LAUREATE EDUCATION, INC. (Form: 10-Q, Received: 08/09/2018 07:57:47)

Number of Financing Receivable Accounts

Balance at Default

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2018

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________.

Commission File Number: 001-38002

Laureate Education, Inc.

(Exact name of registrant as specified in its charter)



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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer x (Do not check if a smaller reporting company)

Smaller reporting company o Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



Class		Outstanding at June 30, 2018
Class A common stock, par value $0.004 per share		91,613,615 shares
Class B common stock, par value $0.004 per share		132,415,605 shares



INDEX
PART I. - FINANCIAL INFORMATION		Page No.

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Operations - Three months ended June 30, 2018 and June 30, 2017	2

	Consolidated Statements of Operations - Six months ended June 30, 2018 and June 30, 2017	3

	Consolidated Statements of Comprehensive Income - Three months ended June 30, 2018 and June 30, 2017	4

	Consolidated Statements of Comprehensive Income - Six months ended June 30, 2018 and June 30, 2017	5

	Consolidated Balance Sheets - June 30, 2018 and December 31, 2017	6

	Consolidated Statements of Cash Flows - Six months ended June 30, 2018 and June 30, 2017	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74

Item 4.	Controls and Procedures	74

PART II. - OTHER INFORMATION

Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	76

Item 6.	Exhibits	77

SIGNATURES		82

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

IN THOUSANDS, except per share amounts




For the three months ended June 30,	2018			2017
	(Unaudited)			(Unaudited)
Revenues	$	1,247,917		$	1,277,439
Costs and expenses:
Direct costs	908,941			942,246
General and administrative expenses	73,203			91,343
Operating income	265,773			243,850
Interest income	5,448			4,460
Interest expense	(65,969		)	(98,962		)
Loss on debt extinguishment	—			(6,915		)
Gain on derivatives	111,596			26,970
Other income (expense), net	2,099			(380		)
Foreign currency exchange loss, net	(17,867		)	(9,726		)
Gain (loss) on sales of subsidiaries, net	11,763			(172		)
Income from continuing operations before income taxes and equity in net income of affiliates	312,843			159,125
Income tax expense	(88,889		)	(42,028		)
Equity in net income of affiliates, net of tax	—			1
Net income	223,954			117,098
Net loss (income) attributable to noncontrolling interests	456			(712		)
Net income attributable to Laureate Education, Inc.	$	224,410		$	116,386

Accretion of Series A convertible redeemable preferred stock and other redeemable noncontrolling interests and equity	(4,324		)	(69,212		)
Gain upon conversion of Series A convertible redeemable preferred stock	74,110			—
Net income available to common stockholders	$	294,196		$	47,174



Basic and diluted earnings per share:
Basic earnings per share	$	1.37	$	0.28
Diluted earnings per share	$	1.00	$	0.28

The accompanying notes are an integral part of these consolidated financial statements.

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

IN THOUSANDS, except per share amounts




For the six months ended June 30,	2018			2017
	(Unaudited)			(Unaudited)
Revenues	$	2,133,205		$	2,133,372
Costs and expenses:
Direct costs	1,774,387			1,795,478
General and administrative expenses	120,504			156,911
Operating income	238,314			180,983
Interest income	11,577			9,154
Interest expense	(135,434		)	(201,595		)
Loss on debt extinguishment	(7,481		)	(8,430		)
Gain on derivatives	92,256			39,117
Other income, net	4,505			56
Foreign currency exchange loss, net	(26,621		)	(7,436		)
Gain (loss) on sales of subsidiaries, net	309,804			(172		)
Income from continuing operations before income taxes and equity in net income of affiliates	486,920			11,677
Income tax expense	(91,421		)	(14,934		)
Equity in net income of affiliates, net of tax	—			1
Net income (loss)	395,499			(3,256		)
Net income attributable to noncontrolling interests	(2,210		)	(3,166		)
Net income (loss) attributable to Laureate Education, Inc.	$	393,289		$	(6,422	)

Accretion of Series A convertible redeemable preferred stock and other redeemable noncontrolling interests and equity	(61,727		)	(108,081		)
Gain upon conversion of Series A convertible redeemable preferred stock	74,110			—
Net income (loss) available to common stockholders	$	405,672		$	(114,503	)



Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share	$	2.01	$	(0.71	)
Diluted earnings (loss) per share	$	1.75	$	(0.71	)

The accompanying notes are an integral part of these consolidated financial statements.

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

IN THOUSANDS




For the three months ended June 30,	2018			2017
	(Unaudited)			(Unaudited)
Net income	$	223,954		$	117,098
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of tax of $0 for both periods	(196,672		)	28,455
Unrealized gain on derivative instruments, net of tax of $0 for both periods	10,126			3,507
Total other comprehensive (loss) income	(186,546		)	31,962
Comprehensive income	37,408			149,060
Net comprehensive income attributable to noncontrolling interests	(15		)	(1,269		)
Comprehensive income attributable to Laureate Education, Inc.	$	37,393		$	147,791

The accompanying notes are an integral part of these consolidated financial statements.

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

IN THOUSANDS




For the six months ended June 30,	2018			2017
	(Unaudited)			(Unaudited)
Net income (loss)	$	395,499		$	(3,256	)
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of tax of $0 for both periods	(113,303		)	131,851
Unrealized gain on derivative instruments, net of tax of $0 for both periods	12,336			6,099
Minimum pension liability adjustment, net of tax of $0	376			—
Total other comprehensive (loss) income	(100,591		)	137,950
Comprehensive income	294,908			134,694
Net comprehensive income attributable to noncontrolling interests	(2,402		)	(4,055		)
Comprehensive income attributable to Laureate Education, Inc.	$	292,506		$	130,639

The accompanying notes are an integral part of these consolidated financial statements.

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

IN THOUSANDS, except per share amounts




	June 30, 2018			December 31, 2017
Assets	(Unaudited)
Current assets:
Cash and cash equivalents (includes VIE amounts of $187,604 and $231,940, see Note 2)	$	402,402		$	468,733
Restricted cash	182,905			224,934
Receivables:
Accounts and notes receivable	618,301			535,176
Other receivables	25,354			21,551
Allowance for doubtful accounts	(193,755		)	(198,802		)
Receivables, net	449,900			357,925
Income tax receivable	24,438			41,178
Prepaid expenses and other current assets	176,101			93,461
Current assets held for sale	35,955			102,623
Total current assets (includes VIE amounts of $460,755 and $407,315, see Note 2)	1,271,701			1,288,854
Notes receivable, net	13,231			4,116
Property and equipment:
Land	382,082			397,153
Buildings	960,463			1,026,656
Furniture, equipment and software	1,197,948			1,188,211
Leasehold improvements	419,018			423,658
Construction in-progress	69,796			84,520
Accumulated depreciation and amortization	(1,235,358		)	(1,185,294		)
Property and equipment, net	1,793,949			1,934,904
Land use rights, net	2,406			2,713
Goodwill	1,819,006			1,954,666
Other intangible assets:
Tradenames	1,242,964			1,295,614
Other intangible assets, net	29,017			35,927
Deferred costs, net	68,078			64,128
Deferred income taxes	157,093			156,006
Derivative instruments	15,410			48,186
Other assets	240,722			214,218
Long-term assets held for sale	276,947			392,391
Total assets (includes VIE amounts of $1,250,631 and $1,419,579, see Note 2)	$	6,930,524		$	7,391,723

The accompanying notes are an integral part of these consolidated financial statements.

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

IN THOUSANDS, except per share amounts




	June 30, 2018			December 31, 2017
Liabilities and stockholders' equity	(Unaudited)
Current liabilities:
Accounts payable	$	72,467		$	79,568
Accrued expenses	279,731			291,216
Accrued compensation and benefits	198,088			247,575
Deferred revenue and student deposits	351,951			312,422
Current portion of long-term debt	157,936			154,234
Current portion of due to shareholders of acquired companies	24,483			40,140
Income taxes payable	42,070			29,857
Derivative instruments	72			4,458
Other current liabilities	39,984			38,560
Current liabilities held for sale	85,135			176,719
Total current liabilities (includes VIE amounts of $241,437 and $341,147, see Note 2)	1,251,917			1,374,749
Long-term debt, less current portion	2,756,109			3,207,064
Due to shareholders of acquired companies, less current portion	35,384			39,429
Deferred compensation	14,719			14,470
Income taxes payable	78,361			112,576
Deferred income taxes	295,043			278,215
Derivative instruments	7,644			9,390
Other long-term liabilities	283,351			260,144
Long-term liabilities held for sale	79,912			94,407
Total liabilities (includes VIE amounts of $312,920 and $449,561, see Note 2)	4,802,440			5,390,444
Series A convertible redeemable preferred stock, par value $0.001 per share – 512 shares authorized, no shares issued and outstanding as of June 30, 2018 and 401 shares issued and outstanding as of December 31, 2017	—			400,276
Redeemable noncontrolling interests and equity	12,980			13,721
Stockholders' equity:
Preferred stock, par value $0.001 per share – 49,488 shares authorized, no shares issued and outstanding as of June 30, 2018 and December 31, 2017	—			—
Class A common stock, par value $0.004 per share – 700,000 shares authorized, 91,614 shares issued and outstanding as of June 30, 2018 and 55,052 shares issued and outstanding as of December 31, 2017	366			220
Class B common stock, par value $0.004 per share – 175,000 shares authorized, 132,416 shares issued and outstanding as of June 30, 2018 and 132,443 shares issued and outstanding as of December 31, 2017	530			530
Additional paid-in capital	3,698,822			3,446,206
Accumulated deficit	(548,617		)	(946,236		)
Accumulated other comprehensive loss	(1,026,339		)	(925,556		)
Total Laureate Education, Inc. stockholders' equity	2,124,762			1,575,164
Noncontrolling interests	(9,658		)	12,118
Total stockholders' equity	2,115,104			1,587,282
Total liabilities and stockholders' equity	$	6,930,524		$	7,391,723

The accompanying notes are an integral part of these consolidated financial statements.

