying consolidated financial statements.  Furthermore, the agreement provides for a deferred compensation payment payable upon retirement or death equal to one year’s salary.  The liability totals $153 and $142 at May 31, 2009 and 2008, respectively, and is included in other long-term liabilities in the in the accompanying consolidated financial statements.
 
10.  COMMITMENTS AND CONTINGENCIES
 
From time to time, the Company is a party to various claims, proceedings, or lawsuits relating to the conduct of its business.  Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to the Company, management believes, based on facts presently known, that the outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s financial position or future results of operations.
 
During the year-ended May 31, 2007, the University settled a lawsuit involving a previously leased facility.  The University recorded a gain of approximately $340 as a result of this settlement, which is included on the accompanying consolidated statement of operations.
 
The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies.  On an ongoing basis, the Company evaluates the results of internal compliance monitoring activities and those of applicable regulatory agencies and, when appropriate, record liabilities to provide for the estimated costs of any necessary remediation.  Currently, there are no outstanding actions but the Company cannot predict the outcome of future program reviews and any unfavorable outcomes could have a material adverse effect on the results of operations, cash flows, and financial position.
 
11.  SELF-INSURED HEALTH INSURANCE
 
The Company maintains a self-insured health insurance plan for employees.  Under this plan, the Company pays a monthly fee to their administrator, as well as claims submitted by their participants.  As there generally is a lag between the time a claim is incurred by a participant and the time the claim is submitted, the Company has recorded a liability for outstanding claims of approximately $422 and $227 at May 31, 2009 and 2008, respectively.  Such liability is reported with accrued liabilities in the accompanying consolidated financial statements.  At May 31, 2009, the Company’s maximum aggregate risk was approximately $1,075.  The maximum specific risk per participant is $50 per year, although total risk for all participants will not exceed the noted maximum aggregate risk for the year.

 
F-20
 

12.  RELATED-PARTY TRANSACTIONS
 
The Company is required under 34 CFR 668.23(d) to disclose all related-party transactions (as defined within the regulation) regardless of materiality to the financial statements.  As described in Note 5, certain notes payable are personally guaranteed by a shareholder of the Company and notes payable are due to shareholders and related parties at May 31, 2009 and 2008.  In addition, rent totaling $1,000 per month is paid to related parties for home office space under month-to-month leases.  All other related-party transactions are intercompany amounts that are eliminated in consolidation.
 
13.  CONDOMINIUM PROJECT
 
During 2008, the Company broke ground on a new building that was planned to house 24 condominiums to be sold to the general public (Vista Park).  The Vista Park project was funded by a construction line of credit (see Note 6).  Construction was completed in 2009, and the building is being actively marketed for sale.  During 2009, three units were sold for approximately $641.
 
In addition, one of the three current apartment buildings is being converted to condominiums and offered for individual sale (Park West).  The apartments are being rented on a short-term basis until sale occurs, and any renovations are funded by the purchaser.  Three condominiums were sold during 2008, and one was sold during 2009.
 
Sales and cost of sales for both the Vista Park and Park West condominiums totaled $784 and $558 for 2009 and $395 and $122 for 2008, respectively, resulting in net sales of $226 and $273, respectively.
 
14.  SEGMENT REPORTING
 
Segment information is presented in accordance with management’s approach to the internal organization used for making operating decisions and assessing performance.  Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision-makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business.
 
As of May 31, 2009 and 2008, the Company operates in two operating and reportable segments: National American University (NAU) and other (see Note 1).  These operating segments are divisions of the Company for which separate financial information is available and evaluated regularly by the chief operating decision-makers in deciding how to allocate resources and in assessing performance.
 
General administrative costs of Dlorah, Inc. are allocated to specific divisions of the Company.
 
The majority of the Company’s revenue is from the NAU division, which provides undergraduate and graduate education programs.  NAU derives its revenue primarily from student tuition.  The other division operates multiple apartment and condominium complexes and derives its revenues primarily from condominium sales and rental income (in thousands):

 
F-21
 

As of and for the Year Ended May 31, 2009
 
NAU
   
Other
   
Dlorah, Inc.
 
Revenue:
   
  
     
  
     
  
 
                         
Academic revenue
 
$
56,874
   
$
—
   
$
56,874
 
Auxiliary revenue
   
4,036
     
—
     
4,036
 
Rental income – apartments
   
—
     
890
     
890
 
Condominium sales
   
—
     
784
     
784
 
Total revenue
   
60,910
     
1,674
     
62,584
 
Operating expenses:
   
  
     
  
     
  
 
                         
Educational services and facilities
   
12,816
     
—
     
12,816
 
Selling, general, and administrative
   
40,163
     
2,045
     
42,208
 
Auxiliary expense
   
1,595
     
—
     
1,595
 
Cost of condominium sales
   
—
     
558
     
558
 
Loss on disposition of property and equipment
   
3
     
—
     
3
 
Total operating expenses
   
54,577
     
2,603
     
57,180
 
Income (loss) from operations
   
6,333
     
(929
) 
   
5,404
 
Other income (expense):
   
  
     
  
     
  
 
                         
Interest income
   
242
     
—
     
242
 
Interest expense
   
(313
) 
   
(521
) 
   
(834
) 
Other income – net
   
—
     
93
     
93
 
Total other expense
   
(71
) 
   
(428
) 
   
(499
) 
Income (loss)
 
$
6,262
   
$
(1,357
) 
 
$
4,905
 
Total assets
 
$
20,620
   
$
8,245
   
$
28,865
 
Expenditures for long-lived assets and course development
 
$
1,000
   
$
487
   
$
1,487
 
Depreciation and amortization
 
$
1,830
   
$
335
   
$
2,165
 
 
As of and for the Year Ended May 31, 2008
 
NAU
 
 
Other
 
 
Dlorah, Inc.
 
Revenue:
   
  
     
  
     
  
 
                         
Academic revenue
 
$
44,218
   
$
—
   
$
44,218
 
Auxiliary revenue
   
4,062
     
—
     
4,062
 
Rental income – apartments
   
—
     
782
     
782
 
Condominium sales
   
—
     
395
     
395
 
Total revenue
   
48,280
     
1,177
     
49,457
 
Operating expenses:
   
  
     
  
     
  
 
                         
Educational services and facilities
   
10,871
     
—
     
10,871
 
Selling, general, and administrative
   
34,540
     
2,361
     
36,901
 
Auxiliary expense
   
1,523
     
—
     
1,523
 
Cost of condominium sales
   
—
     
122
     
122
 
Loss on disposition of property and equipment
   
5
     
—
     
5
 
Total operating expenses
   
46,939
     
2,483
     
49,422
 
Income (loss) from operations
   
1,341
     
(1,306
) 
   
35
 
Other income (expense):
   
  
     
  
     
  
 
                         
Interest income
   
282
     
—
     
282
 
Interest expense
   
(678
) 
   
(345
) 
   
(1,023
) 
Other income – net
   
1
     
91
     
92
 
Total other expense
   
(395
) 
   
(254
) 
   
(649
) 
Income (loss)
 
$
946
   
$
(1,560
) 
 
$
(614
) 
Total assets
 
$
19,737
   
$
8,425
   
$
28,162
 
Expenditures for long-lived assets and course development
 
$
3,449
   
$
4,046
   
$
7,495
 
Depreciation and amortization
 
$
1,783
   
$
331
   
$
2,114
 
 
 
F-22
 
 
As of and for the Year Ended May 31, 2007
 
NAU
   
Other
   
Dlorah, Inc.
 
Revenue:
   
  
     
  
     
  
 
                         
Academic revenue
 
$
39,841
   
$
—
   
$
39,841
 
Auxiliary revenue
   
3,702
     
—
     
3,702
 
Rental income – apartments
   
—
     
906
     
906
 
Total revenue
   
43,543
     
906
     
44,449
 
Operating expenses:
   
  
     
  
     
  
 
                         
Educational services and facilities
   
10,202
     
—
     
10,202
 
Selling, general, and administrative
   
32,238
     
2,344
     
34,582
 
Auxiliary expense
   
1,831
     
—
     
1,831
 
Gain on legal settlement
   
(340
) 
   
—
     
(340
) 
Loss on disposition of property and equipment
   
495
     
—
     
495
 
Total operating expenses
   
44,426
     
2,344
     
46,770
 
Loss from operations
   
(883
) 
   
(1,438
) 
   
(2,321
) 
Other income (expense):
   
  
     
  
     
  
 
                         
Interest income
   
278
     
—
     
278
 
Interest expense (Note 5)
   
(486
) 
   
(270
) 
   
(756
) 
Other income – net
   
9
     
71
     
80
 
Total other expense
   
(199
) 
   
(199
) 
   
(398
) 
Loss
 
$
(1,082
) 
 
$
(1,637
) 
 
$
(2,719
) 
Total assets
 
$
15,650
   
$
4,787
   
$
20,437
 
Expenditures for long-lived assets and course development
 
$
2,509
   
$
606
   
$
3,115
 
Depreciation and amortization
 
$
1,425
   
$
262
   
$
1,687
 
 
15.  FAIR VALUE MEASUREMENTS
 
As discussed in Note 2, the Company adopted FASB Statement No. 157, subject to the deferral provisions of FSP FAS No. 157-2 as of January 1, 2008.  This standard defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements.  FASB Statement No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that are included in each category at May 31, 2009:

 
F-23
 

Level 1  — Quoted prices in active markets for identical assets or liabilities.  The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted market prices.
 
Level 2  — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  The type of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using observable inputs.
 
Level 3  — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  The type of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation.  The Company does not have any Level 3 assets or liabilities.
 
In accordance with the fair value hierarchy, the following table shows the fair value as of May 31, 2009, of those financial assets that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair market value.
 
   
Quoted Prices
 in Active
 Markets
 (Level 1)
   
Other
 Observable
 Inputs
 (Level 2)
   
Unobservable
Inputs
 (Level 3)
   
Fair
 Value
 
Investments
 
$
4,417
   
$
231
   
$
—
   
$
4,648
 
Total assets at fair value
 
$
4,417
   
$
231
   
$
—
   
$
4,648
 
 
16.  SUBSEQUENT EVENTS
 
The Company sold one unit in the Park West condominium project in July 2009 for approximately $164.

 
F-24
 

DLORAH, INC.
   
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 As of August 31, 2009 and May 31, 2009
 (In thousands)

   
August 31,
 2009
   
May 31,
 2009
 
ASSETS
   
  
     
  
 
                 
CURRENT ASSETS:
   
  
     
  
 
                 
Cash and cash equivalents
 
$
4,724
   
$
3,508
 
Investments
   
2,950
     
4,417
 
Student receivables – net of allowance of $191 and $115 at August 31, 2009 and May 31, 2009, respectively
   
1,723
     
1,207
 
Institutional receivables
   
286
     
173
 
Student notes receivable – current portion – net of allowance
   
30
     
30
 
Bookstore inventory
   
678
     
604
 
Deferred income taxes
   
1,156
     
1,090
 
Prepaid and other current assets
   
1,296
     
410
 
Total current assets
   
12,843
     
11,439
 
PROPERTY AND EQUIPMENT
   
  
     
  
 
 
               
Land
   
718
     
718
 
Land improvements
   
374
     
374
 
Buildings and building improvements
   
16,334
     
16,147
 
Furniture, vehicles, and equipment
   
14,944
     
14,564
 
Total gross property and equipment
   
32,370
     
31,803
 
Less accumulated depreciation
   
(20,110
) 
   
(19,651
) 
Total net property and equipment
   
12,260
     
12,152
 
OTHER ASSETS:
   
  
     
  
 
 
               
Condominium inventories
   
3,802
     
3,802
 
Student notes receivable – net of current portion and allowance
   
102
     
105
 
Land held for future development
   
312
     
312
 
Course development – net of accumulated amortization of $893 and $804 at August 31, 2009 and May 31, 2009, respectively
   
772
     
767
 
Restricted Investment
   
305
     
0
 
Other
   
283
     
288
 
  
   
5,576
     
5,274
 
TOTAL
 
$
30,679
   
$
28,865
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
   
  
     
  
 
 
               
CURRENT LIABILITIES:
   
  
     
  
 
 
               
Long-term debt – current portion
 
$
1,951
   
$
2,147
 
Lines of credit
   
3,305
     
3,305
 
Accounts payable
   
3,944
     
3,564
 
Student accounts payable
   
266
     
314
 
Deferred income
   
373
     
367
 
Income tax payable
   
868
     
551
 
Accrued and other liabilities
   
5,418
     
4,900
 
Total current liabilities
   
16,125
     
15,148
 
LONG-TERM DEBT – Net of current portion
   
6,087
     
6,507
 
DEFERRED INCOME TAXES
   
1,503
     
1,503
 
OTHER LONG-TERM LIABILITIES
   
835
     
815
 
COMMITMENTS AND CONTINGENCIES
   
  
     
  
 
 
               
STOCKHOLDERS’ EQUITY:
   
  
     
  
 
 
               
Common stock $10 par value; 100,000 shares authorized; 50,000 shares issued; 28,572 shares outstanding at August 31, 2009 and May 31, 2009
   
281
     
281
 
Additional paid-in capital
   
104
     
104
 
Retained earnings
   
8,510
     
7,251
 
Accumulated other comprehensive income
   
96
     
109
 
  
   
8,991
     
7,745
 
Less treasury stock at cost – 21,428 shares at August 31, 2009 and May 31, 2009 respectively
   
(1,869
) 
   
(1,869
) 
Total Dlorah, Inc. stockholders' equity
   
7,122
     
5,876
 
Non-controlling interest
   
(993
) 
   
(984
) 
Total equity
   
6,129
     
4,892
 
TOTAL
 
$
30,679
   
$
28,865
 
 
See notes to the unaudited condensed consolidated financial statements.  

 
F-25
 
 
DLORAH, INC.
   
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended August 31, 2009 and August 31, 2008
(In thousands)

   
August   31,
  2009
   
August   31,
  2008
 
REVENUE:
 
     
   
     
 
Academic revenue
  $ 15,873     $ 10,782  
Auxiliary revenue
      1,140         886  
Rental income – apartments
      251         238  
Condominium sales
      0         211  
Total revenue
      17,264         12,117  
OPERATING EXPENSES:
               
Cost of educational services
      3,407         2,728  
Selling, general and administrative
      11,179         9,388  
Auxiliary expense
      426         358  
Cost of condominium sales
      0         176  
Total operating expenses
      15,012         12,650  
INCOME (LOSS) FROM OPERATIONS
      2,252         (533 ) 
OTHER INCOME (EXPENSE):
               
Interest income
      86         76  
Interest expense
      (157 )        (233 ) 
Gain on disposition of property and equipment
      0         118  
Other income – net
      24         26  
Total other expense
      (47 )        (13 ) 
INCOME (LOSS) BEFORE INCOME TAXES
      2,205         (546 ) 
INCOME TAX (EXPENSE) BENEFIT
      (955 )        228  
INCOME (LOSS)
      1,250         (318 ) 
NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
      9         (60 ) 
NET INCOME (LOSS) ATTRIBUTABLE TO DLORAH, INC.
      1,259         (378 ) 
OTHER COMPREHENSIVE INCOME – Unrealized (losses) gains on investments
      (13 )        30  
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO DLORAH, INC.
  $ 1,246     $ (348 ) 
 
 See notes to the unaudited condensed consolidated financial statements.
 
F-26
 
DLORAH, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
 For the Three Months Ended August 31, 2009 and August 31, 2008
(In thousands)

    
Equity attributable to Dlorah, Inc.
               
  
 
Common
Stock
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income
   
Treasury
Stock
   
Equity
Attributable to
Non-controlling
Interest
   
Total Stockholders’
Equity
 
Balance – May 31, 2008
  $ 281     $ 104     $ 4,187     $ 28     $ (1,869 )   $ (971 )   $ 1,760  
Comprehensive income:
                                                       
Net (Loss) income
    0       0       (378 )     0       0       60       (318 )
Unrealized gain on investments
    0       0       0       30       0       0       30  
Balance – August 31, 2008
  $ 281     $ 104     $ 3,809     $ 58     $ (1,869 )   $ (911 )   $ 1,472  
Balance – May 31, 2009
  $ 281     $ 104     $ 7,251     $ 109     $ (1,869 )   $ (984 )   $ 4,892  
Comprehensive income:
                                                       
Net income (loss)
    0       0       1,259       0       0       (9 )     1,250  
Unrealized loss on investments
    0       0       0       (13 )     0       0       (13 )
Balance – August 31, 2009
  $ 281     $ 104     $ 8,510     $ 96     $ (1,869 )   $ (993 )   $ 6,129  

 See notes to the unaudited condensed consolidated financial statements.
 
F-27
 
DLORAH, INC.

 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended August 31, 2009 and August 31, 2008
(In thousands)

   
August   31,
  2009
   
August   31,
  2008
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Income (loss)
  $ 1,250     $ (318 )
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
               
Depreciation and amortization
    547       563  
Gain on disposition of property and equipment
    0       (118 )
Provision for uncollectable tuition
    505       388  
Deferred income taxes
    (66 )     0  
Changes in assets and liabilities:
               
Accounts and other receivables
    (1,134 )     (315 )
Student notes
    3       7  
Bookstore inventory
    (74 )     (46 )
Prepaid and other current assets
    (886 )     83  
Condominium inventories
    0       175  
Accounts payable
    142       (1,098 )
Deferred income
    6       34  
Other long-term liabilities
    20       26  
Income tax payable
    317       336  
Accrued and other liabilities
    518       (181 )
Net cash flows provided by (used in) operating activities
    1,148       (464 )
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of investments
    0       (1,449 )
Proceeds from sale of investments
    1,149       180  
Purchases of property and equipment
    (377 )     (95 )
Proceeds from sale of property and equipment
    0       204  
Course development
    (93 )     (48 )
Construction of development property with line of credit borrowings
    0       (412 )
Other
    5       0  
Net cash flows provided by (used in) investing activities
    684       (1,620 )
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Borrowings on lines of credit
    0       690  
Repayments of lines of credit
    0       (420 )
Increase in outstanding checks in excess of book balance
    0       410  
Borrowings of long-term debt
    15       0  
Repayments of long-term debt
    (631 )     (1,015 )
Construction of development property with line of credit borrowings
    0       412  
Net cash flows (used in) provided by financing activities
    (616 )     77  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  $ 1,216     $ (2,007 )
CASH AND CASH EQUIVALENTS – Beginning of year
    3,508       2,108  
CASH AND CASH EQUIVALENTS – End of period
  $ 4,724     $ 101  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid for interest – net of $-0- and $34 capitalized during the three months ended August 31, 2009 and August 31, 2008, respectively
  $ 161     $ 243  
Cash paid (refund received) for income taxes
  $ 953     $ (564 )
 
 See notes to the unaudited condensed consolidated financial statements  
 
F-28
 
DLORAH, INC.

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 As of and For the Three Months Ended August 31, 2009 and August 31, 2008
 (Dollar amounts in thousands)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Nature of Operations  — Dlorah, Inc. (the “Company”) operates National American University (the “University”). The University operates at 17 campuses within the states of South Dakota, Colorado, Kansas, Missouri, Minnesota, New Mexico, and Texas, including its headquarters in Rapid City, South Dakota. A substantial portion of the University’s academic income is dependent upon federal student financial aid programs, company tuition assistance, distance learning programs, and contracts to provide instruction and course materials to other educational institutions. To maintain eligibility for financial aid programs, the University must comply with Department of Education requirements, which include, among other items, the maintenance of certain financial ratios. Approximately 92% and 88% of the Company’s total revenues for the three months ended August 31, 2009 and August 31, 2008, respectively, were derived from the University’s academic income.
 
In addition, the Company operates luxury apartment units and develops real estate in the Rapid City, South Dakota area.
 
In August 2009, Dlorah entered into an agreement with Camden Learning Corp. (Camden) under which the Company will become a publicly-held company. Camden Learning Corp is a public company that was formed to acquire a company, but had minimal other operations other than its eventual acquisition of Dlorah’s stock. Should the agreement be approved by Camden’s shareholders, Dlorah’s owners will own approximately 70% of the public company. We anticipate that the agreement will be accounted for as a recapitalization of Dlorah’s equity, which will result in the addition of approximately $22 million of cash that we will use to grow our business. The current management of the Company is not intended to change. The transaction is expected to close in November 2009.
 
Basis of Presentation  — The accompanying unaudited consolidated financial statements have been prepared on a basis substantially consistent with the Company’s audited financial statements. These financial statements are condensed and do not contain all disclosures required in annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company’s annual financial statements.
 
Furthermore, the results of operations and cash flows for the three month periods ended August 31, 2008, and August 31, 2009, are not necessarily indicative of the results that may be expected for the full year. These financial statements include consideration of subsequent events through September 28, 2009.
 
The unaudited consolidated financial statements presented herein include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated.
 
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States. All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to the Condensed Consolidated Financial Statements
 
 
F-29
 

Estimates  — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to revenue recognition, bad debts, fixed assets, income taxes, benefit plans, and certain accruals. Actual results could differ from those estimates.
 
Financial Instruments  — As of August 31, 2009 and May 31, 2009, the Company’s financial instruments consisted of cash equivalents, investments, accounts receivable, accounts payable, and long-term liabilities. The fair value of fixed-rate liabilities is estimated based on current rates offered to the Company for instruments with similar ratings and maturities. The difference between the carrying value of these financial instruments and their fair value was not material as of August 31, 2009 and May 31, 2009.
 
 
F-30
 

2.  RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS
 
In December 2007, the FASB (Financial Accounting Standards Board) issued a new accounting standard which requires that a non-controlling interest in a consolidated entity be reported in equity, but separate from the parent company’s equity, in the financial statements. It also requires disclosure, on the face of the statements of operations, the amount of consolidated net income attributable to the parent and the non-controlling interest. The standard is effective for fiscal years beginning on or after December 15, 2008. A non-controlling interest exists in certain real estate development operations. This standard was adopted for the year beginning June 1, 2009, which required the Company to record the non-controlling interest within equity, and the statement of operations was updated to separately present net income attributable to the non-controlling interest and net income attributable to Dlorah, Inc. Prior periods have been conformed in accordance with the new accounting standard.
 
In June 2009, the FASB issued a new accounting standard which is intended to improve financial reporting by enterprises involved with variable interest entities. The standard is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. This will be effective for the Company’s fiscal year beginning June 1, 2010. The Company is currently evaluating the impact of this statement on its consolidated financial statements.
 
In June 2009, the FASB issued a new accounting standard which established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued. The standard is effective for financial periods ended after June 30, 2009. The Company has adopted the standard for the quarter ending August 31, 2009.
 
In April 2009, the FASB issued additional guidance related to the disclosure if impairment losses on securities and the accounting for impairment losses on debt securities. The guidance is effective for fiscal years and interim periods ended after June 15, 2009, and was adopted by the Company for the first quarter ended August 31, 2009. The adoption did not have an effect the on the Company’s consolidated results of operations, financial condition, or required financial statement disclosures.
 
3.  INCOME TAXES
 
The effective tax rate for the three months ended August 31, 2009 and August 31, 2008, was 37.2% and 36.5%, respectively.
 
4.  COMMITMENTS AND CONTINGENCIES
 
From time to time, the Company is a party to various claims, proceedings, or lawsuits relating to the conduct of its business. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to the Company, management believes, based on facts presently known, that the outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s unaudited consolidated financial position or future results of operations.
 
 
F-31
 

The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. On an ongoing basis, the Company evaluates the results of internal compliance monitoring activities and those of applicable regulatory agencies and, when appropriate, record liabilities to provide for the estimated costs of any necessary remediation. There are no current outstanding actions but the Company cannot predict the outcome of future program reviews and any unfavorable outcomes could have a material adverse effect on the results of unaudited consolidated statements of operations, cash flows, and financial position.
 
5.  RELATED-PARTY TRANSACTIONS
 
The Company is required to disclose all related-party transactions (as defined within the regulation) regardless of materiality to the financial statements. Certain notes payable are personally guaranteed by a shareholder of the Company and notes payable are due to stockholders and related parties at August 31, 2009 and May 31, 2009, of $1,034 and $1,147, respectively. All other related-party transactions are intercompany amounts that are eliminated in consolidation.
 
6.  CONDOMINIUM PROJECT
 
During 2008, the Company broke ground on a new building that will house 24 condominiums to be sold to the general public (Vista Park). The Vista Park project was funded by a construction line of credit and was completed in 2009. In July 2008, the Company sold one unit within the Vista Park condominium project for approximately $250. In addition, two units were sold for $230 and $225 in December 2008 and April 2009, respectively. The Company sold one unit in September 2009 for approximately $238.
 
7.  FAIR VALUE MEASUREMENTS
 
As discussed in Note 2, the Company adopted a new accounting standard that defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that are included in each category at August 31, 2009 and May 31, 2009:
 
Level 1  — Quoted prices in active markets for identical assets or liabilities. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted market prices.
 
Level 2  — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The type of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using observable inputs.
 
Level 3  — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The type of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation. The Company does not have any Level 3 assets or liabilities.
 
In accordance with the fair value hierarchy, the following table shows the fair value as of August 31, 2009 and May 31, 2009, of those financial assets that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair market value.

 
F-32
 

   
Quoted   Prices
in   Active
Markets
  (Level   1)
   
Other   Observable
Inputs
(Level   2)
   
Unobservable
Inputs
  (Level   3)
   
Fair   Value
 
August 31, 2009
                       
Investments
  $ 2,780     $ 170     $ —     $ 2,950  
Restricted Investments
    305       —       —       305  
Total assets at fair value
  $ 3,085     $ 170     $ —     $ 3,255  
May 31, 2009
                               
Investments
  $ 4,299     $ 231     $ —     $ 4,530  
Total assets at fair value
  $ 4,299     $ 231     $ —     $ 4,530  
 
8.  SEGMENT REPORTING
 
Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business.
 
The Company operates in two operating and reportable segments: National American University (NAU) and other. These operating segments are divisions of the Company for which separate financial information is available and evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.
 
General administrative costs of the Company are allocated to specific divisions of the Company.  The majority of the Company’s revenue is from the NAU division, which provides undergraduate and graduate education programs. NAU derives its revenue primarily from student tuition. The other division operates multiple apartment and condominium complexes and derives its revenues primarily from condominium sales and rental income (in thousands).
 
Three Months Ended August 31, 2009
 
NAU
   
Other
   
Consolidated
Dlorah, Inc.
 
Revenue:
 
 
   
 
   
 
 
Academic revenue
  $ 15,873     $ 0     $ 15,873  
Auxiliary revenue
    1,140       0       1,140  
Rental income – apartments
    0       251       251  
Total revenue
    17,013       251       17,264  
Operating expenses:
                       
Educational services and facilities
    3,407       0       3,407  
Selling, general and administrative
    10,796       383       11,179  
Auxiliary expense
    426       0       426  
Total operating expenses
    14,629       383       15,012  
Income (loss) from operations
    2,384       (132 )     2,252  
Other income (expense):
                       
Interest income
    86       0       86  
Interest expense
    (33 )     (124 )     (157 )
Other income – net
    0       24       24  
Total other expense
    53       (100 )     (47 )
Income (loss)
  $ 2,437     $ (232 )   $ 2,205  
Total assets
  $ 19,674     $ 11,005     $ 30,679  
Expenditures for long-lived assets
  $ (376 )   $ (1 )   $ (377 )
Depreciation and amortization
  $ 424     $ 123     $ 547  
 
F-33

8.  SEGMENT REPORTING  – (continued)
 
Three Months Ended August 31, 2008
 
NAU
   
Other
   
Consolidated
Dlorah, Inc.
 
Revenue:
 
 
   
 
   
 
 
Academic revenue
  $ 10,782     $ 0     $ 10,782  
Auxiliary revenue
    886       0       886  
Rental income – apartments
    0       238       238  
Condominium sales
    0       211       211  
Total revenue
    11,668       449       12,117  
Operating expenses:
                       
Educational services and facilities
    2,728       0       2,728  
Selling, general and administrative
    8,998       390       9,388  
Auxiliary expense
    358       0       358  
Cost of condominium sales
    0       176       176  
Total operating expenses
    12,084       566       12,650  
(Loss) income from operations
    (416 )     (117 )     (533 )
Other income (expense):
                       
Interest income
    76       0       76  
Interest expense
    (124 )     (109 )     (233 )
Gain on disposition of property and equipment
    5       113       118  
Other income – net
    4       22       26  
Total other expense
    (39 )     26       (13 )
Loss
  $ (455 )   $ (91 )   $ (546 )
Expenditures for long-lived assets
  $ (81 )   $ (14 )   $ (95 )
Depreciation and amortization
  $ 476     $ 87     $ 563  
 
 
F-34
 

SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
 
The following unaudited pro forma combined balance sheet combines Camden’s historical balance sheet and that of Dlorah as of August 31, 2009, giving effect to the transactions described in the Merger Agreement as if they had occurred on August 31, 2009.  The following unaudited pro forma condensed combined statements of operations combine Camden’s historical statements of operations for the three months ended August 31, 2009 and for the year ended May 31, 2009 with those of Dlorah for the three months ended August 31, 2009 and for the year ended May 31, 2009, giving effect to the Transaction as if it had occurred on June 1, 2008.
 
The Transaction is considered a “reverse merger” and recapitalization since the stockholders of Dlorah will own at least 74.4% of the outstanding shares of Common Stock on a fully diluted and as-converted basis immediately following the completion of the Transaction, and will have its current officers assuming all corporate offices of the continuing entity, including chief executive officer, chief operating officer and all other day-to-day operating positions.  Accordingly, Dlorah will be deemed to be the accounting acquirer in the Transaction and, consequently the Transaction is treated as a recapitalization of Dlorah.  The assets and liabilities and the historical operations that will be reflected in the Camden financial statements after consummation of the Transaction will be those of Dlorah and will be recorded at the historical cost basis of Dlorah.  Camden’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of Dlorah upon consummation of the Transaction.
 
The pro forma adjustments give effect to events that are directly attributable to the transactions discussed below that have a continuing impact on the operations of Camden and are based on available data and certain assumptions that management believes are factually supportable.
 
The unaudited pro forma condensed financial statements described above should be read in conjunction with Camden’s historical financial statements and those of Dlorah and the related notes thereto.  The pro forma adjustments are preliminary and the unaudited pro forma information is not necessarily indicative of the financial position or results of operations that may have actually occurred had the Transaction taken place on the dates noted, or of the continuing entity’s future financial position or operating results.
 
Consummation of the Transaction is conditioned upon, among other things, the Camden stockholders adopting and approving the Merger Proposal.  If Camden stockholders owning 30% or more of the IPO Shares vote against the Merger Proposal and exercise their right to convert their shares into a pro rata portion of the funds held in the trust account, then the Transaction cannot be consummated.  Consequently, up to 1,987,889 shares of Common Stock, representing one share less than 30% of the IPO Shares, may be converted in this manner without negating the Transaction.  This would represent an aggregate maximum conversion of approximately $15.7 million as of August 31, 2009 to cash.
 
The following unaudited pro forma financial statements have been prepared using two different assumptions with respect to the number of outstanding shares of Common Stock immediately following the Transaction, as follows:
 
 
•
assuming no conversions — this presentation assumes that no stockholders of Camden seek to convert their shares into a pro rata share of the trust account; and
 
 
F-35
 

 
•
assuming maximum conversions — this presentation assumes stockholders of Camden owning 29.99% of the IPO Shares seek conversion
 
In the case of both assumptions, the data is based on approximately 8.2 million shares of Common Stock currently outstanding, the issuance to Dlorah of 100,000 shares of Series A Stock, 2,800,000 common stock purchase warrants and 250,000 shares of restricted Common Stock, which shares shall not be freely tradable until such time as the Common Stock trades at or above $8.00 per share for any sixty (60) consecutive trading day period, and the exchange of Camden Learning’s 2,800,000 founder warrants for 575,000 shares of restricted Common Stock, which shares shall not be freely tradable until such time as the Common Stock trades at or above $8.00 per share for any sixty (60) consecutive trading day period.  Detailed information as to the weighted average shares are provided in Note 3 to the Unaudited Pro Forma Condensed Combined Financial Statements.