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

IN THOUSANDS




For the six months ended June 30,	2018			2017
Cash flows from operating activities	(unaudited)			(unaudited)
Net income (loss)	$	395,499		$	(3,256	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	130,164			131,465
(Gain) loss on sales of subsidiaries and disposal of property and equipment, net	(309,918		)	1,927
Gain on derivative instruments	(92,680		)	(39,386		)
Loss on debt extinguishment	7,481			8,430
Non-cash interest expense	11,023			22,359
Non-cash share-based compensation expense	3,931			35,337
Bad debt expense	58,282			51,439
Deferred income taxes	(660		)	(3,196		)
Unrealized foreign currency exchange loss	18,721			11,756
Non-cash (gain) loss from non-income tax contingencies	(928		)	3,813
Other, net	(10,032		)	(1,052		)
Changes in operating assets and liabilities:
Receivables	(184,005		)	(162,375		)
Prepaid expenses and other assets	(83,347		)	(99,019		)
Accounts payable and accrued expenses	(54,020		)	(86,368		)
Income tax receivable/payable, net	11,951			(21,868		)
Deferred revenue and other liabilities	100,372			9,231
Net cash provided by (used in) operating activities	1,834			(140,763		)
Cash flows from investing activities
Purchase of property and equipment	(93,741		)	(86,793		)
Expenditures for deferred costs	(7,732		)	(8,248		)
Receipts from sales of subsidiaries and property and equipment, net of cash sold	374,713			505
Settlement of derivatives related to sale of subsidiaries	(9,960		)	—
Property insurance recoveries	—			370
Business acquisitions, net of cash acquired	—			(835		)
Payments from (to) related parties and affiliates	983			(508		)
Net cash provided by (used in) investing activities	264,263			(95,509		)
Cash flows from financing activities
Proceeds from issuance of long-term debt, net of original issue discount	298,726			2,110,859
Payments on long-term debt	(671,721		)	(2,415,530		)
Payments of deferred purchase price for acquisitions	(5,875		)	(6,329		)
Payments to purchase noncontrolling interests	(127		)	—
Proceeds from issuance of convertible redeemable preferred stock, net of issuance costs	—			55,290
Payment of dividends on Series A Preferred Stock	(11,103		)	—
Proceeds from initial public offering, net of issuance costs	—			456,561
Withholding of shares to satisfy tax withholding for vested stock awards	(1,744		)	(1,277		)
Payments of debt issuance costs and redemption and call premiums for debt modification	(303		)	(76,469		)
Noncontrolling interest holder's loan to subsidiaries	—			943
Distributions to noncontrolling interest holders	(912		)	(847		)
Net cash (used in) provided by financing activities	(393,059		)	123,201
Effects of exchange rate changes on Cash and cash equivalents and Restricted cash	(12,723		)	19,255
Change in cash included in current assets held for sale	31,325			—
Net change in Cash and cash equivalents and Restricted cash	(108,360		)	(93,816		)
Cash and cash equivalents and Restricted cash at beginning of period	693,667			654,284
Cash and cash equivalents and Restricted cash at end of period	$	585,307		$	560,468

The accompanying notes are an integral part of these consolidated financial statements.

Laureate Education, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and shares in thousands)

Note 1 . Description of Business

Laureate Education, Inc. and subsidiaries (hereinafter Laureate, we, us, our, or the Company) provide higher education programs and services to students through an international network of licensed universities and higher education institutions (institutions). Laureate's programs are provided through institutions that are campus-based and internet-based, or through electronically distributed educational programs (online). On October 1, 2015, we redomiciled in Delaware as a public benefit corporation as a demonstration of our long-term commitment to our mission to benefit our students and society.

The Company's shares are listed on the Nasdaq Global Select Market under the symbol ‘‘LAUR’’. In its initial public offering (IPO) on February 6, 2017 , the Company sold 35,000 shares of its Class A common stock in the IPO at a price of $14.00 per share, resulting in net proceeds to the Company during the first quarter of 2017, after deducting underwriting discounts and commissions and offering expenses payable by us, of $456,561 .

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, (the 2017 Form 10-K) effective August 1, 2017, we changed our operating segments in order to realign our segments according to how our chief operating decision maker allocates resources and assesses performance. The segment changes resulted in Laureate increasing its number of operating segments from three to six , and is consistent with our goal of flattening our organizational structure to improve decision speed and operating effectiveness. As required, the 2017 segment information that is presented for comparative purposes has also been revised to reflect this change.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, these financial statements include all adjustments considered necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with Laureate's audited Consolidated Financial Statements included in our 2017 Form 10-K .

Note 2 . Significant Accounting Policies

The Variable Interest Entity (VIE) Arrangements

Laureate consolidates in its financial statements certain internationally based educational organizations that do not have shares or other equity ownership interests. Although these educational organizations may be considered not-for-profit entities in their home countries and they are operated in compliance with their respective not-for-profit legal regimes, we believe they do not meet the definition of a not-for-profit entity under GAAP, and therefore we treat them as "for-profit" entities for accounting purposes. These entities generally cannot declare dividends or distribute their net assets to the entities that control them.

Under ASC 810-10, "Consolidation," we have determined that these institutions are VIEs and that Laureate is the primary beneficiary of these VIEs because we have, as further described herein: (1) the power to direct the activities of the VIEs that most significantly affect their educational and economic performance and (2) the right to receive economic benefits from contractual and other arrangements with the VIEs that could potentially be significant to the VIEs. We account for the acquisition of the right to control a VIE in accordance with ASC 805, "Business Combinations."

As discussed further in Note 5 , Dispositions , the number of our VIE institutions was reduced by one in January 2018 following the sale of LEI Lie Ying Limited (LEILY).

The VIEs in Brazil and Mexico comprise several not-for-profit foundations that have insignificant revenues and operating expenses. Selected Consolidated Statements of Operations information for VIEs was as follows, net of the charges related to the above-described contractual arrangements:



	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
Selected Statements of Operations information:
Revenues, by segment:
Brazil	$	—		$	46		$	—		$	46
Mexico	86			—			86			—
Andean & Iberian	150,504			137,580			205,540			185,891
Central America & U.S. Campuses	17,506			15,636			32,646			31,011
EMEAA	47,318			67,302			108,514			133,515
Revenues	215,414			220,564			346,786			350,463

Depreciation and amortization	10,594			12,651			21,617			25,473

Operating (loss) income, by segment:
Brazil	(22		)	14			(40		)	(7		)
Mexico	(71		)	(161		)	(228		)	(353		)
Andean & Iberian	33,996			31,772			(5,266		)	(10,151		)
Central America & U.S. Campuses	1,853			(92		)	1,548			963
EMEAA	15,430			8,000			28,201			19,889
Operating income	51,186			39,533			24,215			10,341

Net income	78,926			43,152			56,457			23,040
Net income attributable to Laureate Education, Inc.	79,050			41,955			56,321			21,019

The following table reconciles the Net income (loss) attributable to Laureate Education, Inc. as presented in the table above, to the amounts in our Consolidated Statements of Operations:



	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018		2017
Net income (loss) attributable to Laureate Education, Inc.:
Variable interest entities	$	79,050		$	41,955		$	56,321	$	21,019
Other operations	198,616			184,031			168,082		214,799
Corporate and eliminations	(53,256		)	(109,600		)	168,886		(242,240		)
Net income (loss) attributable to Laureate Education, Inc.	$	224,410		$	116,386		$	393,289	$	(6,422	)

The following table presents selected assets and liabilities of the consolidated VIEs. Except for Goodwill, the assets in the table below include the assets that can be used only to settle the obligations for the VIEs. The liabilities in the table are liabilities for which the creditors of the VIEs do not have recourse to the general credit of Laureate.

Selected Consolidated Balance Sheet amounts for these VIEs were as follows:



	June 30, 2018				December 31, 2017
	VIE		Consolidated		VIE		Consolidated
Balance Sheets data:
Cash and cash equivalents	$	187,604	$	402,402	$	231,940	$	468,733
Current assets held for sale	—		35,955		22,246		102,623
Other current assets	273,151		833,344		153,129		717,498
Total current assets	460,755		1,271,701		407,315		1,288,854

Goodwill	186,514		1,819,006		192,230		1,954,666
Tradenames	91,295		1,242,964		110,577		1,295,614
Other intangible assets, net	—		29,017		—		35,927
Long-term assets held for sale	—		276,947		185,139		392,391
Other long-term assets	512,067		2,290,889		524,318		2,424,271
Total assets	1,250,631		6,930,524		1,419,579		7,391,723

Current liabilities held for sale	—		85,135		64,895		176,719
Other current liabilities	241,437		1,166,782		276,252		1,198,030
Long-term liabilities held for sale	—		79,912		41,732		94,407
Long-term debt and other long-term liabilities	71,483		3,470,611		66,682		3,921,288
Total liabilities	312,920		4,802,440		449,561		5,390,444

Total stockholders' equity	937,711		2,115,104		970,018		1,587,282
Total stockholders' equity attributable to Laureate Education, Inc.	937,480		2,124,762		948,966		1,575,164

On January 24, 2018, a new Higher Education Law (the New Law) was passed by the Chilean Congress. On March 27, 2018, the Constitutional Court declared unconstitutional Article 63 of the New Law, which would have prohibited for-profit organizations such as Laureate from controlling the boards of universities in Chile. The Constitutional Court released its opinion on April 26, 2018, and signature and enactment of the New Law occurred in May 2018. Among other things left intact by the Constitutional Court, the New Law prohibits conflicts of interests and related party transactions with certain exceptions, including the provision of services that are educational in nature or essential for the university's purposes. The New Law provides for a transition period. The incoming Chilean presidential administration, which took office on March 11, 2018, has the responsibility to implement the new legislative mandates and compliance processes.

contains provisions that prohibit Laureate from controlling the boards of the Chilean non-profit universities, but still requires the promulgation of new regulations and procedures that will be applicable to any commercial relationship that the Company has with the Chilean non-profit universities, the Company has determined that it will continue to consolidate the three Chilean non-profit universities, which are accounted for as variable interest entities, and its Chilean real estate subsidiary.