 
F-36
 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
Balance Sheet
 
Camden Learning Corporation and Dlorah, Inc.
Selected Unaudited Pro Forma
 Financial Information as of August 31, 2009
(In Thousands)

                 
No Holders Exercise Their
Conversion Rights
   
Holders Exercise Their
Conversion Rights as to 1,987,889
Shares
 
  
 
Camden
   
Dlorah
   
Pro Forma
Adjustments
   
Pro Forma
Combined
   
Pro Forma
Adjustments
   
Pro Forma
Combined
 
ASSETS
                                   
                                     
Current Assets:
                                   
Cash and cash equivalents
    177       4,724       52,488
(a)
    50,204       (15,744 ) (c)     34,397  
  
                    (3,500 ) (b)             (63 ) (e)        
  
                    (3,313 ) (i)                        
  
                    775
(j)
                       
  
                    (1,147 ) (k)                        
Investments
    —       2,950       —       2,950       —       2,950  
Student receivables – net of allowance
    —       1,723       —       1,723       —       1,723  
Institutional receivables
    —       286       —       286       —       286  
Student notes receivable – current portion
    —       30       —       30       —       30  
Bookstore inventory
    —       678       —       678       —       678  
Deferred Income taxes
    —       1,156       —       1,156       —       1,156  
Income tax receivable
    129       —       —       129       —       129  
Prepaid assets
    37       1,296       —       1,333       —       1,333  
Total current assets
    343       12,843       45,303       58,489       (15,807 )     42,682  
Property and equipment – net of accumulated depreciation
    —       12,260       —       12,260       —       12,260  
Other assets:
                                               
Cash held in trust
    52,488       —       (52,488 ) (a)     —       —       —  
Deferred income taxes
    378       —       —       378       —       378  
Student notes receivables – net of current portion
    —       102       —       102       —       102  
Land held for future development
    —       312       —       312       —       312  
Condominium inventory
    —       3,802       —       3,802       —       3,802  
Course development – net of accumulated amortization
    —       772       —       772       —       772  
Restricted investment
    —       305       —       305       —       305  
Other
    —       283       —       283       —       283  
  
    52,866       5,576       (52,488 )     5,954       —       5,954  
Total Assets
    53,209       30,679       (7,185 )     76,703       (15,807 )     60,896  
 
 
F-37
 
 
                 
No Holders Exercise Their
Conversion Rights
   
Holders Exercise Their
Conversion Rights as to 1,987,889
Shares
 
  
 
Camden
   
Dlorah
   
Pro Forma
Adjustments
   
Pro Forma
Combined
   
Pro Forma
Adjustments
   
Pro Forma
Combined
 
LIABILITIES AND
STOCKHOLDERS' EQUITY
                                   
                                     
Current liabilities:
                                   
Long term debt – current portion
    —       1,951       —       1,951       —       1,951  
Lines of credit
    —       3,305       —       3,305       —       3,305  
Accounts payable
    865       3,944       —       4,809       —       4,809  
Student accounts payable
    —       266       —       266       —       266  
Deferred interest
    63       —       (63 ) (e)     —       —       —  
Deferred income
    —       373       —       373       —       373  
Income tax payable
    —       868       —       868       —       868  
Accrued and other liabilities
    —       5,418       —       5,418       —       5,418  
Total current liabilities
    928       16,125       (63 )     16,990       —       16,990  
Long term debt – net of current portion
    —       6,087       (1,147 ) (k)     4,940       —       4,940  
Deferred income taxes
    —       1,503       —       1,503       —       1,503  
Other long-term liabilities
    —       835       —       835       —       835  
Deferred underwriting compensation
    1,590       —       (1,590 ) (b)     0       —       0  
Common stock, subject to possible redemption
    15,744       —       (15,744 ) (c)     0       —       0  
Stockholders' equity:
                                               
Series A
    —       —       100 (d)     100       —       100  
Common Stock
    1       281       (281 ) (d)     1       —       1  
Additional paid-in capital
    35,889       104       15,744 (c)     45,815       (15,744 ) (c)     30,008  
  
                    (699 ) (d)             (63 ) (e)        
  
                    (3,313 ) (i)                        
  
                    (1,910 ) (b)                        
Retained earnings
    (943 )     8,510       63 (e)     8,510       —       8,510  
  
                    880 (d)                        
Accumulated other comprehensive income
    —       96       —       96       —       96  
  
    34,947       8,991       10,584       54,522       (15,807 )     38,715  
Less treasury stock at cost
    —       (1,869 )     —       (1,869 )     —       (1,869 )
Total Dlorah, Inc. stockholders' equity
    34,947       7,122       10,584       52,653       (15,807 )     36,846  
Non-controlling interest
    —       (993 )     775 (j)     (218 )     —       (218 )
Total equity
    34,947       6,129       11,359       52,435       (15,807 )     36,628  
Total liabilities and stockholders'  equity
    53,209       30,679       (7,185 )     76,703       (15,807 )     60,896  
 
 
F-38
 

Statement of Operations
Camden Learning Corporation and Dlorah, Inc.
Selected Unaudited Pro Forma
 Financial Information for the Year Ended May 31, 2009
(In Thousands)

               
No Holders Exercise
 Their Conversion Rights
   
Holders Exercise Their
 Conversion Rights as
 to 1,987,889 Shares
 
  
 
Camden
   
Dlorah
   
Pro Forma
Adjustments
   
Pro Forma
 Combined
   
Pro Forma
Adjustments
   
Pro Forma
 Combined
 
Revenue:
                                   
                                     
Academic revenue
    —       56,874       —       56,874       —       56,874  
Auxiliary revenue
    —       4,036       —       4,036       —       4,036  
Rental income – apartments
    —       890       —       890       —       890  
Condominium sales
    —       784       —       784       —       784  
Total revenue
    —       62,584       —       62,584       —       62,584  
Operating expenses:
                                               
Cost of educational services
    —       12,816       —       12,816       —       12,816  
Selling, general, and administrative
    907       42,208       (396 ) (f)     42,719       —       42,719  
Auxiliary expense
    —       1,595       —       1,595       —       1,595  
Cost of condominium sales
    —       558       —       558       —       558  
Loss on disposition of property and equipment
    —       3       —       3       —       3  
Total operating expenses
    907       57,180       (396 )     57,691       —       57,691  
Income (loss) from operations
    (907 )     5,404       396       4,893       —       4,893  
Other income (expense):
                                               
Interest income
    378       242       (38 ) (c)     582       (112 ) (e)     470  
Interest expense
    —       (834 )     —       (834 )     —       (834 )
Other income – net
    —       93       —       93       —       93  
Total other income (expense)
    378       (499 )     (38 )     (159 )     (112 )     (271 )
Income (loss) before income taxes
    (529 )     4,905       358       4,734       (112 )     4,622  
Income tax benefit (provision)
    114       (1,797 )     (131 ) (g)     (1,814 )     24   (g)     (1,790 )
Income (loss)
    (415 )     3,108       227       2,920       (88 )     2,832  
Net income (loss) attributable to non-controlling interest
    —       13               13       —       13  
Net income (loss) attributable to Camden and Dlorah, Inc.
    (415 )     3,121       227       2,933       (88 )     2,845  
Dividends paid on Series A shares
    —       —       6,921   (h)     6,921               6,921  
Dividends paid on Common shares
    —       —       901   (h)     901       —       901  
Undistributed earnings/(loss) (UEL)
    (415 )     3,121       (7,595 )     (4,889 )     (88 )     (4,977 )
UEL allocable to Class A shares
    —       —       —       (3,217 )     —       (3,275 )
UEL allocable to Common shares
    —       —       —       (1,672 )     —       (1,702 )
Weighted average common shares outstanding
                                               
Basic
    8,188,800                       8,188,800               6,200,911  
Diluted
    8,188,800                       24,662,775               22,674,836  
Weighted average Class A shares outstanding
                                               
Basic
                            100,000               100,000  
Diluted
                            15,730,000               15,730,000  
Earnings (loss) per Class A share – Basic
                            69.21             $ 69.21  
Distributed Earnings
                            (32.17 )             (32.75 )
Undistributed Earnings (loss)
                          $ 37.04             $ 36.46  
Earnings (loss) per Common share – Basic
                          $ 0.11             $ 0.11  
Distributed Earnings
                            (0.20 )             (0.21 )
Undistributed Earnings (loss)
                          $ (0.09 )           $ (0.10 )
Earnings (loss) per Class A share – Diluted
                          $ 0.12             $ 0.12  
 
 
F-39
 

Statement of Operations
  Camden Learning Corporation and Dlorah, Inc.
Selected Unaudited Pro Forma
 Financial Information for the Three Months Ended August 31, 2009
(In Thousands)

               
No Holders Exercise Their Conversion
Rights
   
Holders Exercise Their Conversion
Rights as to 1,987,889 Shares
 
  
 
Camden
   
Dlorah
   
Pro Forma
Adjustments
   
Pro Forma
Combined
   
Pro Forma
Adjustments
   
Pro Forma
Combined
 
Revenue:
                                   
                                                 
Academic revenue
    —       15,873       —       15,873       —       15,873  
Auxiliary revenue
    —       1,140       —       1,140       —       1,140  
Rental income – apartments
    —       251       —       251       —       251  
Condominium sales
    —       —       —       —       —       —  
Total revenue
    —       17,264       —       17,264       —       17,264  
Operating expenses:
                                               
Cost of educational services
    —       3,407       —       3,407       —       3,407  
Selling, general, and administrative
    831       11,179       (99 ) (f)     11,911       —       11,911  
Auxiliary expense
    —       426       —       426       —       426  
Cost of condominium sales
    —       —       —       —       —       —  
Loss on disposition of property and equipment
    —       —       —       —       —       —  
Total operating expenses
    831       15,012       (99 )     15,744       —       15,744  
Income (loss) from operations
    (831 )     2,252       99       1,520       —       1,520  
Other income (expense):
                                               
Interest income
    4       86       —       90       —       90  
Interest expense
    —       (157 )     —       (157 )     —       (157 )
Other income – net
    —       24       —       24       —       24  
Total other income (expense)
    4       (47 )     —       (43 )     —       (43 )
Income (loss) before income taxes
    (827 )     2,205       99       1,477       —       1,477  
Income tax benefit (provision)
    1       (955 )     (43 ) (g)     (997 )     —       (997 )
Income (loss)
    (826 )     1,250       56       480       —       480  
Net income (loss) attributable to non-controlling interest
    —       9       —       9       —       9  
Net income (loss) attributable to Camden and Dlorah, Inc.
    (826 )     1,259       56       489       —       489  
Other comprehensive income – Unrealized (losses) gains on investments
    —       (13 )     —       (13 )     —       (13 )
Comprehensive income (loss) attributable to Camden and Dlorah, Inc.
    (826 )     1,246       56       476       —       476  
Dividends paid on Series A shares
    —       —       1,730
(h)
    1,730               1,730  
Dividends paid on Common shares
    —       —       225
(h)
    225       —       225  
Undistributed earnings (UE)
    (826 )     1,246       (1,899 )     (1,479 )     —       (1,479 )
UE allocable to Class A shares
    —       —       —       (973 )     —       (973 )
UE allocable to Common shares
    —       —       —       (506 )     —       (506 )
Weighted average common shares outstanding
                                               
Basic
    8,188,800                       8,188,800               6,200,911  
Diluted
    8,188,800                       24,741,907               22,754,018  
Weighted average Class A shares outstanding
                                               
Basic
                            100,000               100,000  
Diluted
                            15,730,000               15,730,000  
Earnings (loss) per Class A share – Basic
                                               
Distributed Earnings
                          $ 17.30             $ 17.30  
Undistributed Earnings (loss)
                            (9.73 )             (9.73 )
  
                          $ 7.57             $ 7.57  
Earnings (loss) per Common share – Basic
                                               
Distributed Earnings
                          $ 0.03             $ 0.03  
Undistributed Earnings (loss)
                            (0.06 )             (0.06 )
  
                          $ (0.03 )           $ (0.03 )
Earnings (loss) per Class A share – Diluted
                          $ 0.02             $ 0.02  
 
 
F-40
 

NOTES TO UNAUDITED PRO FORMA CONDENSED
 COMBINED FINANCIAL STATEMENTS
 
1.             Description of Transaction and Basis of Presentation
 
On August 7, 2009, the Company entered into an Agreement and Plan of Merger pursuant to which Dlorah stockholders have agreed to contribute all of the outstanding capital stock of Dlorah to Camden in exchange for shares of a newly created class of stock, warrants and restricted shares of currently authorized common stock of Camden.  The merger agreement was amended and restated in its entirety on August 11, 2009 and further amended on October 26, 2009.  If stockholders of the Company approve transactions contemplated by the Merger Agreement, Dlorah stockholders will exchange their stock for shares of a newly created class of stock, warrants and restricted common stock, through a Camden subsidiary, which was newly created in order to facilitate the transactions contemplated thereby, in a series of steps outlined below:
 
 
·
Camden will create a merger subsidiary and will merge such subsidiary with and into Dlorah, with Dlorah surviving; and
 
 
·
Dlorah will, as a result, become wholly-owned by Camden.
 
In exchange for their capital stock, Dlorah’s stockholders will receive consideration from Camden of not less than seventy four and four-tenths percent (74.4%) of the issued and outstanding capital stock of Camden, on an as-converted and fully diluted basis consisting of:
 
 
·
100,000 shares of a class of stock to be created immediately prior to the closing, which shares shall be convertible into not less than 15,730,000 shares of Camden common stock, par value $0.0001 per share;
 
 
·
2,800,000 newly issued common stock purchase warrants to purchase 2,800,000 shares of Common Stock at an exercise price of $5.50 per share;
 
 
·
250,000 shares of restricted Common Stock which shares shall not be freely tradable until such time as the Common Stock trades at or above $8.00 per share for any sixty (60) consecutive trading day period; provided that such shares of restricted Common Stock shall be forfeited on the fifth ( 5 th ) anniversary of the date of issuance if such restriction has not been satisfied;
 
The Class A Stock shall be entitled to a quarterly accruing dividend equal to $0.11 per common share equivalent per quarter (for a total of $0.44 per year) for the first two years following issuance and shall automatically convert into Common Stock at the end of such two year period.  When a dividend is paid on the Class A Stock, the holders of Common Stock will receive a dividend equal to one-fourth of the total of the dividend paid on the Class A Stock.  The restricted Common Stock has been excluded from earnings per share calculations until earned as they are contingently issuable.

 
F-41
 

The adoption of the Merger Agreement and transactions contemplated thereby by the Camden stockholders will require the affirmative vote of the majority of the shares of the Common Stock voted at the Special Meeting of Stockholders.  Additionally, the transaction will require a majority of Camden’s public warrant holders approving a proposal to amend the warrant agreement to permit Camden to redeem all of the outstanding warrants for $0.50 per warrant upon consummation of the Transaction.  However, Camden will not be able to complete the Transaction if the holders of 30% or more of the IPO Shares vote against the Merger Proposal and demand that Camden convert their shares into a pro rata portion of the trust account.  The unaudited pro forma condensed combined financial statements assume that 100% of the outstanding shares of Camden’s common stock on the Record Date vote affirmatively and there are no conversions.  A second presentation of the unaudited pro forma condensed combined financial statements assumes that 70.01% of the outstanding shares of Camden’s common stock on the Record Date vote affirmatively and there are 29.99% conversions.
 
2.             Pro Forma Adjustments
 
Descriptions of the adjustments included in the unaudited pro forma balance sheet and statement of operations are as follows:
 
 
(a)
Reflects the release of Camden’s cash held in trust (including the amount held in the trust account representing the deferred portion of the underwriters’ fee), inclusive of any interest earned on such pro rata share (net of taxes payable) and the transfer of the balance to cash and cash equivalents at the completion of the business combination.
 
 
(b)
Gives effect to the payment to the underwriters of Camden’s initial public offering of deferred underwriters’ fees of $1.75 million, of which $1.59 million was accrued as of August 31, 2009, and payment of a finder’s fee by Dlorah of $1.75 million upon completion of the transaction.  Excludes payment of anticipated transaction expenses of approximately $1.5 million since the amount of such expenses is an estimate and therefore is not yet factually supportable.
 
 
(c)
Reflects the adjustment of common stock subject to conversion as a result of the Transaction.  As shown in the balance sheet reflecting the scenario in which no holders exercise their conversion rights, this adjustment reflects the reclassification of the conversion value of the Camden common stock subject to conversion to additional paid-in capital related to the conversion shares.  As shown in the balance sheet reflecting the scenario in which holders exercise their conversion rights as to 1,987,889 shares, this adjustment reflects the cash payout of the conversion value to Camden’s common stockholders who vote against the Merger Proposal and properly exercise their conversion rights with respect to 29.99% of the Camden common stock sold in the initial public offering.
 
 
(d)
Reflects the issuance of 100,000 shares of Class A Stock in exchange for the shares of Dlorah and the elimination of the retained earnings of Camden.
 
 
(e)
Adjustment of interest income and deferred interest:
 
 
i.
No holders exercise their conversion rights — reclassification of deferred interest to retained earnings.
 
 
ii.
Holders exercise their conversion rights as to 1,987,889 shares — payment of $62,000 of interest to redeeming stockholders and reduction of interest income for the year ended May 31, 2009 earned on cash held in trust resulting from holders exercising their conversion of 29.99% of the Camden common stock sold in the initial public offering.
 
 
F-42
 
 
 
(f)
Adjustment to eliminate fees paid to advisory board members as their positions have been discontinued as a result of the merger.
 
 
(g)
Effective tax rate on pro forma adjustments.
 
 
(h)
Payment of the $0.44 dividend per year ($0.11 dividend per quarter) per converted share (15,730,000 shares) on the Class A Shares and payment of the $0.11 dividend per year ($0.0275 dividend per quarter) per share on the Common Stock.
 
 
(i)
Buy-out of 6,626,300 warrants issued in initial public offering at $0.50 per warrant.
 
 
(j)
Adjustment to eliminate non-controlling interest expense, resulting from Dlorah’s 50% interest in Fairway Hills III.  The other partners of Fairway Hills III, each of whom has a 10% interest, are five individuals, four of whom are Bob Buckingham and members of his family.  Dlorah has a positive capital account balance in Fairway Hills III, and the other five partners each has a negative capital account balance.  Prior to the closing of the Transaction, Mr. Buckingham and the partners who are members of his family will make a capital contribution to Fairway Hills III sufficient to satisfy their negative capital account balances.  The partner that is not related to Mr. Buckingham will not likely make a capital contribution at that time, and his capital account will likely remain in a deficit until Fairway Hills III is able to allocate sufficient income to him to satisfy the negative balance.
 
 
(k)
Payment of certain obligations to related parties as indicated in the Merger Agreement.  Specifically, Dlorah owes certain obligations to seventeen members of the Buckingham family.  The amounts owed range from a high of approximately $356,565 to a low of approximately $300.  Collectively, these obligations total approximately $1,147,907.  These obligations will be satisfied by the Company by payment to each of the family members the day immediately preceding closing of the Transaction.
 
3.
Weighted Average Shares
 
Weighted average shares for each of the periods in Unaudited Pro Forma Condensed Combined Statement of Operations have been prepared using the following assumptions:
 
—             No holders exercise their conversion rights as to 1,987,889 shares
 
—             Holders exercise their conversion rights as to 1,987,889 shares
 
 
F-43
 
 
   
For the Year Ended May 31, 2009
 
  
 
No Holders
Exercise Their
Conversion
Rights
   
Holders Exercise
Their Conversion
Rights as to
1,987,889 shares
 
Camden weighted average shares outstanding at May 31, 2009 before merger transaction
    8,188,800       8,188,800  
Weighted average shares subject to redemption
    —       1,987,889  
Weighted average shares, assuming a June 1 2008 merger transaction date
    8,188,800       6,200,911  
Net dilution of warrants and restricted stock, Utilizing the treasury stock method
    743,925       743,925  
Conversion of Series A Shares to Common Shares
    15,730,000       15,730,000  
Weighted average diluted shares, assuming June 1, 2008 merger transaction date
    24,662,725       22,674,836  

   
For the Three Months Ended
 August 31, 2009
 
  
 
No Holders
Exercise Their
Conversion
Rights
   
Holders Exercise
Their Conversion
Rights as to
1,987,889 shares
 
Camden weighted average shares outstanding at August 31, 2009 before merger transaction
    8,188,800       8,188,800  
Weighted average shares subject to redemption
    —       1,987,889  
Weighted average shares, assuming a June 1 2008 merger transaction date
    8,188,800       6,200,911  
Net dilution of warrants and restricted stock, Utilizing the treasury stock method
    823,107       823,107  
Conversion of Series A Shares to Common Shares
    15,730,000       15,730,000  
Weighted average diluted shares, assuming June 1, 2009 merger transaction date
    24,741,907       22,754,018  
 
4.             Recent Accounting Pronouncements
 
In December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”), which establishes accounting and reporting standards for the ownership interests in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary.  SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners.  SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008.  SFAS 160 was adopted for our fiscal year beginning June 1, 2009.  The adoption of SFAS 160 did not have a material impact on our financial statements.
 
 
F-44
 

EXHIBIT INDEX
 
Exhibit No.
 
Description
     
Exhibit No.
 
Description
     
1.1
 
Underwriting Agreement, dated November 29, 2007, by and between Camden Learning Corporation and Morgan Joseph & Co., Inc. (previously filed with the SEC on the registrant’s Current Report on Form 8-K on December 5, 2007)
     
1.2
 
Amendment No. 1 to the Underwriting Agreement, dated October 26, 2009, by and between Camden Learning Corporation and Morgan Joseph & Co., Inc.
     
2.1
 
Agreement and Plan of Reorganization, dated August 7, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc. and Dlorah, Inc. (previously filed with the SEC on the registrant’s Current Report on Form 8-K on August 11, 2009 as Exhibit 2.1)
     
2.2
 
Amended and Restated Agreement and Plan of Reorganization, dated August 11, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc. and Dlorah, Inc. (previously filed with the SEC on the registrant’s Current Report on Form 8-K on August 11, 2009 as Exhibit 2.2)
     
2.3
 
Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, dated October 26, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc., and Dlorah, Inc.  (previously filed with the SEC on the registrant’s Current Report on Form 8-K on October 27, 2009 as Exhibit 10.1)
     
3.1
 
Second Amended and Restated Certificate of Incorporation
     
3.2
 
Amended and Restated Bylaws
     
4.1
 
Specimen Common Stock Certificate
     
4.2
 
Common Stock Purchase Warrant issued by Camden Learning Corporation to H. & E. Buckingham Limited Partnership on November 23, 2009 in the amount of 2,166,360 warrant shares
     
4.3
 
Common Stock Purchase Warrant issued by Camden Learning Corporation to Robert D. Buckingham Living Trust on November 23, 2009 in the amount of 633,640 warrant shares
     
10.1
 
Warrant Agreement, dated November 29, 2007, between Camden Learning Corporation and Continental Stock Transfer & Trust Company (form previously filed with the SEC on the registrant’s Registration Statement on Form S-1/A on November 27, 2007 as Exhibit 4.4)
     
10.2
 
Amendment No. 1 to the Warrant Agreement, dated November 23, 2009, between Camden Learning Corporation and Continental Stock Transfer & Trust Company
     
10.3
 
Securities Escrow Agreement, dated November 29, 2007, among Camden Learning Corporation, Continental Stock Transfer & Trust Company and certain of the founding stockholders of Camden Learning Corporation  (previously filed with the SEC on the registrant’s Current Report on Form 8-K on December 5, 2007, as Exhibit 10.3)
 
 
129
 
 
10.4
 
Amendment No. 1 to the Securities Escrow Agreement, dated as of November 23, 2009, by and among Camden Learning Corporation, Continental Stock Transfer & Trust Company and certain of the founding stockholders of Camden Learning Corporation
     
10.5
 
Lock Up Agreement, effective as of November 23, 2009, by and between H. & E. Buckingham Limited Partnership and Camden Learning Corporation
     
10.6
 
Lock Up Agreement, effective as of November 23, 2009, by and between Robert D. Buckingham Living Trust and Camden Learning Corporation
     
10.7
 
Registration Rights Agreement, dated as of November 23, 2009, by and among Camden Learning Corporation and each of H. & E. Buckingham Limited Partnership and Robert D. Buckingham Living Trust
     
10.8
 
Registration Rights Agreement, dated as of November 29, 2007, by and among Camden Learning Corporation and certain of the founding stockholders of Camden Learning Corporation (previously filed with the SEC on the registrant’s Current Report on Form 8-K on December 5, 2007, as Exhibit 10.4)
     
10.9
 
Restricted Stock Agreement, effective as of November 23, 2009, between Camden Learning Corporation and H. & E. Buckingham Limited Partnership
     
10.10
 
Restricted Stock Agreement, effective as of November 23, 2009, between Camden Learning Corporation and Robert D. Buckingham Living Trust
     
10.11
 
Restricted Stock Agreement, effective as of November 23, 2009, between Camden Learning Corporation and Camden Learning, LLC
     
10.12
 
National American University Holdings, Inc. 2009 Stock Option and Compensation Plan
     
10.13
 
Employment Agreement between Dlorah, Inc. and Jerry L. Gallentine, amended and restated September 9, 2003, and further amended by the First Amendment to Employment Agreement, dated November 18, 2009
     
10.14
 
Employment Agreement between Dlorah, Inc. and Robert D. Buckingham, dated January 3, 1995, as amended by the Employment Agreement Amendment, dated November 18, 2009
     
10.15
 
Employment Agreement between Dlorah, Inc. and Ronald Shape, dated November 18, 2009
     
10.16
 
Stock Purchase Agreement, dated November 13, 2009, between Camden Learning Corporation and Bulldog Investors
     
10.17
 
Stock Purchase Agreement, dated November 19, 2009, between Camden Learning Corporation and Credit Suisse Securities
     
10.18
 
Form of Joinder to Registration Rights Agreement
     
16.1
 
Letter from McGladrey & Pullen, LLC
 
 
130
 
EXHIBIT 1.2
 
AMENDMENT NO. 1 TO THE UNDERWRITING AGREEMENT
 
This Amendment, dated October 26, 2009 (the "Amendment"), to the Underwriting Agreement, dated as of November 29, 2007 (the "Underwriting Agreement"), by and between Camden Learning Corporation, a Delaware corporation (the "Company"), and Morgan Joseph & Co. Inc. Capitalized terms used, but not defined, herein shall have the meanings given to such terms in the Underwriting Agreement.

WHEREAS, the Company consummated its initial public offering in November 2007, pursuant to which the Company issued, after giving effect to the exercise of a portion of the overallotment option, 6,626,300 units (each a "Unit") consisting of one share of common stock, par value $0.0001 per share, of the Company (the "Common Stock") and one warrant to purchase one share of Common Stock at an exercise price of $5.50 per share (the "Public Warrants"); and

WHEREAS, in conjunction with its initial public offering, the Company issued to the Representative the right, but not the obligation, for a purchase price of $100.00, to purchase an aggregate of 625,000 units (the "Representative Units") identical to the Units in all respects except the exercise price of the warrants underlying the Representative Units was $6.71 per share of Common Stock and that such Representative Units carried a purchase price of $9.60 and could be exercised on a cashless basis; and

WHEREAS, each of the Representative's and the Company's duties and obligations are governed by the Underwriting Agreement; and

WHEREAS, the Company has entered into that certain Agreement and Plan of Reorganization dated August 7, 2009, as amended in its entirety by the Amended and Restated Agreement and Plan of Reorganization dated August 11, 2009, and as further modified by Amendment No. 1 thereto dated October 26, 2009 (as amended, the "Merger Agreement"), by and among the Company, Dlorah Subsidiary, Inc. ("Merger Sub"), wholly-owned subsidiary of the Company and Dlorah, Inc., a South Dakota corporation which owns and operates National American University (Dlorah, Inc., together with its divisions and subsidiaries, is referred to herein as "Dlorah"), pursuant to which Merger Sub will merge with and into Dlorah with Dlorah surviving as a wholly-owned subsidiary of the Company (the "Merger"). As a result of the Merger, the stockholders of Dlorah will contribute all of the outstanding capital stock of Dlorah to the Company in exchange for shares of a newly created class of common stock, common stock purchase warrants and restricted shares of the Company's currently authorized common stock (the "Transaction").

NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree to amend the Underwriting Agreement as set forth herein:

1. Underwriting Agreement.
 
 
1.1 Deferred Compensation. Section 1.1.3 shall be amended and restated in its entirety as follows:
 
"On the Closing Date and, if applicable, on the Option Closing Date (as defined in Section 1.2.2), Morgan Joseph & Co. agrees to deposit into the Trust Account a portion of the Underwriters' discount equal to $0.24 per Unit in the Offering and, if applicable, a portion of the discount equal to $0.24 per Option Unit (as defined in Section 1.2.1) (the "Deferred Fees"). Upon the consummation of a Business Combination, Morgan Joseph & Co. shall be entitled to receive a portion of the Deferred Fees equal to $1,750,000 and shall forfeit any rights or claims to the balance of the Deferred Fees and interest accrued thereon. In the event the Company is unable to consummate the Transaction or any other Business Combination and CST, the trustee of the Trust Account, commences liquidation of the Trust Account, Morgan Joseph & Co. hereby agrees to the following: (i) to forfeit any rights or claims to the Deferred Fees and any interest accrued thereon; and (ii) that the Deferred Fees shall be distributed on a pro-rata basis among the holders of the shares of Common Stock included in the Units sold in the Offering along with any interest accrued thereon, net of taxes.
 
1.2 References to Certain Terms. References to the following terms shall be revised as follows:
 
All references to "Securities" shall be amended to solely reference the Public Securities; and
 
All references to both "Representative's Purchase Option" and "Representative's Warrants" are hereby deleted.
 
1.3 Securities Escrow Agreement. Section 2.22.2 is hereby amended and restated in its entirety as follows:
 
"The Company has caused the Existing Stockholders to enter into an escrow agreement ("Securities Escrow Agreement")   with CST ("Escrow Agent"),   substantially in the form annexed as Exhibit 10.3 to the Registration Statement, whereby (i) the Common Stock owned by the Existing Stockholders (the "Existing Stockholders Shares") will be held in escrow by the Escrow Agent, until one year from the date of consummation of a Business Combination and (ii) the Placement Warrants will be held in escrow by the Escrow Agent until such time that the Company consummates a Business Combination; provided, however, (i) that if the Escrow Agent is notified by the Company that the Company is being liquidated at any time during the applicable Escrow Period (as that term is defined in the Securities Escrow Agreement), then immediately prior to the effectiveness of such liquidation, the Escrow Agent shall promptly destroy the certificates representing the Existing Stockholders Shares and the Placement Warrants and (ii) the Existing Stockholders may transfer up to 600,000 of the Existing Stockholder Shares to certain institutional investors approved by the Representative (the "Transferred Stock"), and in connection therewith, reduce or
 
 
eliminate the lock-up period with respect to the Transferred Stock. Subject to the exception with respect to the Transferred Stock set forth above, during the escrow period, the Existing Stockholders shall be prohibited from selling or otherwise transferring such shares (except to spouses and children of Existing Stockholders and trusts established for their benefit and as otherwise set forth in the Securities Escrow Agreement) and, to the extent such Existing Stockholder Securities are not transferred as Transferred Stock, will retain the right to vote such shares during the Escrow Period. To the Company's knowledge, the Securities Escrow Agreement is enforceable against each of the Existing Stockholders and will not, with or without the giving of notice or the lapse of time or both, result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, any agreement or instrument to which any of the Existing Stockholders is a party. The Securities Escrow Agreement shall not be amended, modified or otherwise changed without the prior written consent of the Representative."

2. Miscellaneous.

2.1 Severability. This Amendment shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Amendment or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as part of this Amendment a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
 
2.2 Continuing Effect. Except as amended by this Amendment, the Underwriting Agreement remains in full force and effect.
 
 
IN WITNESS WHEREOF, the undersigned have executed this Amendment to the Underwriting Agreement as of the date first set forth above.
 
 
 
CAMDEN LEARNING CORPORATION

By:
Name: David Warnock
Title: President and Chief Executive Officer
 
 
 
MORGAN JOSEPH & CO. INC.
 
By:
Name: Tina Pappas
Title: Managing Director
 

EXHIBIT 3.1

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.

FIRST:                    The name of the corporation is National American University Holdings, Inc. (the “ Corporation ”).
 
SECOND:              The address of the Corporation’s registered office in the State of Delaware is National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware 19904, County of Kent. The name of the Corporation’s registered agent at such address is National Registered Agents, Inc.
 
THIRD:                 The purpose of the Corporation will be to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law, as amended from time to time (“ DGCL ”).
 
FOURTH:              The total number of shares of all classes of capital stock which the Corporation has authority to issue is 51,100,000, of which 50,000,000 shares are Common Stock of the par value of $0.0001 (“ Common Stock ”), and of which 100,000 shares are Class A Common Stock of the par value of $0.0001 (“ Class A Stock ”), and of which 1,000,000 shares are Preferred Stock of the par value $0.0001 (“ Preferred Stock ”).  The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
 
A.            Preferred Stock .  The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “ Preferred Stock Designation ”) and as may be permitted by the DGCL.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.

 
 

B.            Common Stock .  Except as otherwise required by the DGCL or applicable law or as otherwise provided in this Article Fourth or in any Preferred Stock Designation, the holders of the Common Stock shall exclusively possess all voting power.  Except as otherwise required by the DGCL or applicable law or as otherwise provided in this Article Fourth or in any Preferred Stock Designation, the holders of shares of Common Stock shall at all times vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the stockholders of the Corporation.
 
C.            Class A Stock .  The Class A Stock and Common Stock shall have the following rights, preferences, powers, privileges and restrictions, qualifications and limitations:
 
1.             Dividends .
 
1.1            Class A Dividends .  On the first day of each of the eight successive fiscal quarters for the Corporation that follow the first issuance of any shares of Class A Stock (the “ Class A Original Issue Date ”), dividends shall accrue or be paid (the “ Class A Dividends ”) on shares of Class A Stock at the rate of $0.11 per quarter (for a total of $0.44 per year) for each share of Common Stock issuable to the holder of a share of Class A Stock pursuant to the Class A Conversion Ratio defined and described below (the “ Converted Share Amount ”), subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Class A Stock or the Common Stock.  Class A Dividends, to the extent not paid, shall accrue from day to day, whether or not declared, and shall be cumulative.  At such time as the Corporation pays all or any portion of any Class A Dividends to the holders of the Class A Stock then outstanding, then the Corporation must simultaneously declare and pay to the holders of Common Stock then outstanding (but not the holders of Class A Stock) a per share dividend equal to one fourth (1/4) of the per share amount of any Class A Dividends then paid (the “ Common Pro Rata Portion ”).  Except as otherwise provided herein, all accrued dividends shall be payable only when, as, and if declared by the Board of Directors of the Corporation (the “ Board of Directors ”).
 
1.2            Other Dividends .  For as long as shares of Class A Stock shall be issued and outstanding, the Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation unless (a) the holders of the Class A Stock then outstanding first receive, or simultaneously receive, the Class A Dividends then accrued and not previously paid and (b) the holders of Common Stock simultaneously receive the Common Pro Rata Portion of the amount of the Class A Dividend then paid.  For as long as shares of Class A Stock shall be issued and outstanding, any other dividends paid by the Corporation in addition to such payments of the Class A Dividends and the Common Pro Rata Portion shall be paid to the holders of Class A Stock and Common Stock together on a pro rata basis (calculated on an as-converted basis as if all issued and outstanding shares of Class A Stock had been converted into Common Stock).
 
2.             Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales .

 
2
 

2.1            Payments of Dividends .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation while any shares of Class A Stock shall be issued and outstanding, (a) the holders of shares of Class A Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, an amount per share equal to the Class A Dividends accrued but not paid as of the date of the completion of such liquidation, dissolution or winding up, and (b) the holders of shares of Common Stock then outstanding (but not the holders of Class A Stock) shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, the Common Pro Rata Portion accrued but not paid as of the date of completion of such liquidation, dissolution or winding up.  If upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Class A Stock and Common Stock the full amount to which they shall be entitled under this Section C.2.1 , then the holders of shares of Class A Stock and Common Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full (calculated on an as-converted basis as if all issued and outstanding shares of Class A Stock had been converted into Common Stock).
 
2.2            Payments to Holders of Class A Stock and Common Stock .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation while any shares of Class A Stock shall be issued and outstanding, after the payment of all amounts required to be paid to the holders of shares of Class A Stock and Common Stock in accordance with Section C.2.1 above, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock and the holders of Class A Stock, on an as-converted basis, pro rata based on the number of shares held by each such holder on an as-converted basis.
 
2.3            Deemed Liquidation Events .
 
2.3.1             Definition .  The sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly-owned subsidiary of the Corporation, shall be considered a “ Deemed Liquidation Event ” for purposes of this Second Amended and Restated Certificate of Incorporation.
 
2.3.2             Effecting a Deemed Liquidation Event .  For as long as shares of Class A Stock shall be issued and outstanding, the Corporation shall not have the power to effect a Deemed Liquidation Event unless the agreement or other arrangement for such transaction (the “ Deemed Liquidation Agreement ”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Sections C.2.1 and C.2.2 of this Article Fourth.

 
3
 

2.3.3             Amount Deemed Paid or Distributed .  The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.  The value of such property, rights or securities shall be determined in good faith by the Board of Directors.
 
2.3.4             Allocation of Escrow .   If any portion of the consideration payable to the stockholders of the Corporation upon a Deemed Liquidation Event is placed into escrow or is payable to the stockholders of the Corporation subject to contingencies, the Deemed Liquidation Agreement shall provide that (a) the portion of such consideration that is not placed in escrow or not subject to any contingencies (the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Sections C.2.1 and C.2.2 of this Article Fourth as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event, and (b) any additional consideration which becomes payable to the stockholders of the Corporation upon release from escrow or satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Sections C.2.1 and C.2.2 of this Article Fourth after taking into account the previous payment out of the Initial Consideration as part of the same transaction.
 
3.              Voting .   On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Class A Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Class A Stock held by such holder are convertible pursuant to the Converted Share Amount as of the record date for determining stockholders entitled to vote on such matter.  Except as provided by the DGCL or other applicable law, holders of Class A Stock shall vote together with the holders of Common Stock as a single class.
 
4.              Optional Conversion .  The holders of the Class A Stock shall have conversion rights as follows (the “ Conversion Rights ”):
 
4.1            Right to Convert .
 
4.1.1             Conversion Ratio .  Each share of Class A Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into 157.3   shares of Common Stock (the “ Class A Conversion Ratio ”).  The Class A Conversion Ratio shall be subject to adjustment as provided below.

 
4
 

4.1.2             Termination of Conversion Rights .  In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, f ollowing the allocation and payment of the consideration payable to the stockholders of the Corporation in accordance with Sections C.2.1 and C.2.2 of this Article Fourth, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Class A Stock.
 
4.2            Mechanics of Conversion .
 
4.2.1             Notice of Conversion .  In order for a holder of Class A Stock to voluntarily convert shares of Class A Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Class A Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Class A Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Class A Stock represented by such certificate or certificates.  Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued.  If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing.  The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “ Conversion Time ”), and the shares of Common Stock issuable upon conversion of the shares of Class A Stock represented by such certificate shall be deemed to be outstanding of record as of such date.  The Corporation shall, as soon as practicable after the Conversion Time, issue and deliver to such holder of Class A Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Class A Stock represented by the surrendered certificate that were not converted into Common Stock, together with cash in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 
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4.2.2             Reservation of Shares .  The Corporation shall at all times when the Class A Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Class A Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class A Stock.  If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Class A Stock, then the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Second Amended and Restated Certificate of Incorporation.  Before taking any action which would cause an adjustment reducing the Class A Conversion Ratio below the then par value of the shares of Common Stock issuable upon conversion of the Class A Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock pursuant to the Class A Conversion Ratio.
 