While we believe that all of our institutions in Chile are operating in full compliance with Chilean law, we cannot predict the extent or outcome of any educational reforms that may be implemented in Chile. The Company does not believe the New Law will change its relationship with its two tech/voc institutions in Chile that are for-profit entities. However, it is possible that the Chilean government will adopt additional laws that affect for-profit tech/voc institutions and their relationships with their owners. Depending upon how these reforms are defined and implemented, there could be a material adverse effect on our financial condition and results of operations.

In May 2018, an amendment to Turkey's higher education law was passed ; see Note 18 , Legal and Regulatory Matters for further description.

Allowance for Doubtful Accounts

Receivables are deemed to be uncollectible when they have been outstanding for two years , or earlier when collection efforts have ceased, at which time they are written off. Prior to that, Laureate records an allowance for doubtful accounts to reduce our receivables to their net realizable value. Our allowance estimation methodology is based on the age of the receivables, the status of past-due amounts, historical collection trends, current economic conditions and student enrollment status. In the event that current collection trends differ from historical trends, an adjustment is made to the allowance account and bad debt expense.

The reconciliations of the beginning and ending balances of the Allowance for doubtful accounts were as follows:



For the six months ended June 30,	2018			2017
Balance at beginning of period	$	204,252		$	196,270
Additions: charges to bad debt expense	58,282			51,439
Additions: charges to other accounts ^(a)	1,124			190
Deductions ^(b)	(65,635		)	(45,490		)
Balance at end of period	$	198,023		$	202,409

^(a) Charges to other accounts includes reclassifications.

^(b) Deductions includes accounts receivable written off against the allowance (net of recoveries), reclassifications, and foreign

currency translation. The beginning and ending balances of the Allowance for doubtful accounts include the current

portion, as shown on the face of Consolidated Balance Sheets, in addition to the noncurrent portion that is included in

Notes receivable, net on the Consolidated Balance Sheets.

Recently Adopted Accounting Standards

Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09), Revenue from Contracts with Customers (Topic 606)

On May 28, 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, which, along with amendments issued in 2015 and 2016, supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, ‘‘Revenue Recognition’’ and most industry-specific guidance. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method and elected to apply the standard only to contracts that were not completed as of that date. We recorded a net increase to opening retained earnings of approximately $1,400 as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the deferral of costs to obtain a contract which were previously expensed as incurred. The impact to revenues as a result of applying Topic 606 was an increase of $498 for the six months ended June 30, 2018 .

In accordance with the requirements under Topic 606, the impact of adoption on our Consolidated Statement of Operations and Consolidated Balance Sheet was as follows:



	For the six months ended June 30, 2018
	As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)
Statement of Operations data:
Revenues	$	2,133,205		$	2,132,707		$	498

Costs and Expenses:
Direct costs	1,774,387			1,778,729			(4,342		)
Income tax expense	(91,421		)	(91,368		)	(53		)

Net income	395,499			390,712			4,787



	As of June 30, 2018
	As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)
Balance Sheet data:
Assets:
Deferred costs, net	$	68,078		$	62,319		$	5,759

Liabilities:
Deferred revenue and student deposits	351,951			352,449			(498		)
Deferred income taxes	295,043			294,990			53

Equity:
Accumulated deficit	(548,617		)	(554,821		)	6,204

ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15 in order to address the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This standard addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The Company adopted this standard beginning January 1, 2018. Since this standard requires retrospective application, for the six months ended June 30, 2017 we have reclassified from operating activities to financing activities approximately $65,000 of redemption and call premiums that were paid in connection with a debt modification that was completed during the second quarter of 2017.

ASU No. 2016-16 (ASU 2016-16), Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

In October 2016, the FASB issued ASU 2016-16 in order to improve the accounting for income tax consequences for intra-entity transfers of assets other than inventory. Prior to adopting this ASU, the recognition of current and deferred income taxes for an intra-entity transfer was prohibited until the asset was sold to a third party. The amendments in this ASU state that an entity should recognize income tax consequences of an intra-entity transfer when the transfer occurs. This aligns the recognition of income tax consequences for intra-entity transfers of assets with International Financing Reporting Standards (IFRS). Laureate adopted ASU 2016-16 effective January 1, 2018 and recorded a cumulative-effect adjustment to retained earnings of approximately $2,900 .

ASU No. 2016-18 (ASU 2016-18), Statement of Cash Flows (Topic 230): Restricted Cash

In November 2016, the FASB issued ASU 2016-18 in order to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. This ASU was adopted by Laureate beginning January 1, 2018 and resulted in a change in presentation within the Consolidated Statements of Cash Flows. As required, Laureate retrospectively applied the guidance to the prior period presented, which resulted in a decrease of $318 in operating cash flows and an increase of $143 in investing cash flows on the Consolidated Statement of Cash Flows for the six months ended June 30, 2017 . As required by the ASU, we have provided a reconciliation from cash and cash equivalents as presented on our Consolidated Balance Sheets to cash, cash equivalents, and restricted cash as reported on our Consolidated Statements of Cash Flows. See Note 20 , Supplemental Cash Flow Information , for this reconciliation, as well as a discussion of the nature of our restricted cash balances.

ASU No. 2017-07 (ASU 2017-07), Compensation - Retirement Benefits (Topic 715)

In March 2017, the FASB issued ASU 2017-07 in order to improve the presentation of net periodic pension cost and net periodic post retirement benefit cost. Prior to adoption of this ASU, these costs comprised several components that reflected different aspects of an employer's financial arrangements as well as the cost of benefits provided to employees, and were aggregated for reporting purposes. Under the amendments in this ASU, the service cost component of net periodic benefit cost is disaggregated and reported in the same line item(s) as other compensation costs arising from services rendered during the period, and the remaining components are presented on the income statement separately from the service cost component and outside a subtotal of income from operations, if presented. Laureate adopted ASU 2017-07 on January 1, 2018. Since the effect of ASU 2017-07 on prior periods presented was insignificant, we did not revise the Consolidated Statement of Operations for the six months ended June 30, 2017 . For the six months ended June 30, 2018 , the service cost component is included in Direct costs on our Consolidated Statement of Operations and the other components of net periodic benefit cost/(income), which totaled $62 , are included in Other income, net on our Consolidated Statement of Operations.

Recently Issued Accounting Standards Not Yet Adopted

ASU No. 2016-02 (ASU 2016-02), Leases (Topic 842)

On February 25, 2016, the FASB issued ASU 2016-02. Lessees will need to recognize on their balance sheet a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of the lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs and uneven rent payments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. The standard is effective for Laureate beginning January 1, 2019. The new standard must be adopted using a modified retrospective transition method and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We have completed our diagnostic assessment and have established a cross-functional implementation team which is in the process of identifying changes to our accounting policies, business processes, systems and internal controls in preparation for the implementation. We anticipate that ASU 2016-02 will have a material impact on our Consolidated Balance Sheets, as we will record significant asset and liability balances in connection with our leased properties. We are still evaluating the impact to our Consolidated Statements of Operations and Cash Flows. We do not currently plan to early adopt this ASU.

Note 3 . Revenue

Revenue Recognition

Laureate's revenues primarily consist of tuition and educational service revenues. We also generate other revenues from student fees, dormitory/residency fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. These revenues are recognized net of scholarships and other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. Laureate's institutions have various billing and academic cycles.

We determine revenue recognition through the five-step model prescribed by Topic 606 as follows:

• Identification of the contract, or contracts, with a customer;

• Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and

• Recognition of revenue when, or as, we satisfy a performance obligation.

We assess collectibility on a portfolio basis prior to recording revenue. Generally, students cannot re-enroll for the next academic session without satisfactory resolution of any past-due amounts. If a student withdraws from an institution, Laureate's obligation to issue a refund depends on the refund policy at that institution and the timing of the student's withdrawal. Generally, our refund obligations are reduced over the course of the academic term. We record refunds as a reduction of deferred revenue as applicable.

The following table shows the components of Revenues by segment and as a percentage of total net revenue for the three months ended June 30, 2018 :



	Brazil			Mexico			Andean & Iberian			Central America & U.S. Campuses			EMEAA			Online & Partnerships			Corporate ⁽¹⁾			Total
Tuition and educational services	$	343,171		$	174,964		$	509,935		$	75,497		$	166,011		$	180,373		$	—		$	1,449,951		116	%
Other	2,842			19,951			29,417			13,040			11,890			12,551			(5,605		)	84,086			7	%
Gross revenue	346,013			194,915			539,352			88,537			177,901			192,924			(5,605		)	1,534,037			123	%
Less: Discounts / waivers / scholarships	(120,414		)	(35,270		)	(52,893		)	(10,118		)	(39,456		)	(27,969		)	—			(286,120		)	(23	)%
Total	$	225,599		$	159,645		$	486,459		$	78,419		$	138,445		$	164,955		$	(5,605	)	$	1,247,917		100	%

⁽¹⁾ Includes the elimination of intersegment revenues.

The following table shows the components of Revenues by segment and as a percentage of total net revenue for the six months ended June 30, 2018 :



	Brazil			Mexico			Andean & Iberian			Central America & U.S. Campuses			EMEAA			Online & Partnerships			Corporate ⁽¹⁾			Total
Tuition and educational services	$	545,274		$	341,274		$	718,704		$	151,554		$	337,068		$	361,618		$	—		$	2,455,492		115	%
Other	5,703			45,229			53,330			26,495			24,807			26,732			(9,328		)	172,968			8	%
Gross revenue	550,977			386,503			772,034			178,049			361,875			388,350			(9,328		)	2,628,460			123	%
Less: Discounts / waivers / scholarships	(202,586		)	(70,960		)	(69,345		)	(20,604		)	(76,396		)	(55,364		)	—			(495,255		)	(23	)%
Total	$	348,391		$	315,543		$	702,689		$	157,445		$	285,479		$	332,986		$	(9,328	)	$	2,133,205		100	%

⁽¹⁾ Includes the elimination of intersegment revenues.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting in ASC Topic 606. A contract’s transaction price is allocated to each performance obligation identified in the arrangement based on the relative standalone selling price of each distinct good or service in the contract and recognized as revenue when, or as, the performance obligation is satisfied. The primary method used to estimate standalone selling price is the adjusted market assessment approach, under which we evaluate the market and estimate the price that a customer would be willing to pay for the goods and services we provide.

Our performance obligations are primarily satisfied over time during the course of an academic semester or academic year. Laureate's transaction price is determined based on gross price, net of scholarships and other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. The majority of our revenue is derived from tuition and educational services agreements with students, and thus, is recognized over time on a weekly straight-line basis over each academic session. We view the knowledge gained by the student as the benefit which the student receives during the academic sessions. We use the output method to recognize tuition and educational services revenue as this method faithfully depicts our performance toward complete satisfaction of the performance obligation. Dormitory/residency revenues, which are included in the Other line item in the table above, are recognized over time throughout the occupancy period using the output method based on the proportional period of time elapsed which faithfully depicts our performance toward complete satisfaction of the performance obligation.

We have elected the optional exemption to not disclose amounts where the performance obligation is part of a contract that has an original expected duration of one year or less. We expect to recognize substantially all revenue on these remaining performance obligations over the next 12 months .

Contract Balances

The timing of billings, cash collections and revenue recognition results in accounts receivable (contract assets) and deferred revenue and student deposits (contract liabilities) on the Consolidated Balance Sheets. We have various billing and academic cycles and recognize student receivables when an academic session begins, although students generally enroll in courses prior to the start of the academic session. Receivables are recognized only to the extent that it is probable that we will collect substantially all of the consideration to which we are entitled in exchange for the goods and services that will be transferred to the student. We receive advance payments or deposits from our students before revenue is recognized, which are recorded as contract liabilities in deferred revenue and student deposits. Payment terms vary by university with some universities requiring payment in advance of the academic session and other universities allowing students to pay in installments over the term of the academic session.

All of our contract assets are considered accounts receivable and are included within the Accounts and notes receivable balance in the accompanying Consolidated Balance Sheets. Total accounts receivable from our contracts with students were $618,301 and $535,176 as of June 30, 2018 and December 31, 2017, respectively. In addition, as of June 30, 2018 and December 31, 2017, accounts receivable that were classified as assets held for sale were $4,353 and $34,744 , respectively. The increase in the contract assets balance for the period ended June 30, 2018 is primarily driven by our enrollment cycle. The first calendar quarter generally coincides with the primary intake for some of our larger institutions. All contract asset amounts are classified as current.

Contract liabilities in the amount of $351,951 and $312,422 were included within the Deferred revenue and student deposits balance in the current liabilities section of the accompanying Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, respectively. In addition, as of June 30, 2018 and December 31, 2017, contract liabilities that were classified as liabilities held for sale were $35,379 and $94,951 , respectively. The increase in the contract liability balance during the period ended June 30, 2018 is the result of semester billings and cash payments received in advance of satisfying performance obligations, offset by revenue recognized during that period. Revenue recognized for the six months ended June 30, 2018 that was included in the contract liability balance at the beginning of the year was approximately $256,000 .

Costs to Obtain a Contract

Certain commissions and bonuses earned by third party agents and our employees are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over the period of benefit which ranges from two to four years. We determined the expected period of benefit, by university, as the expected student enrollment period. As of June 30, 2018 and December 31, 2017, the asset balances were $7,780 and $0 , respectively, and the accumulated amortization balances were $2,021 and $0 , respectively, both of which are included in Deferred costs, net , in the accompanying Consolidated Balance Sheets. The associated operating cost of $2,021 was recorded in Direct costs in the accompanying Consolidated Statement of Operations for the six months ended June 30, 2018 . We also pay certain commissions and bonuses where the period of benefit is one year or less. We have elected the practical expedient available in ASC 340-40 whereby any incremental costs of obtaining a contract are recognized as an expense when incurred if the amortization period of the asset that would have been recognized is one year or less.

Practical Expedients and Optional Exemptions

We elected to adopt this standard using the modified retrospective approach with the cumulative effect of adoption recognized at the initial date of application. We have elected to apply the standard only to contracts that are not completed at the initial date of application.

As noted above, we recognize the incremental costs of obtaining a contract with a student as an expense when incurred in instances where the amortization period of the asset that we would have recognized is one year or less.

We have made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are both imposed on and concurrent with specific revenue-producing transactions and collected by the entity from our customers (e.g., sales, use, value added, some excise taxes).

Note 4 . Assets Held for Sale

The Company has identified certain subsidiaries that may not reach a scale that will be meaningful for Laureate, or that represent a strategic sale opportunity, and has undertaken a process to sell these entities. As described in Note 5 , Dispositions , several of these sale transactions closed during the first half of 2018. The sale of Kendall College, LLC (Kendall) closed during the third quarter of 2018 , as described in Note 21 , Subsequent Events .

As of June 30, 2018 , the subsidiaries in our EMEAA and Central America & U.S. Campuses segments that were classified as held for sale at December 31, 2017 in our 2017 Form 10-K and were not sold during the first half of 2018 continued to meet the criteria for classification as held for sale under ASC 360-10-45-9, "Long-Lived Assets Classified as Held for Sale." In addition, as described further below, during the first quarter of 2018, St. Augustine, a subsidiary in our Central America & U.S. Campuses segment that was not previously classified as held for sale, met the criteria for classification as held for sale. Accordingly, as of June 30, 2018 , the assets and liabilities of these disposal groups were classified as held for sale and recorded at the lower of their carrying values or their estimated 'fair values less costs to sell.'

The amounts classified as held-for-sale assets and liabilities are subject to finalization. The carrying amounts of the major classes of long-lived assets and liabilities that were classified as held for sale as of June 30, 2018 are presented in the following tables:



Property and equipment, net	$	163,334
Goodwill	68,018
Tradenames	32,188
Other long-term assets	13,407
Long-term assets held for sale	$	276,947



Deferred revenue and student deposits	$	35,379
Long-term debt, including current portion	68,931
Other liabilities	60,737
Total liabilities held for sale	$	165,047

In the aggregate, revenues of the disposal groups represented $120,176 and $106,903 of Laureate's total revenues during the six months ended June 30, 2018 and 2017 , respectively.

University of St. Augustine for Health Sciences, LLC (St. Augustine)

On April 24, 2018 , the Company and Exeter Street Holdings, LLC (the Seller) and St. Augustine, both of which are wholly owned subsidiaries of the Company, entered into a Membership Interest Purchase Agreement (the Purchase Agreement) with University of St. Augustine Acquisition Corp. (the Purchaser), an affiliate of Altas Partners LP. Pursuant to the Purchase Agreement, the Purchaser will purchase from the Seller all of the issued and outstanding membership interests of St. Augustine. As of June 30, 2018 , St. Augustine has been classified as held for sale on our Consolidated Balance Sheet. The transaction value under the Purchase Agreement is $400,000 , subject to customary closing adjustments, and the parties expect that the transaction will close in late 2018, subject to required regulatory approvals, including approvals by the U.S. Department of Education and the WASC Senior College and University Commission, and customary closing conditions. For the fiscal year ended December 31, 2017, St. Augustine had $89,600 in revenue, $30,500 in operating income and $4,100 in depreciation and amortization, and as of June 30, 2018 had approximately 3,500 students.

Note 5 . Dispositions

Sale of Cyprus and Italy Operations

As previously disclosed in our 2017 Form 10-K, on January 11, 2018 , we completed the sale of European University-Cyprus Ltd (EUC) and Laureate Italy S.r.L. (Laureate Italy). Upon closing, we received gross proceeds of approximately 232,000 Euros (EUR) (approximately US $275,500 , or approximately US $244,300 net of cash sold and net of the approximately $4,100 working capital settlement between the Company and the buyer that was completed during the second quarter of 2018), and recognized a total gain on sale for the six months ended June 30, 2018 of approximately $218,000 . The Company used the proceeds from this transaction, along with borrowings on our revolving credit facility that were subsequently repaid with the China sale proceeds discussed below, to repay $350,000 of principal balance on our syndicated term loan that matures in April 2024 (the 2024 Term Loan), as discussed in Note 9 , Debt .

Sale of China Operations

As previously disclosed in our 2017 Form 10-K, on January 25, 2018 , we completed the sale of LEI Lie Ying Limited (LEILY). At closing, the Company received initial gross proceeds totaling approximately $128,800 (approximately $110,800 net of cash sold), net of banker transaction fees and certain taxes and duties totaling approximately $16,000 . Six months after the closing date, the buyer was required to pay to the Company the Hong Kong Dollar (HKD) equivalent of Chinese Renminbi (RMB) 120,000 (the First Holdback Payment, approximately US $18,200 at June 30, 2018 ). On July 27, 2018, the Company received the First Holdback Payment from the buyer, net of withholding taxes and agreed-upon legal fees, for a net payment of HKD 142,221 or $18,117 at the date of receipt, prior to banker transaction fees. Twelve months after the closing date, the buyer is required to pay to the Company the HKD equivalent of RMB 60,000 (the Second Holdback Payment, approximately US $9,100 at June 30, 2018 ). Both the First Holdback Payment and the Second Holdback Payment are subject to deduction of any indemnifiable losses payable by the Company to the buyer pursuant to the sale purchase agreement. The remainder of the transaction value was paid into an escrow account and will be distributed to the Company pursuant to the terms and conditions of the escrow agreement.

In addition to the initial proceeds received, as of June 30, 2018 , the Company has recorded a current receivable of approximately $28,700 for the First Holdback Payment and the Second Holdback Payment, as well as a long-term receivable of approximately $25,900 for the portion of the escrowed amount that the Company expects to receive. In addition, the Company has recorded a liability of approximately $15,700 related to loss contingencies for which we have indemnified the buyer. The Company recognized a gain on the sale of LEILY for the six months ended June 30, 2018 of approximately $80,000 .