4.2.3             Effect of Conversion .  All shares of Class A Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment of any accrued but unpaid dividends thereon through the date of conversion .  Such accrued but unpaid dividends shall be paid by the Corporation at the time of its next dividend payment.  Any shares of Class A Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Class A Stock accordingly.
 
4.2.4             No Further Adjustment .  Upon any such conversion, no adjustment to the Class A Conversion Ratio shall be made on the Class A Stock surrendered for conversion.
 
4.2.5             Taxes .  The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Class A Stock pursuant to this Section C.4 .  The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Class A Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
 
4.3            Adjustment for Stock Splits and Combinations .  If the Corporation at any time or from time to time after the Class A Original Issue Date shall effect a split or subdivision of the outstanding Common Stock, then the Class A Conversion Ratio in effect immediately before that subdivision shall be adjusted (as determined in good faith by the Board of Directors) so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding.  If the Corporation shall at any time or from time to time after the Class A Original Issue Date combine or effect a reverse split of the outstanding shares of Common Stock, then the Class A Conversion Ratio in effect immediately before the combination shall be adjusted (as determined in good faith by the Board of Directors) so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding.  Any adjustment under this Section C.4.3 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 
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4.4             Certain Dividends and Distributions .  If the Corporation at any time or from time to time after the Class A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in the form of additional shares of Common Stock, then and in each such event the holders of Class A Stock shall simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Class A Stock had been converted into Common Stock on the date of such event.
 
4.5             Adjustments for Other Dividends and Distributions .  If the Corporation at any time or from time to time after the Class A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property, and the provisions of Section C.1 of this Article Fourth do not apply to such dividend or distribution, then and in each such event the holders of Class A Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Class A Stock had been converted into Common Stock on the date of such event.
 
4.6             Adjustment for Merger or Reorganization, etc .  Subject to the provisions of Section C.2.3   of this Article Fourth , if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Class A Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections C.4.4 or C.4.5   of this Article Fourth ), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Class A Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Class A Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section C.4 with respect to the rights and interests thereafter of the holders of the Class A Stock, to the end that the provisions set forth in this Section C.4 (including provisions with respect to changes in and other adjustments of the Class A Conversion Ratio) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Class A Stock.

 
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4.7             Certificate as to Adjustments .  Upon the occurrence of each adjustment or readjustment of the Class A Conversion Ratio or each other adjustment or readjustment pursuant to this Section C.4 , the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Class A Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Class A Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Class A Stock (but in any event not later than 30 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Class A Conversion Ratio then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Class A Stock.
 
4.8             Notice of Record Date .  In the event (a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Class A Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security, (b)  of any proposed capital reorganization of the Corporation, reclassification of the Common Stock of the Corporation, or Deemed Liquidation Event, or (c) of any proposed voluntary or involuntary dissolution, liquidation or winding-up of the Corporation, then, and in each such case, the Corporation will send or cause to be sent to the holders of the Class A Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Class A Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Class A Stock and the Common Stock.  Such notice shall be sent at least 30 days prior to the record date or effective date for the event specified in such notice.
 
5.             Mandatory Conversion .
 
5.1             Trigger Events .  On December 1, 2011 (the “ Mandatory Conversion Time ”), (a) all issued and outstanding shares of Class A Stock shall automatically be converted into shares of Common Stock at the then effective Class A Conversion Ratio, and (b) such shares of Class A Stock may not be reissued by the Corporation.

 
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5.2             Procedural Requirements .  At the Mandatory Conversion Time, each holder of shares of Class A Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice.  If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing.  All rights with respect to the Class A Stock converted pursuant to Section C.5.1 of this Article Fourth will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section C.5.2 .  The Corporation shall, as soon as practicable after the Mandatory Conversion Time, (a) issue and deliver to such holder of Class A Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof, together with cash in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion, and (b) pay all accrued but unpaid Class A Dividends on all shares of Class A Stock (in which case the Corporation shall declare and pay to the holders of Common Stock (but not  the holders of Class A Stock) the Common Pro Rata Portion accrued but unpaid as of the date thereof) .  Such converted Class A Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Class A Stock accordingly.
 
6.             Redeemed or Otherwise Acquired Shares .  Any shares of Class A Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred.  Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Class A Stock following redemption.
 
7.             Waiver .  Any of the rights, powers, preferences and other terms of the Class A Stock set forth herein may be waived on behalf of all holders of Class A Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Class A Stock then outstanding.
 
8.             Notices .  Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Class A Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the DGCL, and shall be deemed sent upon such mailing or electronic transmission.

 
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FIFTH:                  The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
 
A.           Election of directors need not be by ballot unless the by-laws of the Corporation so provide.
 
B.           The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the by-laws of the Corporation.
 
C.           The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and binding upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors’ interests, or for any other reason.
 
D.           In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this Second Amended and Restated Certificate of Incorporation, and to any by-laws from time to time made by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made.
 
SIXTH:
 
A.           A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.  If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.  Any repeal or modification of this paragraph A by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.

 
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B.           The Corporation shall, to the fullest extent permitted by Section 145 of the DGCL, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto.  Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized hereby.
 
SEVENTH:            The Corporation hereby elects not to be governed by Section 203 of the DGCL.
 
EIGHTH:   Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

 
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EXHIBIT 3.2
BY-LAWS
OF
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
A DELAWARE CORPORATION
 
ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The address of the Corporation’s registered office in the State of Delaware is National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware 19904, County of Kent. The name of the Corporation’s registered agent at such address is National Registered Agents, Inc.

SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places, within or outside the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.
 
ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS. All meetings of stockholders shall be held at the principal executive office of the Corporation, or at such other place within or outside of the State of Delaware as may be fixed from time to time by the Board of Directors.

SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held on July 1 of each year, or if that day is a legal holiday, on the next following business day, or at such other date and time as may be fixed by the Board of Directors. At each annual meeting of stockholders the stockholders shall elect directors and transact such other business as may properly be brought before the meeting.

SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders may be called at any time for any purpose or purposes by the Board of Directors or by the Chief Executive Officer, and shall be called by the Chief Executive Officer, President or the Secretary upon the written request of the majority of the directors or upon the written request of the holders of at least a majority of all outstanding shares entitled to vote on the action proposed to be taken. Such written request must state the date, time, place and purpose or purposes of the proposed meeting. A special meeting of stockholders called by the Board of Directors or the President, other than one required to be called by reason of a written request of stockholders, may be cancelled by the Board of Directors at any time not less than 24 hours before the scheduled commencement of the meeting.

 
 
 

SECTION 4. NOTICE OF MEETINGS. Written notice of each annual meeting or special meeting of stockholders, stating the place, date and time of the meeting, and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters that the Board of Directors, at the time of giving notice, intends to present for action by the stockholders, must be given in the manner set forth in Article VI of these By-Laws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at the meeting. If directors are to be elected, the notice shall include the names of all nominees whom the Board intends, at the time of notice, to present for election.

The notice shall also state the general nature of any proposed action to be taken at the meeting.

SECTION 5. QUORUM AND ADJOURNMENTS. Except as otherwise required by law or the Certificate of Incorporation, the presence in person or by proxy of holders of a majority of the shares entitled to vote at a meeting of stockholders will be necessary, and will constitute a quorum, for the transaction of business at such meeting. If a quorum is not present or represented by proxy at any meeting of stockholders, the holders of a majority of the shares entitled to vote at the meeting who are present in person or represented by proxy may adjourn the meeting from time to time until a quorum is present. An adjourned meeting may be held later without notice other than announcement at the meeting, except that if the adjournment is for more than forty-five (45) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given in the manner set forth in Article VI to each stockholder of record entitled to vote at the adjourned meeting.

SECTION 6. PROXY AND VOTING. At any meeting of stockholders each stockholder having the right to vote may vote in person or by proxy. Except as otherwise provided by law or in the Certificate of Incorporation, each stockholder will be entitled to one vote for each share of stock entitled to vote standing in his name on the books of the Corporation. All elections will be determined by plurality votes. Except as otherwise provided by law or in the Certificate of Incorporation or these By-Laws, any other matter will be determined by the vote of a majority of the shares which are voted with regard to it.

SECTION 7. WRITTEN CONSENTS. Whenever the vote of stockholders at a meeting is required or permitted in connection with any corporate action, the meeting and vote may be dispensed with if the action taken has the written consent of the holders of shares having at least the minimum number of votes required to authorize the action at a meeting at which all shares entitled to vote were present and voted.

 
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ARTICLE III

DIRECTORS

SECTION 1. FUNCTION. The Board of Directors will manage the business of the Corporation, except as otherwise provided by law, the Certificate of Incorporation or these By-Laws.

SECTION 2. NUMBER. The number of directors which will constitute the entire Board of Directors shall be such number, not less than one (1) nor more than nine (9), as shall be determined by the Board of Directors from time to time, provided that in the event the outstanding shares of stock are owned by fewer than three (3) stockholders the number of directors may be a number not less than the number of stockholders. Until further action by the Board of Directors, the number of directors which shall constitute the entire Board of Directors shall be six (6). As used in these By-Laws, the term “entire Board of Directors” means the total number of directors which the Corporation would have if there were no vacancies.

SECTION 3. ELECTION AND TERM. Except as provided in Section 5 of this Article, the directors shall be elected at the annual meeting of stockholders. Except as otherwise provided by law, the Certificate of Incorporation, or these By-Laws, each director elected will serve until the next succeeding annual meeting of stockholders and until his successor is elected and qualified.

SECTION 4. REMOVAL. Any of the directors may be removed for cause by vote of a majority of the entire Board. Any or all of the directors may be removed for cause or without cause by vote of the holders of a majority of the outstanding shares of each class of voting stock of the Corporation voting as a class.

SECTION 5. VACANCIES. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board may be filled by vote of a majority of the directors then in office, even if less than a quorum exists. A director elected to fill a vacancy, including a vacancy created by a newly created directorship, shall serve until the next succeeding annual meeting of stockholders and until his successor is elected and qualified.

SECTION 6. LOCATION OF BOOKS AND RECORDS. The books of the Corporation, except such as are required by law to be kept within the State of Delaware, may be kept at such place or places within or outside of the State of Delaware as the Board of Directors may from time to time determine.

SECTION 7. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, may establish reasonable compensation of any or all directors for services to the Corporation as directors or officers or otherwise.

 
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ARTICLE IV

MEETINGS OF THE BOARD OF DIRECTORS

SECTION 1. FIRST MEETING. The first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders. If the meeting is held at the place of the meeting of stockholders, no notice of the meeting need be given to the newly elected directors. If the first meeting is not held at that time and place, it shall be held at a time and place specified in a notice given in the manner provided for notice of special meetings of the Board of Directors.

SECTION 2. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held upon such notice, or without notice, at such times and at such places within or outside of the State of Delaware, as shall from time to time be determined by the Board of Directors.

SECTION 3. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board, if there is one, or by the Chief Executive Officer, on at least four (4) days’ notice by mail or forty-eight (48) hours’ notice to each director delivered personally or by telephone or telegraph, and shall be called by the Chief Executive Officer, President or the Secretary on like notice at the written request of any two directors (one of which must include the Chairman of the Board, if there is one, or the Chief Executive Officer).

SECTION 4. NOTICE OF MEETINGS. Whenever notice of a meeting of the Board of Directors is required, the notice must be given in the manner set forth in Article VI of these By-Laws and shall state the place, date and hour of the meeting. Except as provided by law, the Certificate of Incorporation, or other provisions of these By-Laws, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting.

SECTION 5. QUORUM, ACTION AND ADJOURNMENTS. Except as otherwise required by law or the Certificate of Incorporation or other provisions of these By-Laws, a majority of the directors in office, but in no event less than one-third (1/3) of the entire Board of Directors, will constitute a quorum for the transaction of business, provided that if there shall be fewer than three (3) directors in office, then the number of directors in the office shall constitute a quorum for the transaction of business, and the vote of a majority of the directors present at any meeting at which a quorum is present will be the act of the Board of Directors. If a quorum is not present at any meeting of directors, a majority of the directors present at the meeting may adjourn the meeting from time to time, without notice of the adjourned meeting other than announcement at the meeting. To the extent permitted by law, a director participating in a meeting by conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other will be deemed present in person at the meeting and all acts taken by him during his participation shall be deemed taken at the meeting.

SECTION 6. WRITTEN CONSENTS. Any action of the Board of Directors may be taken without a meeting if written consent to the action signed by all members of the Board of Directors is filed with the minutes of the Board of Directors.

 
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SECTION 7. ACTION BY TELEPHONIC CONFERENCE. Members of the Board of Directors, or any committee designated by such board, may participate in a meeting of such board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting.

ARTICLE V

COMMITTEES

SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may designate from among its members an Executive Committee and other committees, each consisting of two or more directors, and may also designate one or more of its members to serve as alternates on these committees. To the extent permitted by law, the Executive Committee will have all the authority of the Board of Directors, except as the Board of Directors otherwise provides, and, to the extent permitted by law, the other committees will have such authority as the Board of Directors grants them. The Board of Directors will have power at any time to change the membership of any committees, to fill vacancies in their membership and to discharge any committees. All resolutions establishing or discharging committees, designating or changing members of committees, or granting or limiting authority of committees, may be adopted only by the affirmative vote of a majority of the entire Board of Directors.

SECTION 2. PROCEDURES. Each committee shall keep regular minutes of its proceedings and report to the Board of Directors as and when the Board of Directors shall require. Unless the Board of Directors otherwise provides, a majority of the members of any committee may determine its actions and the procedures to be followed at its meetings (which may include a procedure for participating in meetings by conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other), and may fix the time and place of its meetings.

SECTION 3. WRITTEN CONSENTS. Any action of a committee may be taken without a meeting if written consent to the action signed by all the members of the committee is filed with the minutes of the committee.

ARTICLE VI

NOTICES

SECTION 1. NOTICE TO STOCKHOLDERS. Any notice to a stockholder shall be given personally or by first-class mail. If mailed, a notice will be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of stockholders.

SECTION 2. NOTICE TO DIRECTORS. Any notice to a director may be given personally, by telephone or by mail, facsimile transmission, telex, telegraph, cable or similar instrumentality. A notice will be deemed given when actually given in person or by telephone, when received, if given by facsimile transmission or telex, on the third business day after the day when deposited with the United States mail, postage prepaid, or on the day when delivered to a cable or similar communications company, directed to the director at his business address or at such other address as the director may have designated to the Secretary in writing as the address or number to which notices should be sent.

 
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SECTION 3. WAIVER OF NOTICE. Any person may waive notice of any meeting by signing a written waiver, whether before or after the meeting. The waiver the notice need not specify either the business to be transacted or the purpose of any annual or special meeting of the stockholders. In addition, attendance at a meeting will be deemed a waiver of notice unless the person attends for the purpose, expressed to the meeting at its commencement, of objecting to the transaction of any business because the meeting is not lawfully called or convened.

ARTICLE VII

OFFICERS

SECTION 1. DESIGNATIONS. The officers of the Corporation may include a Chief Executive Officer, a President, a Chief Operating Officer, a Chief Financial Officer, a Secretary and a Treasurer. In addition, the Board of Directors may also elect a Chairman of the Board, a Vice Chairmen of the Board, and one or more Vice Presidents (one or more of whom may be designated an Executive Vice President or a Senior Vice President), one or more Assistant Secretaries or Assistant Treasurers, or one or more Chief Financial Officers, and such other officers as it may from time to time deem advisable. Any number of offices may be held by the same person. No officer except the Chairman of the Board need be a director of the Corporation.

SECTION 2. ELECTIONS, TERM AND REMOVAL. Each officer shall be elected by the Board of Directors and shall hold office for such term, if any, as the Board of Directors shall determine. Any officer may be removed at any time, either with or without cause, by the vote of a majority of the entire Board of Directors.

SECTION 3. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board of Directors or to the Chief Executive Officer. Such resignation will take effect at the time specified in the notice or, if no time is specified, at the time of receipt of the notice, and the acceptance of such resignation will not be necessary to make it effective.

SECTION 4. COMPENSATION. The compensation of officers shall be fixed by the Board of Directors or by the compensation committee, if any, of the Board of Directors.

SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other duties as from time to time may be assigned to him by the Board of Directors.

SECTION 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have general charge of the management of the business and affairs of the Corporation, subject to the control of Board of Directors, and will ensure that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer will preside over any meetings of the stockholders and of the Board of Directors at which neither the Chairman of the Board nor a Vice Chairman is present.

 
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SECTION 7. OTHER OFFICERS. The officers of the Corporation, other than the Chairman of the Board and the Chief Executive Officer, shall have such powers and perform such duties in the management of the property and affairs of the Corporation, subject to the control of the Board of Directors and the Chief Executive Officer, as customarily pertain to their respective offices, as well as such powers and duties as from time to time may be prescribed by the Board of Directors.

SECTION 8. FIDELITY BONDING. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.
 
ARTICLE VIII

CERTIFICATES FOR SHARES

SECTION 1. CERTIFICATES. The shares of stock of the Corporation shall be represented by certificates, in such form as the Board of Directors may from time to time prescribe, signed by the Chief Executive Officer or the President or the Chief Financial Officer and the Secretary or the Treasurer.

SECTION 2. FACSIMILE SIGNATURES. Any or all signatures upon a certificate may be a facsimile. Even if an officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall cease to be that officer, transfer agent or registrar before the certificate is issued, that certificate may be issued by the Corporation with the same effect as if he or it were that officer, transfer agent or registrar at the date of issue.

SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors may direct that a new certificate be issued in place of any certificate issued by the Corporation which is alleged to have been lost, stolen or destroyed. When doing so, the Board of Directors may prescribe such terms and conditions precedent to the issuance of the new certificate as it deems expedient, and may require a bond sufficient to indemnify the Corporation against any claim that may be made against it with regard to the allegedly lost, stolen or destroyed certificate or the issuance of the new certificate.

SECTION 4. SURRENDER, TRANSFER AND CANCELLATION. The Corporation or a transfer agent of the Corporation, upon surrender to it of a certificate representing shares, duly endorsed and accompanied by proper evidence of lawful succession, assignment or authority of transfer, shall issue a new certificate to the person entitled to it, and shall cancel the old certificate and record the transaction upon the books of the Corporation.

 
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SECTION 5. RECORD DATE. The Board of Directors may fix a date as the record date for determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or to express consent to, or dissent from, any proposal without a meeting, or to receive payment of any dividend or allotment of any rights, or to take or be the subject of any other action. The record date must be not less than ten (10) nor more than sixty (60) days before the date of the meeting, nor more than sixty (60) days prior to the proposed action. If no record date is fixed, the record date will be as provided by law. A determination of stockholders entitled to notice of or to vote at any meeting of stockholders which has been made as provided in this Section will apply to any adjournment of the meeting, unless the Board of Directors fixes a new record date for the adjourned meeting.

SECTION 6. STOCKHOLDERS OF RECORD. The Corporation shall for all purposes be entitled to treat a person registered on its books as the owner of those shares, with the exclusive right, among other things, to receive dividends and to vote with regard to those shares, and the Corporation will not be bound to recognize any equitable or other claim to or interest in shares of its stock on the part of any other person, whether or not the Corporation has notice of the claim or interest of the other person, except as otherwise provided by the laws of Delaware.

ARTICLE IX

INDEMNIFICATION

SECTION 1. SUITS BY THIRD PARTIES. The Corporation shall indemnify any person who was or is made a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, will not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, had reasonable cause to believe that the conduct was unlawful.

SECTION 2. DERIVATIVE SUITS. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.


SECTION 3. INDEMNIFICATION AS OF RIGHT. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, the person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection therewith.

SECTION 4. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 and 2. Such determination will be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable and a quorum of disinterested directors so directs, by independent legal counsel (compensated by the Corporation) in a written opinion, or (3) by the stockholders.

SECTION 5. ADVANCE OF FUNDS. Expenses (including attorneys fees)incurred by an officer, director, employee or agent in defending a civil, criminal, administrative or investigative action, suit or proceeding, or threat thereof, may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the Corporation as authorized in this Article.

SECTION 6. NON-EXCLUSIVITY. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.

SECTION 7. SUCCESSORS AND ASSIGNS. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided, when authorized or ratified continue as to a person who has ceased to be a director, officer or agent and shall inure to the benefit of the heirs, executors and administrators of such person.


SECTION 8. INSURANCE PREMIUMS. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against the person and incurred by him in any such capacity, or arising out of the person’s status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article.

SECTION 9. REFERENCES TO “CORPORATION.” References in this Article to “the Corporation” will include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, will stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

SECTION 10. REFERENCES TO CERTAIN TERMS. For purposes of this Article, references to “other enterprises” will include employee benefit plans; references to “fines” will include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” will include any service as a director, officer, employee or agent of a subsidiary of the Corporation and any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan will be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article.

SECTION 11. APPLICATION OF ARTICLE. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided, when authorized or ratified continue as to a person who has ceased to be a director, officer or agent and shall inure to the benefit of the heirs, executors and administrators of such person.

SECTION 12. RETROACTIVE EFFECT. The provisions of this Article will be deemed retroactive and will include all acts of the officers and directors of the Corporation since the date of incorporation.

 
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ARTICLE X

GENERAL PROVISIONS

SECTION 1. CORPORATE SEAL. The corporate seal shall have inscribed on it the name of the Corporation, the year of its creation, and such other appropriate legend as the Board of Directors may from time to time determine. Unless prohibited by the Board of Directors, a facsimile of the corporate seal may be affixed or reproduced in lieu of the corporate seal itself.

SECTION 2. FISCAL YEAR. The fiscal year of the Corporation will end on December 31, unless changed to such other date as the Board of Directors may prescribe.

ARTICLE XI

AMENDMENTS

SECTION 1. BY-LAWS. These By-Laws may be amended or repealed, and new By-Laws may be adopted, amended or repealed (a) at any regular or special meeting of stockholders, or (b) by the affirmative vote of a majority of the entire Board of Directors at any regular or special meeting of the Board of Directors.
 
 
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EXHIBIT 4.2
 
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 
COMMON STOCK PURCHASE WARRANT
 
CAMDEN LEARNING CORPORATION
 
Warrant Shares: 2,166,360
 
Issue Date: November 23, 2009.
 
THIS COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, H. & E. Buckingham Limited Partnership, or its successors or assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date set forth as the issue date above (the “ Initial Exercise Date ”) and on or prior to the close of business on November 22, 2011, the two year anniversary of the Initial Exercise Date (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from National American University Holdings, Inc., a Delaware corporation (the “ Company ”), up to 2,166,360 shares (the “ Warrant Shares ”) of common stock, par value $0.001, of the Company (“ Common Stock ”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b), subject to adjustment as described in this Warrant.
 
Section 1 . Definitions .
 
a) Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Agreement and Plan of Reorganization (the “ Plan of Merger ”), dated August 7, 2009, among the Company, Dlorah Subsidiary, Inc. and Dlorah, Inc., as amended by that certain Amended and Restated Agreement and Plan of Reorganization (the “ Amended and Restated Merger Agreement ”), dated August 11, 2009, as further amended by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, dated October 26, 2009 (“ Amendment No. 1 ”, together with the Plan of Merger and Amended and Restated Merger Agreement, collectively, the “ Merger Agreement ”).
 
 
b) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) first, if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) second, if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) third, if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) finally, in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
 
c) “Trading Day” means a day on which the principal Trading Market is open for trading.
 
d) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Alternext, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
 
Section 2 . Exercise .
 
a) Exercise of Warrant .  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company.   The Holder, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this para graph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
 
 
b) Exercise Price .  The exercise price per share of the Common Stock under this Warrant shall be $5.50, subject to adjustment hereunder (the “Exercise Price”).
 
c) Cashless Exercise .  This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
 
 
(A) =
the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
 
(B) =
the Exercise Price of this Warrant; and
 
(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
 
d) Mechanics of Exercise .
 
i. Delivery of Certificates Upon Exercise .  This Warrant shall be deemed to have been exercised on the first date on which both the Notice of Exercise and payment of the Exercise Price, if any, shall have been delivered to the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, prior to the issuance of such shares, having been paid.
 
ii. Delivery of New Warrants Upon Exercise .  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
 
iii. No Fractional Shares or Scrip .  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
 
 
iv. Charges, Taxes and Exp enses .  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
 
v. Closing of Books .  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
 
Section 3 . Certain Adjustments and Registration Rights .
 
a) Stock Dividends Split Ups .  If after the date hereof, and subject to the provisions of Section 3(f) below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.
 
b) Aggregation of Shares .  If after the date hereof, and subject to the provisions of Section 3(f), the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
 
c) Adjustments in Exercise Price . Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant is adjusted, as provided in Section 3(a) and 3(b) above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.
 
d) Replacement of Securities upon Reorganization, etc .  In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than a change covered by Section 3(a) or (b) hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrant and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the Holder would have received if such Holder had exercised his, her or its Warrant(s) immediately prior to such event. The provisions of this Section 3(d) shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.
 
 
e) Notices of Cha nges in Warrant .  Upon every adjustment of the Warrant Price or the number of shares issuable on exercise of a Warrant, the Company shall give written notice thereof to the Holder, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of the Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 3(a), 3(b), 3(c) or 3(d), then, in any such event, the Company shall give written notice to the Hlder, at the last address set forth for such Holder in the Company’s records, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.
 
f) No Fractional Shares .  Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 3, the Holder would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up to the nearest whole number the number of the shares of Common Stock to be issued to the Holder.
 
g) Form of Warrant .  The form of this Warrant will not be changed because of any adjustment pursuant to this Section 3 unless requested by Holder. Any warrants issued in substitution of this Warrant, if any, after such adjustment may state the same Warrant Price and the same number of shares as is stated in this Warrant.
 
h) Registration Rights .  This Warrant and the Warrants Shares are subject to certain registrations rights pursuant to the Registration Rights Agreement to be executed in conjunction with this Warrant and the Merger Agreement (the “Registration Rights Agreement”).
 
 
Section 4 . Transfer of Warrant .
 
a) Transferability .  Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or his, her or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new Holder for the purchase of Warrant Shares without having a new Warrant issued.
 
b) New Warrants .  This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or his, her or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
 
c) Warrant Register .  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), initially in the name of Holder and in the name of such other Holders of this Warrant from time to time. The Company may deem and treat the Holder as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
 
d) Transfer Restrictions .  If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that transferee of this Warrant comply with the terms, limitations and restrictions hereof and of the Registration Rights Agreement.
 
e) Representation by the Holder .  The Holder, by the acceptance hereof, represents and warrants that he, she or it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
 
 
Section 5 . Miscellaneous .
 
a) No Rights as Stockholder Until Exercise .  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth herein.
 
b) Loss, Theft, Destruction or Mutilation of Warrant .  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
 
c) Saturdays, Sundays, Holidays, etc .  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
 
d) Authorized Shares .
 
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
 
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
 
 
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
 
e) Governing Law .  This Warrant shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof. All actions, proceedings or claims arising out of or relating to this Warrant shall be heard and determined exclusively in any state or federal court located in New Castle County, Delaware. The parties hereby (a) submit to the exclusive jurisdiction of any Delaware state or federal court for the purpose of any actions, proceedings or claims arising out of or relating to this Warrant brought by any party, and (b) irrevocably waive, and agree not to assert by way of motion, defense or otherwise, in any such action, proceeding or claim, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action, proceeding or claim is brought in an inconvenient forum, that the venue of the action, proceeding or claim is improper, or that this Warrant or the transactions contemplated hereby may not be enforced in or by any of the above-named courts. Each of the parties agree that a final judgment in any action or proceeding with respect to which all appeals have been taken or waived, shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Each of parties irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Warrant, on behalf of itself or its property, by personal delivery of copies of such process to such party. Nothing in this Section 5(e) shall affect the right of any party to serve legal process in any other manner permitted by law.
 
f) Restrictions .  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
 
g) Nonwaiver and Expenses .  No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to such Holder any amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
 
 
h) Notices .  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Merger Agreement or pursuant to any Assignment Form duly delivered to the Company by the Holder.
 
i) Limitation of Liability .  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
 
j) Remedies .  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
 
k) Successors and Assigns .  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder.
 
l) Amendment .  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
 
m) Severability .  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
 
n) Headings .  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
 
********************
 
(Signature Pages Follow)
 
 
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
 
 
 
CAMDEN LEARNING CORPORATION
 
       
 
By:
 
    Name: David Warnock  
    Title: President  
 
     
 
 
NOTICE OF EXERCISE
 
TO: [_______________________
 
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
 
(2) Payment shall take the form of (check applicable box):
 
o in lawful money of the United States; or
 
o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c) of this Warrant, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
 
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
 
_______________________________
 
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
 
_______________________________
 
_______________________________
 
_______________________________
 
[SIGNATURE OF HOLDER]
 
Name of Investing Entity:  
Signature of Authorized Sig natory of Investing Entity :  
Name of Authorized Signatory:  
Title of Authorized Signatory:  
Date:  
 
 
ASSIGNMENT FORM
 
(To assign the foregoing warrant, execute
 this form and supply required information.
 Do not use this form to exercise the warrant.)
 
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
 
_______________________________________________ whose address is
 
_______________________________________________________________.
 
_______________________________________________________________
 
Dated: ______________, _______
 
Holder’s Signature:  
   
Holder’s Address:  
   
   
   
   
 
Signature Guaranteed: _____________________________________________
 
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
 
EXHIBIT 4.3
 
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 
COMMON STOCK PURCHASE WARRANT
 
CAMDEN LEARNING CORPORATION
 
     
Warrant Shares: 633,640
 
Issue Date: November 23, 2009.
 
THIS COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, Robert D. Buckingham Living Trust, or its successors or assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date set forth as the issue date above (the “ Initial Exercise Date ”) and on or prior to the close of business on November 22, 2011, the two year anniversary of the Initial Exercise Date (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from National American University Holdings, Inc., a Delaware corporation (the “ Company ”), up to 633,640 shares (the “ Warrant Shares ”) of common stock, par value $0.001, of the Company (“ Common Stock ”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b), subject to adjustment as described in this Warrant.
 
Section 1 . Definitio ns .
 
a) Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Agreement and Plan of Reorganization (the “ Plan of Merger ”), dated August 7, 2009, among the Company, Dlorah Subsidiary, Inc. and Dlorah, Inc., as amended by that certain Amended and Restated Agreement and Plan of Reorganization (the “ Amended and Restated Merger Agreement ”), dated August 11, 2009, as further amended by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, dated October 26, 2009 (“ Amendment No. 1 ”, together with the Plan of Merger and Amended and Restated Merger Agreement, collectively, the “ Merger Agreement ”).
 
 
b) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) first, if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) second, if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) third, if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) finally, in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
 
c) “Trading Day” means a day on which the principal Trading Market is open for trading.
 
d) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Alternext, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
 
Section 2 . Exercise .
 
a) Exercise of Warrant .  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company.   The Holder, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, fo llowing the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
 
 
b) Exercise Price .  The exercise price per share of the Common Stock under this Warrant shall be $5.50, subject to adjustment hereunder (the “Exercise Price”).
 
c) Cashless Exercise .  This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
 
 
(A) =
the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
 
(B) =
the Exercise Price of this Warrant; and
 
 
(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
 
d) Mechanics of Exercise .
 
i. Delivery of Certificates Upon Exercise .  This Warrant shall be deemed to have been exercised on the first date on which both the Notice of Exercise and payment of the Exercise Price, if any, shall have been delivered to the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, prior to the issuance of such shares, having been paid.
 
ii. Delivery of New Warrants Upon Exercise .  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
 
iii. No Fractional Shares or Scrip .  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
 
 
iv. Charges, Taxes and Expenses .  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
 
v. Closing of Books .  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
 
Section 3 . Certain Adjustments and Registration Rights .
 
a) Stock Dividends Split Ups .  If after the date hereof, and subject to the provisions of Section 3(f) below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.
 
b) Aggregation of Shares .  If after the date hereof, and subject to the provisions of Section 3(f), the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
 
c) Adjustments in Exercise Price . Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant is adjusted, as provided in Section 3(a) and 3(b) above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.
 
 
d) Replacement of Securities upon Reorganization, etc .  In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than a change covered by Section 3(a) or (b) hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrant and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the Holder would have received if such Holder had exercised his, her or its Warrant(s) immediately prior to such event. The provisions of this Section 3(d) shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.
 
e) Notices of Changes in W arrant .  Upon every adjustment of the Warrant Price or the number of shares issuable on exercise of a Warrant, the Company shall give written notice thereof to the Holder, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of the Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 3(a), 3(b), 3(c) or 3(d), then, in any such event, the Company shall give written notice to the Hlder, at the last address set forth for such Holder in the Company’s records, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.
 
f) No Fractional Shares .  Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 3, the Holder would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up to the nearest whole number the number of the shares of Common Stock to be issued to the Holder.
 
g) Form of Warrant .  The form of this Warrant will not be changed because of any adjustment pursuant to this Section 3 unless requested by Holder. Any warrants issued in substitution of this Warrant, if any, after such adjustment may state the same Warrant Price and the same number of shares as is stated in this Warrant.
 
h) Registration Rights .  This Warrant and the Warrants Shares are subject to certain registrations rights pursuant to the Registration Rights Agreement to be executed in conjunction with this Warrant and the Merger Agreement (the “Registration Rights Agreement”).
 
 
Section 4 . Transfer of Warrant .
 
a) Transferability .  Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or his, her or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new Holder for the purchase of Warrant Shares without having a new Warrant issued.
 
b) New Warrants .  This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or his, her or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
 
c) Warrant Register .  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), initially in the name of Holder and in the name of such other Holders of this Warrant from time to time. The Company may deem and treat the Holder as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
 
d) Transfer Restrict ions .  If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that transferee of this Warrant comply with the terms, limitations and restrictions hereof and of the Registration Rights Agreement.
 
e) Representation by the Holder .  The Holder, by the acceptance hereof, represents and warrants that he, she or it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
 
 
Section 5 . Miscellaneous .
 
a) No Rights as Stockholder Until Exercise .  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth herein.
 
b) Loss, Theft, Destruction or Mutilation of Warrant .  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
 
c) Saturdays, Sundays, Holidays, etc .  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
 
d) Authorized Shares .
 
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
 
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
 
 
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
 
e) Governing Law .  This Warrant shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof. All actions, proceedings or claims arising out of or relating to this Warrant shall be heard and determined exclusively in any state or federal court located in New Castle County, Delaware. The parties hereby (a) submit to the exclusive jurisdiction of any Delaware state or federal court for the purpose of any actions, proceedings or claims arising out of or relating to this Warrant brought by any party, and (b) irrevocably waive, and agree not to assert by way of motion, defense or otherwise, in any such action, proceeding or claim, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action, proceeding or claim is brought in an inconvenient forum, that the venue of the action, proceeding or claim is improper, or that this Warrant or the transactions contemplated hereby may not be enforced in or by any of the above-named courts. Each of the parties agree that a final judgment in any action or proceeding with respect to which all appeals have been taken or waived, shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Each of parties irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Warrant, on behalf of itself or its property, by personal delivery of copies of such process to such party. Nothing in this Section 5(e) shall affect the right of any party to serve legal process in any other manner permitted by law.
 
f) Restrictions .  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
 
 
g) Nonwaiver and Expenses .  No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to such Holder any amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
 
h) Notices .  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Merger Agreement or pursuant to any Assignment Form duly delivered to the Company by the Holder.
 
i) Limitation of Liability .  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
 
j) Remedies .  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
 
k) Successors and Assigns .  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder.
 
l) Amendment .  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
 
m) Severability .  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
 
n) Headings .  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
 
********************
 
(Signature Pages Follow)
 
 
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
 
 
 
CAMDEN LEARNING CORPORATION
 
       
 
By:
 
    Name: David Warnock  
    Title: President  
 
     
 
 
NOTICE OF EXERCISE
 
TO: [_______________________
 
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
 
(2) Payment shall take the form of (check applicable box):
 
o in lawful money of the United States; or
 
o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c) of this Warrant, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
 
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
 
_______________________________
 
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
 
_______________________________
 
_______________________________
 
_______________________________
 
[SIGNATURE OF HOLDER]
 
Name of Investing Entity:  
Signature of Authorized Sig natory of Investing Entity :  
Name of Authorized Signatory:  
Title of Authorized Signatory:  
Date:  
 
 
ASSIGNMENT FORM
 
(To assign the foregoing warrant, execute
 this form and supply required information.
 Do not use this form to exercise the warrant.)
 