Sale of German Operations

On April 12, 2018, LEI European Investments B.V., a Netherlands private limited liability company (LEI BV), and Laureate International B.V., a Netherlands private limited liability company (Laureate International), both of which are indirect, wholly owned subsidiaries of Laureate Education, Inc., executed and closed a Sale and Purchase Agreement (the Laureate Germany SPA) with Global University Systems Germany B.V., a Netherlands private limited liability company (Global University Systems). Pursuant to the Laureate Germany SPA, Global University Systems purchased from LEI BV all of the issued and outstanding shares of capital stock of Laureate Germany Holding GmbH and its consolidated institutions, including the University of Applied Sciences Europe and Laureate Academies GmbH (collectively, Laureate Germany), and Laureate International guaranteed the obligations of LEI BV under the Laureate Germany SPA. Upon completion of the sale, LEI BV received gross proceeds of EUR 1,000 (approximately US $1,200 at the date of receipt). At the date of sale, Laureate Germany had approximately $12,900 of cash and restricted cash on its balance sheet. In connection with this transaction, the Company contributed capital to Laureate Germany of approximately $3,600 , and expects to pay estimated real estate transfer taxes of approximately $400 . The Company recognized a loss on the sale of Laureate Germany for the six months ended June 30, 2018 of approximately $5,500 .

Sale of Moroccan Operations

As previously reported in our 2017 Form 10-K, on November 29, 2017, Laureate Middle East Holdings B.V., a Netherlands private limited liability company and an indirect, wholly owned subsidiary of the Company (LMEH), and La Société Maroc Emirats Arabes Unis de Développement, a Morocco company (SOMED and, together with LMEH, the Sellers), Laureate I B.V., a Netherlands private limited liability company and an indirect, wholly owned subsidiary of the Company (the Guarantor), and UPM Pédagogique, a Morocco company (the Purchaser), entered into a Share Purchase Agreement (the Laureate Somed SPA), pursuant to which the Purchaser agreed to purchase from the Sellers all of the issued and outstanding capital shares of Laureate Somed Holding, a Morocco company (Laureate Somed), for a total transaction value of 500,000 Moroccan Dirhams, and the Guarantor agreed to guarantee certain obligations of LMEH under the Laureate Somed SPA. The transaction closed on April 13,

2018 , and LMEH received net proceeds of 300,000 Moroccan Dirhams (approximately US $32,500 at the date of sale, or approximately $31,100 net of cash sold). The proceeds were used for general debt repayment across the Company rather than repayment of a specific tranche. Prior to the consummation of the sale, LMEH owned approximately 60% of the capital shares of Laureate Somed, while SOMED owned the remaining approximately 40% of the capital shares of Laureate Somed. Laureate Somed is the operator of Université Internationale de Casablanca, a comprehensive campus-based university in Casablanca, Morocco. The Company recognized a gain on the sale of Laureate Somed of approximately $17,400 for the six months ended June 30, 2018 .

Note 6 . Due to Shareholders of Acquired Companies

The amounts due to shareholders of acquired companies generally arise in connection with Laureate’s acquisition of a majority or all of the ownership interest of these companies. Promissory notes payable to the sellers of acquired companies, referred to as “seller notes,” are commonly used as a means of payment for business acquisitions. Seller note payments are classified as Payments of deferred purchase price for acquisitions within financing activities in our Consolidated Statements of Cash Flows. The amounts due to shareholders of acquired companies, currencies, and interest rates applied were as follows:



	June 30, 2018		December 31, 2017		Nominal Currency	Interest Rate %
Universidade Anhembi Morumbi (UAM Brazil)	$	41,229	$	45,206	BRL	CDI + 2%
University of St. Augustine for Health Sciences, LLC (St. Augustine)	11,550		11,550		USD	7%
Universidad Tecnologica Centroamericana (UNITEC Honduras)	3,016		3,813		HNL	IIBC
Faculdade Porto-Alegrense (FAPA)	2,906		3,084		BRL	IGP-M
IADE Group	1,166		2,374		EUR	3%
Monash South Africa (MSA)	—		9,571		AUD	n/a
CH Holding Netherlands B.V. (CH Holding)	—		3,971		USD	n/a
Total due to shareholders of acquired companies	59,867		79,569
Less: Current portion of due to shareholders of acquired companies	24,483		40,140
Due to shareholders of acquired companies, less current portion	$	35,384	$	39,429



AUD: Australian Dollar		CDI: Certificados de Depósitos Interbancários (Brazil)
BRL: Brazilian Real		IIBC: Índice de Inflación del Banco Central (Honduras)
EUR: European Euro		IGP-M: General Index of Market Prices (Brazil)
HNL: Honduran Lempira
USD: United States Dollar

MSA

During the second quarter of 2018, the conditions required for resolution of the MSA earnout were completed and the seller note liability was reversed as the criteria for payment was not met.

Note 7 . Business and Geographic Segment Information

Laureate’s educational services are offered through six operating segments: Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses, EMEAA and Online & Partnerships. Laureate determines its operating segments based on information utilized by the chief operating decision maker to allocate resources and assess performance. As previously disclosed in our 2017 Form 10-K, effective August 1, 2017, we changed our operating segments in order to realign our segments according to how our chief operating decision maker allocates resources and assesses performance. As required, the 2017 segment information that is presented for comparative purposes has also been revised to reflect this change.

continued growth in the number of higher education students. Traditional higher education students (defined as 18-24 year olds) have historically been served by public universities, which have limited capacity and are often underfunded, resulting in an inability to meet the growing student demand and employer requirements. This supply and demand imbalance has created a market opportunity for private sector participants. Most students finance their own education. However, there are some government-sponsored student financing programs which are discussed below. These campus-based segments include Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses and EMEAA. Specifics related to each of these campus-based segments and our Online & Partnerships segment are discussed below:

In Brazil, approximately 75% of post-secondary students are enrolled in private higher education institutions. While the federal government defines the national curricular guidelines, institutions are licensed to operate by city. Laureate owns 13 institutions in eight states throughout Brazil, with a particularly strong presence in the competitive São Paulo market. Many students finance their own education while others rely on the government-sponsored programs such as Prouni and FIES.

Public universities in Mexico enroll approximately two thirds of students attending post-secondary education. However, many public institutions are faced with capacity constraints or the quality of the education is considered low. Laureate owns two institutions and is present throughout the country with a footprint of over 40 campuses. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education.

The Andean & Iberian segment includes institutions in Chile, Peru, Portugal and Spain. In Chile, private universities enroll approximately 80% of post-secondary students. In Peru, the public sector plays a significant role, but private universities are increasingly providing the capacity to meet growing demand. In Spain and Portugal, the high demand for post-secondary education places capacity constraints on the public sector, pushing students to turn to the private sector for high-quality education. Chile has government-sponsored student financing programs, while in the other countries students generally finance their own education.

The Central America & U.S. Campuses segment includes institutions in Costa Rica, Honduras, Panama and the United States. Students in Central America typically finance their own education while students in the United States finance their education in a variety of ways, including Title IV programs.

The EMEAA segment includes an institution in the European country of Turkey, as well as locations in the Middle East, Africa and Asia Pacific consisting of campus-based institutions with operations in Australia, India, Malaysia, New Zealand, South Africa and Thailand. Additionally, EMEAA manages nine licensed institutions in the Kingdom of Saudi Arabia and manages one additional institution in China through a joint venture arrangement.

The Online & Partnerships segment includes fully online institutions operating globally that offer professionally oriented degree programs in the United States through Walden University, a U.S.-based accredited institution, and through the University of Liverpool and the University of Roehampton in the United Kingdom. These online institutions primarily serve working adults with undergraduate and graduate degree program offerings. Students in the United States finance their education in a variety of ways, including Title IV programs.

Intersegment transactions are accounted for in a similar manner as third-party transactions and are eliminated in consolidation. The Corporate amounts presented in the following tables includes corporate charges that were not allocated to our reportable segments and adjustments to eliminate intersegment items.

We evaluate segment performance based on Adjusted EBITDA, which is a non-GAAP performance measure defined as Income (loss) from continuing operations before income taxes and equity in net income of affiliates, adding back the following items: Gain (loss) on sales of subsidiaries, net , Foreign currency exchange loss, net , Other income, net , Gain on derivatives , Loss on debt extinguishment , Interest expense , Interest income , Depreciation and amortization expense, Loss on impairment of assets, Share-based compensation expense and expenses related to our Excellence-in-Process (EiP) initiative. EiP is an enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources. It includes the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting. We have expanded the EiP initiative into other back- and mid-office areas, as well as certain student-facing activities. EiP also includes certain non-recurring costs incurred in connection with the planned dispositions described in Note 4 , Assets Held for Sale , and the completed dispositions described in Note 5 , Dispositions .

When we review Adjusted EBITDA on a segment basis, we exclude intercompany revenues and expenses, related to network fees and royalties between our segments, which eliminate in consolidation. We use total assets as the measure of assets for reportable segments.

The following tables provide financial information for our reportable segments, including a reconciliation of Adjusted EBITDA to Income from continuing operations before income taxes, as reported in the Consolidated Statements of Operations:



	For the three months ended						For the six months ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenues
Brazil	$	225,599		$	260,641		$	348,391		$	377,474
Mexico	159,645			159,959			315,543			310,819
Andean & Iberian	486,459			434,397			702,689			615,547
Central America & U.S. Campuses	78,419			73,112			157,445			149,483
EMEAA	138,445			182,153			285,479			341,986
Online & Partnerships	164,955			175,541			332,986			352,607
Corporate	(5,605		)	(8,364		)	(9,328		)	(14,544		)
Revenues	$	1,247,917		$	1,277,439		$	2,133,205		$	2,133,372
Adjusted EBITDA of reportable segments
Brazil	$	77,934		$	91,276		$	51,918		$	52,151
Mexico	27,806			34,250			58,250			72,124
Andean & Iberian	208,856			183,760			201,963			165,291
Central America & U.S. Campuses	14,592			11,654			32,229			28,748
EMEAA	21,266			38,026			44,544			67,821
Online & Partnerships	45,427			48,775			90,401			102,870
Total Adjusted EBITDA of reportable segments	395,881			407,741			479,305			489,005
Reconciling items:
Corporate	(34,694		)	(65,913		)	(70,630		)	(98,580		)
Depreciation and amortization expense	(62,402		)	(66,950		)	(130,164		)	(131,465		)
Loss on impairment of assets	—			—			—			—
Share-based compensation expense	(7,687		)	(12,949		)	(3,931		)	(35,337		)
EiP expenses	(25,325		)	(18,079		)	(36,266		)	(42,640		)
Operating income	265,773			243,850			238,314			180,983
Interest income	5,448			4,460			11,577			9,154
Interest expense	(65,969		)	(98,962		)	(135,434		)	(201,595		)
Loss on debt extinguishment	—			(6,915		)	(7,481		)	(8,430		)
Gain on derivatives	111,596			26,970			92,256			39,117
Other income (expense), net	2,099			(380		)	4,505			56
Foreign currency exchange loss, net	(17,867		)	(9,726		)	(26,621		)	(7,436		)
Gain (loss) on sales of subsidiaries, net	11,763			(172		)	309,804			(172		)
Income from continuing operations before income taxes and equity in net income of affiliates	$	312,843		$	159,125		$	486,920		$	11,677



	June 30, 2018		December 31, 2017
Assets
Brazil	$	1,131,655	$	1,256,364
Mexico	966,869		969,400
Andean & Iberian	2,107,779		2,117,317
Central America & U.S. Campuses	365,437		376,070
EMEAA	753,076		1,022,569
Online & Partnerships	1,256,671		1,294,147
Corporate	349,037		355,856
Total assets	$	6,930,524	$	7,391,723

Note 8 . Goodwill

The change in the net carrying amount of Goodwill from December 31, 2017 through June 30, 2018 was composed of the following items:



	Brazil			Mexico			Andean & Iberian			Central America & U.S. Campuses			EMEAA			Online & Partnerships		Total
Goodwill	$	493,373		$	503,373		$	321,762		$	154,759		$	117,413		$	460,740	$	2,051,420
Accumulated impairment loss	—			—			—			(96,754		)	—			—		(96,754		)
Balance at December 31, 2017	493,373			503,373			321,762			58,005			117,413			460,740		1,954,666
Acquisitions	—			—			—			—			—			—		—
Dispositions	—			—			—			—			—			—		—
Reclassification to Long-term assets held for sale	—			—			—			(58,005		)	—			—		(58,005		)
Impairments	—			—			—			—			—			—		—
Currency translation adjustments	(59,159		)	(5,308		)	(7,143		)	—			(6,045		)	—		(77,655		)
Adjustments to prior acquisitions	—			—			—			—			—			—		—
Balance at June 30, 2018	$	434,214		$	498,065		$	314,619		$	—		$	111,368		$	460,740	$	1,819,006

Note 9 . Debt

Outstanding long-term debt was as follows:



	June 30, 2018		December 31, 2017
Senior long-term debt:
Senior Secured Credit Facility (stated maturity dates April 2022 and April 2024), net of discount	$	1,275,336	$	1,625,344
Senior Notes (stated maturity dates May 2025)	800,000		800,000
Total senior long-term debt	2,075,336		2,425,344
Other debt:
Lines of credit	76,499		55,799
Notes payable and other debt	691,390		753,439
Total senior and other debt	2,843,225		3,234,582
Capital lease obligations and sale-leaseback financings	167,312		234,356
Total long-term debt	3,010,537		3,468,938
Less: total unamortized deferred financing costs	96,492		107,640
Less: current portion of long-term debt	157,936		154,234
Long-term debt, less current portion	$	2,756,109	$	3,207,064

$68,931 of long-term debt, including the current portion, is included in the held-for-sale liabilities recorded on the Consolidated Balance Sheet as of June 30, 2018 . For further description of the held-for-sale amounts, see Note 4 , Assets Held for Sale .

Estimated Fair Value of Debt

The estimated fair value of our debt was determined using observable market prices, as the majority of our securities, including the Senior Secured Credit Facility and the Senior Notes due 2025, are traded in a brokered market. The fair value of our remaining debt instruments approximates carrying value based on their terms. As of June 30, 2018 and December 31, 2017 , our long-term debt was classified as Level 2 within the fair value hierarchy, based on the frequency and volume of trading in the brokered market. The estimated fair value of our debt was as follows:



	June 30, 2018				December 31, 2017
	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Total senior and other debt	$	2,843,225	$	2,897,157	$	3,234,582	$	3,293,258

Amendment to Senior Secured Credit Facility - 2024 Term Loan

On February 1, 2018 , we amended our Senior Secured Credit Facility to reduce the interest rate on our 2024 Term Loan. In connection with this transaction, we also prepaid $350,000 of the principal balance of the 2024 Term Loan in addition to $1,239 of accrued interest using the proceeds from the sale of our Cyprus and Italy operations, along with borrowings on our revolving credit facility that were subsequently repaid with the China sale proceeds. As a result of the $350,000 prepayment, there will be no further quarterly principal payments required and the remaining balance will be due at maturity.

Pursuant to this amendment, the interest rate margins applicable to the 2024 Term Loan were amended to 3.50% for LIBOR term loans and 2.50% for ABR term loans and such interest rate margins will no longer be based upon the Company’s consolidated total debt to consolidated EBITDA ratio. The amendment effectively reduces the current interest rate margins applicable to the outstanding term loans, which prior to the amendment was based on the Company’s consolidated total debt to consolidated EBITDA ratio, by 100 basis points, from 4.50% to 3.50% for LIBOR term loans, and 3.50% to 2.50% for ABR term loans. The amended credit agreement also provided for a prepayment premium with respect to the outstanding term loans. The prepayment premium equaled one percent ( 1% ) of the amount of any term loans that were subject to certain repricing transactions occurring on or prior to August 1, 2018, of which there were none.

Certain Covenants

As of June 30, 2018 , our senior long-term debt contained certain negative covenants including, among others: (1) limitations on additional indebtedness; (2) limitations on dividends; (3) limitations on asset sales, including the sale of ownership interests in subsidiaries and sale-leaseback transactions; and (4) limitations on liens, guarantees, loans or investments. The Second Amended and Restated Credit Agreement provides, solely with respect to the Revolving Credit Facility, that the Company shall not permit its Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Second Amended and Restated Credit Agreement, to exceed 3.50x as of the last day of each quarter ending June 30, 2018 and thereafter. However, the agreement also provides that if (i) the Company’s Consolidated Total Debt to Consolidated EBITDA ratio, as defined in the Second Amended and Restated Credit Agreement, is not greater than 4.75 x as of such date and (ii) less than 25% of the Revolving Credit Facility is utilized as of that date, then such financial covenant shall not apply. As of June 30, 2018 , these conditions were satisfied and, therefore, we were not subject to the leverage ratio covenant. In addition, notes payable at some of our locations contain financial maintenance covenants.

Note 10 . Commitments and Contingencies

Noncontrolling Interest Holder Put Arrangements

The following section provides a summary table and description of the various noncontrolling interest holder put arrangements that Laureate had outstanding as of June 30, 2018 . Laureate has elected to accrete changes in the arrangements’ redemption values over the period from the date of issuance to the earliest redemption date. The redeemable noncontrolling interests are recorded at the greater of the accreted redemption value or the traditional noncontrolling interest. Until the first exercise date, the put instruments’ reported values may be lower than the final amounts that will be required to settle the minority put arrangements. As of June 30, 2018 , the carrying value of all noncontrolling interest holder put arrangements was $ 11,258 , which includes accreted incremental value of $12,406 in excess of traditional noncontrolling interests.

If the minority put arrangements were all exercised at June 30, 2018 , Laureate would be obligated to pay the noncontrolling interest holders an estimated amount of $11,258 , as summarized in the following table:



	Nominal Currency	First Exercisable Date	Estimated Value as of June 30, 2018 redeemable within 12-months:		Reported Value
Noncontrolling interest holder put arrangements
INTI Education Holdings Sdn Bhd (Inti Holdings) - 10.10%	MYR	Current	$	9,267	$	9,267
Pearl Retail Solutions Private Limited (Pearl) - 10%	INR	Current	1,930		1,930
Stamford International University (STIU) - Puttable preferred stock of TEDCO	THB	Current	61		61
Total noncontrolling interest holder put arrangements			11,258		11,258
Puttable common stock - not currently redeemable	USD	*	—		1,722
Total redeemable noncontrolling interests and equity			$	11,258	$	12,980

* Contingently redeemable

MYR: Malaysian Ringgit

INR: Indian Rupee

THB: Thai Baht

Laureate’s noncontrolling interest put arrangements are specified in agreements with each noncontrolling interest holder. The terms of these agreements determine the measurement of the redemption value of the put options based on a non-GAAP measure of earnings before interest, taxes, depreciation and amortization (EBITDA, or recurring EBITDA), the definition of which varies for each particular contract.

Commitments and contingencies are generally denominated in foreign currencies.

Series A Convertible Redeemable Preferred Stock

As disclosed in our 2017 Form 10-K, in December 2016 and January 2017, the Company issued an aggregate of 400 shares of convertible redeemable preferred stock (the Series A Preferred Stock) for total gross proceeds of $400,000 . The Series A Preferred Stock included a Beneficial Conversion Feature (BCF) that was contingent on a qualified IPO (as defined in the Certificate of Designations governing the terms of the Series A Preferred Stock), which was consummated on February 6, 2017. Accordingly, during the first quarter of 2017, the Company recorded the BCF at its estimated fair value as a reduction of the carrying value of the Series A Preferred Stock and an increase to Additional paid-in capital . The accretion of this BCF reduced net income available to common stockholders in the calculation of earnings per share, as shown in Note 16 , Earnings (Loss) Per Share . The total BCF of $265,368 was accreted using a constant yield approach over a one -year period. For the six months ended June 30, 2018 and 2017 , we recorded total accretion on the Series A Preferred Stock of $61,974 and $101,194 , respectively, and paid cash dividends on the Series A Preferred Stock of $11,103 and $0 , respectively. As of December 31, 2017 , the Series A Preferred Stock had a carrying value of $400,276 .