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
 
_______________________________________________ whose address is
 
_______________________________________________________________.
 
_______________________________________________________________
 
Dated: ______________, _______
 
Holder’s Signature:  
   
Holder’s Address:  
   
   
   
   
 
Signature Guaranteed: _____________________________________________
 
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
 
 
EXHIBIT 10.2
 
AMENDMENT NO. 1 TO THE WARRANT AGREEMENT
 
This Amendment, dated as of November 23, 2009 (the “Amendment”), to the Warrant Agreement, dated as of November 29, 2007 (the “Warrant Agreement”), by and between Camden Learning Corporation, a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation (“Warrant Agent”).
 
WHEREAS, the Company consummated its initial public offering in November 2007, pursuant to which the Company issued, after giving effect to the exercise of a portion of the overallotment option, 6,626,300 units; and
 
WHEREAS, each unit consisted of one share of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) and one warrant to purchase one share of Common Stock at an exercise price of $5.50 per share (the “Public Warrants”); and
 
WHEREAS, in conjunction with its initial public offering, the Company privately placed 2,800,000 warrants, at $ 1.00 per warrant, to Camden Learning, LLC, a limited liability company partially owned and controlled by Company officers and directors (the “Private Warrants”), with each Private Warrant exercisable into one share of Common Stock at $5.50 (the Private Warrants, together with the Public Warrants, the “Warrants”); and
 
WHEREAS, the terms of the Warrants are governed by the Warrant Agreement and capitalized terms used, but not defined, herein shall have the meaning given to such term in the Warrant Agreement; and
 
WHEREAS, the Company has entered into that certain Agreement and Plan of Reorganization dated August 7, 2009, as amended in its entirety by the Amended and Restated Agreement and Plan of Reorganization dated August 11, 2009 (the “Merger Agreement”), by and among Dlorah Subsidiary, Inc. (“Merger Sub”), a newly-formed Delaware corporation and wholly-owned subsidiary of the Company and Dlorah, Inc., a South Dakota corporation which owns and operates National American University (Dlorah, Inc., together with its divisions and subsidiaries, is referred to herein as “Dlorah”), pursuant to which Merger Sub will merge with and into Dlorah with Dlorah surviving as a wholly-owned subsidiary of the Company (the “Merger”). As a result of the Merger, the stockholders of Dlorah will contribute all of the outstanding capital stock of Dlorah to the Company in exchange for shares of a newly created class of common stock, common stock purchase warrants and restricted shares of the Company’s currently authorized common stock (collectively, the “Transaction”); and

WHEREAS, pursuant to the Merger Agreement, the Company agreed to seek the approval of the holders of its outstanding Public Warrants to amend the Warrant Agreement to require the Company to redeem all of the outstanding Public Warrants upon the consummation of the Transaction at a price of $0.50 per warrant (the “Warrant Redemption Proposal”); and
 
WHEREAS, a majority in interest of the outstanding Warrants has approved the Warrant Redemption Proposal.
 
NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree to amend the Warrant Agreement as set forth herein:

 
1
 
 
1. Warrant Agreement .
 
1.1 Redemption .  Section 6 is hereby amended and restated in its entirety so that it now reads in full as follows:
 
6.1    Redemption of Warrants .  Notwithstanding anything contained herein to the contrary, immediately prior to the consummation of the Business Combination (the “Redemption Time”), the Company will call the Public Warrants for redemption (the “Public Warrant Redemption”), in whole and not in part, at a price of FIFTY HUNDREDTHS OF ONE DOLLAR ($0.50) per outstanding Public Warrant (the “Redemption Consideration”). Notwithstanding anything contained herein to the contrary, upon the consummation of the Business Combination, all Public Warrants shall automatically be cancelled and cease to exist and the holders of certificates, which immediately prior to the Redemption Time represented such Public Warrants, shall cease to have any rights with respect to the Public Warrants other than the right to receive the Redemption Consideration. As soon as reasonably practicable following the Redemption Time, the Warrant Agent will, upon receipt of any documents as may reasonably be required by the Warrant Agent, deliver electronically through DTC to the record holders of the Public Warrants the Redemption Consideration for further distribution and credit to the account of the beneficial holders of such Public Warrants. The Company shall not be required to provide any prior notice of such Public Warrant Redemption to the holders of the Public Warrants other than as required by law.
 
2.   Miscellaneous .
 
2.1 Governing Law .  The validity, interpretation, and performance of this Amendment and of the Public Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles. The parties agree that all actions and proceedings arising out of this Amendment or any of the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Amendment or the transactions contemplated hereby .
 
2.2 Binding Effect .  This Amendment shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.
 
2.3 Entire Agreement .  This Amendment sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Except as set forth in this Amendment, provisions of the Warrant Agreement which are not inconsistent with this Amendment shall remain in full force and effect.
 
2.4 Severability .  This Amendment shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Amendment or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as part of this Amendment a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 
2
 
 
2.5 Counterparts .  This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall constitute but one and the same instrument.
 
2.6 Indemnity .  Notwithstanding any provision of this Amendment or the Warrant Agreement to the contrary, the Company hereby agrees to indemnify the Warrant Agent and save it harmless from and against any and all expenses, including reasonable counsel fees and disbursements, or losses incurred by the Warrant Agent in connection with any action, suit or other proceeding brought against the Warrant Agent involving any claim or potential claim, or in connection with any claim or demand, which in any way arises out of or relates to this Amendment or the Warrant Agent’s execution thereof.
 
[Signature Page Follows]

 
3
 
 
IN WITNESS WHEREOF, the undersigned have executed this Amendment to the Warrant Agreement as of the date first set forth above.
 
CAMDEN LEARNING CORPORATION

By:
/s/ David Warnock
Name:
David Warnock
Title:
Chief Executive Officer

CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By:
/s/ Alexandra Albrecht
Name:
Alexandra Albrecht
Title:
Vice President
 
Acknowledged and Agreed:
 
MORGAN JOSEPH & CO.
By:
/s/ Tina Pappas
Name:
Tina Pappas
Title:
Managing Director
 
Signature Page to Amendment No. 1 to Warrant Agreement
 
 

EXHIBIT 10.4

AMENDMENT NO. 1 TO THE SECURITIES ESCROW AGREEMENT

This Amendment, dated as of November 23, 2009 (the “Amendment”), to the Securities Escrow Agreement, dated as of November 29, 2007 (the “Escrow Agreement”), is made by and among Camden Learning Corporation, a Delaware corporation (the “Company”), the undersigned parties (the “Initial Stockholders”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Escrow Agent”).

WHEREAS, the Company consummated its initial public offering (the “IPO”) on December 5, 2007, pursuant to an Underwriting Agreement dated November 29, 2007 between the Company and Morgan Joseph & Co. Inc., acting as representative of the several underwriters (collectively, the “Underwriters”), pursuant to which the Underwriters agreed to purchase 6,250,000 units (the “Units”) of the Company; and

WHEREAS, each Unit consists of one share of common stock, par value $0.0001 per share (the “Common Stock”), of the Company and one warrant to purchase one share of Common Stock at an exercise price of $5.50 per share; and

WHEREAS, in conjunction with the IPO, the Company issued 1,562,650 shares of restricted Common Stock (the “Escrow Shares”) to the Initial Stockholders with such Escrow Shares subject to the terms and conditions of the Securities Escrow Agreement (as amended by this Amendment); and

WHEREAS, the Company has entered into that certain Agreement and Plan of Reorganization as amended and restated in its entirety on August 11, 2009 and further amended on October 26, 2009 by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization (as amended, the “Merger Agreement”) pursuant to which Dlorah Subsidiary, Inc., a newly formed, wholly-owned subsidiary of the Company (“Merger Sub”), will merge with and into Dlorah, Inc., a South Dakota corporation (Dlorah, Inc., together with its divisions and subsidiaries, is referred to herein as “Dlorah”), with Dlorah surviving as a wholly-owned subsidiary of the Company, as a result of which the stockholders of Dlorah will contribute all of the outstanding capital stock of Dlorah to the Company in exchange for shares of a newly created class of common stock, common stock purchase warrants and restricted shares of the Company’s currently authorized Common Stock (the “Acquisition”); and

WHEREAS, in connection with the Acquisition, the Initial Stockholders have decided to transfer up to an aggregate of 838,772 Escrow Shares to certain stockholders of the Company; and

WHEREAS, in connection with the consummation of the Acquisition, the Initial Stockholders have agreed to cancel all 2,800,000 warrants to purchase Common Stock, at an exercise price of $5.50 per share of Common Stock owned by such Initial Stockholders.
 
- 1 -

NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree to amend the Escrow Agreement as set forth herein:

1.
Escrow Agreement .

1.1            Section 3.1 .  Section 3.1 of the Escrow Agreement is hereby amended and restated in its entirety as follows:

“(a)           Upon compliance with Section 3.2 hereof, upon the effective time of the acquisition (the “Acquisition”) of 100% of the capital stock of Dlorah, Inc. (“Dlorah”) by the Company (the “Effective Time”), and regardless of whether the Initial Stockholders provide instructions directing as such, the Escrow Agent is hereby authorized to release 838,772 Escrow Shares from the accounts of Camden Learning, LLC (the “Transferred Stock”) and to irrevocably transfer the Transferred Stock, as soon as practicable following the Acquisition, to the accounts of those certain institutional or strategic investors set forth on Exhibit A attached hereto (the “Investors”).  Except as set forth above, the Escrow Agent shall hold the Escrow Shares until the termination of the Escrow Period.  The Escrow Period shall be the period beginning on the date of the certificates representing the shares are deposited with the Escrow Agent and ending on the date that is twelve (12) months following the consummation of the Acquisition.  On the termination date of the Escrow, the Escrow Agent shall, upon written instructions from the Company or the Company’s counsel, disburse each of the Initial Stockholder’s Escrow Shares to such Initial Stockholder; provided, however, that if after the Company consummates the Acquisition, it (or the surviving entity) subsequently consummates a liquidation, merger, stock exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares of Common Stock for cash, securities or other property, then the Escrow Agent will, upon consummation of such transaction, immediately release the Escrow Shares to the Initial Stockholders so they can participate.  The Escrow Agent shall have no further duties hereunder after the disbursement of the Escrow Shares in accordance with this Section 3.

(b)           The Transferred Stock released at the Effective Time shall not be subject to the Escrow Period; however , the Transferred Stock shall remain restricted pending registration pursuant to an effective registration statement filed by the Company or another exemption from the Securities Act of 1933, as amended.

(c)           At the Effective Time, the Inside Stockholder owning the Private Warrants shall have no further right, title or interest in the Private Warrants which shall be released from escrow and immediately cancelled, in whole and not in part, by the Escrow Agent (the “Cancellation”).  At such time of the Cancellation, the Private Warrants shall cease to exist.”
 
- 2 -

1.2            Section 4.3 .  Section 4.3 shall be amended restated in its entirety as follows:

“Except with respect to the Transferred Stock, which shall not be subject to the Escrow Period, during the Escrow Period, no sale transfer or other disposition may be made of any or all of the Escrow Shares except (i) by gift to a member of Initial Stockholder’s immediate family or to a trust or other entity, the beneficiary of which is an Initial Stockholder or a member of an Initial Stockholder’s immediate family, (ii) by virtue of the laws of descent and distribution upon death of any Initial Stockholder, (iii) pursuant to a qualified domestic relations order, (iv) to an entity that is an Initial Stockholder, (v) to any person or entity controlling, controlled by, or under common control with, an Initial Stockholder or (vi) with respect to an Initial Stockholder who is an individual, to an entity controlled by such Initial Stockholder; provided , however , that such permitted transfers may be implemented only upon the respective transferee’s written agreement to be bound by the terms and conditions of this Agreement and of the Insider Letter signed by the Initial Stockholder transferring the Escrow Shares. During the Escrow Period, the Initial Stockholders shall not pledge or grant a security interest in the Escrow Securities or grant a security interest in their rights under this Agreement.”

1.3            Escrow Securities .  All references to the “Escrow Securities” shall be replaced by the “Escrow Shares” which shall not include the Transferred Stock.

2.            Definitions .  Capitalized terms used but not defined herein shall have the meaning given to such term in the Escrow Agreement.

3.            Governing Law . The validity, interpretation, and performance of this Amendment and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles. The parties agree that all actions and proceedings arising out of this Amendment or any of the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Amendment or the transactions contemplated hereby .
  
4.            Binding Effect .  This Amendment shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.

5.            Entire Agreement . This Amendment sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Except as set forth in this Amendment, provisions of the Escrow Agreement which are not inconsistent with this Amendment shall remain in full force and effect.
 
- 3 -

6.            Severability .  This Amendment shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Amendment or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as part of this Amendment a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

7.            Counterparts .  This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall constitute but one and the same instrument.

8.            Indemnity .  Notwithstanding any provision of this Amendment or the Escrow Agreement to the contrary, the Company hereby agrees to indemnify the Escrow Agent and save it harmless from and against any and all expenses, including reasonable counsel fees and disbursements, or losses incurred by the Escrow Agent in connection with any action, suit or other proceeding brought against the Escrow Agent involving any claim or potential claim, or in connection with any claim or demand, which in any way arises out of or relates to this Amendment or the Escrow Agent’s execution thereof.



[Signature Page Follows]
 
- 4 -

IN WITNESS WHEREOF, the undersigned have executed this Amendment to the Escrow Agreement as of the date first set forth above.

 
  CAMDEN LEARNING, LLC  
       
 
By:
Camden Partners Strategic III, LLC  
  Title: Manager  
 
 
By:
Camden Partners Strategic Manager, LLC  
  Title: Manager  
 
 
By:
/s/ David Warnock  
 
Name: David Warnock
Title: Managing Member
 
 
 
By:
/s/ Therese Kreig Crane, Ed. D.  
  Therese Kreig Crane Ed.D  
 
 
By:
/s/ Ronald Tomalis  
 
Ronald Tomalis
 
 
 
By:
/s/ William Jews  
  William Jews  

 

Agreed and acknowledged, this 23rd day of November, 2009:

CAMDEN LEARNING CORPORATION
 
By:
/s/ David Warnock  
Name: David Warnock
Title:   President and Chief Executive Officer
 
 
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
 
By:
/s/ Alexandra Albrecht  
Name: Alexandra Albrecht
Title:   Vice President
 

MORGAN JOSEPH & CO. INC.
 
By:
/s/ Tina Pappas  
Name: Tina Pappas
Title:   Managing Director
 
- 5 -
EXHIBIT 10.5
 
LOCK UP AGREEMENT
 
To:
Camden Learning Corporation
500 East Pratt Street, Suite 1200
Baltimore, MD 21202
 
Re:     Proposed Business Combination Involving Camden Learning Corporation and Dlorah, Inc.
 
1.
Acknowledgement. The undersigned acknowledges that Camden Learning Corporation ( "Camden" ) and Dlorah, Inc. ( "Dlorah" ) are intending to complete a proposed business combination pursuant to that certain Agreement and Plan of Reorganization, dated August 7, 2009, as amended by the Amended and Restated Agreement and Plan of Reorganization, dated August 11, 2009, as further amended by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization by and among Camden, Dlorah and Dlorah Subsidiary Inc., a wholly-owned subsidiary of Camden (collectively, the “Merger Agreement” ). In consideration of the transactions contemplated by the Merger Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by the undersigned), the undersigned covenants and agrees with Camden as follows with respect to the shares of Camden Class A common stock, common stock and warrants issued or issuable to the undersigned (or to persons or entities with respect to which the undersigned would have beneficial ownership of such shares within the rules and regulations of the Securities and Exchange Commission) whether pursuant to the Merger Agreement or otherwise and any other security of Dlorah or Camden that is convertible into, or exercisable or exchangeable for, securities of Camden (collectively, the “Camden Shares” ).
 
2.
Lock-Up. The undersigned represents and warrants to Camden that, for the duration of the Lock- Up Period (as defined below), the undersigned will not, directly or indirectly: (i) offer, sell, contract to sell, pledge, lend, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any Camden Shares, (ii) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Camden Shares (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of any Camden Shares, whether or not such transaction is to be settled by delivery of Camden Shares, other securities, cash or other consideration, or (iii) engage directly or indirectly in any transaction the likely result of which would involve a transaction prohibited by either of clauses (i) or (ii). The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to, or reasonably expected to lead to, or result in, a sale or disposition of any Camden Shares even if such Camden Shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Camden Shares or with respect to any security that includes, relates to, or derives any significant part of its value from the Camden Shares. The undersigned agrees and consents to the entry of stop transfer instructions with Camden’s transfer agent and registrar against, and authorizes Camden to cause the transfer agent and registrar to decline, the transfer of relevant securities held by the undersigned except in compliance with the foregoing restrictions.

 
 
 
 
Notwithstanding the foregoing, the undersigned may sell, contract to sell, dispose of, or otherwise transfer for value or otherwise, the Camden Shares by (i) gift, will or intestacy, or (ii) distribution to partners, members, shareholders or beneficiaries of the undersigned; provided however, that in the case of a transfer pursuant to (i) or (ii) above, it shall be a condition to such transfer that the transferee execute an agreement stating that the transferee is receiving and holding the Camden Shares subject to the provisions of this Lock Up Agreement.
 
3.
Lock-Up Period. For the purposes hereof, the “Lock-Up Period” shall mean with respect to all of the Camden Shares, the period beginning on the date of the Effective Time (as such term is defined in the Merger Agreement) and ending on the date that is one hundred eighty (180) days following the date of the Effective Time.
 
4.
Termination. This agreement may be terminated by mutual written consent of the parties hereto. This agreement shall be terminated one calendar day following the date that is one hundred eighty-one (181) days following the date of the Effective Time, in accordance with its terms. The undersigned further understands that this agreement is irrevocable, and that all authority herein conferred or agreed to be conferred shall survive death or incapacity of the undersigned and will be binding on the undersigned and the respective successors, heirs, personal representatives, and assigns of the undersigned.
 
5.
Authority. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into the agreements set forth herein.
 
6.
Public Disclosure. The undersigned agrees not to make any public disclosure or announcement of or pertaining to this agreement, the Merger Agreement or the transactions contemplated thereby or hereby without the prior written consent of Camden except as required by law.
 
7.
Damages. The undersigned recognizes and acknowledges that this agreement is an integral part of the Merger Agreement and that a breach by the undersigned of any covenants or other commitments contained in this Agreement will cause the other party to sustain injury for which it may not have an adequate remedy at law for money damages. Therefore, the undersigned agrees that in the event of any such breach, Camden shall be entitled to the remedy of specific performance of such covenants or commitments and preliminary and permanent injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity, and the undersigned agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief.
 
8.
Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable therein (without regard to conflict of laws principles).
 
9.
Facsimile. Camden and the undersigned shall be entitled to rely on delivery of a facsimile copy hereof which shall be legally effective to create a valid and binding agreement of the undersigned and Camden in accordance with the terms hereof.
 
10.
Counterparts. This agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
 
2
 
11 .
Entire Agreement. This agreement constitutes the entire agreement and understanding between the parties pertaining to the subject matter of this agreement.

H. & E. BUCKINGHAM LIMITED PARTNERSHIP
 
By:
/s/ Bob Buckingham
 
Bob Buckingham
 
General Partner

 
3
 

EXHIBIT 10.6
 
LOCK UP AGREEMENT
 
To:
Camden Learning Corporation
500 East Pratt Street, Suite 1200
Baltimore, MD 21202
 
Re:     Proposed Business Combination Involving Camden Learning Corporation and Dlorah, Inc.
 
1.
Acknowledgement. The undersigned acknowledges that Camden Learning Corporation ( " Camden" ) and Dlorah, Inc. ( " Dlorah" ) are intending to complete a proposed business combination pursuant to that certain Agreement and Plan of Reorganization, dated August 7, 2009, as amended by the Amended and Restated Agreement and Plan of Reorganization, dated August 11, 2009, as further amended by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization by and among Camden, Dlorah and Dlorah Subsidiary Inc., a wholly-owned subsidiary of Camden (collectively, the “Merger Agreement” ). In consideration of the transactions contemplated by the Merger Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by the undersigned), the undersigned covenants and agrees with Camden as follows with respect to the shares of Camden Class A common stock, common stock and warrants issued or issuable to the undersigned (or to persons or entities with respect to which the undersigned would have beneficial ownership of such shares within the rules and regulations of the Securities and Exchange Commission) whether pursuant to the Merger Agreement or otherwise and any other security of Dlorah or Camden that is convertible into, or exercisable or exchangeable for, securities of Camden (collectively, the “Camden Shares” ).
 
2.
Lock-Up. The undersigned represents and warrants to Camden that, for the duration of the Lock- Up Period (as defined below), the undersigned will not, directly or indirectly: (i) offer, sell, contract to sell, pledge, lend, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any Camden Shares, (ii) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Camden Shares (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of any Camden Shares, whether or not such transaction is to be settled by delivery of Camden Shares, other securities, cash or other consideration, or (iii) engage directly or indirectly in any transaction the likely result of which would involve a transaction prohibited by either of clauses (i) or (ii). The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to, or reasonably expected to lead to, or result in, a sale or disposition of any Camden Shares even if such Camden Shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Camden Shares or with respect to any security that includes, relates to, or derives any significant part of its value from the Camden Shares. The undersigned agrees and consents to the entry of stop transfer instructions with Camden’s transfer agent and registrar against, and authorizes Camden to cause the transfer agent and registrar to decline, the transfer of relevant securities held by the undersigned except in compliance with the foregoing restrictions.

 
 
 
Notwithstanding the foregoing, the undersigned may sell, contract to sell, dispose of, or otherwise transfer for value or otherwise, the Camden Shares by (i) gift, will or intestacy, or (ii) distribution to partners, members, shareholders or beneficiaries of the undersigned; provided however, that in the case of a transfer pursuant to (i) or (ii) above, it shall be a condition to such transfer that the transferee execute an agreement stating that the transferee is receiving and holding the Camden Shares subject to the provisions of this Lock Up Agreement.
 
3.
Lock-Up Period. For the purposes hereof, the “Lock-Up Period” shall mean with respect to all of the Camden Shares, the period beginning on the date of the Effective Time (as such term is defined in the Merger Agreement) and ending on the date that is one hundred eighty (180) days following the date of the Effective Time.
 
4.
Termination. This agreement may be terminated by mutual written consent of the parties hereto. This agreement shall be terminated one calendar day following the date that is one hundred eighty-one (181) days following the date of the Effective Time, in accordance with its terms. The undersigned further understands that this agreement is irrevocable, and that all authority herein conferred or agreed to be conferred shall survive death or incapacity of the undersigned and will be binding on the undersigned and the respective successors, heirs, personal representatives, and assigns of the undersigned.
 
5.
Authority. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into the agreements set forth herein.
 
6.
Public Disclosure. The undersigned agrees not to make any public disclosure or announcement of or pertaining to this agreement, the Merger Agreement or the transactions contemplated thereby or hereby without the prior written consent of Camden except as required by law.
 
7.
Damages. The undersigned recognizes and acknowledges that this agreement is an integral part of the Merger Agreement and that a breach by the undersigned of any covenants or other commitments contained in this Agreement will cause the other party to sustain injury for which it may not have an adequate remedy at law for money damages. Therefore, the undersigned agrees that in the event of any such breach, Camden shall be entitled to the remedy of specific performance of such covenants or commitments and preliminary and permanent injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity, and the undersigned agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief.
 
8.
Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable therein (without regard to conflict of laws principles).
 
9.
Facsimile. Camden and the undersigned shall be entitled to rely on delivery of a facsimile copy hereof which shall be legally effective to create a valid and binding agreement of the undersigned and Camden in accordance with the terms hereof.
 
10.
Counterparts. This agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 
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11 .
Entire Agreement. This agreement constitutes the entire agreement and understanding between the parties pertaining to the subject matter of this agreement.

ROBERT D. BUCKINGHAM LIVING TRUST
 
By:
/s/ Bob Buckingham
 
Bob Buckingham
 
Trustee

 
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EXHIBIT 10.7
 
REGISTRATION RIGHTS AGREEMENT
 
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of the 23rd day of November, 2009, by and among Camden Learning Corporation, a Delaware corporation (the “ Company ”), and each of H. & E. Buckingham Limited Partnership, a South Dakota limited partnership, and Robert D. Buckingham Living Trust, a South Dakota trust (each such purchaser, a “Purchaser” and, collectively, the “ Purchasers ”).
 
This Agreement is made pursuant to that certain Agreement and Plan of Reorganization, dated August 7, 2009, as amended by the Amended and Restated Agreement and Plan of Reorganization, dated August 11, 2009, as further amended by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization by and among the Company, Dlorah, Inc. and Dlorah Subsidiary Inc., a wholly-owned subsidiary of the Company (collectively, the “ Merger Agreement ”).
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:”
 
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein that are defined in the Merger Agreement shall have the meanings given such terms in the Merger Agreement. The following capitalized terms used herein have the following meanings:
 
“ Agreement ” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.
 
“ Commission ” means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act or the Exchange Act.
 
“ Common Stock ” means the common stock, par value $0.0001 per share, of the Company.
 
“ Company ” is defined in the preamble to this Agreement.
 
“ Demand Registration ” is defined in Section 2.1.1.
 
“ Demanding Holder ” is defined in Section 2.1.1.
 
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
 
“ Form S-3 ” is defined in Section 2.2.4.
 
“ Indemnified Party ” is defined in Section 4.3.
 
“ Indemnifying Party ” is defined in Section 4.3.
 
“ Maximum Number of Shares ” is defined in Section 2.1.4.
 
“ Notices ” is defined in Section 6.2.
 
“ Piggy-Back Registration ” is defined in Section 2.2.1.
 
“ Purchaser ” is defined in the preamble to this Agreement.
 
“ Purchaser Indemnified Party ” is defined in Section 4.1.
 
“ Register, ” “ registered ” and “ registration ” mean a registration with respect to the Registrable Securities effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
 
“ Registrable Securities ” means (a) the Common Stock issuable or issued upon conversion of the Series A Stock, (b) the 2,800,000 common stock warrants representing the Warrant Consideration and the Common Stock issuable or issued upon exercise or other conversion of such warrants, (c) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion or exercise of any other securities of the Company acquired by the Purchasers after the date hereof, and (d) any warrants, shares of capital stock or other securities of the Company issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares of Common Stock referenced in clauses (a), (b) and (c) above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (i) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act; (ii) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of them shall not require registration under the Securities Act; (iii) such securities shall have ceased to be outstanding; or (iv) the Registrable Securities are saleable under Rule 144 without volume limitations or time restrictions.
 
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“ Registration Statement ” means a registration statement filed by the Company with the Commission in compliance with the Securities Act for a public offering and sale of Common Stock (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).
 
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
 
“ Underwriter ” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.
 
2. REGISTRATION RIGHTS.
 
2.1 Demand Registration .
 
2.1.1. Request for Registration . At any time and from time to time on or after the date of this Agreement, the holders of a majority-in-interest of the Registrable Securities, held by the Purchasers or the transferees of the Purchasers, may make a written demand for registration under the Securities Act of all or part of their Registrable Securities (a “ Demand Registration ”). Any demand for a Demand Registration shall specify the number and type of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will notify all holders of Registrable Securities of the demand within ten (10) days from the receipt of the Demand Registration, and each holder of Registrable Securities who wishes to include all or a portion of such holder’s Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “ Demanding Holder ”) shall so notify the Company within fifteen (15) days after the receipt by the holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.1.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to effect more than an aggregate of four (4) Demand Registrations under this Section 2.1.1 in respect of Registrable Securities.
 
2.1.2. Effective Registration . A registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement or otherwise with respect thereto; provided , however , if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders thereafter elect to continue the offering; provided , further , the Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.
 
2.1.3. Underwritten Offering . If a majority-in-interest of the Demanding Holders so elect and such holders so advise the Company as part of their written demand for a Demand Registration, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. In such event, the right of any holder to include its Registrable Securities in such registration shall be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by a majority-in-interest of the holders initiating the Demand Registration.
 
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2.1.4. Reduction of Offering . If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises the Company and the Demanding Holders in writing that the dollar amount or number of shares of Registrable Securities which the Demanding Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other shareholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders ( pro rata   in accordance with the number of shares of Registrable Securities which such Demanding Holders have requested be included in such registration, regardless of the number of shares of Registrable Securities held by each Demanding Holder) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i), (ii), and (iii), the shares of Common Stock that other shareholders desire to sell that can be sold without exceeding the Maximum Number of Shares.
 
2.1.5. Withdrawal . If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to the Company and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Demand Registration. In such event, the Company need not seek effectiveness of such Registration Statement for the benefit of other Purchasers. If the majority-in-interest of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration, then such registration shall not count as a Demand Registration.
 
2.2 Piggy-Back Registration .
 
2.2.1. Piggy-Back Rights . If at any time on or after the date of this Agreement, the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for stockholders of the Company for their account (or by the Company and by stockholders of the Company including, without limitation, pursuant to Section 2.1), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities as soon as practicable but in no event less than thirty (30) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of shares of Registrable Securities as such holders may request in writing within twenty (20) days following receipt of such notice (a “ Piggy-Back Registration ”). The Company shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.
 
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2.2.2. Reduction of Offering . If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders of Registrable Securities in writing that the dollar amount or number of shares of Common Stock which the Company desires to sell, taken together with shares of Common Stock, if any, as to which registration has been demanded pursuant to written contractual arrangements with persons other than the holders of Registrable Securities hereunder, the Registrable Securities as to which registration has been requested under this Section 2.2, and the shares of Common Stock, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other shareholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such registration:
 
(i) If the registration is undertaken for the Company’s account: (A) first, the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities, if any, including the Registrable Securities, as to which registration has been requested pursuant to the applicable written contractual piggy-back registration rights of such security holders ( pro rata   in accordance with the number of shares of Common Stock which each such person has actually requested to be included in such registration, regardless of the number of shares of Common Stock with respect to which such persons have the right to request such inclusion) that can be sold without exceeding the Maximum Number of Shares; and (C) third, to the extent that the Maximum Number of shares has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual piggy-back registration rights with such persons (pro rata in accordance with the number of shares of Common Stock which each such person has actually requested to be included in such registration, regardless of the number of shares of Common Stock with respect to which such persons have the right to request such inclusion) that can be sold without exceeding the Maximum Number of Shares; and
 
(ii) If the registration is a “demand” registration undertaken at the demand of persons other than the holders of Registrable Securities or pursuant to contractual arrangements with such persons, (A) first, the shares of Common Stock for the account of the demanding persons that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (C) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the Registrable Securities as to which registration has been requested under this Section 2.2 ( pro rata   in accordance with the number of shares of Registrable Securities held by each such holder); and (D) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A), (B) and (C), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register, if any, as to which registration has been requested pursuant to written contractual arrangements with such persons that can be sold without exceeding the Maximum Number of Shares.
 
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2.2.3. Withdrawal . Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may also elect to withdraw a Registration Statement at any time prior to the effectiveness of the Registration Statement.
 
2.2.4. Registrations on Form S-3 . The holders of Registrable Securities may at any time and from time to time, request in writing that the Company register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may be available at such time (“ Form S-3 ”); provided , however , that the Company shall not be obligated to effect such request through an underwritten offering. Upon receipt of such written request, the Company will promptly give written notice of the proposed registration to all other holders of Registrable Securities, and, as soon as practicable thereafter, effect the registration of all or such portion of such holder’s or holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other holder or holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided , however , that the Company shall not be obligated to effect any such registration pursuant to this Section 2.2.4 if Form S-3 is not available for such offering. Registrations effected pursuant to this Section 2.2 shall not be counted as Demand Registrations effected pursuant to Section 2.1.
 
2.3 No Net Cash Settlement Value . In connection with the exercise of the warrants issued in connection with the Warrant Consideration, the Company will not be obligated to deliver securities pursuant to a Registration Statement, and there will be no contractual penalties for failure to deliver securities pursuant to a Registration Statement, if a Registration Statement is not effective at the time of exercise of such warrants. The Company may satisfy its obligation under such warrants, however, by delivering unregistered shares of Common Stock to the holder or holder of such warrants. In no event will the Company be required to net cash settle the exercise of such a warrant.
 
2.4 Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of the Purchasers or other holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that allow such holder or prospective holder (a) to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities that are included, or (b) allow such holder or prospective holder to initiate a demand for registration of any securities of the Company held by such holder or prospective holder.
 
3. REGISTRATION PROCEDURES.
 
3.1 Filings; Information . Whenever the Company is required to effect the registration of any Registrable Securities pursuant to Section 2, the Company shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:
 
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3.1.1. Filing Registration Statement . The Company shall, as expeditiously as possible (and in any event within sixty (60) days after the date notice of a Demand Registration is given by Demanding Holders), prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its best efforts to cause such Registration Statement to become and remain effective for the period required by Section 3.1.3; provided , however , that the Company shall have the right to defer any Demand Registration for up to thirty (30) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if the Company shall furnish to the Demanding Holders a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company (in the exercise of its fiduciary duties to the Company and its stockholders), it would be materially detrimental to the Company and its stockholders for such Registration Statement to be effected at such time, because such action would (a) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company, (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, or (c) render the Company unable to comply with requirements under the Securities Act or the Exchange Act, then the Company shall have the right to defer taking action with respect to such filing; provided further, however , that the Company shall not have the right to exercise the right set forth in the immediately preceding proviso more than once in any 365-day period in respect of a Demand Registration hereunder; and pro vided further   that the Company shall not register any securities for its own account or that of any other stockholder during such thirty (30) day period other than (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan, (ii) a registration relating to a Rule 145 transaction, (ii i) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.
 
3.1.2. Copies . The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the holders of Registrable Securities included in such registration, and such holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the holders of Registrable Securities included in such registration or legal counsel for any such holders may request in order to facilitate the disposition of the Registrable Securities owned by such holders.
 
3.1.3. Amendments and Supplements . The Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement (which period shall not exceed the sum of one hundred eighty (180) days plus any period during which any such disposition is interfered with by any stop order or injunction of the Commission or any governmental agency or court) or such securities have been withdrawn.
 
3.1.4. Notification . After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) business days after such filing, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such holders promptly and confirm such advice in writing in all events within two (2) business days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity to review such documents and comment thereon, and the Company shall not file any Registration Statement or prospectus or amendment or supplement thereto, including documents incorporated by reference, to which such holders or their legal counsel shall object.
 
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3.1.5. State Securities Laws Compliance . The Company shall use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other Governmental Authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided , however , that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.1.5 or subject itself to taxation in any such jurisdiction.
 
3.1.6. Agreements for Disposition . The Company shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of the Company in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the holders of Registrable Securities included in such registration statement. No holder of Registrable Securities included in such registration statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such holder’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such holder’s material agreements and organizational documents, and with respect to written information relating to such holder that such holder has furnished in writing expressly for inclusion in such Registration Statement. Holders of Registrable Securities shall agree to such covenants and indemnification and contribution obligations for selling stockholders as are customarily contained in agreements of that type. Further, such holders shall cooperate fully in the preparation of the registration statement and other documents relating to any offering in which they include securities pursuant to Section 2 hereof. Each holder shall also furnish to the Company such information regarding itself, the Registrable Securities held by such holder and the intended method of disposition of such securities as shall be reasonably required to effect the registration of the Registrable Securities.
 