The Company and each holder of shares of the Company’s Series A Preferred Stock could elect to convert all of the shares of Series A Preferred Stock into shares of Class A Common Stock one day following the first anniversary of the closing of the Company’s initial public offering, which occurred on February 6, 2017. However, the Company was not permitted to convert any shares of Series A Preferred Stock until there was an effective registration statement available to permit the holders of Series A Preferred Stock to sell the underlying shares of Class A Common Stock. On April 23, 2018 , immediately after the Company’s shelf registration statement on Form S-3 became effective, all of the issued and outstanding shares of the Series A Preferred Stock were converted into 36,143 shares of the Company’s Class A common stock, par value $0.004 per share. This conversion was treated as a redemption for accounting purposes and resulted in an increase in Additional paid-in capital upon reclassification of the carrying value of the Series A Preferred Stock. See Note 13 , Stockholders' Equity , for further detail. A portion of the fair value of the shares of Class A common stock issued to redeem the Series A Preferred Stock was allocated to the BCF contained in the Series A Preferred Stock. The difference between the remaining fair value of the shares of Class A common stock issued, the carrying value of the Series A Preferred Stock and fair value of the embedded derivatives resulted in a gain of $74,110 , which was recorded as Additional paid-in capital but included in income available to common stockholders in the calculation of earnings per share.

Other Loss Contingencies

Laureate is subject to legal actions arising in the ordinary course of its business. In management's opinion, we have adequate legal defenses, insurance coverage and/or accrued liabilities with respect to the eventuality of such actions. We do not believe that any settlement would have a material impact on our Consolidated Financial Statements. Refer to Note 18 , Legal and Regulatory Matters , for a discussion of certain matters.

Contingent Liabilities for Taxes

As of June 30, 2018 and December 31, 2017 , Laureate has recorded cumulative liabilities totaling $66,922 and $74,318 , respectively, for taxes other-than-income tax, principally payroll-tax-related uncertainties recorded at the time of an acquisition. The changes in this recorded liability are related to acquisitions, interest and penalty accruals, changes in tax laws, expirations of statutes of limitations, settlements and changes in foreign currency exchange rates. The terms of the statutes of limitations on these contingencies vary but can be up to 10 years . This liability is included in Other long-term liabilities on the Consolidated Balance Sheets. We have also recorded current liabilities for taxes other-than-income tax of $135 and $138 , respectively, as of June 30, 2018 and December 31, 2017 , in Other current liabilities on the Consolidated Balance Sheets. Changes in the recorded values of non-income tax contingencies impact operating income and interest expense, while changes in the related indemnification assets impact only operating income. The total increase/(decrease) to operating income for adjustments to non-income tax contingencies and indemnification assets were $928 and $(3,813) , respectively, for the six months ended June 30, 2018 and 2017 .

In addition, as of June 30, 2018 and December 31, 2017 , Laureate has recorded cumulative liabilities for income tax contingencies of $61,242 and $100,404 , respectively. As of June 30, 2018 and December 31, 2017 , indemnification assets primarily related to acquisition contingencies were $98,177 and $98,493 , respectively. These indemnification assets primarily cover contingencies for income taxes and taxes other-than-income taxes. In addition, we have identified certain contingencies, primarily tax-related, that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on the Company’s results of operations if the outcomes are unfavorable. In most cases, Laureate has received indemnifications from the former owners and/or noncontrolling interest holders of the acquired businesses for contingencies, and therefore, we do not believe we will sustain an economic loss even if we are required to pay these additional amounts. In cases where we are not indemnified, the unrecorded contingencies are not individually material and are primarily in Brazil. In the aggregate, we estimate that the reasonably

possible loss for these unrecorded contingencies in Brazil could be up to approximately $48,000 if the outcomes were unfavorable in all cases.

Other Loss Contingencies

Laureate has accrued liabilities for certain civil actions against our institutions, a portion of which existed prior to our acquisition of these entities. Laureate intends to vigorously defend against these matters. As of June 30, 2018 and December 31, 2017 , approximately $48,000 and $22,000 , respectively, of loss contingencies were included in Other long-term liabilities and Other current liabilities on the Consolidated Balance Sheets. The increase is primarily due to loss contingencies recorded as a result of the sale of LEILY in China, as discussed in Note 5 , Dispositions , as well as loss contingencies in the Brazil segment for which we are indemnified by the former owner and have recorded a corresponding indemnification asset.

Material Guarantees – Student Financing

Chile

The accredited Chilean institutions in the Laureate network also participate in a government-sponsored student financing program known as Crédito con Aval del Estado (the CAE Program). The CAE Program was formally implemented by the Chilean government in 2006 to promote higher education in Chile for lower socio-economic level students in good academic standing. The CAE Program involves tuition financing and guarantees that are provided by our institutions and the government. As part of the CAE Program, these institutions provide guarantees which result in contingent liabilities to third-party financing institutions, beginning at 90% of the tuition loans made directly to qualified students enrolled through the CAE Program and declining to 60% over time. The guarantees by these institutions are in effect during the period in which the student is enrolled , and the guarantees are assumed entirely by the government upon the student’s graduation. When a student leaves one of Laureate's institutions and enrolls in another CAE-qualified institution, the Laureate institution will remain guarantor of the tuition loans that have been granted up to the date of transfer, and until the student's graduation from a CAE-qualified institution. The maximum potential amount of payments our institutions could be required to make under the CAE Program was approximately $506,000 and $527,000 at June 30, 2018 and December 31, 2017 , respectively. This maximum potential amount assumes that all students in the CAE Program do not graduate, so that our guarantee would not be assigned to the government, and that all students default on the full amount of the CAE-qualified loan balances. As of June 30, 2018 and December 31, 2017 , we recorded $36,115 and $27,073 , respectively, as estimated long-term guarantee liabilities for these obligations.

Material Guarantees – Other

In conjunction with the purchase of UNP Brazil, Laureate pledged all of the acquired shares as a guarantee of our payments of rents as they become due. In the event that we default on any payment, the pledge agreement provides for a forfeiture of the relevant pledged shares. In the event of forfeiture, Laureate may be required to transfer the books and management of UNP to the former owners.

Laureate acquired the remaining 49% ownership interest in UAM Brazil in April 2013. As part of the agreement to purchase the 49% ownership interest, Laureate pledged 49% of its total shares in UAM Brazil as a guarantee of our payment obligations under the purchase agreement. In the event that we default on any payment, the agreement provides for a forfeiture of the pledged shares.

In connection with the purchase of FMU on September 12, 2014, Laureate pledged 75% of the acquired shares to third-party lenders as a guarantee of our payment obligations under the loans that financed a portion of the purchase price. Laureate pledged the remaining 25% of the acquired shares to the sellers as a guarantee of our payment obligations under the purchase agreement for the seller notes . In the event that we default on any payment of the loans or seller notes, the purchase agreement provides for a forfeiture of the relevant pledged shares. After the payment of the seller notes in September 2017, the shares pledged to the sellers were pledged to the third-party lenders until full payment of the loans, which mature in April 2021.

In connection with a loan agreement entered into by a Laureate subsidiary in Peru, all of the shares of UPN Peru, one of our universities, were pledged to the third-party lender as a guarantee of the payment obligations under the loan.

Standby Letters of Credit, Surety Bonds and Other Commitments

As of June 30, 2018 and December 31, 2017 , Laureate's outstanding letters of credit (LOCs) and surety bonds primarily consisted of the items discussed below.

As of June 30, 2018 and December 31, 2017 , we had approximately $136,700 and $136,900 , respectively, posted as LOCs in favor of the Department of Education (DOE). These LOCs were required to allow Walden, Kendall, NewSchool and St. Augustine to continue participating in the DOE Title IV program. These LOCs are fully collateralized with cash equivalents and certificates of deposit, which are classified as Restricted cash on our June 30, 2018 and December 31, 2017 Consolidated Balance Sheets.

As of June 30, 2018 and December 31, 2017 , we had $0 and $39,505 , respectively, posted as cash collateral for LOCs related to the Spain Tax Audits. As discussed in Note 15 , Income Taxes , the cash collateral for these LOCs was released during the first quarter of 2018 and used for payments to the Spanish taxing authorities in order to stop additional interest from accruing while the appeals process continues. The cash collateral for these LOCs was classified as Restricted cash on our December 31, 2017 Consolidated Balance Sheet.

As part of our normal operations, our insurers issue surety bonds on our behalf, as required by various state education authorities in the United States. We are obligated to reimburse our insurers for any payments made by the insurers under the surety bonds. As of June 30, 2018 and December 31, 2017 , the total face amount of these surety bonds was $14,922 and $ 13,980 , respectively. These bonds are fully collateralized with cash, which was classified as Restricted cash on our June 30, 2018 and December 31, 2017 Consolidated Balance Sheets.

In November 2016, in order to continue participating in Prouni, a federal program that offers tax benefits designed to increase higher education participation rates in Brazil, UAM Brazil posted a guarantee in the amount of $15,300 . In connection with the issuance of the guarantee, UAM Brazil obtained a non-collateralized surety bond from a third party in order to secure the guarantee. The cost of the surety bond was $1,400 , of which half was reimbursed by the former owner of UAM Brazil, and is being amortized over the five -year term. The Company believes that this matter will not have a material impact on our Consolidated Financial Statements.