3.1.7. Cooperation . The principal executive officer of the Company, the principal financial officer of the Company, the principal accounting officer of the Company and all other officers and members of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.
 
3.1.8. Records . The Company shall make available for inspection by the holders of Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any holder of Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.
 
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3.1.9. Opinions and Comfort Letters . The Company shall furnish to each holder of Registrable Securities included in any Registration Statement a signed counterpart, addressed to such holder, of (i) any opinion of counsel to the Company delivered to any Underwriter and (ii) any comfort letter from the Company’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, the Company shall furnish to each holder of Registrable Securities included in such Registration Statement, at any time that such holder elects to use a prospectus, an opinion of counsel to the Company to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.
 
3.1.10. Earnings Statement . The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and make available to its shareholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
 
3.1.11. Listing . The Company shall use its best efforts to cause all Registrable Securities included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to the holders of a majority of the Registrable Securities included in such registration.
 
3.2 Obligation to Suspend Distribution . Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the Company, pursuant to a written insider trading compliance program adopted by the Company’s Board of Directors, of the ability of all “insiders” covered by such program to transact in the Company’s securities because of the existence of material non-public information, each holder of Registrable Securities included in any registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such holder receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in the Company’s securities is removed, as applicable, and, if so directed by the Company, each such holder will deliver to the Company all copies, other than permanent file copies then in such holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.
 
3.3 Registration Expenses . The Company shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective or whether any or all holders of Registrable Securities withdraw from any Registration Statement, including, without limitation: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by the Company in connection with such registration and (ix) the fees and expenses of one legal counsel selected by the holders of a majority-in-interest of the Registrable Securities included in such registration. The Company shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the holders thereof, which underwriting discounts or selling commissions shall be borne by such holders. Additionally, in an underwritten offering, all selling stockholders and the Company shall bear the expenses of the underwriter pro rata in proportion to the respective amount of shares each is selling in such offering.
 
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3.4 Information . The holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the Company’s obligation to comply with federal and applicable state securities laws.
 
3.5 Holder Obligations . No holder of Registrable Securities may participate in any underwritten offering pursuant to this Section 3 unless such holder (i) agrees to sell only such holder’s Registrable Securities on the basis reasonably provided in any underwriting agreement, and (ii) completes, executes and delivers any and all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required by or under the terms of any underwriting agreement or as reasonably requested by the Company.
 
4. INDEMNIFICATION AND CONTRIBUTION.
 
4.1 Indemnification by the Company . The Company agrees to indemnify and hold harmless Purchasers and each other holder of Registrable Securities, and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each Person, if any, who controls a Purchaser and each other holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) of Registrable Securities (each, an “ Purchaser Indemnified Party ”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement (or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission (or alleged omission) to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under state securities laws. The Company shall promptly reimburse the Purchaser Indemnified Party for any legal and any other expenses reasonably incurred by such Purchaser Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided , however , that the Company will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon any untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by such selling holder expressly for use therein. The Company also shall indemnify any Underwriter of the Registrable Securities, their officers, employees, affiliates, directors, partners, members and agents and each person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.
 
4.2 Indemnification by Holders of Registrable Se curities . Each selling holder of Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling holder, indemnify and hold harmless the Company, each of its directors and officers and each Underwriter (if any), and each other Person, if any, who controls another selling holder or such Underwriter or the Company within the meaning of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, judgments, damages or liabilities, severally and not jointly, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by such selling holder expressly for use therein, and shall reimburse the Company, its directors and officers, and each other selling holder or such controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each selling holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling holder in connection with the sale of the Registrable Securities by such selling holder pursuant to the Registration Statement containing such untrue statement.
 
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4.3 Conduct of Indemnification Proceedings . Promptly after receipt by any person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the “ Indemnified Party ”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder, notify such other person (the “ Indemnifying Party ”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the opinion of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.
 
4.4 Contribution .
 
4.4.1. If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
 
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4.4.2. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata   allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1. The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
 
5. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. The Company covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or any similar Rule or regulation hereafter adopted by the Commission. Without limiting the foregoing, the Company shall do each of the following:
 
(a)  make and keep available adequate current public information, as those terms are understood and defined in Rule 144, at all times after the effective date of the Registration Statement is filed by the Company;
 
(b)  use commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
 
(c)  furnish to any Purchaser or holder of Registrable Securities, so long as the Purchaser or such holder owns any Registrable Securities, forthwith upon request such information as may be reasonably requested and not otherwise publicly available in availing any Purchaser or such holder of any rule or regulation of the Commission that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
 
6. MISCELLANEOUS.
 
6.1 Assignment; No Third Party Beneficiaries . This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the holders of Registrable Securities hereunder may be freely assigned or delegated by such holder of Registrable Securities in conjunction with and to the extent of any transfer of Registrable Securities by any such holder. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and their respective successors and the permitted assigns of the Purchasers or holders of Registrable Securities or of any assignee of the Purchaser or holder of Registrable Securities. This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.1.
 
6.2 Notices . All notices, demands, requests, consents, approvals or other communications (collectively, “Notices”) required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile; provided, that if such service or transmission is not on a business day or is after normal business hours, then such notice shall be deemed given on the next business day. Notice otherwise sent as provided herein shall be deemed given on the next business day following timely delivery of such notice to a reputable air courier service with an order for next-day delivery.
 
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To the Company:
Dlorah, Inc.
 
5301 S. Highway 16, Suite 200
 
Rapid City, SD 57701
 
Attention: Bob Buckingham
 
Facsimile: (605) 721-5241
   
with a copy to:
Camden Learning, LLC
 
500 East Pratt Street
 
Suite 1200
 
Baltimore, MD 21202
 
Attn: David L. Warnock
   
To the Purchasers, c/o Dlorah, Inc. to:
 
5301 S. Highway 16, Suite 200
 
Rapid City, SD 57701
 
Attention: Bob Buckingham
 
Facsimile: (605) 721-5241
   
with a copy to:
Gray, Plant, Mooty, Mooty & Bennett, P.A.
 
500 IDS Center
 
80 South Eighth Street
 
Minneapolis, MN 55402
 
Attn: Mark D. Williamson, Esq.
 
Facsimile: (612) 632-4379
 
6.3 Severability . This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
 
6.4 Counterparts; Facsimile Signatures . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Facsimile signatures shall be deemed to be original signatures for all purposes of this Agreement.
 
6.5 Entire Agreement . This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written.
 
6.6 Modifications and Amendments . No amendment, modification or termination of this Agreement shall be binding upon any party unless executed in writing by such party.
 
6.7 Titles and H eadings . Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.
 
6.8 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided, however, that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Purchaser or holder of Registrable Securities without the written consent of such Purchaser or holder, unless such amendment, termination, or waiver applies to all Purchasers or holders of Registrable Securities in the same fashion. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6. 8 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
 
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6.9 Remedies Cumulative . In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the Purchaser or any other holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.
 
6.10 Governing Law . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof. All actions, proceedings or claims arising out of or relating to this Agreement shall be heard and determined exclusively in any state or federal court located in New Castle County, Delaware. The parties hereby (a) submit to the exclusive jurisdiction of any Delaware state or federal court for the purpose of any actions, proceedings or claims arising out of or relating to this Agreement brought by any party, and (b) irrevocably waive, and agree not to assert by way of motion, defense or otherwise, in any such action, proceeding or claim, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action, proceeding or claim is brought in an inconvenient forum, that the venue of the action, proceeding or claim is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any of the above-named courts. Each of the parties agree that a final judgment in any action or proceeding with respect to which all appeals have been taken or waived, shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Each of parties irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party. Nothing in this Section 6.10 shall affect the right of any party to serve legal process in any other manner permitted by law.
 
6.11 Waiver of Trial by Jury . Each party hereby irrevocably and unconditionally waives the right to a trial by jury in any action, suit, counterclaim or other proceeding (whether based on contract, tort or otherwise) arising out of, connected with or relating to this Agreement, the transactions contemplated hereby, or the actions of the Purchaser in the negotiation, administration, performance or enforcement hereof.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
 
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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
 
 
CAMDEN LEARNING CORPORATION
 
       
 
By:
/s/ David L. Warnock  
    Name: David L. Warnock  
    Title: Chief Executive Officer and President  
       
       
 
PURCHASERS:
 
  H. & E. BUCKINGHAM LIMITED PARTNERSHIP  
       
  By:   /s/ Robert Buckingham  
    Robert Buckingham  
    Its:  General Partner  
       
       
  ROBERT D. BUCKINGHAM LIVING TRUST  
       
  By:  /s/ Robert Buckingham  
    Robert Buckingham  
    Its:  Trustee  
 
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EXHIBIT 10.9
 
CAMDEN LEARNING CORPORATION
 
RESTRICTED STOCK AGREEMENT
 
THIS RESTRICTED STOCK AGREEMENT (this “ Agreement ”) between Camden Learning Corporation, a Delaware corporation (the “ Company ”), and H & E Buckingham Limited Partnership (the “ Stockholder ”) takes effect on November 23, 2009.
 
Reference herein is made to that certain Amended and Restated Agreement and Plan of Reorganization, by and among the Company, Dlorah Subsidiary, Inc. and Dlorah, Inc., dated August 11, 2009, as amended October 26, 2009 (the “ Merger Agreement ”).  Capitalized terms not explicitly defined in this Agreement but defined in the Merger Agreement shall have the same meanings as set forth with respect to such terms in the Merger Agreement.
 
RECITALS
 
A.
In connection with the transactions contemplated by the Merger Agreement, Stockholder received 193,425 shares of the Company’s common stock, $0.0001 par value (the “ Shares ”).
 
 
B.
The Stockholder and the Company have agreed to certain restrictions with respect to the ownership and transferability of the Shares, in accordance with the terms and conditions of this Agreement.
 
AGREEMENT
 
In consideration of the above recitals and the promises set forth in this Agreement, the parties agree as follows:
 
1.            Restriction .  Stockholder shall be prohibited from selling, assigning, transferring, pledging, encumbering or otherwise disposing of the Shares, and the Shares shall be subject to forfeiture, until such time as the Company’s common stock shall have traded at or above $8.00 per share for any sixty (60) consecutive Trading Day period occurring prior to November 23, 2014 (the “ Restriction ”).  In the event such trading price threshold is achieved, the Restriction will lapse and the Shares will no longer be subject to forfeiture.  In the event such trading price threshold is not achieved, the Shares will automatically be forfeited on November 23, 2014.
 
2.            Status of Participant .  Upon issuance of the Shares, Stockholder will be recorded as a registered stockholder of the Company with respect to the Shares.  The Company will promptly provide to Stockholder written confirmation of such issuance and recordation.  Upon issuance of the Shares, Stockholder will have all rights of a holder of common stock of the Company, including, without limitation, voting rights.  Rights to dividends and distributions in respect of the Shares shall be credited on the Company’s books and records and accrued in favor of the Stockholder, but shall not be paid unless and until the Restriction is removed.
 
 
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3.            Transferability .  Stockholder shall not sell, transfer, assign or otherwise dispose of any Shares while the Shares are Restricted.  Notwithstanding anything else in this Agreement to the contrary, the provisions of this Section 3   shall not apply to any transfer or gift during lifetime or death of the Stockholder to a Permitted Transferee provided that:   (a) Stockholder informs the Company of such transfer prior to effecting it; and (b) the transferee or donee shall furnish the Company with a written agreement to be bound by and comply with all provisions of this Agreement.
 
If the Stockholder is an individual   person, “Permitted Transferee” means (a) any lineal descendant of Stockholder, excluding any person adopted after attaining age eighteen and any descendant of that person; (b) any trust if the trust was created by the Stockholder for the benefit of his or her lineal descendants;   (c) any trust if the trust is revocable by the Stockholder and if the Stockholder is the primary beneficiary of that trust during his or her lifetime; and (d) the Stockholder’s spouse.
 
If the Stockholder is a company, partnership or trust, “Permitted Transferee” means (a) any lineal descendant of a shareholder, partner, or beneficiary of Stockholder, excluding any person adopted after attaining age eighteen and any descendant of that person; (b) any trust if the trust was created by a shareholder, partner or beneficiary of the Stockholder; (c) any trust if the trust is revocable by a shareholder, partner or beneficiary of the Stockholder,   and if the shareholder, partner, or beneficiary of the Stockholder is the primary beneficiary of that trust during his or her lifetime; (d) partners, members or shareholders of the Stockholder; and (e) the spouse of a shareholder, partner or beneficiary of the Stockholder.
 
4.            Securities Law Compliance; Certain Representations .
 
(a)           The Shares acquired by Stockholder under this Agreement have been acquired for investment for Stockholder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof.  Stockholder has no present intention of selling, granting any participation in or otherwise distributing the Shares.  Stockholder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participations to such person or entity or to any other person or entity, with respect to any of the Shares.
 
(b)           Stockholder represents and warrants that it (i) has been furnished with all information which it deems necessary to evaluate the merits and risks of receipt of the Shares; (ii) has had the opportunity to ask questions and receive answers concerning the information received about the Shares and the Company; and (iii) has been given the opportunity to obtain any additional information it deems necessary to verify the accuracy of any information obtained concerning the Shares and the Company.  Stockholder is an “accredited investor” under Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”).
 
 
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(c)           Stockholder hereby agrees that it will in no event sell or distribute all or any part of the Shares unless (i) there is an effective registration statement under the Securities Act, and applicable state and other securities law covering any such transaction involving the Shares; or (ii) the Company receives an opinion of Stockholder’s legal counsel stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration.  The Company shall provide promptly to Stockholder all information reasonably requested in connection with preparing such opinion.  Stockholder understands that the Company has no obligation to register the Shares with the Securities and Exchange Commission (the “ SEC ”) and has not represented to Stockholder that the Company will so register the Shares.
 
(d)           Stockholder confirms that it has been advised, prior to its receipt of the Shares, that neither the offering of the Shares nor any offering materials have been reviewed by any administrator or other governmental entity under the Securities Act or any other applicable securities act.
 
(e)           The Company represents and warrants that each of the issuance and delivery of the Shares in accordance with the Agreement, as well as the execution and delivery of this Agreement, has been duly authorized by all necessary corporate action on the part of the Company, and that all such Shares have been duly reserved for issuance and that the Shares will, upon issuance, be duly and validly issued, fully paid and nonassessable and free and clear of any liens or encumbrances except for restrictions on transfer set forth herein and under applicable securities laws (subject only to the vesting and forfeiture provision in this Agreement).  The Company further represents and warrants that assuming the accuracy of Section 4(a), the issuance of the Shares to Stockholder does not require registration under the Securities Act and is in compliance with applicable federal and state securities laws.
 
5.            Book Entry Registration of the Shares .  The Company will issue the Shares by registering the Shares in book entry form in Stockholder’s name and the applicable restrictions will be noted in the Company’s records and book entry system.  No certificate(s) representing the Shares will be issued unless and until the Restriction shall have been removed.  Subject to provision by Stockholder of any documentation reasonably requested by the Company, upon written request by Stockholder, the Company will provide such documentation as is reasonably necessary to (a) remove any restrictions under this Agreement with respect to the Shares, or (b) otherwise facilitate a lawful transfer of the Shares pursuant to the terms and conditions of this Agreement.
 
6.            Restrictive Legends .  The restrictions noted in the Company’s records and any certificate or certificates representing the Shares shall bear the following legend in substantially the following form (as well as any other legends required by applicable state and federal corporate securities laws) as reasonably deemed appropriate by the Company:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATES AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION OR OTHER TRANSFER THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR THE COMPANY’S RECEIPT OF AN OPINION OF TRANSFEROR’S LEGAL COUNSEL STATING THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION OR THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION.  IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A RESTRICTED STOCK AGREEMENT DATED AS OF NOVEMBER 23, 2009 AND MAY ONLY BE TRANSFERRED IN COMPLIANCE THEREWITH.
 
 
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Notwithstanding the foregoing, upon Stockholder’s request, promptly following the date that Shares may be sold under Rule 144 without volume restrictions or manner of sale limitations, the Company shall cause its legal counsel to issue a legal opinion to Stockholder (which opinion shall be reasonable in form and substance) that any and all certificates representing such Shares shall be issued free of all legends.
 
7.            Capital Adjustments .  If any of the outstanding Shares should be changed into, or exchanged for, a different number or kind of shares of the capital stock or other securities of the Company, or, if further changes or exchanges of any capital stock or other securities into which the Shares will have been changed, or for which it will have been exchanged, will be made (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, reclassification, split-up, combination of shares or otherwise), then there will be substituted and exchanged therefor the number and kind of shares of capital stock or other securities into which each outstanding Share will be so changed or exchanged.  In the event of any such changes or exchanges, if the Board of Directors of the Company, in its sole discretion, should determine that in order to prevent dilution or enlargement of rights under this Agreement, an adjustment should be made in the number or kind of shares of capital stock or other securities subject to this Agreement, such adjustment will be made and will be effective and binding for all purposes of this Agreement.
 
8.            Notices .  Notices required hereunder shall be given in person or by registered mail to the address of Stockholder shown on the records of the Company, and to the Company at its respective principal executive offices.
 
9.            Survival of Terms .  This Agreement shall apply to and bind Stockholder and the Company and their respective permitted assignees and transferees, heirs, executors, administrators and legal successors.  The parties covenant and agree that they and their respective permitted assignees and transferees, heirs, executors, administrators and legal successors will execute any and all instruments, releases, assignments and other consents which may reasonably be required of them in order to carry out the provisions of this Agreement.
 
 
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10.            Counterparts and Facsimile Signatures .  This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument, and by facsimile.
 
11.            Entire Agreement; Governing Law .  This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes in its entirety all prior undertakings and agreements of the Company and Stockholder with respect to the subject matter hereof, and may not be modified adversely to the Stockholder’s interest except by means of a writing signed by the Company and Stockholder.  This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware or of any other state.
 
12.            Amendment.   This Agreement shall not be amended in any manner so as to increase the benefits or reduce the burdens hereunder to the Stockholder unless the Company simultaneously amends all other Restricted Stock Agreements executed by the Company on the date hereof.
 
Stockholder represents that it has read this Agreement and is familiar with its terms and provisions.  Stockholder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors of the Company upon any questions arising under this Agreement.
 
[Signature Page Follows]
 
 
5
 
 
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.
 
STOCKHOLDER         
  CAMDEN LEARNING CORPORATION
   
/s/ Robert Buckingham       /s/ David Warnock
By   By
     
Robert Buckingham     David Warnock
Print Name   
  Print Name
     
General Partner       President and Chief Executive Officer
Title    Title
 
 
[Signature Page to Restricted Stock Agreement]
 
 
6
 
EXHIBIT 10.10
 
CAMDEN LEARNING CORPORATION
 
RESTRICTED STOCK AGREEMENT
 
 

 
THIS RESTRICTED STOCK AGREEMENT (this “ Agreement ”) between Camden Learning Corporation, a Delaware corporation (the “ Company ”), and Robert D. Buckingham Living Trust (the “ Stockholder ”) takes effect on November 23, 2009.
 
Reference herein is made to that certain Amended and Restated Agreement and Plan of Reorganization, by and among the Company, Dlorah Subsidiary, Inc. and Dlorah, Inc., dated August 11, 2009, as amended October 26, 2009 (the “ Merger Agreement ”).  Capitalized terms not explicitly defined in this Agreement but defined in the Merger Agreement shall have the same meanings as set forth with respect to such terms in the Merger Agreement.
 
RECITALS
 
A.
In connection with the transactions contemplated by the Merger Agreement, Stockholder received 56,575 shares of the Company’s common stock, $0.0001 par value (the “ Shares ”).
 
 
B.
The Stockholder and the Company have agreed to certain restrictions with respect to the ownership and transferability of the Shares, in accordance with the terms and conditions of this Agreement.
 
AGREEMENT
 
In consideration of the above recitals and the promises set forth in this Agreement, the parties agree as follows:
 
1.            Restriction .  Stockholder shall be prohibited from selling, assigning, transferring, pledging, encumbering or otherwise disposing of the Shares, and the Shares shall be subject to forfeiture, until such time as the Company’s common stock shall have traded at or above $8.00 per share for any sixty (60) consecutive Trading Day period occurring prior to November 23, 2014 (the “ Restriction ”).  In the event such trading price threshold is achieved, the Restriction will lapse and the Shares will no longer be subject to forfeiture.  In the event such trading price threshold is not achieved, the Shares will automatically be forfeited on November 23, 2014.
 
2.            Status of Participant .  Upon issuance of the Shares, Stockholder will be recorded as a registered stockholder of the Company with respect to the Shares.  The Company will promptly provide to Stockholder written confirmation of such issuance and recordation.  Upon issuance of the Shares, Stockholder will have all rights of a holder of common stock of the Company, including, without limitation, voting rights.  Rights to dividends and distributions in respect of the Shares shall be credited on the Company’s books and records and accrued in favor of the Stockholder, but shall not be paid unless and until the Restriction is removed.
 
1
 
3.            Transferability .  Stockholder shall not sell, transfer, assign or otherwise dispose of any Shares while the Shares are Restricted.  Notwithstanding anything else in this Agreement to the contrary, the provisions of this Section 3   shall not apply to any transfer or gift during lifetime or death of the Stockholder to a Permitted Transferee provided that:   (a) Stockholder informs the Company of such transfer prior to effecting it; and (b) the transferee or donee shall furnish the Company with a written agreement to be bound by and comply with all provisions of this Agreement.
 
If the Stockholder is an individual   person, “Permitted Transferee” means (a) any lineal descendant of Stockholder, excluding any person adopted after attaining age eighteen and any descendant of that person; (b) any trust if the trust was created by the Stockholder for the benefit of his or her lineal descendants;   (c) any trust if the trust is revocable by the Stockholder and if the Stockholder is the primary beneficiary of that trust during his or her lifetime; and (d) the Stockholder’s spouse.
 
If the Stockholder is a company, partnership or trust, “Permitted Transferee” means (a) any lineal descendant of a shareholder, partner, or beneficiary of Stockholder, excluding any person adopted after attaining age eighteen and any descendant of that person; (b) any trust if the trust was created by a shareholder, partner or beneficiary of the Stockholder; (c) any trust if the trust is revocable by a shareholder, partner or beneficiary of the Stockholder,   and if the shareholder, partner, or beneficiary of the Stockholder is the primary beneficiary of that trust during his or her lifetime; (d) partners, members or shareholders of the Stockholder; and (e) the spouse of a shareholder, partner or beneficiary of the Stockholder.
 
4.            Securities Law Compliance; Certain Representations .
 
(a)           The Shares acquired by Stockholder under this Agreement have been acquired for investment for Stockholder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof.  Stockholder has no present intention of selling, granting any participation in or otherwise distributing the Shares.  Stockholder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participations to such person or entity or to any other person or entity, with respect to any of the Shares.
 
(b)           Stockholder represents and warrants that it (i) has been furnished with all information which it deems necessary to evaluate the merits and risks of receipt of the Shares; (ii) has had the opportunity to ask questions and receive answers concerning the information received about the Shares and the Company; and (iii) has been given the opportunity to obtain any additional information it deems necessary to verify the accuracy of any information obtained concerning the Shares and the Company.  Stockholder is an “accredited investor” under Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”).
 
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(c)           Stockholder hereby agrees that it will in no event sell or distribute all or any part of the Shares unless (i) there is an effective registration statement under the Securities Act, and applicable state and other securities law covering any such transaction involving the Shares; or (ii) the Company receives an opinion of Stockholder’s legal counsel stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration.  The Company shall provide promptly to Stockholder all information reasonably requested in connection with preparing such opinion.  Stockholder understands that the Company has no obligation to register the Shares with the Securities and Exchange Commission (the “ SEC ”) and has not represented to Stockholder that the Company will so register the Shares.
 
(d)           Stockholder confirms that it has been advised, prior to its receipt of the Shares, that neither the offering of the Shares nor any offering materials have been reviewed by any administrator or other governmental entity under the Securities Act or any other applicable securities act.
 
(e)           The Company represents and warrants that each of the issuance and delivery of the Shares in accordance with the Agreement, as well as the execution and delivery of this Agreement, has been duly authorized by all necessary corporate action on the part of the Company, and that all such Shares have been duly reserved for issuance and that the Shares will, upon issuance, be duly and validly issued, fully paid and nonassessable and free and clear of any liens or encumbrances except for restrictions on transfer set forth herein and under applicable securities laws (subject only to the vesting and forfeiture provision in this Agreement).  The Company further represents and warrants that assuming the accuracy of Section 4(a), the issuance of the Shares to Stockholder does not require registration under the Securities Act and is in compliance with applicable federal and state securities laws.
 
5.            Book Entry Registration of the Shares .  The Company will issue the Shares by registering the Shares in book entry form in Stockholder’s name and the applicable restrictions will be noted in the Company’s records and book entry system.  No certificate(s) representing the Shares will be issued unless and until the Restriction shall have been removed.  Subject to provision by Stockholder of any documentation reasonably requested by the Company, upon written request by Stockholder, the Company will provide such documentation as is reasonably necessary to (a) remove any restrictions under this Agreement with respect to the Shares, or (b) otherwise facilitate a lawful transfer of the Shares pursuant to the terms and conditions of this Agreement.
 
6.            Restrictive Legends .  The restrictions noted in the Company’s records and any certificate or certificates representing the Shares shall bear the following legend in substantially the following form (as well as any other legends required by applicable state and federal corporate securities laws) as reasonably deemed appropriate by the Company:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATES AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION OR OTHER TRANSFER THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR THE COMPANY’S RECEIPT OF AN OPINION OF TRANSFEROR’S LEGAL COUNSEL STATING THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION OR THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION.  IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A RESTRICTED STOCK AGREEMENT DATED AS OF NOVEMBER 23, 2009 AND MAY ONLY BE TRANSFERRED IN COMPLIANCE THEREWITH.
 
3
 
Notwithstanding the foregoing, upon Stockholder’s request, promptly following the date that Shares may be sold under Rule 144 without volume restrictions or manner of sale limitations, the Company shall cause its legal counsel to issue a legal opinion to Stockholder (which opinion shall be reasonable in form and substance) that any and all certificates representing such Shares shall be issued free of all legends.
 
7.            Capital Adjustments .  If any of the outstanding Shares should be changed into, or exchanged for, a different number or kind of shares of the capital stock or other securities of the Company, or, if further changes or exchanges of any capital stock or other securities into which the Shares will have been changed, or for which it will have been exchanged, will be made (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, reclassification, split-up, combination of shares or otherwise), then there will be substituted and exchanged therefor the number and kind of shares of capital stock or other securities into which each outstanding Share will be so changed or exchanged.  In the event of any such changes or exchanges, if the Board of Directors of the Company, in its sole discretion, should determine that in order to prevent dilution or enlargement of rights under this Agreement, an adjustment should be made in the number or kind of shares of capital stock or other securities subject to this Agreement, such adjustment will be made and will be effective and binding for all purposes of this Agreement.
 
8.            Notices .  Notices required hereunder shall be given in person or by registered mail to the address of Stockholder shown on the records of the Company, and to the Company at its respective principal executive offices.
 
9.            Survival of Terms .  This Agreement shall apply to and bind Stockholder and the Company and their respective permitted assignees and transferees, heirs, executors, administrators and legal successors.  The parties covenant and agree that they and their respective permitted assignees and transferees, heirs, executors, administrators and legal successors will execute any and all instruments, releases, assignments and other consents which may reasonably be required of them in order to carry out the provisions of this Agreement.
 
4
 
10.            Counterparts and Facsimile Signatures .  This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument, and by facsimile.
 
11.            Entire Agreement; Governing Law .  This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes in its entirety all prior undertakings and agreements of the Company and Stockholder with respect to the subject matter hereof, and may not be modified adversely to the Stockholder’s interest except by means of a writing signed by the Company and Stockholder.  This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware or of any other state.
 
12.            Amendment.   This Agreement shall not be amended in any manner so as to increase the benefits or reduce the burdens hereunder to the Stockholder unless the Company simultaneously amends all other Restricted Stock Agreements executed by the Company on the date hereof.
 
Stockholder represents that it has read this Agreement and is familiar with its terms and provisions.  Stockholder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors of the Company upon any questions arising under this Agreement.
 
[Signature Page Follows]
 
5
 
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.
 
STOCKHOLDER         
  CAMDEN LEARNING CORPORATION
   
/s/ Robert Buckingham       /s/ David Warnock
By   By
     
Robert Buckingham     David Warnock
Print Name   
  Print Name
     
Trustee   President and Chief Executive Officer
Title    Title
 
 
[Signature Page to Restricted Stock Agreement]
 
6
 
EXHIBIT 10.11
 
CAMDEN LEARNING CORPORATION
 
RESTRICTED STOCK AGREEMENT
 
THIS RESTRICTED STOCK AGREEMENT (this “Agreement” ) between Camden Learning Corporation, a Delaware corporation (the “Company” ) , and Camden Learning LLC, a Delaware limited liability company (the “Stockholder” ) takes effect on November 23, 2009.
 
Reference herein is made to that certain Amended and Restated Agreement and Plan of Reorganization, by and among the Company, Dlorah Subsidiary, Inc. and Dlorah, Inc., dated August 11, 2009, as amended October 26, 2009 (the “Merger Agreement” ). Capitalized terms not explicitly defined in this Agreement but defined in the Merger Agreement shall have the same meanings as set forth with respect to such terms in the Merger Agreement.
 
RECITALS
 
A.
In connection with the transactions contemplated by the Merger Agreement, Stockholder received 575,000 shares of the Company’s common stock, $0.0001 par value (the “Shares” ) .
 
B.
The Stockholder and the Company have agreed to certain restrictions with respect to the ownership and transferability of the Shares, in accordance with the terms and conditions of this Agreement.
 
AGREEMENT
 
In consideration of the above recitals and the promises set forth in this Agreement, the parties agree as follows:
 
1.            Restriction. Stockholder shall be prohibited from selling, assigning, transferring, pledging, encumbering or otherwise disposing of the Shares, and the Shares shall be subject to forfeiture, until such time as the Company’s common stock shall have traded at or above $8.00 per share for any sixty (60) consecutive Trading Day period occurring prior to November 23, 2014 (the “Restriction” ). In the event such trading price threshold is achieved, the Restriction will lapse and the Shares will no longer be subject to forfeiture. In the event such trading price threshold is not achieved, the Shares will automatically be forfeited on November 23, 2014.
 
2.            Status of Participant. Upon issuance of the Shares, Stockholder will be recorded as a registered stockholder of the Company with respect to the Shares. The Company will promptly provide to Stockholder written confirmation of such issuance and recordation. Upon issuance of the Shares, Stockholder will have all rights of a holder of common stock of the Company, including, without limitation, voting rights. Rights to dividends and distributions in respect of the Shares shall be credited on the Company’s books and records and accrued in favor of the Stockholder, but shall not be paid unless and until the Restriction is removed.

 
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3.            Transferability. Stockholder shall not sell, transfer, assign or otherwise dispose of any Shares while the Shares are Restricted. Notwithstanding anything else in this Agreement to the contrary, the provisions of this Section 3 shall not apply to any transfer or gift during lifetime or death of the Stockholder to a Permitted Transferee provided that: (a) Stockholder informs the Company of such transfer prior to effecting it; and (b) the transferee or donee shall furnish the Company with a written agreement to be bound by and comply with all provisions of this Agreement.
 
If the Stockholder is an individual person, “Permitted Transferee” means (a) any lineal descendant of Stockholder, excluding any person adopted after attaining age eighteen and any descendant of that person; (b) any trust if the trust was created by the Stockholder for the benefit of his or her lineal descendants; (c) any trust if the trust is revocable by the Stockholder and if the Stockholder is the primary beneficiary of that trust during his or her lifetime; and (d) the Stockholder’s spouse.
 
If the Stockholder is a company, partnership or trust, “Permitted Transferee” means (a) any lineal descendant of a shareholder, partner, or beneficiary of Stockholder, excluding any person adopted after attaining age eighteen and any descendant of that person; (b) any trust if the trust was created by a shareholder, partner or beneficiary of the Stockholder; (c) any trust if the trust is revocable by a shareholder, partner or beneficiary of the Stockholder, and if the shareholder, partner, or beneficiary of the Stockholder is the primary beneficiary of that trust during his or her lifetime; (d) partners, members or shareholders of the Stockholder; and (e) the spouse of a shareholder, partner or beneficiary of the Stockholder.
 
4.            Securities Law Compliance; Certain Representations.
 
(a)           The Shares acquired by Stockholder under this Agreement have been acquired for investment for Stockholder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof. Stockholder has no present intention of selling, granting any participation in or otherwise distributing the Shares. Stockholder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participations to such person or entity or to any other person or entity, with respect to any of the Shares.
 
(b)           Stockholder represents and warrants that it (i) has been furnished with all information which it deems necessary to evaluate the merits and risks of receipt of the Shares; (ii) has had the opportunity to ask questions and receive answers concerning the information received about the Shares and the Company; and (iii) has been given the opportunity to obtain any additional information it deems necessary to verify the accuracy of any information obtained concerning the Shares and the Company. Stockholder is an “accredited investor” under Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act” ).

 
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(c)           Stockholder hereby agrees that it will in no event sell or distribute all or any part of the Shares unless (i) there is an effective registration statement under the Securities Act, and applicable state and other securities law covering any such transaction involving the Shares; or (ii) the Company receives an opinion of Stockholder’s legal counsel stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration. The Company shall provide promptly to Stockholder all information reasonably requested in connection with preparing such opinion. Stockholder understands that the Company has no obligation to register the Shares with the Securities and Exchange Commission (the “SEC” ) and has not represented to Stockholder that the Company will so register the Shares.
 
(d)           Stockholder confirms that it has been advised, prior to its receipt of the Shares, that neither the offering of the Shares nor any offering materials have been reviewed by any administrator or other governmental entity under the Securities Act or any other applicable securities act.
 
(e)           The Company represents and warrants that each of the issuance and delivery of the Shares in accordance with the Agreement, as well as the execution and delivery of this Agreement, has been duly authorized by all necessary corporate action on the part of the Company, and that all such Shares have been duly reserved for issuance and that the Shares will, upon issuance, be duly and validly issued, fully paid and nonassessable and free and clear of any liens or encumbrances except for restrictions on transfer set forth herein and under applicable securities laws (subject only to the vesting and forfeiture provision in this Agreement). The Company further represents and warrants that assuming the accuracy of Section 4(a), the issuance of the Shares to Stockholder does not require registration under the Securities Act and is in compliance with applicable federal and state securities laws.
 
5.             Book Entry Registration of the Shares. The Company will issue the Shares by registering the Shares in book entry form in Stockholder’s name and the applicable restrictions will be noted in the Company’s records and book entry system. No certificate(s) representing the Shares will be issued unless and until the Restriction shall have been removed. Subject to provision by Stockholder of any documentation reasonably requested by the Company, upon written request by Stockholder, the Company will provide such documentation as is reasonably necessary to (a) remove any restrictions under this Agreement with respect to the Shares, or (b) otherwise facilitate a lawful transfer of the Shares pursuant to the terms and conditions of this Agreement.
 
6.             Restrictive Legends. The restrictions noted in the Company’s records and any certificate or certificates representing the Shares shall bear the following legend in substantially the following form (as well as any other legends required by applicable state and federal corporate securities laws) as reasonably deemed appropriate by the Company:

 
-3-
 
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATES AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION OR OTHER TRANSFER THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR THE COMPANY’S RECEIPT OF AN OPINION OF TRANSFEROR’S LEGAL COUNSEL STATING THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION OR THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A RESTRICTED STOCK AGREEMENT DATED AS OF NOVEMBER 23, 2009 AND MAY ONLY BE TRANSFERRED IN COMPLIANCE THEREWITH.
 
Notwithstanding the foregoing, upon Stockholder’s request, promptly following the date that Shares may be sold under Rule 144 without volume restrictions or manner of sale limitations, the Company shall cause its legal counsel to issue a legal opinion to Stockholder (which opinion shall be reasonable in form and substance) that any and all certificates representing such Shares shall be issued free of all legends.
 
7.           Capital Adjustments. If any of the outstanding Shares should be changed into, or exchanged for, a different number or kind of shares of the capital stock or other securities of the Company, or, if further changes or exchanges of any capital stock or other securities into which the Shares will have been changed, or for which it will have been exchanged, will be made (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, reclassification, split-up, combination of shares or otherwise), then there will be substituted and exchanged therefor the number and kind of shares of capital stock or other securities into which each outstanding Share will be so changed or exchanged. In the event of any such changes or exchanges, if the Board of Directors of the Company, in its sole discretion, should determine that in order to prevent dilution or enlargement of rights under this Agreement, an adjustment should be made in the number or kind of shares of capital stock or other securities subject to this Agreement, such adjustment will be made and will be effective and binding for all purposes of this Agreement.
 
8.           Notices. Notices required hereunder shall be given in person or by registered mail to the address of Stockholder shown on the records of the Company, and to the Company at its respective principal executive offices.
 
9.           Survival of Terms. This Agreement shall apply to and bind Stockholder and the Company and their respective permitted assignees and transferees, heirs, executors, administrators and legal successors. The parties covenant and agree that they and their respective permitted assignees and transferees, heirs, executors, administrators and legal successors will execute any and all instruments, releases, assignments and other consents which may reasonably be required of them in order to carry out the provisions of this Agreement.
 
10.         Counterparts and Facsimile Signatures. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument, and by facsimile.

 
-4-
 
 
11.           Entire Agreement; Governing Law. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes in its entirety all prior undertakings and agreements of the Company and Stockholder with respect to the subject matter hereof, and may not be modified adversely to the Stockholder’s interest except by means of a writing signed by the Company and Stockholder. This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware or of any other state.
 
12.           Amendment. This Agreement shall not be amended in any manner so as to increase the benefits or reduce the burdens hereunder to the Stockholder unless the Company simultaneously amends all other Restricted Stock Agreements executed by the Company on the date hereof.
 
Stockholder represents that it has read this Agreement and is familiar with its terms and provisions. Stockholder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors of the Company upon any questions arising under this Agreement.
 
[Signature Page Follows]

 
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IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.
 
CAMDEN LEARNING, LLC
 
CAMDEN LEARNING CORPORATION
     
By: 
Camden Partners Strategic III, LLC
 
By:
/s/ David Warnock
Title: Manager
   
David Warnock, President and CEO
       
By: 
Camden Partners Strategic Manager, LLC
   
     
Title: Manager
   

By:
/s/ Donald W. Hughes
 
Name: Donald W. Hughes
 
Title: Managing Member
 
Dated: November 23, 2009
 
[Signature Page to Restricted Stock Agreement]

 
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EXHIBIT 10.12
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
2009 STOCK OPTION AND COMPENSATION PLAN
 
Section 1 . Purpose of the Plan; Effect on Prior Plans . The purpose of the Plan is to aid National American University Holdings, Inc. (the “ Company ”) in recruiting and retaining employees, officers, Directors, and other Consultants capable of assuring the future success of the Company through the grant of Awards to such persons under the Plan. The Company expects that Awards of stock-based compensation and opportunities for stock ownership in the Company will provide incentives to Plan participants to exert their best efforts for the success of the Company’s business and thereby align the interests of Plan Participants with those of the Company’s stockholders.
 
Section 2. Definitions
 
The following capitalized terms used in the Plan have the meanings set forth in this Section 2:
 
(a) “ Affiliate ” means (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee.
 
(b) “ Award ” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent, Performance Award, Stock Award, Other Stock-Based Award, or Cash Award granted under the Plan.
 
(c) “ Award Agreement ” means any written agreement, contract or other instrument or document evidencing an Award granted under the Plan. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
 
(d) “ Board ” means the Board of Directors of the Company.
 
(e) “ Cash Award ” means any Award granted under Section 7(d) of the Plan that is payable in cash and denominated as a “Cash Award.”
 
(f) “ Change in Control ” means the occurrence of any of the following:
 
(a) A “change in ownership,” as described in Section 1.409A-3(i)(5)(v) of the Treasury Regulations.
() A “change in effective control,” as described in Section 1.409A-3(i)(5)(vi) of the Treasury Regulations, but substituting “50 percent” for “30 percent” in the first sentence of Section 1.409A-3(i)(5)(vi)(A)(1).
(c) A “change in ownership of a substantial portion of the assets,” as described in Section 1.409A-3(i)(5)(vii) of the Treasury Regulations, but substituting “50 percent” for “40 percent” in the first sentence thereof.
(g) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
 
(h) “ Committee ” means the Compensation Committee of the Board or any successor committee of the Board designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3, and each member of the Committee shall be a “Non-Employee Director” within the meaning of Rule 16b-3 and an “outside director” within the meaning of Section 162(m) of the Code. The Company expects to have the Plan administered in accordance with the requirements of the “qualified performance-based compensation” exception under Section 162(m) of the Code, to the extent applicable.
 
 
 
 
 
(i) “ Company ” means National American University Holdings, Inc., a Delaware corporation.
 
(j) “ Consultant ” means an individual who renders services to the Company in a non-employee capacity, including a Non-employee Director.
 
(k) “ Director ” means a member of the Board.
 
(l) “ Dividend Equivalent ” means any right granted under Section 7(e) of the Plan.
 
(m) “ Eligible Person ” means any employee, officer or Consultant of the Company or any Affiliate whom the Committee determines to be an Eligible Person.
 
(n) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
 
(o) “ Fair Market Value ” means, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given date for purposes of the Plan shall be the closing sale price of the Shares on the principal United States Securities Exchange registered under the Exchange Act on which the Shares are listed (the “ Exchange ”) on the applicable date. If the Exchange is closed for trading on such date, then the last sale price used shall be the one on the date the Shares last traded on the Exchange.
 
(p) “ Incentive Stock Option ” means an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision, as set forth in part in Section 6(a)(iv).
 
(q) “ Non-employee Director ” means a Director who is not an employee of the Company or an Affiliate.
 
(r) “ Non-Qualified Stock Option ” means an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
 
(s) “ Option ” means an Incentive Stock Option or a Non-Qualified Stock Option.
 
(t) “ Other Stock-Based Award ” means any stock-based right granted under Section 7(d) of the Plan.
 
(u) “ Participant ” means an Eligible Person who is designated by the Committee to be granted an Award under the Plan.
 
(v) “ Performance Award ” means any right granted under Section 7(b) of the Plan.
 
(w) “ Performance Goals ” means the goals established by the Committee, which shall be satisfied or met as a condition to the exercisability, vesting or receipt of all or a portion of an Award. Such goals shall be based exclusively on one or more of the following corporate-wide or subsidiary, division or operating unit financial measures: (1) pre-tax or after-tax income (before or after allocation of corporate overhead and bonus), (2) net income (before or after taxes), (3) reduction in expenses, (4) pre-tax or after-tax operating income, (5) earnings (including earnings before taxes, earnings before interest and taxes, or earnings before interest, taxes, depreciation and amortization, (6) gross revenue, (7) working capital, (8) profit margin or gross profits, (9) Share price, (10) cash flow or cash flow per Share (before or after dividends), (11) cash flow return on investment, (12) return on capital (including return on total capital or return on invested capital), (13) return on assets or net assets, (14) market share, (15) pre-tax or after-tax earnings per Share, (16) pre-tax or after-tax operating earnings per Share, (17) total stockholder return, (18) growth measures, including revenue growth, as compared with a peer group or other benchmark, (19) economic value-added models or equivalent metrics, (20) comparisons with various stock market indices, (21) improvement in or attainment of expense levels or working capital levels, (22) operating margins, gross margins or cash margins, (23) year-end cash, (24) debt reductions, (25) stockholder equity, (26) regulatory achievements, (27) implementation, completion or attainment of measurable objectives with respect to research, development, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel, (28) customer satisfaction, (29) operating efficiency, productivity ratios, or (30) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals (including accomplishing regulatory approval for projects), cost or cost savings
 
 
 
 
 
targets, accomplishing critical milestones for projects, and goals relating to acquisitions or divestitures, or any combination thereof (in each case before or after such objective income and expense allocations or adjustments as the Committee may specify within the applicable period). Each such goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on current internal targets, the past performance of the Company (including the performance of one or more subsidiaries, divisions and/or operating units) and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital (including, but limited to, the cost of capital), stockholders’ equity and/or shares outstanding, or to assets or net assets. In all cases, the performance goals shall be such that they satisfy any applicable requirements under Treas. Reg. Sec. 1.162-27(e)(2) (as amended from time to time) that the achievement of such goals be “substantially uncertain” at the time that they are established, and that the award opportunity be defined in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goal has been met, and, subject to the Committee’s right to apply negative discretion (within the meaning of Treas. Reg. Sec. 1.162-27(d)(iii)), the amount of the Award payable as a result of such performance. To the extent applicable, the measures used in setting performance goals set under the Plan for any given performance period shall be determined in accordance with GAAP and in a manner consistent with the methods used in the Company’s audited financial statements, without regard to: (i) extraordinary items as determined by the Company’s independent public accountants in accordance with GAAP; (ii) changes in accounting, unless, in each case, the Committee decides otherwise within the applicable period; or (iii) non-recurring acquisition expenses and restructuring charges. Notwithstanding the foregoing, in calculating operating earnings or operating income (including on a per Share basis), the Committee may, within the applicable period for a given performance period, provide that such calculation shall be made on the same basis as reflected in a release of the Company’s earnings for a previously completed period as specified by the Committee. For purposes hereof, the “applicable period,” with respect to any performance period, is the period commencing on or before the first day of the performance period and ending no later than the earlier of (x) the ninetieth (90 th ) day of the performance period, or (y) the date on which twenty-five percent (25%) of the performance period has been completed.
 
(x) “ Person ” means any individual, corporation, partnership, association or trust.
 
(y) “ Plan ” means the the Company 2009 Stock Option and Compensation Plan, as may be amended from time to time.
 
(z) “ Restricted Stock ” means any Share granted under Section 7(a) of the Plan.
 
(aa) “ Restricted Stock Unit ” means any unit granted under Section 7(a) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
 
(bb) “ Rule 16b-3 ” means Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation.
 
(cc) “ Section 162(m) ” means Section 162(m) of the Code, or any successor provision, and the applicable Treasury Regulations promulgated thereunder.
 
(dd) “ Shares ” means shares of common stock, par value of $0.0001 per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c)of the Plan.
 
(ee) “ Stock Appreciation Right ” means any right granted under Section 6(b) of the Plan.
 
(ff) “ Stock Award ” means any Share granted under Section 7(c) of the Plan.
 
Section 3 . Administration
 
(a) Power and Authority of the Committee . The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or the method by which payments or other rights are to be calculated in connection with) each Award; (iv) determine the terms and conditions of
 
 
 
 
 
any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement, provided, however, that, except as otherwise provided in Section 4(c) hereof, the Committee shall not, without receiving prior approval of the Company’s stockholders, reprice, adjust or amend the exercise price of Options or the grant price of Stock Appreciation Rights previously awarded to any Participant, whether through amendment, cancellation and replacement grant, or any other means; (vi) accelerate the exercisability of any Award or the lapse of restrictions relating to any Award; (vii) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (viii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable to a Participant with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder of the Award or the Committee; (ix) interpret and administer the Plan and any instrument or agreement, including any Award Agreement, relating to the Plan; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award or Award Agreement, and any employee or Consultant of the Company or any Affiliate.
 
(b) Action of the Committee . A majority of the Committee shall constitute a quorum. The acts of the Committee shall be either: (a) acts of a majority of the members of the Committee present at any meeting at which a quorum is present; or (b) acts approved in writing by all of the members of the Committee without a meeting. The Committee may appoint a chairman or a secretary as it deems appropriate.
 
(c) Delegation . The Committee may delegate its powers and duties under the Plan to one or more Directors or executive officers of the Company, or a committee of Directors or executive officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee may not delegate its power and authority with regard to: (a) the grant of an Award to any person who is a “covered employee” within the meaning of Section 162(m) of the Code or who, in the Committee’s judgment, is likely to be a covered employee at any time during the period an Award hereunder to such employee would be outstanding; or (b) the selection for participation in the Plan of an officer or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an Award to such an officer or other person.
 
(d) Power and Authority of the Board of Directors . Notwithstanding anything to the contrary contained herein, the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Section 162(m) of the Code.
 
(e) Liability and Indemnification of Plan Administrators . No member of the Board or Committee, nor any executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and the members of the Board, the Committee and the executive officers shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law, except as otherwise may be provided in the Company’s Certificate of Incorporation, Bylaws, and under any directors’ and officers’ liability insurance that may be in effect from time to time.
 
Section 4 . Shares Available for Awards
 
(a) Shares Available . Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Awards under the Plan shall be 1,300,000. Shares to be issued under the Plan will be authorized but unissued Shares or Shares that have been reacquired by the Company and designated as treasury shares. Shares that are subject to Awards that terminate, lapse or are cancelled or forfeited shall be available again for grant under the Plan. If the purchase price of any Shares with respect to an Option is satisfied by delivering Shares to the Company (by either actual delivery or attestation), only the
 
 
 
 
 
number of Shares delivered to the Participant, net of the Shares delivered to the Company or attested to, shall be deemed delivered for purposes of determining the number of Shares available for further Awards. Shares that are tendered by a Participant or withheld by the Company as full or partial payment to the Company of the purchase or exercise price relating to an Award or to satisfy tax withholding obligations relating to an Award shall not be available for future grants under the Plan. In addition, if Stock Appreciation Rights are settled in Shares upon exercise, the aggregate number of Shares subject to the Award rather than the number of Shares actually issued upon exercise shall be counted against the number of Shares authorized under the Plan.
 
(b) Accounting for Awards . For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan.
 
(c) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is required to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of: (a) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards; (b) the number and type of Shares (or other securities or other property) subject to outstanding Awards; and (c) the purchase or exercise price with respect to any Award.
 
Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or Directors of the Company or any Affiliate prior to such acquisition or combination.
 
(d) Award Limitations
 
(i) 162(m) Limitation . No Participant may be granted an Award or Awards under the Plan for more than 50,000 Shares (subject to adjustment as provided in Section 4(c) of the Plan) in the aggregate in any calendar year, or, in the case of a Cash Award pursuant to Section 7(d) of the Plan, for more than $1,500,000 in any calendar year.
 
(ii) Incentive Stock Option Limitation. The aggregate number of Shares which may be issued under the Plan as Incentive Stock Options is 100,000 (subject to adjustment as provided in Section 4(c) of the Plan).
 
(iii) Limitation on Full Value Awards. The aggregate number of Shares which may be issued under the Plan as Restricted Stock, Restricted Stock Units, Stock Awards, Dividend Equivalents, or any other award for which the employee is entitled to receive the full value of the share upon satisfaction of the performance goal or goals, is 400,000 (subject to adjustment as provided in Section 4(c) of the Plan).
 
Section 5 . Eligibility
 
Any Eligible Person may be designated to be a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services provided by the respective Eligible Persons, their present and potential contributions to the success of the
 
 
 
 
 
Company or such other factors as the Committee, in its discretion, shall deem relevant. The Committee’s selection of an Eligible Person to be a Participant with respect to an Award shall not require the Committee to select such Eligible Person to receive any other Award at any time.
 
An Incentive Stock Option may be granted to full-time or part-time employees (which term as used herein includes, without limitation, officers and Directors who are also employees) only, and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or any successor provision.
 
Section 6 . Options and Stock Appreciation Rights
 
(a) Options . The Committee may grant Options with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
 
(i) Exercise Price . The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option; provided, however, that the Committee may designate a per share exercise price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock option previously granted by an entity that is acquired by or merged with the Company or an Affiliate.
 
(ii) Option Term . The term of each Option shall be fixed by the Committee but shall not be longer than 10 years from the date of grant.
 
(iii) Time and Method of Exercise . The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms in which, payment of the exercise price with respect thereto may be made or deemed to have been made. The Committee may permit net settlement of any Option.
 
(iv) Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of Options that are intended to qualify as Incentive Stock Options:
 
(A) The aggregate Fair Market Value (determined as of date the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all of the Company’s plans) shall not exceed $100,000.
 
(B) Any Award Agreement granting Incentive Stock Options under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain all provisions required in order for the Award to qualify as an Incentive Stock Option.
 
(C) All Incentive Stock Options must be granted within ten (10) years from the earlier of the date on which the Plan is adopted by the Board or the date the Plan is approved by the stockholders of the Company.
 
(D) No Incentive Stock Option shall be granted to a Participant who, at the time of grant would own (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of the Company (within the meaning of Section 422 of the Code).
 
(b) Stock Appreciation Rights . The Committee may grant Stock Appreciation Rights subject to the terms of the Plan and such additional terms and conditions not inconsistent with the provision of the Plan as the Committee shall determine. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive in cash or Shares (as specified by the Committee) upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right; provided, however, that the Committee may designate a per share grant price below Fair Market Value on the date of grant if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate.
 
 
 
 
 
Section 7 . Restricted Stock, Restricted Stock Units, Performance Awards, Stock Awards, Other Stock-Based Awards and Cash Awards, Dividend Equivalents
 
(a) Restricted Stock and Restricted Stock Units . The Committee may grant Awards of Restricted Stock and Restricted Stock Units with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
 
(i) Restrictions . Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate. The minimum vesting period of such Awards shall be one year from the date of grant. Notwithstanding the foregoing, the Committee may permit acceleration of vesting of such Awards in the event of the Participant’s death, disability or retirement.
 
(ii) Issuance and Delivery of Shares . Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. Shares representing Restricted Stock that is no longer subject to restrictions shall be delivered to the Participant promptly after the applicable restrictions lapse or are waived. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holder of the Restricted Stock Units.
 
(iii) Forfeiture . Except as otherwise determined by the Committee, upon a Participant’s termination of employment or cessation of services as a Consultant, including resignation or removal as a Director (in either case, as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units held by the Participant at such time shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units.
 
(b) Performance Awards . The Committee may grant Performance Awards denominated in Shares that may be settled or payable in Shares (including, without limitation, Restricted Stock or Restricted Stock Units) or cash. Performance Awards granted to Participants who may be “covered employees” under Section 162(m) of the Code are intended to be “qualified performance-based compensation” within the meaning of Section 162(m). Performance Awards shall, to the extent required by Section 162(m), be conditioned solely on the achievement of one or more objective Performance Goals, and such Performance Goals shall be established by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Subject to the terms of the Plan and any applicable Award Agreement, the Performance Goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award, and any other terms and conditions of any Performance Award shall be determined by the Committee. The Committee shall also certify in writing that such Performance Goals have been met prior to payment of the Performance Awards to the extent required by Section 162(m).
 
(c) Stock Awards . The Committee may grant Shares without restrictions thereon in its discretion. Subject to the terms of the Plan, Stock Awards may have such terms and conditions as the Committee shall determine.
 
(d) Other Stock-Based Awards and Cash Awards . The Committee may grant such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. The Committee shall determine the terms and conditions of such
 
 
 
 
 
Awards, subject to the terms of the Plan. Shares, or other securities delivered pursuant to a purchase right granted under this Section 7(d), shall be purchased for consideration having a value equal to at least 100% of the Fair Market Value of such Shares or other securities on the date the purchase right is granted. In addition the Committee may, in its discretion, grant Cash Awards to Eligible Employees according to such terms and conditions as the Committee may establish, subject to the terms of the Plan and the Award Agreement.
 
(e) Dividend Equivalents . The Committee may grant Dividend Equivalents under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of any cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan, such Dividend Equivalents may have such terms and conditions as the Committee shall determine.
 
Section 8 . General Rules Applicable to Awards
 
(a) Consideration for Awards . Awards may be granted for no cash consideration or for any cash or other consideration as may be determined by the Committee or required by applicable law.
 
(b) Awards May Be Granted Separately or Together . Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
 
(c) Forms of Payment under Awards . Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property, withholding Shares otherwise issuable under the Award, or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents with respect to installment or deferred payments.
 
(d) Term of Awards . The term of each Award shall be for a period not longer than 10 years from the date of grant.
 
(e) Limits on Transfer of Awards . Except as otherwise provided by the Committee or the terms of this Plan, no Award and no right under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution. The Committee may establish procedures as it deems appropriate for a Participant to designate a Person or Persons, as beneficiary or beneficiaries, to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participant’s death. The Committee, in its discretion and subject to such additional terms and conditions as it determines, may permit a Participant to transfer a Non-Qualified Stock Option to any “family member” (as such term is defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the Securities Act of 1933, as amended) at any time that such Participant holds such Option, provided that such transfers may not be for value ( i.e. , the transferor may not receive any consideration therefor) and the family member may not make any subsequent transfers other than by will or by the laws of descent and distribution. Each Award under the Plan or right under any such Award shall be exercisable during the Participant’s lifetime only by the Participant (except as provided herein or in an Award Agreement or amendment thereto relating to a Non-Qualified Stock Option) or, if permissible under applicable law, by the Participant’s guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.
 
(f) Restrictions; Securities Exchange Listing . All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem
 
 
 
 
 
advisable under the Plan, applicable federal or state securities laws and regulatory requirements, and the Committee may cause appropriate entries to be made or legends to be placed on the certificates for such Shares or other securities to reflect such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange.
 
Section 9 . Change in Control
 
In the event that the Company is a party to a merger, exchange or reorganization, outstanding Awards shall be subject to the terms and conditions of the agreement of merger, exchange or reorganization, which may include, without limitation, accelerating the vesting or exercise date of Awards and the cancellation of outstanding Awards in exchange for the immediate distribution of a cash payment equal to: (a) in the case of Options and Stock Appreciation Rights, the difference between the Fair Market Value on the date of the Change in Control and the exercise price multiplied by the number of Shares subject to the Option or Stock Appreciation Right, and (b) in the case of Restricted Stock, Restricted Stock Units, and Performance Stock Awards, the Fair Market Value of a Share on the date of the Change in Control multiplied by the number of Shares then subject to the Award.
 
Section 10 . Amendment and Termination; Corrections
 
(a) Amendments to the Plan . The Board may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, prior approval of the stockholders of the Company shall be required for any amendment to the Plan that:
 
(i) requires stockholder approval under the rules or regulations of the Securities and Exchange Commission, the NASDAQ Stock Market LLC, or any other securities exchange that are applicable to the Company;
 
(ii) increases the number of shares authorized under the Plan as specified in Section 4(a) of the Plan;
 
(iii) increases the number of Shares subject to the limitations contained in Section 4(d) of the Plan;
 
(iv) permits repricing of Options or Stock Appreciation Rights without prior shareholder approval;
 
(v) permits the award of Options or Stock Appreciation Rights at a price less than 100% of the Fair Market Value of a Share on the date of grant of such Option or Stock Appreciation Right, contrary to the provisions of Sections 6(a)(i) and 6(b)(ii) of the Plan; or
 
(vi) would cause Section 162(m) of the Code to become unavailable with respect to the Plan.
 
(b) Amendments to Awards . Subject to the provisions of the Plan, the Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. Except as otherwise provided in the Plan, the Committee may amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, but no such action may adversely affect the rights of the holder of such Award without the consent of the Participant or holder or beneficiary thereof.
 
(c) Correction of Defects, Omissions and Inconsistencies . The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan.
 
Section 11 . Tax Withholding
 
The Company may take such action as it deems appropriate to withhold or collect from a Participant the applicable federal, state, local or foreign payroll, withholding, income or other taxes that are required to be withheld or collected by the Company upon the grant, exercise, vesting or payment of an Award. The Committee may require the Company to withhold Shares having a Fair Market Value equal to the amount necessary to satisfy the Company’s minimum statutory withholding requirements upon the grant, exercise, vesting or payment of an Award from Shares that otherwise would have been delivered to a Participant. The Committee may, subject to any terms and conditions that the Committee may adopt, permit a Participant to elect to pay all or a portion of the minimum statutory withholding taxes by: (a) having the Company withhold Shares otherwise to be delivered upon the grant, exercise, vesting or payment of an Award with a Fair Market
 
 
 
 
 
Value equal to the amount of such taxes; (b) delivering to the Company Shares other than Shares issuable upon the grant, exercise, vesting or payment of an Award with a Fair Market Value equal to the amount of such taxes; or (c) paying cash. Any such election must be made on or before the date that the amount of tax to be withheld is determined.
 
Section 12 . General Provisions .
 
(a) No Rights to Awards . No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants.
 
(b) Award Agreements . No Participant shall have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company and, if requested by the Company, signed by the Participant.
 
(c) No Rights of Stockholders . Except with respect to Restricted Stock and Stock Awards, neither a Participant nor the Participant’s legal representative shall be, or have any of the rights and privileges of, a stockholder of the Company with respect to any Shares issuable upon the exercise or payment of any Award, in whole or in part, unless and until the Shares have been issued.
 
(d) No Limit on Other Compensation Plans or Arrangements . Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation plans or arrangements.
 
(e) No Right to Employment, Directorship, or to Provide Other Services . The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee of the Company or any Affiliate, or a Director to be retained as a Director, nor any other service provider to be retained by the Company, nor will it affect in any way the right of the Company or an Affiliate to terminate a Participant’s employment or other services at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment or other services for the Company free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement.
 
(f) Governing Law . The internal law, and not the law of conflicts, of the State of Delaware, shall govern all questions concerning the validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award.
 
(g) Severability . If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.
 
(h) No Trust or Fund Created . Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
 
(i) Securities Matters . The Company shall not be required to deliver any Shares until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.
 
(j) No Fractional Shares . No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be canceled, terminated or otherwise eliminated.
 
 
 
 
 
(k) Headings . Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
 
Section 13 . Effective Date of the Plan
 
The Plan shall be subject to and be effective upon approval by the stockholders of the Company.
 
Section 14 . Term of the Plan
 
The Plan shall terminate at midnight on December 1, 2019, unless terminated before then by the Board. Awards may be granted under the Plan until the Plan terminates or until all Shares available for Awards under the Plan have been purchased or acquired; provided, however, that Incentive Stock Options may not be granted following the 10-year anniversary of the Board’s adoption of the Plan. The Plan shall remain in effect as long as any Awards are outstanding.
 
 

EXHIBIT 10.13
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
 
PARTIES :
 
The parties to this First Amendment to Employment Agreement (this “Amendment”) are Dlorah, Inc., a South Dakota corporation, having its principal place of business in Rapid City, South Dakota, (acting by and through its National American University Division) hereinafter called “Employer,” and Jerry L. Gallentine, of Rapid City, South Dakota, the designated President of National American University and Dlorah, Inc., hereinafter called “President.”
 
PURPOSE :  
 
The parties have previously entered into an Employment Agreement as Amended and Restated September 9, 2003, effective January 1, 2004 (the “Employment Agreement”).  Pursuant to the provisions set forth in Section III of the Employment Agreement, President gave timely notice of termination to terminate the Employment Agreement effective at the end of the 24 month notice period required.  That notice was given effective April 15, 2008 and the 24 month period will expire at midnight, April 14, 2010.  The parties have had discussions concerning that matter and have agreed to extend the Employment Agreement subject to the terms and conditions set forth more specifically herein.  The purpose of this Amendment is to amend and extend the Employment Agreement of Dr. Gallentine as President.
 
TERM AND WAIVER OF STATUTORY PROTECTION :
 
The parties agree that the term commenced originally on January 1, 1996, and was extended by Employment Agreement and the parties further agree that, notwithstanding the Notice of Termination by the President to the Employer dated April 15, 2008, that the parties hereby agree that the term of the Employment Agreement shall continue until terminated by either party upon six (6) months’ written notice to the other party of the intention to terminate.  In the event the President gives notice of termination, he shall continue to perform the Employment Agreement during the six (6) month notice period.  In the event the Employer gives the notice, the Employer shall determine whether to require the President to continue to perform the Employment Agreement during the notice period.
 
The parties understand that Section 60-2-6 of the South Dakota Codified Laws provides that a contract to render personal services cannot be enforced against the President beyond the term of two (2) years from the commencement of service under it.  In consideration of One Dollar ($1.00) and other good and valuable consideration, including the extension of the Employment Agreement, the receipt and sufficiency of which is hereby acknowledged, each party does hereby waive any protection given to that party by said statute and agrees that the Employment Agreement may be enforced as if said statute did not exist.

 
 
 

COMPENSATION :
 
The parties acknowledge that the compensation of the President shall continue according to the terms and conditions of the Employment Agreement through April 14, 2010, including all accrued bonus rights now or hereafter accruing during such period. Beginning April 15, 2010, the President shall be compensated with a salary of $150,000.00 per year. Any bonus provided under the Employment Agreement that is vested as of April 15, 2010 shall be paid according to the payment terms in the Employment Agreement specified for such bonus. In addition, in the event the President is employed and not been continuously employed by the Employer through May 31, 2010, the President shall be entitled to a bonus for the fiscal year ending May 31, 2010. The amount of such bonus shall be determined as provided under Sections VI.C. through VI.F. of the Employment Agreement, but shall be pro rated to April 15, 2010. Such bonus shall be paid in full no later than March 15, 2011. In the event the President is employed after May 31, 2010, the President shall be eligible for bonuses at the discretion of the Board of Directors.
 
The parties acknowledge that the Employer entered into an agreement to merge into a publicly-held company which shall be known as National American University Holdings, Inc., a Delaware Corporation. Attached hereto as Exhibit A is an organization chart for National American University Holdings, Inc., showing the structure of the company upon completion of the anticipated merger. The parties therefore agree that, in the event of successful completion of the merger, the President shall be eligible, at the Employer’s discretion, to participate in any equity-based incentive plan of the Employer. This compensation shall be as an additional bonus and incentive compensation to the President and not in lieu of salary.
 
PERQUISITES :
 
Article VII, Perquisites, is amended at Subsection D thereof, to read as follows:
 
 
D.
The parties agree that the President may perform this Agreement while spending up to one-half of each calendar month at his office located in northwestern Kansas or such other location approved by the Chairman of the Board of the Employer.  Said office in Kansas or as otherwise approved, will be provided by the President but the Employer agrees to pay the operational expenses of said office of utilities, internet charges and telephone charges.  The equipment furnished originally by Employer to equip the office has been conveyed to the President pursuant to the terms of the prior agreement of the parties.  Any additional equipment required for remote office shall be agreed to by the parties, both as to provision and any monthly expense or maintenance thereof from time to time as may be required.
 
 
 
 

TERMINATION :

That Article X, Termination, shall be amended at Subsection B, D and F, with such subsections to read as follows:
 
 
B.
Resignation by the President upon at least six (6) calendar months’ written notice in which case the President shall not be entitled to any further compensation after said six (6) month period.
 
 
D.
Death of the President.  If the President dies during the term of this Agreement, the Employer agrees to pay to his estate or other individual named by him as a beneficiary under this Agreement, for a period of twelve (12) months, an amount equal to his base salary as determined under Article VI A hereof in effect at the time of his death payable monthly, plus bonuses actually vested at the time of his death, as provided herein.
 
 
F.
The parties agree that the Employer, acting through the Board of Directors, shall have the right to terminate this Agreement at any time upon a majority vote of the Board of Directors without proof of cause provided that if the cancellation shall be for other than cause, the President shall be entitled to receive in addition to any vested bonus, as liquidated damages, his then current salary payable monthly for twelve (12) months after termination.  The President shall have no obligation to seek other employment in such event.  The then current base salary shall be paid monthly during the period that such amounts are payable hereunder.  The payments made to the President under this Paragraph F of this Article X shall be in lieu of any and all other entitlements whether contractually or statutorily derived.
 
REQUIRED SIX MONTH DELAY :
 
Notwithstanding any other provision in this Agreement to the contrary, if at the time of his separation from service, the President is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, distributions made on account of the President’s separation from service may not be made before the date that is six (6) months after the President’s separation from service unless such payments fall under the exception from Section 409A for separation pay due to involuntary separation from service (as provided in Treas.  Reg.   § 1.409A-1(b)(9)(iii)).  If payments are delayed pursuant to this paragraph, distributions will commence on the first day of the seventh month following the termination of employment and the first monthly distribution shall include the aggregate payments that were delayed.
 
For purposes of this Agreement “separation from service” shall mean when the President retires or otherwise has a termination of employment with the Employer.  Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Employer and the President reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the President will perform after such date (whether as an employee or independent contractor) will permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.
 
CLARIFICATION OF RESPONSIBILITY :
 
Notwithstanding certain statements in the Employment Agreement, the parties understand and agree that all policy determination is made by the Board of Directors with advice, where appropriate of the Board of Governors, and that the President is employed by and responds to the Board of Directors which determines his duties.
 
 
 
 

RATIFICATION :
 
The parties hereby ratify, confirm and approve the Employment Agreement, as amended by the terms of this Amendment.  In the event of any conflict between the terms of said Employment Agreement and this Amendment, the terms and conditions of this Amendment shall govern the interpretation thereof.
 
PARTIES BOUND :
 
This Amendment is binding upon the parties hereto, their personal representatives, estates, successors and assigns.

(The balance of this page intentionally left blank.)

 
 
 

EXECUTED by the parties at Rapid City, South Dakota on the 18th day of November, 2009.

 
/s/ Jerry L. Gallentine
 
Jerry L. Gallentine, President and
 
Employee
     
 
DLORAH, INC.
     
 
By:
/s/ Robert D. Buckingham
   
Robert D. Buckingham, Chairman
     
   
NATIONAL AMERICAN UNIVERSITY
   
DIVISION OF DLORAH, INC.
     
 
By:
/s/ Robert D. Buckingham
   
Robert D. Buckingham, Chairman
 
 
 
 
EXHIBIT 10.14
 
EMPLOYMENT AGREEMENT AMENDMENT
 
PARTIES :

The parties to this Agreement are Dlorah, Inc., a South Dakota corporation, having its principle place of business in Rapid City, South Dakota, hereinafter referred to as “Employer,” and Robert D.  Buckingham of Rapid City, South Dakota, the Executive Chairman of the Board of Dlorah, Inc., hereinafter called “Chairman.”

PURPOSE :

The Chairman is employed as the executive chairman of Dlorah, Inc. (not to be confused with the Chief Executive Officer of National American University) pursuant to an Employment Agreement originally dated the 3rd day of January, 1995 , the term of which Employment Agreement expires on December 31, 2011.  The parties acknowledge that the Employer has entered into an Agreement to merge Employer into National American University Holdings, Inc., a publicly held corporation on or about November 30, 2009 and, in the event of the completion of such merger, the role of the Chairman shall continue as Chairman of National American University Holdings, Inc., in accordance with this Agreement.  The parties have agreed to amend the Agreement and the purpose of this writing is to set forth the terms and conditions of the amendment

The parties agree that Section IV of the Agreement shall be amended to read as follows:
 
IV.
 
TERM AND WAIVER OF STATUTORY PROTECTION :
 
The term of this Agreement commenced on the 3 rd day of January, 1995 and shall continue until the resignation or removal of the Chairman.

The parties understand that SDCL 60-2-6 provides that a contract to render personal service cannot be enforced against the Chairman beyond the term of two (2) years from the commencement of service under the contract.  In consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each party does hereby waive any protection given to that party by said statute and agree that this Agreement may be enforced as if said statute did not exist.

 
 
 

The parties agree that Article V of the Agreement shall be amended to read as follows:
 
V.
 
COMPENSATION:

For all services rendered by the Chairman under this Agreement, the Employer agrees to pay compensation as follows:

 
a.
Annual Salary:  Commencing on December 1, 2009, and until the resignation or removal of the Chairman, the Chairman shall be paid a minimum salary of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per fiscal year, payable in twelve (12) equal monthly installments as basic compensation. Until the effective date, the Chairman shall be paid according to his existing compensation as determined by the Employment Agreement prior to this amendment and restatement.

 
b.
Cost of Living Adjustments:   Commencing with Employer’s fiscal year beginning June 1, 2010, and for each of the Employer’s fiscal years thereafter, during the term of this Agreement, the Chairman’s basic monthly compensation shall be increased or decreased by the appropriate percentage increase or decrease (as the case may be) in the consumer price index - US City Average - All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor between said index for the previous March (i.e.  for example, March 2009, and March of the current calendar year (i.e.  for example March 2010).  The parties agree that if, for any reason, said index is not published at such time, that they will use any other index changes in the cost of living regularly published and generally considered reliable and acceptable to the parties.

 
 
 

 
c.
Incentive Compensation: In addition to all other compensation payable hereunder, the parties agree that if the Chairman is employed and has been continuously employed by Employer through the last day of the fiscal year, the Chairman shall be paid an incentive payment equal to ten percent (10%) of the net income of the Employer for such fiscal year as computed by the Employer’s Certified Public Accountant before: 1) provision for state and federal income taxes and 2) payment of director’s fees and any dividends on the stock of the Employer; and 3) payment of any damages by the Employer to Employees or others as a result of lawsuits or threatened lawsuits against the Employer or its affiliated entities. For the purpose of this provision, the amount of such damages actually paid by the Employer shall be determined by deducting any payments made to the Employer or the claimant by insurance companies insuring the Employer.

 
In addition, said net income shall also be computed without taking into account extraordinary items shown on the annual financial statement and without taking into account gains or losses of more than One Hundred Thousand and 00/100 Dollars ($100,000.00) per year from the sale of major corporate properties. For the purposes of this paragraph only, “extraordinary items” are defined as transactions distinguished by their unusual nature and by the infrequency of their occurrence. Similarly, for the purpose of this paragraph only, “major corporate properties” are defined as those assets used by the corporation and not held for sale in the ordinary course of business.

 
Said incentive compensation shall commence with the Employer’s fiscal year beginning June 1, 2009, shall continue each fiscal year thereafter until December 31, 2011, and shall be paid, in a lump sum payment, no later than March 15 th of the following year (which occurs first following the last day of the fiscal year for which the incentive compensation is payable). The incentive compensation for the period between June 1, 2011 and December 31, 2011 shall be determined effective as of May 31, 2012 by prorating the results of the application of the incentive formula in order to compensate the Chairman for 7/l2ths of the fiscal year.

 
The parties further acknowledge and agree that the incentive compensation payments due the Chairman for the fiscal year ended May 31, 2009, remain due and shall be paid to the Chairman in a lump sum payment on or before March 15, 2010.

 
 
 

 
d.
Notwithstanding c. above, incentive compensation accruing after the merger date shall accrue at seven percent (7%) of the net income of the Employer as defined above and shall be paid no later than the later of:

 
1.
Two and one-half (2½) months following the last day of the fiscal year for which the incentive compensation is payable, or

 
2.
March 15 th following the last day of the fiscal year for which the bonus payment is payable.

 
Such payment shall be paid to the Chairman in the form of cash, stock options, stock awards or other stock-based compensation as determined by the Company’s Board of Directors in its sole discretion. If the Chairman’s employment terminates at any time due to a termination by the Employer without cause or by the Chairman with good reason, the Chairman shall be ineligible to earn and be paid a pro-rata portion of the annual incentive compensation for the year of termination in accordance with the provisions of this Agreement.

 
For purposes of this Agreement, “good reason” shall mean the safe harbor definition of good reason, as defined in Treas. Reg. Section 1.409A-1(n)(2)(ii), except that the following condition shall be added to the list of conditions listed in such section: (7) A material diminution in the service provider’s opportunity to earn incentive compensation. The definition of good reason shall include the requirement that the Chairman provide notice to the Employer of the existence of the good reason condition within 90 days after the initial existence of the condition and provide the Employer 60 days during which it may remedy the condition.

 
e.
Notwithstanding all of the above provisions of this agreement, total compensation of the Chairman in any one fiscal year shall not exceed the sum of One Million and 00/100 Dollars ($1,000,000.00).

 
f.
Unless renewed or revised, the parties agree that the present incentive compensation formula set forth in subsection c and d above shall expire as of December 31, 2011. The annual salary will continue until the resignation or removal of the Chairman as set forth in Section VI.

 
 
 

The parties agree that VI shall be amended to read as follows:
 
VI.
 
DUTIES OF THE CHAIRMAN :

The Chairman shall be the chief supervising executive officer of Dlorah, Inc., having supervision over the President and CEO of National American University and President of Real Estate Operations of Dlorah, Inc., all as shown more fully on the Organization Chart (Exhibit “A” hereto).

The parties acknowledge that Employer has entered into an Agreement to merge Employer into National American University Holdings, Inc., a publicly held corporation, and in the event of the completion of such merger, the role of the Chairman shall continue in accordance with this Agreement.

Chairman’s title shall be Chairman of the Board of Directors of National American University Holdings, Inc., and Chairman shall have the duties and responsibilities as provided for herein and assigned by the Employer’s Board of Directors as may be reasonably assigned from time to time. During Chairman’s Employment with the Employer, Chairman agrees to spend the time and effort reasonably necessary to perform Chairman’s duties with the Employer and will abide by all reasonable policies and decisions made by the Employer as well as all applicable federal, state and local laws, regulations or ordinances. Chairman will act in the best interest of the Employer at all times. Chairman will not, during employment by the Employer, without prior written approval of the Board of Directors of Employer engage in, become an employee, director, officer, agent, partner of or consultant to or a stockholder of (except as stockholder of a public company in which Chairman owns less than 5%) of the issued and outstanding capital stock of such company) or renders services to any company or other business entity which is a competitor or significant supplier of or customer of the Employer or engage in any other activities that would interfere with the performance of Chairman’s duties as an employee of the Employer or that would create an actual or perceived conflict of interest with respect to Chairman’s obligations as an employee of the Employer. Notwithstanding the foregoing, Chairman may serve on corporate, civil or charitable boards or committees provided that such service does not require a material time commitment by the Chairman and that such activities are not competitive with the Employer.

 
 
 

While the management duties assumed by the Chairman are to be on a full time basis, the parties agree and contemplate that the Chairman may conduct outside activities in not-for-profit and community type ventures so long as such activities do not adversely affect his ability to competently manage the affairs of the Employer.

The parties recognize that it is not feasible to provide a schedule of time or duties for the Chairman. They contemplate, and the Chairman agrees, that he will devote such time and at such times as is reasonably necessary to competently manage the Employer, even though performance of such agreement requires the Chairman to be on duty outside of normal working hours, during holidays, weekends, all-night services, interruptions or postponements of vacations, etc. However, the parties contemplate that, as has been the practice of the Chairman in the past, he will be on duty Monday through Friday of every week during which he is not on vacation; provided that, as has been his past practice, he is to be allowed free time so long as such free time does not detract significantly from the quality of management rendered to the Employer. Any such free time activity shall not be considered vacation time.

All benefits will be continued as are in effect as of November 1, 2009, under said contract, including but not limited to, the Chairman’s flexibility regarding work hours, locations of residence and office. The parties understand that the Chairman, in lieu of vacations, shall be allowed such free time as the Chairman, in his reasonable discretion shall determine that it does not interfere with his duties and responsibilities to the Corporation.

The parties agree that Section VII is amended to read as follows:
 
VII.
 
VACATIONS :

The parties agree that the Chairman, due to his flexible scheduling, shall not have a fixed vacation minimum or maximum under this Agreement.

The parties agree that Section VIII shall be amended to read as follows:
 
VIII.
 
TERMINATION BY CHAIRMAN :

The parties agree that the Chairman may terminate this Agreement and separate from service at any time prior to the expiration of its term or any renewal thereof by giving written notice to the Board of Directors of the Employer at least two (2) years prior to the date of separation. In the event the Chairman separates from service after having provided such notice, the parties agree that his full compensation as determined hereunder (not including incentive compensation) shall continue for a period of twelve (12) months following the date of his separation from service.

 
 
 


For purposes of this Agreement, “separation from service” shall mean when the Chairman retires or otherwise has a termination of employment with the Employer. Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Employer and the Chairman reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the Chairman will perform after such date (whether as an employee or independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed whether as an employee or independent contractor over the immediately preceding 36 month period.

The parties agree that the “date of termination” as referred to above, shall be the date of the separation from service of the Chairman. The parties further agree that the term “full compensation” as set forth above refers to the compensation as provided for in Section V above but excluding subsection (V) (c) “incentive compensation.”
 
The parties agree that Section IX shall be amended to read as follows:
 
IX.
 
DEATH OR DISABILITY OF CHAIRMAN :

In the event of the death of the Chairman during the term of this Agreement or in the event of the disability of the Chairman, the parties agree that this Agreement shall terminate upon the death of the Chairman or the expiration of six (6) months after his disability. Notwithstanding the termination of this Agreement for such reason, the Employer agrees to pay to the Chairman or in the event of his death, to his estate or upon distribution of his estate to the person or persons entitled thereto upon distribution of his estate, an amount equal to his compensation as provided for in Article V of this Agreement (but not including incentive compensation) for a period of one (1) year after death or disability as defined herein. Thereafter, nothing further shall be payable to the Chairman under this Article.

This Article shall not apply in the case of termination by the Employer as provided in Article X hereof.

 
 
 

For the purposes of this Article, “disability” shall mean any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Chairman to be unable to perform the duties of his position of employment or any substantially similar position of employment.

The parties agree that Section X shall be amended to read as follows:
 
X.
 
TERMINATION BY EMPLOYER :

The parties agree that the Employer may terminate this Agreement at any time prior to the expiration of its term for cause if the Board of the Directors of the Employer determines in good faith that the Chairman has failed to perform his obligations under this Agreement. The parties agree that, for the purpose of this Article of this Agreement, failure of the Chairman to perform his obligations under this Agreement shall be limited to the Chairman’s failure or refusal to make reasonable efforts to follow the clear and reasonable directions of the Board of Directors. To invoke the provisions of this Article X of this Agreement, the parties agree that the Board of Directors of the Employer must give six (6) months written notice to the Chairman of the intention of the Board to terminate this Agreement and the reasons therefore, which reasons must be within the definition of failure to perform contained in the preceding sentence.

During the six (6) month cure period, each party shall be required to negotiate in good faith, to resolve any differences between the Chairman and the Board of Directors such that there will be, throughout the six (6) month period a reasonable expectation that the Chairman will return to perform services for the Employer. A refusal or failure to perform services will be deemed a repudiation of this Agreement by the Chairman.

In addition, the parties agree that, within fifteen (15) days prior to the expiration of the six (6) month notice period, there shall be another special meeting of the Board of Directors of the Employer called for the purpose of reconsidering the intention to terminate expressed in the notice. In order for the termination to be effective, and notwithstanding any provision of law to the contrary, the vote in favor of termination at the special meeting must be by at least sixty-seven percent (67%) of all members of the Board of Directors, including the Chairman, whose vote shall be counted. In the event this Agreement is terminated under this Article X for cause, the Employer agrees to pay the Chairman his annual salary rate through the date of termination.

 
 
 

In the event this Agreement is terminated under this Article X without cause, the Employer agrees to pay the Chairman his annual salary rate, as determined for the calendar year of such termination to continue for 24 consecutive months after such termination.

The Chairman may also be terminated for cause and without further compensation in the event of dishonesty or any conduct which is in violation of felony criminal statutes of South Dakota or the United States of America which involve moral turpitude. Discharge for cause for such moral turpitude may be made upon a vote of a majority of the Board of Directors after giving the Chairman an opportunity to appear before the Board to discuss notice of dismissal, any such meeting to be conducted in executive session.

In addition to all other payments to be made to the Chairman under this Article X hereof, in the event the termination contemplated by this Article X is accomplished and is finally determined by a court of competent jurisdiction to have been wrongful, the Employer agrees to pay the Chairman as damages for said wrongful termination such amount as a court may determine as being reasonable.

The parties agree that a new Section XIV shall be adopted to read as follows:
 
XIV.
 
REQUIRED SIX MONTH DELAY :

Notwithstanding any other provisions in this Agreement to the contrary, if, at the time of his separation from service, the Chairman is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, distributions made on account of the Chairman’s separation from service may not be paid before the date that is six (6) months after the Chairman’s separation from service unless such payments fall under the exception from Section 409A for separation pay due to involuntary separation from service(s) provided in Treas.  Reg.   § 1.409A-1(b)(9)(iii).  If payments are delayed pursuant to this paragraph, distributions will commence on the first day of the seventh month following the termination of employment and the first monthly distribution shall include the aggregate payments that were delayed.

 
 
 

BINDING UPON SUCCESSORS :

The parties agree that the Employment Agreement originally dated January 3, 1995, as amended hereby, shall be binding upon them and all their executors, administrators, successors, and assigns.

 
 
 

Accepted by the parties this 18 th   day of November , 2009.

DLORAH, INC.

By:
/s/ Robert D. Buckingham
 
By:
/s/ Robert D. Buckingham
 
Robert D. Buckingham, Chairman
   
Robert D. Buckingham, Employee
       
as Executive Chairman

 
 
 

EXHIBIT 10.15
 
EMPLOYMENT AGREEMENT
 
I.
 
PARTIES :  
 
The parties to this agreement are National American University, hereinafter called “NAU,” a Division of Dlorah, Inc., a South Dakota corporation, having its principal place of business in Rapid City, South Dakota, and Dr. Ronald Shape, of Rapid City, South Dakota, the designated Chief Executive Officer of National American University, hereinafter called “CEO.”
 
II.
 
PURPOSE :
 
The parties understand that NAU operates National American University at Rapid City, South Dakota, with branches at 16 locations in 7 states as of the date of this agreement.  The CEO has been employed by NAU as its CEO since April, 2009.  The purpose of this agreement is to acknowledge the terms and conditions of an Employment Agreement by and between the parties for the employment of the CEO.
 
III.
 
TERM AND WAIVER OF STATUTORY PROTECTION :
 
The parties agree that the term of the agreement commenced June 1, 2009 and shall continue until terminated by either pursuant to Article XII hereof.
 
The parties understand that Section 60-2-6 of the South Dakota Codified Laws provides that a contract to render personal services cannot be enforced against the CEO beyond the term of two (2) years from the commencement of service under it.  In consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each party does hereby waive any protection given to that party by said statute and agrees that this agreement may be enforced as if said statute did not exist.

 
 

IV.
 
DUTIES :
 
The parties agree that the CEO shall have charge of administration of NAU under the policies adopted by the Board of Directors of Dlorah, Inc. (“Directors”) with input from the Board of Governors of National American University (the “Board”) and the President.  The CEO agrees that he will, at all times during the term of this agreement, faithfully and industriously, with the best use of his experience, ability, education, and talent, perform all of the duties required pursuant to the terms of this agreement and all duties required by directives of the Directors, the Board and the President and that he will act in accordance with all official policies adopted by the Directors, the Board and Dlorah, Inc., heretofore or hereafter, including those presented in the policy manuals of NAU.
 
The CEO agrees to devote his entire time, attention and energy to the administration of NAU and shall not, during the term of this agreement, engage in any other business or professional activity, whether for profit or compensation or not, without the prior written permission of the President and the Chairman of the Board.  This paragraph shall not be construed to prevent the CEO from investing his financial assets in such form or manner as will not require any services on the part of the CEO in the operation of the affairs of the companies in which such investments are made.
 
The duties of the Chief Executive Officer shall include those set forth in the policies of NAU, including the following:
 
 
A.
Provide day-to-day leadership and management to NAU’s operations and financial operations consistent with the mission, goals and core values of the institution.
 
 
B.
Be responsible for driving NAU to achieve and surpass sales, profitability, cash flow and university goals and objectives.
 
 
C.
Advise the President on strategic business development and key corporate planning issues.  Keep the President informed about business activities, potential threats, opportunities and recommended actions.
 
 
D.
Be responsible for the measurement and effectiveness of all processes, internal and external.  Provide timely, accurate and complete reports on the operating condition of the organization.
 
 
E.
Spearhead the development, communication and implementation of effective growth strategies and processes.

 
-2-
 

 
F.
Collaborate with a management team to develop and implement plans for the operational infrastructure of systems, processes and personnel designed to accommodate the rapid growth objectives of NAU.
 
 
G.
Motivate and coordinate a high performance management team; attract, recruit, and retain required members of the executive team not currently in place and provide mentoring as a cornerstone to the management career development program.
 
 
H.
Encourage managers to evaluate and take actions that are consistent with NAU’ s overall strategy which will lead to high performance.
 
 
I.
Assist as required in raising additional capital at appropriate valuations and times to enable NAU to meet sales, growth and market share objectives.
 
 
J.
Foster a success-oriented accountable environment within the institution.
 
 
K.
Represent NAU, as needed, with clients, investors and business partners.
 
 
L.
Set performance goals which are taylored to each division.
 
 
M.
Employ management technics to the extent available to resources to ensure quality education.
 
 
N.
Direct recruitment and selection of staff and recommend employment of qualified candidates to the Board.
 
 
O.
Coordinate periodic evaluation of NAU programs and personnel.
 
 
P.
Coordinate planning of annual academic, student service, marketing and branch campus budgets.
 
 
Q.
Articulate programs with other institutions and agencies.
 
 
R.
Maintain high standards of employment and staff development for all personnel.
 
 
S.
Advise the President on issues, policies, procedures and guidelines pertaining to academic student services, branches and admissions and marketing services.
 
 
T.
Represent NAU at appropriate professional meetings and conferences.
 
 
U.
Organize and operate NAU in accordance with the policies, procedures and regulations established by the Board.
 
 
V.
Call and preside over meetings of the Administrative Council and other meetings for purposes of interpreting and implementing NAU policy.

 
-3-
 

 
W.
Provide leadership and overall supervision for the sufficient operation of the academic programs, plant and other enterprises.
 
 
X.
Provide leadership and overall supervision for the promotion, financing and development of every facet of Dlorah and NAU, keeping within its purpose.
 
 
Y.
Participate in meetings, programs and committees that may require special insight and understanding that can best be provided by CEO.
 
 
Z.
Other duties in support of the mission of NAU as assigned by the Directors and President.
 
NAU reserves the right to alter the job description and duties in order to meet the needs and goals of NAU from time to time providing CEO reasonable notice and opportunity for input in such changes.
 
V.
 
CONSULTATION :
 
The CEO shall not perform consultation with other organizations except upon prior approval of the President.  Any time spent in consultation with others will be charged against the CEO’s vacation allowance in the year in which the consulting was performed.  The CEO agrees to seek and obtain approval from the President for any such consulting.  The parties agree that no consulting shall be provided to competing entities or businesses during the term of this agreement and any extension thereof.
 
VI.
 
COMPENSATION :
 
The parties acknowledge that effective June 1, 2009, NAU is paying the CEO a base salary of $230,000.00 per calendar year, payable in equal semi-monthly installments.  The base salary is payment for all services rendered by the CEO under this agreement except as otherwise provided in this Article VI.
 
The parties agree that the compensation may be increased or decreased as follows:

 
-4-
 

 
A.
Commencing with NAU’s fiscal year beginning June 1, 2010 and for each of NAU’s fiscal years thereafter during the term of this agreement, the CEO’s base annualized salary shall be increased or decreased by the appropriate percentage increase or decrease (as the case may be) in the Consumer Price Index - US City Average - All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor in said index for the previous March (i.e., for example, March 2009) and March of the current year (i.e., for example, March 2010).  The parties agree that, if for any reason, said index is not published at such time, they will use another index of changes in the cost of living regularly published and generally considered reliable.
 
 
B.
The parties understand that a separate audited financial statement for NAU is prepared by a Certified Public Accountant for NAU as of each fiscal year ending May 31.  The parties agree to determine from said audited financial statement, for each fiscal year, whether NAU has experienced a “Net Profit” of 15% or more of the Gross Profit also known as the “Gross Profit.”  Gross Profit will be calculated by adding all tuition revenues and all other income but subtracting the cost of sales for books and food, such gross profit then being the same as the Gross Profit shown on the internally generated financial statement of NAU.
 
For the purposes of said determination, operating expenses and Net Profit shall not include:
 
 
1.
Provision for State and Federal income taxes.
 
 
2.
Interest income.
 
 
3.
Interest expense.
 
 
4.
Contributions to the NAU 401k retirement program.
 
 
5.
Gains and losses from securities.
 
 
6 .
Extraordinary items shown on the annual financial statement, and gains or losses from the sale of major corporate properties outside of the normal course of business.
 
 
7.
Gains and losses from the Fairway Hills Real Estate Division.
 
 
8.
Corporate overhead such as Board and Directors expense.  The parties have agreed that for calculation purposes, the NAU ratio will be consistent with historical calculations, i.e.  Board expenses excluded.
 
 
C.
The CEO shall be paid merit pay based upon NAU objectives being achieved during the term of this agreement for the following areas:

 
1.
Annual Profitability;

 
-5-
 

 
2.
Quarterly Collections;
 
 
3.
Credit Hour Growth
 
The parties agree that if the CEO is employed and has been continuously employed by NAU through the last day of a fiscal year, the CEO shall be entitled to receive “Annual Profitability” merit pay for such fiscal year.  The parties further agree that if the CEO is employed and has been continuously employed by NAU through the last day of a fiscal quarter, the CEO shall be entitled to receive “Quarterly Collections” and “Credit Hour Growth” merit pay for such quarter.  The amount of such merit pay shall be determined according to the guidelines set forth on Exhibit A (attached to this agreement and by this reference incorporated herein).  All merit pay earned under this Section VI.C. shall be paid no later than the latter of:  (a) 2-1/2 months following the last day of the fiscal year or fiscal quarter for which the merit pay is payable, or (b) March 15 th   following the last day of the fiscal year or fiscal quarter for which the merit pay is payable.
 
The parties acknowledge that Dlorah, Inc., entered into an agreement to merge into a publicly held company, which shall be known as National American University Holdings, Inc., a Delaware corporation, following the merger.  The parties therefore agree that in the event of successful completion of the merger, the CEO shall be eligible, at the discretion of NAU, to participate in any equity-based incentive plan of the employer, NAU.
 
Attached hereto as Exhibit B is an organization chart which contemplates the completion of the merger.
 
In the event that the merger is not completed in the manner provided for in the plan, the parties will review the compensation provisions in this agreement in order to adjust the CEO’s compensation consistent with responsibilities of the company, the same to be completed on or before January 31, 2010.  The modification of this agreement in order to accommodate such change shall not reduce the basic salary compensation due the CEO during the term of this contract nor any incentive benefit or bonus accrued as of such date, however, such replacement incentive plan may replace, in its entirety, the bonus compensation plan set forth above.  NAU shall give CEO at least thirty (30) days written notice of the proposed change.  The parties agree to negotiate such changes in good faith in order to reach agreement on the same within thirty (30) days of notice.  If the parties are unable to reach agreement, either shall have the option to terminate this agreement upon six (6) month’s notice in the manner provided in Article Ill of this Agreement and the employment of the CEO shall continue during such period according to the terms proposed by NAU, which shall not be for less basic compensation than that provided for in this Article VI above.

 
-6-
 

VII.
 
PERQUISITES :
 
The parties agree that the CEO shall receive the following perquisites during the term of this agreement:
 
 
A.
Holidays observed by the administration of NAU.
 
 
B.
Five (5) weeks of vacation each academic year - June 1 through May 31.  This vacation time may not be carried over without permission of NAU.
 
 
C.
Sick leave equivalent to that given to administrative personnel of NAU.
 
 
D.
Reimbursement of authorized travel expenses.
 
 
E.
Other benefits as provided by the NAU Employee Handbook.
 
VIII.
 
RESIDENCY REQUIREMENT :
 
The CEO agrees to reside within such proximity to the city limits of Rapid City, South Dakota, as will enable him to attend to his duties at the administrative offices of NAU in Rapid City, South Dakota, on a daily basis.
 
IX.
 
WORKING FACILITIES :
 
NAU agrees to furnish the CEO with an office, stenographic help, and such other facilities and services as are suitable to his position and adequate for the performance of his duties as provided in Article IV.

 
-7-
 

X.
 
EXCLUSIVE EMPLOYMENT/CONFIDENTIAL INFORMATION :
 
The CEO agrees to spend his full working time during the term of this agreement in performance of his duties with NAU and will abide by all policies and decisions made by the Board as well as all applicable federal, state and local laws, regulations or ordinances.  The CEO will act in the best interest of NAU at all times and will not, during the term hereof, without prior written approval of the President and the Board, engage in, become an employee, director, officer, agent, partner of, or consultant to or stockholder of (except a stockholder of a public company in which he owns less than 1%   of the issued and outstanding capital stock of such company) or render services to any company or other business entity which is a competitor or significant supplier or customer of NAU or engage in any other activities that would interfere with the performance of his duties as CEO of NAU or would create an actual or perceived conflict of interest with respect to his obligations as CEO.
 
The CEO agrees to not directly or indirectly use or disclose any confidential information of NAU for the benefit of anyone other than NAU during the course of employment or after the termination of employment regardless of the reason for such termination.  For the purposes of this agreement, “confidential information” shall mean any information about or related to NAU or any affiliated entity or any of their employees, contractors, directors, representatives, suppliers, vendors, members, customers, students or other third parties or entities with whom NAU or the affiliates do business which CEO learns of or develops during the time he is employed with NAU that derives independent economic value from being not generally known or readily ascertainable by other persons who could obtain economic value from its disclosure or use including, but not limited to, trade secrets, inventions, financial information, personnel information and information relating to such matters as existing or contemplated products, services, profit margins, fee schedules, pricing, business processes, business plans, sales technics, marketing technics, training manuals and materials, policies or practices related to business personnel or other matters, computer databases, computer programs, software and other technology, customer lists, member lists, student lists, and preferences or requirements or information related to any of the same.
 
The CEO recognizes that the confidential information constitutes a valuable asset of NAU and agrees to act in such a manner as to prevent its disclosure and use by any person unless for the benefit of NAU.

 
-8-
 

XI.
 
RETURN OF CONFIDENTIAL INFORMATION AND NAU’S PROPERTY :
 
The CEO agrees that upon termination of his employment, regardless of the reason for such termination, he will promptly turn over to NAU, in good condition, all property of NAU or the affiliates in his possession or control including, but not limited to, all originals, copies of, or electronically stored documents or other materials containing confidential information regardless of who prepared them.  In the case of electronically stored information retained by the CEO outside of NAU’s electronic systems, the CEO will promptly make a hard copy of such information in paper, audio recording, disc format or other format as appropriate, turn that hard copy over to NAU and then destroy his electronically stored information.  Further, the CEO agrees to execute written confirmation that all confidential information in his possession or to which he has access, has been turned over to NAU or destroyed at the time of his termination.
 
XII.
 
TERMINATION :
 
The parties agree that this agreement may be terminated in any of the following manners:
 
 
A.
Mutual written agreement of the parties, in which case any compensation payable to the CEO shall be defined in said agreement.
 
 
B.
Resignation by the CEO upon at least twenty-four calendar months written notice, in which case the CEO shall not be entitled to any further compensation after said twenty-four month period, except accrued merit pay which shall be paid in accordance with Article VI (C) or in a lump sum at the election of NAU.
 
 
C.
Mental or physical incapacity of the CEO to an extent that makes it impossible for him to fully perform the duties described in Article IV, hereof.  In the event the CEO becomes disabled due to accident, illness, or mental or physical incapacity, or for any other reason becomes incapable of performing the requirements of this Agreement, NAU shall have the right to terminate this Agreement, and all obligations of NAU shall cease upon such termination other than as provided in this Paragraph C of this Article XII.  If NAU, in its sole discretion acting through the Board, determines that the CEO is disabled, NAU shall have the right to require the CEO to submit to a physical and/or mental examination at the expense of NAU by a physician licensed to practice medicine in South Dakota and selected by NAU.  In the event the CEO is determined by such medical examination to be unable to fully continue or resume his duties as CEO, within 60 days of his disability, and if NAU elects then to terminate this Agreement, then NAU agrees to pay him his then current base salary (as determined under Article VI A hereof), payable monthly for a period of twelve months.  In addition, NAU agrees to pay him his prorated share, if any, of compensation determined for the year of disability under Article VI (C), said proration to be based upon the number of days in the year of disability prior to the date of termination and said compensation to be paid to him at the same time as it would have been paid if the provisions of this Paragraph C did not operate.  Such payments shall not include the perquisites described in Article VII hereof.

 
-9-
 

 
D.
Death of the CEO.  If the CEO dies during the term of this agreement, NAU agrees to pay to his estate or other individual named by him as a beneficiary under this agreement, for a period of one year, an amount equal to his base salary (as determined under Article VI A hereof) in effect at the time of his death, payable monthly.  In addition, NAU agrees to pay him his prorated share, if any, of compensation determined for the year of death under Article VI (C), said proration to be based upon the number of days in the year of death prior to the date of said death, and said compensation to be paid to him at the same time as it would have been paid if the provisions of this Paragraph D did not operate.
 
 
E.
The parties agree that the CEO may be discharged for cause, (without further compensation), including but not limited to dishonesty, willful misconduct, refusal or unwillingness to perform the duties and responsibilities of the office of CEO satisfactorily in good faith and to the best of his ability, insubordination, prolonged absence from duty without the consent of NAU, or any conduct which is in violation of the criminal statutes of South Dakota or a federal law, or which involves moral turpitude.  Discharge for cause may only be made upon a vote of the majority of the Board after giving the CEO an opportunity to appear before the Board to discuss the notice of dismissal, any such meeting to be conducted in executive session.  If the CEO is discharged and terminated for cause, he shall be entitled to receive only the base salary then in effect, prorated to the date of termination, and all fringe benefits through the date of termination and the remaining installments due, if any, for any bonus earned for a NAU fiscal year prior to the final year that includes the CEO’s date of termination.

 
-10-
 

 
F.
The parties agree that the Board shall have the right to terminate this Agreement at any time upon a majority vote of the Board without proof of cause; provided that if the cancellation should be for other than cause, the CEO shall be entitled to receive, as liquidated damages, his then current base salary (as determined under Article VI A hereof), payable monthly, for two years after termination or until the CEO shall again be employed by another employer, whichever shall first occur.  Said then current base salary shall be paid monthly during the period that such amounts are payable hereunder.  The payments made to the CEO under this Paragraph F of this Article XII shall be in lieu of any and all other entitlements, whether contractually or statutorily derived, including, but not limited to any additional compensation which would otherwise be due him under the provisions of Article VI, Paragraphs (C).  In the event that NAU gives the notice, NAU shall determine whether to require the CEO to continue to perform the agreement during the notice period.
 
XIII.
 
WAIVER OF BREACH :
 
The parties agree that the waiver by NAU of any breach by the CEO of any provision of this Agreement shall not be construed as a waiver of any subsequent breach by the CEO and shall not preclude such enforcement or disciplinary action as NAU deems necessary and appropriate.
 
XIV.
 
ASSIGNMENT :
 
The parties agree that this is a personal service contract and may not be assigned by the CEO.
 
XV.
 
INTEGRATION :
 
The parties agree that this writing constitutes the entire Agreement between them and that there are no other oral or collateral agreements or understandings of any kind or character except those contained herein.

 
-11-
 

XVI.
 
REQUIRED SIX MONTH DELAY :
 
Notwithstanding any other provision in this Agreement to the contrary, if at the time of his separation from service, the CEO is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, distributions made on account of the CEO’s separation from service may not be made before the date that is six (6) months after the CEO’s separation from service unless such payments fall under the exception from Section 409A for separation pay due to involuntary separation from service (as provided in Treas. Reg. § 1. 409A-1(b)(9)(iii)).  If payments are delayed pursuant to this paragraph, distributions will commence on the first day of the seventh month following the separation from service and the first monthly distribution shall include the aggregate payments that were delayed.
 
For purposes of this Agreement, “separation from service” shall mean when the CEO retires or otherwise has a termination of employment with the Employer.  Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Employer and the CEO reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the CEO will perform after such date (whether as an employee or independent contractor) will permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.

(The balance of this page intentionally left blank.)

 
-12-
 

DATED this 18th day of November , 2009.
 
DLORAH, INC.
   
By:
/s/ Robert D. Buckingham
 
Robert D.  Buckingham
Its:
Chairman
 
NATIONAL AMERICAN UNIVERSITY
DIVISION OF DLORAH, INC.
   
By:
/s/ Jerry Gallentine
 
Jerry Gallentine, Ph.D.
Its:
President
   
 
/s/ Ronald Shape
Ronald Shape, Ed.D.

 
-13-
 

EXHIBIT A
 
MERIT PAY FOR CEO
 
The merit pay plan consists of three independent goals associated with key performance indicators of the CEO position in conjunction with university objectives:
 
Annual Profitability:
This goal would be based on the annual audited financial report, net of adjustments as defined in Section VI(B) of the Agreement.  The merit pay would be determined by multiplying the annual audited gross profit, by the corresponding merit percentage below:
 
Profit margin of 15 to 15.99% would allow for a .05% (.0005) merit
Profit margin of 16 to 16.99% would allow for a .1% (.001) merit
Profit margin of 17(+)% would allow for a .15% (.0015) merit
 
Quarterly Collections:
This goal would be based on the quarterly collection percentage 180 days after the start of the quarter.  The merit pay would be calculated by multiplying the prior quarter’s gross profit by the corresponding merit percentage below:
 
Percent collected of 97 to 97.99% would allow for a .02% (.0002) merit
Percent collected of 98 to 98.99% would allow for a .03 % (.0003) merit
Percent collected of 99( +) % would allow for a .04% (.0004) merit
 
Credit Hour Growth:
This goal would be based on the percent of campus generated credit hour growth in the current quarter over the same quarter of the prior year.  The merit pay would be calculated by multiplying the prior quarter’s gross profit by the corresponding merit percentage below:
 
Growth of 5 to 9.99% would allow for a .04% (.0004) merit
Growth of 10 to 14.99% would allow for a .06% (.0006) merit
Growth of 15(+)% would allow for a .08% (.0008) merit
 
DATED the 18th day of November , 2009.
 
DLORAH, INC.
   
/s/ Ronald Shape
   
Ronald Shape, Ed.D.
By:
/s/ Robert D. Buckingham
   
 
Robert D. Buckingham
   
Its:
Chairman
 
NATIONAL AMERICAN UNIVERSITY
   
DIVISION OF DLORAH, INC.
 
   
By
/s/ Jerry Gallentine
     
Jerry Gallentine, Ph.D.
 
  
Its:
President

 
-14-
 
 
EXHIBIT 10.16
 
STOCK PURCHASE AGREEMENT
 
This STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of this 13 th day of November, 2009 by and between Camden Learning Corporation, a Delaware corporation (“Buyer” or “Camden”) and the signatory on the execution page hereof and its affiliates (collectively, “Seller”). 1
 
WHEREAS, Camden was organized for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition or other similar business combination, an operating business (“Business Combination”); and
 
WHEREAS, Camden consummated an initial public offering in November, 2007 (“IPO”) in connection with which it raised gross proceeds of approximately $53 million, a significant portion of which was placed in a trust account (the “Trust Account”) pending the consummation of a Business Combination, or the dissolution and liquidation of Camden in the event it is unable to consummate a Business Combination on or prior to November 29, 2009; and
 
WHEREAS, Camden has entered into that certain Agreement and Plan of Reorganization as amended and restated in its entirety on August 11, 2009 and further amended on October 26 th , 2009 by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization (as amended, the “Merger Agreement”) pursuant to which Dlorah Subsidiary, Inc., a newly formed, wholly-owned subsidiary of Camden (“Merger Sub”), will merge with and into Dlorah, Inc., a South Dakota corporation which owns and operates National American University (Dlorah, Inc., together with its divisions and subsidiaries, is referred to herein as “Dlorah”), with Dlorah surviving as a wholly-owned subsidiary of Camden, as a result of which the stockholders of Dlorah will contribute all of the outstanding capital stock of Dlorah to the Corporation in exchange for shares of a newly created class of common stock, common stock purchase warrants and restricted shares of the Corporation’s currently authorized common stock (the “Acquisition”); and
 
WHEREAS, pursuant to certain provisions in Camden’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), a holder of Camden’s shares of common stock, par value $.0001 per share (the “Common Stock”), issued in Camden’s initial public offering (“IPO”) may, if it votes against the Business Combination, demand that Camden redeem such Common Stock into cash (“Redemption Rights”); and
 
1 “Affiliates” shall have the meaning ascribed to such term under Rule 501 of Regulation D of the Securities Exchange Act of 1934, as amended.
 
 
 
 
 
WHEREAS, the Acquisition will not be consummated if the holders of 30% or more of the Common Stock issued in the IPO vote against the Acquisition and request Redemption Rights; and
 
WHEREAS, Buyer has requested Seller sell, and Seller has agreed to sell, the number of shares of Common Stock set forth on the signature page hereof (the “Shares”); and
 
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
 
ARTICLE I
Purchase and Closing
 
Section 1.01      Purchase.
 
(a)   Seller hereby agrees to sell to Buyer and Buyer hereby agrees to purchase from Seller at the Closing (as defined below) the Shares at $7.97   per share (the “Purchase Price Per Share”) for the aggregate purchase price set forth on the signature page hereto (the “Aggregate Purchase Price”). Following the execution of this Agreement, Buyer hereby agrees to provide irrevocable instructions to its transfer agent in the form attached hereto as Exhibit A , to deliver the Aggregate Purchase Price at the Closing. Buyer’s obligation to purchase the Shares from Seller shall be conditioned on the consummation of the Acquisition.
 
(b)   If, at any time following the execution of this Agreement the market price of the Shares exceeds the pro rata amount due a stockholder of Buyer who elects to exercise its Redemption Rights, Seller may sell some or all of the Shares in the market (a “Sale”); provided , however , any such Sale shall only reduce the number of Shares covered by this Agreement and the Aggregate Purchase thereof as a result of such Sale. In the event of a Sale, each of the other terms and provisions of this Agreement shall terminate only in accordance with Section 7.01.
 
Section 1.02    Closing. The Buyer shall initiate the liquidation of Buyer’s Trust Account as soon as practicable following the earlier of (i) the consummation of the Acquisition and (ii) November 29, 2009. The closing of the purchase and sale of the Shares (“Closing”) will occur as soon as practicable, but in no event more than (1) business day after: (i) the liquidation of Buyer’s Trust Account in connection with the consummation of the Acquisition and (ii) the settlement of all (and not less than all) of the Shares following Seller’s delivery of the Shares to an account specified by Buyer using the Depository Trust Company’s DWAC (Deposit/Withdrawal at Custodian) System. At the Closing, Buyer shall pay Seller the Aggregate Purchase Price by wire transfer from Camden’s Trust Account of immediately available funds to an account specified by Seller. It shall be a condition to the obligation of Buyer on the one hand and Seller on the other hand, to consummate the transfer of the Shares and payment of the Aggregate Purchase Price contemplated hereunder that the other party’s representations and warranties are true and correct at the Closing with the same effect as though made on such date, unless waived in writing by the party to whom such representations and warranties are made.

 
2
 
 
ARTICLE II
Voting of the Shares; Proxy and Waiver of Redemption
 
Section 2.01     Voting; Redemption. In further consideration of the Aggregate Purchase Price, Seller hereby agrees that as soon as practicable, Seller will cause the Shares to be voted in favor of the Acquisition and each of the other proposals (the “Proposals”) to be submitted at the special meeting, or adjournment thereof called for by Camden for the purpose of voting upon (i) the Acquisition and (ii) any other proposal set forth in Camden’s definitive proxy statement describing the Acquisition and Proposals (the “Meeting”), each in the manner set forth in such definitive proxy statement.
 
Section 2.02    Prior Votes. If Seller has already voted in connection with the Meeting, Seller shall, if applicable, withdraw and revoke its vote against the Acquisition and Proposals with respect to the Shares and rescind its demand, to exercise its Redemption Rights with respect to the Shares.
 
Section 2.03     Appointment of Proxy. Subject to the limitation set forth below, Seller hereby appoints David Warnock as its true and lawful proxy and attorney-in-fact, with full power of substitution, to vote all of the Shares in accordance with the terms of this Agreement. The proxy and power of attorney granted herein shall be deemed to be coupled with an interest, shall be irrevocable during the term of this Agreement, and shall survive the death, disability, incompetency, bankruptcy, insolvency or dissolution of Seller. Furthermore, Seller will, from time to time as reasonably requested by Buyer, execute and deliver such further instruments, ancillary agreements or other documents or take such other actions as may be necessary or advisable to give effect to, confirm, evidence or effectuate the purposes of the proxy granted by this Section 2.03. This Section 2.03 shall become effective only if Seller fails to vote the Shares in accordance with this Agreement and upon the termination of this Agreement in accordance with Section 7.01, this Section 2.03 shall be of no further force and effect.
 
Section 2.04      Evidence of Vote. Seller shall provide further evidence of both (i) its vote in favor of the Acquisition and Proposals, and (ii) its non-demand or withdrawal of Redemption Rights, within one (1) business day of any reasonable request by Buyer for such evidence.
 
Section 2.05      Waiver of Right of Redemption. By entering into this Agreement, Seller hereby waives its rights to redeem the Shares. The waiver granted by Seller pursuant to this Section 2.05 is irrevocable unless and until this Agreement is terminated in accordance with Section 7.01 and is granted in consideration of Buyer entering into this Agreement and incurring certain related fees and expenses.

 
3
 
 
ARTICLE III
Representations and Warranties of the Seller
 
Seller hereby represents and warrants to Buyer on the date hereof and on the Closing Date that:
 
Section 3.01     Sophisticated Seller. Seller is sophisticated in financial matters and is able to evaluate the risks and benefits attendant to the sale of Shares to Buyer.
 
Section 3.02    Independent Investigation. Seller, in making the decision to sell the Shares to Buyer, has not relied upon any oral or written representations or assurances from Buyer or any of its officers, directors or employees or any other representatives or agents of Buyer other than as set forth in this Agreement. Seller has had access to all of the filings made by Camden with the SEC, pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended, in each case to the extent available publicly via the SEC’s Electronic Data Gathering, Analysis and Retrieval system.
 
Section 3.03    Authority. This Agreement has been validly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery thereof by Buyer, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by Seller does not and will not, to the best of Seller’s knowledge, conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which Seller is a party which would prevent Seller from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which Seller is subject.
 
Section 3.04    No Legal Advice from Buyer. Seller acknowledges that is has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with Seller’s own legal counsel, investment and tax advisors. Seller is not relying on any statements or representations of Buyer or any of its representatives or agents for legal, tax or investment advice with respect to this Agreement or the transactions contemplated by the Agreement.
 
Section 3.05    Ownership of Shares. Seller is the legal and beneficial owner of the Shares and will transfer to Buyer at the Closing good and marketable title to the Shares free and clear of any liens, claims, security interests, options, charges or any other encumbrance whatsoever. The Seller beneficially owned all of the Shares as of the close of the trading day on November 5, 2009 and has the sole right to exercise Redemption Rights and vote the Shares, whether at the Meeting or upon action by written consent, with respect to all of the Shares. Except as provided by this Agreement, Seller has not, directly or indirectly, granted any proxies or entered into any voting trust or other agreement or arrangement with respect to the voting, regardless of whether such vote would occur at the Meeting or upon action by written consent, of any of the Shares.

 
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Section 3.06    Number of Shares. The Shares being transferred pursuant to this Agreement represent all of the Common Stock beneficially owned by Seller as of the date hereof, including any such shares of Common Stock which may result from the exercise of any option, call or other derivative security interest.
 
Section 3.07     Cash Account. If the Shares are not currently held in an account which prohibits rehypothecation by the Seller’s prime broker, Seller will transfer the Shares into such an account as soon as practicable following the execution of this Agreement; provided , however , in no event shall such transfer occur more than two (2) business days from the execution of this Agreement.
 
Section 3.08     Seller Taxes. Seller understands that Seller (and not the Buyer) shall be responsible for any and all tax liabilities of Seller that may arise as a result of the transactions contemplated by this Agreement.
 
Section 3.09    Aggregate Purchase Price Negotiated. Seller represents and understands that both the number of Shares and the Aggregate Purchase Price were negotiated figures by the parties and that the terms and conditions by the parties of this Agreement may differ from arrangements entered into with other holders of Common Stock.
 
Section 3.10    Finder’s Fees. No investment banker, broker, finder or other intermediary is entitled to a fee or commission from Camden in respect of this Agreement based upon any arrangement or agreement made by or on behalf of Seller.
 
ARTICLE IV
Representations and Warranties of the Buyer
 
Buyer hereby represents and warrants to Seller on the date hereof and on the Closing Date that:
 
Section 4.01     Sophisticated Buyer. Buyer is sophisticated in financial matters and is able to evaluate the risks and benefits attendant to the purchase of Shares from Seller.
 
Section 4.02    Independent Investigation. Buyer, in making the decision to purchase the Shares from Seller, has not relied upon any oral or written representations or assurances from Seller or any of its officers, directors, partners or employees or any other representatives or agents of Seller other than as set forth in this Agreement.

 
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Section 4.03    Authority. This Agreement has been validly authorized, executed and delivered by Buyer and assuming the due authorization, execution and delivery thereof by Seller, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by Buyer does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which Buyer is a party which would prevent Buyer from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which Buyer is subject.
 
Section 4.04    No Legal Advice from Seller. Buyer acknowledges that is has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with Buyer’s own legal counsel, investment and tax advisors. Buyer is relying solely on such counsel and advisors and not on any statements or representations of Seller or any of its representatives or agents for legal, tax or investment advice with respect to this Agreement or the transactions contemplated by this Agreement.
 
Section 4.05     Buyer Taxes. Buyer understands that Buyer (and not the Seller) shall be responsible for any and all tax liabilities of Buyer that may arise as a result of the transactions contemplated by this Agreement.
 
ARTICLE V
Negative Covenants of the Seller
 
Section 5.01    No Further Acquisitions of Camden Securities. Seller hereby covenants and agrees that following the execution of this Agreement and prior to Closing, Seller shall not acquire any Common Stock, other securities of Camden convertible into or exchangeable for shares of Common Stock in Camden or any options, calls or other rights to acquire Common Stock of Camden or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any Common Stock or other securities of Camden.
 
Section 5.03     No Borrowing of the Shares. Seller hereby covenants and agrees that it shall not allow the Shares to be borrowed by, or lent to, any other person or entity whatsoever during the term of this Agreement.
 
Section 5.02     No Other Proxies or Voting Agreements. Seller hereby covenants and agrees that except pursuant to the terms of this Agreement, Seller shall not, directly or indirectly, (i) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any of the Shares, regardless of whether such vote would occur at the Meeting or upon action by written consent or (ii) sell, assign, transfer, encumber or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect assignment, transfer, encumbrance or other disposition of, any of the Shares during the term of this Agreement. Seller shall not seek or solicit any such assignment, transfer, encumbrance or other disposition or any such contract, option or other arrangement or understanding with respect to the Shares.

 
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ARTICLE VI
Acknowledgement; Waiver
 
Section 6.01      Acknowledgement; Waiver. Seller (i) acknowledges that Buyer may possess or have access to material non-public information which has not been communicated to Seller; (ii) hereby waives any and all claims, whether at law, in equity or otherwise, that he, she, or it may now have or may hereafter acquire, whether presently known or unknown, against Buyer or any of its officers, directors, employees, agents, affiliates, subsidiaries, successors or assigns relating to any failure to disclose any non-­public information in connection with the transactions contemplated by this Agreement, including without limitation, any such claims arising under the securities or other laws, rules and regulations, and (iii) is aware that Buyer is relying on the foregoing acknowledgement and waiver in clauses (i) and (ii) above, respectively, in connection with the transactions contemplated by this Agreement.
 
ARTICLE VII
Miscellaneous
 
Section 7.01    Termination. Except with respect to Buyer’s obligation under the first sentence of Section 1.02, notwithstanding any provision in this Agreement to the contrary, this Agreement shall become null and void and of no further force and effect upon the earlier to occur: (i) termination by the written agreement of the parties to this Agreement, (ii) the day on which the Company terminates the Acquisition or (iii) 12:00 a.m. on November 30, 2009.
 
Section 7.02    Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This Agreement or any counterpart may be executed via facsimile transmission, and any such executed facsimile copy shall be treated as an original.
 
Section 7.03    Governing Law. This Agreement shall for all purposes be deemed to be made under and shall be construed in accordance with the laws of the State of Delaware. Each of the parties hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall, to the fullest extent applicable, be brought and enforced first in the Delaware Chancery Court, then to such other court in the State of Delaware as appropriate and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

 
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Section 7.04    Remedies Cumulative. Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such other party contained in this Agreement. Accordingly, Seller hereby agrees Buyer is entitled to an injunction prohibiting any conduct by the Seller in violation of this Agreement and shall not seek the posting of any bond in connection with such request for an injunction. Furthermore, in any action by Buyer to enforce this Agreement, Seller waives its right to assert any counterclaims and its right to assert set-off as a defense. The prevailing party agrees to pay all costs and expenses, including reasonable attorneys’ and experts’ fees that such prevailing party may incur in connection with the enforcement of this Agreement.
 
Section 7.05    Severability. If any term, provision or covenant of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated
 
Section 7.06    Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party hereto.
 
Section 7.07     Headings. The descriptive headings of the Sections hereof are inserted for convenience only and do not constitute a part of this Agreement.
 
Section 7.08    Entire Agreement; Changes in Writing. This Agreement constitutes the entire agreement among the parties hereto and supersedes and cancels any prior agreements, representations and warranties, whether oral or written, among the parties hereto relating to the transaction contemplated hereby. Neither this Agreement not any provision hereof may be changed or amended orally, but only by an agreement in writing signed by the other party hereto.

 
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Section 7.09     Trust Waiver. Camden’s initial public offering was consummated on December 5, 2007 as a result of which it received gross proceeds of $53,010,400, a significant portion of which are held in the Trust Account. The Trust Account is invested in U.S. government securities in a trust account at JP Morgan Chase Bank, N.A. and held in trust by Continental Stock Transfer & Trust Company (the “Trustee”) pursuant to the Investment Management Trust Account Agreement, dated as of November 29, 2007, between Camden and Trustee. Other than with respect to the Aggregate Purchase Price to be paid to Seller in connection with this Agreement, Seller agrees that it does not now have, and shall not at any time have, any claim to, or make any claim against, the Trust Account or any asset contained therein, regardless of whether such claim arises as a result of, in connection with or relating in any way to, the business relationship between Seller, on the one hand, and Camden, on the other hand, this Agreement, or any other agreement or any other matter, and regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability. Other than with respect to the Aggregate Purchase Price to be paid to Seller in connection with this Agreement, Seller hereby irrevocably waives any and all claims it may have, now or in the future (in each case, however, prior to the consummation of a business combination), and will not seek recourse against, the Trust Account for any other reason whatsoever in respect thereof. Other than with respect to an action for the recovery of the Aggregate Purchase Price to be paid to Seller in connection with this Agreement, in the event Seller commences any other action or proceeding based upon, in connection with, relating to or arising out of any matter relating to Camden, which proceeding seeks, in whole or in part, relief against the Trust Account or the public stockholders of Camden, whether in the form of money damages or injunctive relief, Camden shall be entitled to recover from Seller the associated legal fees and costs in connection with any such action.
 
[Signature Page Follows]
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth on the first page of this Agreement.
 
CAMDEN LEARNING
CORPORATION
   
By:
/s/ David Warnock
Name:
David Warnock
Title:
CEO
   
BULLDOG INVESTORS
By:
Name: 
Andrew Dakos
Title:  
Principal  
 
Purchase Price Per Share: $7.97
Number of Shares: 1,030,167
Aggregate Purchase Price: 8,210,430.99

Signature Page to Stock Purchase Agreement

 
 
 
EXHIBIT 10.17
 
STOCK PURCHASE AGREEMENT
 
This STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of this 19th day of November, 2009 by and between Camden Learning Corporation, a Delaware corporation (“Buyer” or “Camden”) and the signatory on the execution page hereof and its affiliates (collectively, “Seller”).
 
WHEREAS, Camden was organized for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition or other similar business combination, an operating business (“Business Combination”); and
 
WHEREAS, Camden consummated an initial public offering in November, 2007 (“IPO”) in connection with which it raised gross proceeds of approximately $53 million, a significant portion of which was placed in a trust account (the “Trust Account”) pending the consummation of a Business Combination, or the dissolution and liquidation of Camden in the event it is unable to consummate a Business Combination on or prior to November 29, 2009; and
 
WHEREAS, Camden has entered into that certain Agreement and Plan of Reorganization as amended and restated in its entirety on August 11, 2009 and further amended on October 26 th , 2009 by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization (as amended, the “Merger Agreement”) pursuant to which Dlorah Subsidiary, Inc., a newly formed, wholly-owned subsidiary of Camden (“Merger Sub”), will merge with and into Dlorah, Inc., a South Dakota corporation which owns and operates National American University (Dlorah, Inc., together with its divisions and subsidiaries, is referred to herein as “Dlorah”), with Dlorah surviving as a wholly-owned subsidiary of Camden, as a result of which the stockholders of Dlorah will contribute all of the outstanding capital stock of Dlorah to the Corporation in exchange for shares of a newly created class of common stock, common stock purchase warrants and restricted shares of the Corporation’s currently authorized common stock (the “Acquisition”); and
 
WHEREAS, pursuant to certain provisions in Camden’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), a holder of Camden’s shares of common stock, par value $.0001 per share (the “Common Stock”), issued in Camden’s initial public offering (“IPO”) may, if it votes against the Business Combination, demand that Camden redeem such Common Stock into cash (“Redemption Rights”); and
 
WHEREAS, the Acquisition will not be consummated if the holders of 30% or more of the Common Stock issued in the IPO vote against the Acquisition and request Redemption Rights; and
 
WHEREAS, Buyer has requested Seller sell, and Seller has agreed to sell, the number of shares of Common Stock set forth on the signature page hereof (the “Shares”); and
 
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 
 
 
 
ARTICLE I
Purchase and Closing
 
Section 1.01     Purchase. Seller hereby agrees to sell to Buyer and Buyer hereby agrees to purchase from Seller at the Closing (as defined below) the Shares at $7.92 per share (the “Purchase Price Per Share”) for the aggregate purchase price set forth on the signature page hereto (the “Aggregate Purchase Price”). Prior to the Closing, Buyer hereby agrees to provide irrevocable instructions to its transfer agent in the form attached hereto as Exhibit A , to deliver the Aggregate Purchase Price at the Closing. Buyer’s obligation to purchase the Shares from Seller shall be conditioned on the consummation of the Acquisition.
 
Section 1.02    Closing. The closing of the purchase and sale of the Shares within two business days of the date that the Business Combination is consummated (such second business day being the (“Closing”). At the Closing, Buyer shall pay Seller the Aggregate Purchase Price by wire transfer from Camden’s Trust Account of immediately available funds to an account specified by Seller and Seller shall deliver the Shares to Buyer electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal at Custodian) System to an account specified by Buyer. For purposes of clarity, and notwithstanding anything in this Agreement to the contrary, in the event the closing of the Business Combination does not occur by November 29 2009, this Agreement shall be null and void, ab initio, and no party hereto shall have any rights or obligations under this Agreement. It shall be a condition to the obligation of Buyer on the one hand and Seller on the other hand, to consummate the transfer of the Shares and payment of the Aggregate Purchase Price contemplated hereunder that the other party’s representations and warranties are true and correct at the Closing with the same effect as though made on such date, and that the other party shall have complied with all of its obligations hereunder, unless waived in writing by the party to whom such representations and warranties are made or compliance is promised.
 
ARTICLE II
Agreement not to Redeem  and Proxy
 
Section 2.01    Agreement not to Redeem. In further consideration of the Aggregate Purchase Price, Seller hereby agrees it will not exercise its Redemption Rights and if Seller has previously elected to exercise its Redemption Rights with respect to any of its Shares, it shall properly and validly withdraw such redemption election with respect to any of its Shares within one business day of this Agreement.
 
Section 2.02     Appointment of Proxy. Seller hereby appoints David Warnock as its true and lawful proxy and attorney-in-fact, with full power of substitution, to vote all of the Shares in such manner as such person or his substitute shall in his sole discretion deem proper, and to otherwise act (including without limitation acting by written consent) with respect to all the Shares at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of Camden held on or prior to November 23, 2009. The proxy and power of attorney granted herein shall be deemed to be coupled with an interest in the Shares, and is irrevocable. The Seller hereby revokes all prior proxies granted by Seller at any time with respect to the Shares (and such other shares or other securities) and no subsequent proxies will be given by Seller (and if given will be deemed not to be effective).

 
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ARTICLE III
Representations and Warranties of the Seller
 
Seller hereby represents and warrants to Buyer on the date hereof and on the Closing Date that:
 
Section 3.01     Sophisticated Seller. Seller is sophisticated in financial matters and is able to evaluate the risks and benefits attendant to the sale of Shares to Buyer.
 
Section 3.02    Independent Investigation. Seller, in making the decision to sell the Shares to Buyer, has not relied upon any oral or written representations or assurances from Buyer or any of its officers, directors or employees or any other representatives or agents of Buyer other than as set forth in this Agreement. Seller has had access to all of the filings made by Camden with the SEC, pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended, in each case to the extent available publicly via the SEC’s Electronic Data Gathering, Analysis and Retrieval system.
 
Section 3.03    Authority. This Agreement has been validly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery thereof by Buyer, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by Seller does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which Seller is a party which would prevent Seller from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which Seller is subject.
 
Section 3.04     No Legal Advice from Buyer. Seller acknowledges that is has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with Seller’s own legal counsel, investment and tax advisors. Seller is not relying on any statements or representations of Buyer or any of its representatives or agents for legal, tax or investment advice with respect to this Agreement or the transactions contemplated by the Agreement.
 
Section 3.05    Ownership of Shares. Seller is the legal and beneficial owner of the Shares and will transfer to Buyer at the Closing good and marketable title to the Shares free and clear of any liens, claims, security interests, options, charges or any other encumbrance whatsoever. The Seller beneficially owned all of the Shares as of the close of the trading day on November 5, 2009 and has the sole right to exercise Redemption Rights and vote the Shares, whether at the Meeting or upon action by written consent, with respect to all of the Shares. Except as provided by this Agreement, Seller has not, directly or indirectly, granted any proxies or entered into any voting trust or other agreement or arrangement with respect to the voting, regardless of whether such vote would occur at the Meeting or upon action by written consent, of any of the Shares.
 
Section 3.06    Number of Shares. The Shares being transferred pursuant to this Agreement represent all of the Common Stock beneficially owned by Seller as of the date hereof, including any such shares of Common Stock which may result from the exercise of any option, call or other derivative security interest.
 
Section 3.07     Cash Account. If the Shares are not currently held in an account which prohibits rehypothecation by the Seller’s prime broker, Seller will transfer the Shares into such an account as soon as practicable following the execution of this Agreement; provided , however , in no event shall such transfer occur more than two (2) business days from the execution of this Agreement.

 
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Section 3.08     Seller Taxes. Seller understands that Seller (and not the Buyer) shall be responsible for any and all tax liabilities of Seller that may arise as a result of the transactions contemplated by this Agreement.
 
Section 3.09    Aggregate Purchase Price Negotiated. Seller represents and understands that both the number of Shares and the Aggregate Purchase Price were negotiated figures by the parties and that the terms and conditions by the parties of this Agreement may differ from arrangements entered into with other holders of Common Stock.
 
Section 3.10     Finder’s Fees. No investment banker, broker, finder or other intermediary is entitled to a fee or commission from Camden in respect of this Agreement based upon any arrangement or agreement made by or on behalf of Seller.
 
ARTICLE IV
Representations and Warranties of the Buyer
 
Buyer hereby represents and warrants to Seller on the date hereof and on the Closing Date that:
 
Section 4.01     Sophisticated Buyer. Buyer is sophisticated in financial matters and is able to evaluate the risks and benefits attendant to the purchase of Shares from Seller.
 
Section 4.02     Independent Investigation. Buyer, in making the decision to purchase the Shares from Seller, has not relied upon any oral or written representations or assurances from Seller or any of its officers, directors, partners or employees or any other representatives or agents of Seller other than as set forth in this Agreement other than those made in this Agreement.
 
Section 4.03    Authority. This Agreement has been validly authorized, executed and delivered by Buyer and assuming the due authorization, execution and delivery thereof by Seller, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by Buyer does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which Buyer is a party which would prevent Buyer from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which Buyer is subject.
 
Section 4.04     No Legal Advice from Seller. Buyer acknowledges that is has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with Buyer’s own legal counsel, investment and tax advisors. Buyer is relying solely on such counsel and advisors and not on any statements or representations of Seller or any of its representatives or agents for legal, tax or investment advice with respect to this Agreement or the transactions contemplated by this Agreement.
 
Section 4.05     Buyer Taxes. Buyer understands that Buyer (and not the Seller) shall be responsible for any and all tax liabilities of Buyer that may arise as a result of the transactions contemplated by this Agreement.
 
ARTICLE V
Negative Covenants of the Seller
 
Section 5.01    No Further Acquisitions of Camden Securities. Seller hereby covenants and agrees that following the execution of this Agreement and prior to Closing, Seller shall not acquire any Common Stock, other securities of Camden convertible into or exchangeable for shares of Common Stock in Camden or any options, calls or other rights to acquire Common Stock of Camden or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any Common Stock or other securities of Camden.

 
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Section 5.03     No Borrowing of the Shares. Seller hereby covenants and agrees that it shall not allow the Shares to be borrowed by, or lent to, any other person or entity whatsoever during the term of this Agreement.
 
Section 5.02    No Other Proxies or Voting Agreements. Seller hereby covenants and agrees that except pursuant to the terms of this Agreement, Seller shall not, directly or indirectly, (i) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any of the Shares, regardless of whether such vote would occur at the Meeting or upon action by written consent or (ii) sell, assign, transfer, encumber or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect assignment, transfer, encumbrance or other disposition of, any of the Shares during the term of this Agreement. Seller shall not seek or solicit any such assignment, transfer, encumbrance or other disposition or any such contract, option or other arrangement or understanding with respect to the Shares and agrees to notify Buyer promptly, and to provide all details requested by Buyer, if Seller shall be approached or solicited, directly or indirectly, by any person with respect to the Shares.
 
ARTICLE VI
Acknowledgement; Waiver
 
Section 6.01    Acknowledgement; Waiver. Seller (i) acknowledges that Buyer may possess or have access to material non-public information which has not been communicated to Seller; (ii) hereby waives any and all claims, whether at law, in equity or otherwise, that he, she, or it may now have or may hereafter acquire, whether presently known or unknown, against Buyer or any of its officers, directors, employees, agents, affiliates, subsidiaries, successors or assigns relating to any failure to disclose any non-public information in connection with the transactions contemplated by this Agreement, including without limitation, any such claims arising under the securities or other laws, rules and regulations, and (iii) is aware that Buyer is relying on the foregoing acknowledgement and waiver in clauses (i) and (ii) above, respectively, in connection with the transactions contemplated by this Agreement.
 
ARTICLE VII
Miscellaneous
 
Section 7.01    Termination. Notwithstanding any provision in this Agreement to the contrary, this Agreement shall become null and void and of no further force and effect upon the earlier to occur: (i) termination by the written agreement of the parties to this Agreement or (ii) the day on which the Company terminates the Acquisition.
 
Section 7.02    Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This Agreement or any counterpart may be executed via facsimile transmission, and any such executed facsimile copy shall be treated as an original.

 
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Section 7.03    Governing Law. This Agreement shall for all purposes be deemed to be made under and shall be construed in accordance with the laws of the State of Delaware. Each of the parties hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall, to the fullest extent applicable, be brought and enforced first in the Delaware Chancery Court, then to such other court in the State of Delaware as appropriate and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
 
Section 7.04    Remedies Cumulative. Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such other party contained in this Agreement. Accordingly, Seller hereby agrees Buyer is entitled to an injunction prohibiting any conduct by the Seller in violation of this Agreement and shall not seek the posting of any bond in connection with such request for an injunction. Furthermore, in any action by Buyer to enforce this Agreement, Seller waives its right to assert any counterclaims and its right to assert set-off as a defense. The prevailing party agrees to pay all costs and expenses, including reasonable attorneys’ and experts’ fees that such prevailing party may incur in connection with the enforcement of this Agreement.
 
Section 7.05    Severability. If any term, provision or covenant of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated
 
Section 7.06    Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party hereto.
 
Section 7.07     Headings. The descriptive headings of the Sections hereof are inserted for convenience only and do not constitute a part of this Agreement.
 
Section 7.08    Entire Agreement; Changes in Writing. This Agreement constitutes the entire agreement among the parties hereto and supersedes and cancels any prior agreements, representations and warranties, whether oral or written, among the parties hereto relating to the transaction contemplated hereby. Neither this Agreement not any provision hereof may be changed or amended orally, but only by an agreement in writing signed by the other party hereto.

 
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Section 7.09    Trust Waiver. Camden’s initial public offering was consummated on December 5, 2007 as a result of which it received gross proceeds of $53,010,400, a significant portion of which are held in a trust fund established by Camden for the benefit of its public stockholders (the “Trust Fund”). The Trust Fund is invested in U.S. government securities in a trust account at JP Morgan Chase Bank, N.A. and held in trust by Continental Stock Transfer & Trust Company (the “Trustee”) pursuant to the Investment Management Trust Account Agreement, dated as of November 29, 2007, between Camden and Trustee. Other than with respect to the Aggregate Purchase Price to be paid to Seller in connection with this Agreement, Seller agrees that it does not now have, and shall not at any time have, any claim to, or make any claim against, the Trust Fund or any asset contained therein, regardless of whether such claim arises as a result of, in connection with or relating in any way to, the business relationship between Seller, on the one hand, and Camden, on the other hand, this Agreement, or any other agreement or any other matter, and regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability. Other than with respect to the Aggregate Purchase Price to be paid to Seller in connection with this Agreement, Seller hereby irrevocably waives any and all claims it may have, now or in the future (in each case, however, prior to the consummation of a business combination), and will not seek recourse against, the Trust Fund for any other reason whatsoever in respect thereof. Other than with respect to an action for the recovery of the Aggregate Purchase Price to be paid to Seller in connection with this Agreement, in the event Seller commences any other action or proceeding based upon, in connection with, relating to or arising out of any matter relating to Camden, which proceeding seeks, in whole or in part, relief against the Trust Fund or the public stockholders of Camden, whether in the form of money damages or injunctive relief, Camden shall be entitled to recover from Seller the associated legal fees and costs in connection with any such action where Camden has been found by a court or adjudicatory body of competent jurisdiction to have no liability in such action.
 
[Signature Page Follows]

 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth on the first page of this Agreement.
 
CAMDEN LEARNING
CORPORATION
   
By:
Name:
David Warnock
Title:
CEO
   
CREDIT SUISSE SECURITIES (USA)
   
By:
Name:
Joe Capone
Title:
Director
 
Purchase Price Per Share: $7.92
Number of Shares: 100,000
Aggregate Purchase Price: 792,000
 
Signature Page to Stock Purchase Agreement

 
 
 
EXHIBIT 10.18

JOINDER TO REGISTRATION RIGHTS AGREEMENT
 
This JOINDER AGREEMENT (this “Joinder Agreement”), dated as of November ___, 2009, to the Registration Rights Agreement (the “Agreement”)  dated  as of November 29, 2007, by and among Camden Learning Corporation, a Delaware corporation (the “Company”), and the Investors is made by and between the Company and the stockholder listed on the signature page hereof (the “Stockholder”).  All capitalized terms used in this Joinder Agreement without definition shall have the meanings ascribed thereto in the Agreement.

WHEREAS, in connection with the Company’s initial public offering consummated on December 5, 2007, the Company issued 1,562,650 shares of restricted common stock, par value $0.0001 per share (the “Restricted Stock”) to the Investors with such Restricted Stock subject to the terms and conditions of that certain Securities Escrow Agreement dated November 29, 2007, as amended; and

WHEREAS, the Company has now entered into that certain Agreement and Plan of Reorganization as amended and restated in its entirety on August 11, 2009 and further amended on October 26, 2009 by Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, pursuant to which Dlorah Subsidiary, Inc., a newly formed, wholly-owned subsidiary of Camden (‘‘Merger Sub’’), will merge with and into Dlorah, Inc., a South Dakota corporation (Dlorah, Inc., together with its divisions and subsidiaries, is referred to herein as “Dlorah”), with Dlorah surviving as a wholly-owned subsidiary of Camden, as a result of which the stockholders of Dlorah will contribute all of the outstanding capital stock of Dlorah to Camden in exchange for shares of a newly created class of Camden common stock, common stock purchase warrants and restricted shares of Camden’s currently authorized common stock (the “Acquisition”); and
 
WHEREAS, in connection with the Acquisition and pursuant to the Share Transfer Agreement dated November __, 2009 by and between Camden Learning, LLC (“CL LLC”) and the Stockholder, CL LLC has agreed to transfer [NUMBER] of shares of Restricted Stock to the Stockholder (the “Transferred Stock”); and

WHEREAS, the Agreement sets forth the terms upon which the Restricted Stock can be registered, and as transferee of a certain portion of the Restricted Stock, the Stockholder wishes to be joined to the Agreement with respect to the Transferred Stock.

 
 
 

NOW, THEREFORE, the parties hereto agree as follows:

1.            Joinder .

The Stockholder hereby agrees to become a party to the Agreement and to be bound by all of the provisions thereof as if a signatory thereto, and shall have all of the rights and privileges of an original signatory to the Agreement with respect to the Transferred Stock.

2.           Notices .

The provisions of Section 6.3 of the Agreement shall be amended to add the following notice information for the Stockholder:

If to the Stockholder to:

[INSERT]

A copy of any notice sent to the Stockholder hereunder shall be sent to:

[INSERT]

3.             Miscellaneous .

(a)            Governing Law .  This Joinder Agreement shall be governed by, interpreted under, and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed within the State of New York, without giving effect to any choice-of-law provisions thereof that would compel the application of the substantive laws of any other jurisdiction.  Each of the parties hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Joinder Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York (each, a “New York Court”), and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

(b)            Entire Agreement .  This Joinder Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and, except as expressly provided herein, may not be changed or modified except by an instrument in writing signed by the party to be charged.  This Joinder Agreement may be executed in one or more counterparts and delivered by facsimile, each of which shall constitute an original, and together shall constitute one and the same instrument.

(c)            Headings .  The headings contained in this Joinder Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation thereof.

(d)            Binding Effect .  This Joinder Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives, successors and assigns.

 
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(e)            Counterparts . This Agreement may be executed in several counterparts each one of which shall constitute an original and may be delivered by facsimile transmission and together shall constitute one instrument.

 
3
 

WITNESS the execution of this Joinder Agreement as of the date first above written.

[Insert New Stockholder]
   
By:
 
Name:
 
Title:
 

CAMDEN LEARNING CORPORATION
   
By:
 
 
Name: David Warnock
 
Title: Chairman, President and Chief Executive Officer

 
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EXHIBIT 16.1
 
 
[McGladrey & Pullen, LLP Letterhead]
 
 
 
 
 
 
November 30, 2009


Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Re: 
Camden Learning Corporation
Commission File # 000-52919

Ladies and Gentlemen:

We have read the statements made by Camden Learning Corporation in Item 4.01 of the accompanying Form 8-K, which is being filed with the Securities and Exchange Commission.  We agree with the statements therein concerning our firm.

Very truly yours,


/s/ McGladrey & Pullen, LLP

McGLADREY & PULLEN, LLP