Note 11 . Financing Receivables

Laureate’s financing receivables consist primarily of trade receivables related to student tuition financing programs with an initial term in excess of one year. We have offered long-term financing through the execution of note receivable agreements with students at some of our institutions. Our disclosures include financing receivables that are classified in our Consolidated Balance Sheets as both current and long-term, reported in accordance with ASC 310, “Receivables.”

Laureate’s financing receivables balances were as follows:



	June 30, 2018			December 31, 2017
Financing receivables	$	38,156		$	22,977
Allowance for doubtful accounts	(7,779		)	(8,411		)
Financing receivables, net of allowances	$	30,377		$	14,566

We do not purchase financing receivables in the ordinary course of our business. We may sell certain receivables that are significantly past due. No material amounts of financing receivables were sold during the periods reported herein.

Delinquency is the primary indicator of credit quality for our financing receivables. Receivable balances are considered delinquent when contractual payments on the loan become past due. Delinquent financing receivables are placed on non-accrual status for interest income. The accrual of interest is resumed when the financing receivable becomes contractually current and when collection of all remaining amounts due is reasonably assured. We record an Allowance for doubtful accounts to reduce our financing receivables to their net realizable value. The Allowance for doubtful accounts is based on the age of the receivables, the status of past-due amounts, historical collection trends, current economic conditions, and student enrollment status. Each of our institutions evaluates its balances for potential impairment. We consider impaired loans to be those that are past due one year or greater, and those that are modified as a troubled debt restructuring (TDR). The aging of financing receivables grouped by country portfolio was as follows:



	Chile		Other		Total
As of June 30, 2018
Amounts past due less than one year	$	10,257	$	805	$	11,062
Amounts past due one year or greater	3,073		542		3,615
Total past due (on non-accrual status)	13,330		1,347		14,677
Not past due	21,028		2,451		23,479
Total financing receivables	$	34,358	$	3,798	$	38,156

As of December 31, 2017
Amounts past due less than one year	$	6,800	$	1,300	$	8,100
Amounts past due one year or greater	3,551		1,335		4,886
Total past due (on non-accrual status)	10,351		2,635		12,986
Not past due	8,494		1,497		9,991
Total financing receivables	$	18,845	$	4,132	$	22,977

The following is a rollforward of the Allowance for doubtful accounts related to financing receivables for the six months ended June 30, 2018 and 2017 , grouped by country portfolio:



	Chile			Other			Total
Balance at December 31, 2017	$	(6,107	)	$	(2,304	)	$	(8,411	)
Charge-offs	944			—			944
Recoveries	—			(14		)	(14		)
Reclassifications	—			504			504
Provision	(745		)	63			(682		)
Currency adjustments	162			(282		)	(120		)
Balance at June 30, 2018	$	(5,746	)	$	(2,033	)	$	(7,779	)

Balance at December 31, 2016	$	(6,209	)	$	(2,966	)	$	(9,175	)
Charge-offs	2,033			353			2,386
Recoveries	—			(9		)	(9		)
Reclassifications	—			—			—
Provision	(1,112		)	161			(951		)
Currency adjustments	(100		)	(55		)	(155		)
Balance at June 30, 2017	$	(5,388	)	$	(2,516	)	$	(7,904	)

Restructured Receivables

A TDR is a financing receivable in which the borrower is experiencing financial difficulty and Laureate has granted an economic concession to the student debtor that we would not otherwise consider. When we modify financing receivables in a TDR, Laureate typically offers the student debtor an extension of the loan maturity and/or a reduction in the accrued interest balance. In certain situations, we may offer to restructure a financing receivable in a manner that ultimately results in the forgiveness of contractually specified principal balances. Our only TDRs are in Chile.

The number of financing receivable accounts and the pre- and post-modification account balances modified under the terms of a TDR during the six months ended June 30, 2018 and 2017 were as follows:



	Number of Financing Receivable Accounts	Pre-Modification Balance Outstanding		Post-Modification Balance Outstanding
2018	326	$	1,092	$	1,036
2017	326	$	1,466	$	1,336

The preceding table represents accounts modified under the terms of a TDR during the six months ended June 30, 2018 , whereas the following table represents accounts modified as a TDR between January 1, 2017 and June 30, 2018 that subsequently defaulted during the six months ended June 30, 2018 :

The following table represents accounts modified as a TDR between January 1, 2016 and June 30, 2017 that subsequently defaulted during the six months ended June 30, 2017 :

Note 12 . Share-based Compensation

Share-based compensation expense was as follows:



	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018			2017
Stock options, net of estimated forfeitures	$	2,074	$	9,550	$	(5,092	)	$	28,831
Restricted stock awards	5,613		3,399		9,023			6,506
Total	$	7,687	$	12,949	$	3,931		$	35,337

The negative stock options expense for the six months ended June 30, 2018 relates to the correction of an immaterial error recorded in the prior year.

Note 13 . Stockholders' Equity

The components of net changes in stockholders' equity were as follows:



	Laureate Education, Inc. Stockholders
	Class A Common Stock			Class B Common Stock				Additional paid-in capital			(Accumulated deficit) retained earnings			Accumulated other comprehensive (loss) income			Non-controlling interests			Total stockholders' equity
	Shares	Amount		Shares		Amount
Balance at December 31, 2017	55,052	$	220	132,443		$	530	$	3,446,206		$	(946,236	)	$	(925,556	)	$	12,118		$	1,587,282
Adoption of accounting standards	—	—		—		—		—			4,330			—			—			4,330
Balance at January 1, 2018	55,052	220		132,443		530		3,446,206			(941,906		)	(925,556		)	12,118			1,591,612
Non-cash stock compensation	—	—		—		—		3,931			—			—			—			3,931
Conversion of Class B shares to Class A shares	86	—		(86	)	—		—			—			—			—			—
Vesting of restricted stock, net of shares withheld to satisfy tax withholding	333	2		59		—		(1,746		)	—			—			—			(1,744		)
Distributions to noncontrolling interest holders	—	—		—		—		—			—			—			(892		)	(892		)
Change in noncontrolling interests	—	—		—		—		(468		)	—			—			(23,305		)	(23,773		)
Accretion of redeemable noncontrolling interests and equity	—	—		—		—		806			—			—			—			806
Accretion of Series A Preferred Stock	—	—		—		—		(61,974		)	—			—			—			(61,974		)
Gain upon conversion of Series A Preferred Stock	—	—		—		—		74,110			—			—			—			74,110
Reclassification of Series A Preferred Stock upon conversion	36,143	144		—		—		237,957			—			—			—			238,101
Reclassification of redeemable noncontrolling interests and equity	—	—		—		—		—			—			—			19			19
Net income	—	—		—		—		—			393,289			—			2,210			395,499
Foreign currency translation adjustment, net of tax of $0	—	—		—		—		—			—			(113,495		)	192			(113,303		)
Unrealized gain on derivatives, net of tax of $0	—	—		—		—		—			—			12,336			—			12,336
Minimum pension liability adjustment, net of tax of $0	—	—		—		—		—			—			376			—			376
Balance at June 30, 2018	91,614	$	366	132,416		$	530	$	3,698,822		$	(548,617	)	$	(1,026,339	)	$	(9,658	)	$	2,115,104

As described in Note 2 , Significant Accounting Policies , the change in opening retained earnings from the adoption of accounting standards comprises an increase of approximately $1,400 from the cumulative impact of adopting Topic 606 and an increase of approximately $2,900 from the cumulative impact of adopting ASU 2016-16.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (AOCI) in our Consolidated Balance Sheets includes the accumulated translation adjustments arising from translation of foreign subsidiaries' financial statements, the unrealized gains on derivatives designated as cash flow hedges, and the accumulated net gains or losses that are not recognized as components of net periodic benefit cost for our minimum pension liability. The components of these balances were as follows:



	June 30, 2018								December 31, 2017
	Laureate Education, Inc.			Noncontrolling Interests		Total			Laureate Education, Inc.			Noncontrolling Interests			Total
Foreign currency translation loss	$	(1,040,716	)	$	159	$	(1,040,557	)	$	(927,221	)	$	(33	)	$	(927,254	)
Unrealized gain on derivatives	16,993			—		16,993			4,657			—			4,657
Minimum pension liability adjustment	(2,616		)	—		(2,616		)	(2,992		)	—			(2,992		)
Accumulated other comprehensive loss	$	(1,026,339	)	$	159	$	(1,026,180	)	$	(925,556	)	$	(33	)	$	(925,589	)

Note 14 . Derivative Instruments

In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We may seek to control a portion of these risks through a risk management program that includes the use of derivative instruments.

The interest and principal payments for Laureate’s senior long-term debt arrangements are to be paid primarily in USD. Our ability to make debt payments is subject to fluctuations in the value of the USD against foreign currencies, since a majority of our operating cash used to make these payments is generated by subsidiaries with functional currencies other than USD. As part of our overall risk management policies, Laureate has at times entered into foreign currency swap contracts and floating-to-fixed interest rate swap contracts. In addition, we occasionally enter into foreign exchange forward contracts to reduce the impact of other non-functional currency-denominated receivables and payables.

We do not enter into speculative or leveraged transactions, nor do we hold or issue derivatives for trading purposes. We generally intend to hold our derivatives until maturity.

Laureate reports all derivatives at fair value. These contracts are recognized as either assets or liabilities, depending upon the derivative’s fair value. Gains or losses associated with the change in the fair value of these swaps are recognized in our Consolidated Statements of Operations on a current basis over the term of the contracts, unless designated and effective as a hedge. For swaps that are designated and effective as cash flow hedges, gains or losses associated with the change in fair value of the swaps are recognized in our Consolidated Balance Sheets as a component of AOCI and amortized into earnings as a component of Interest expense over the term of the related hedged items. For derivatives that are both designated and effective as net investment hedges, gains or losses associated with the change in fair value of the derivatives are recognized on our Consolidated Balance Sheets as a component of AOCI.

The reported fair values of our derivatives, which are classified in Derivative instruments on our Consolidated Balance Sheets, were as follows:



	June 30, 2018		December 31, 2017
Derivatives designated as hedging instruments:
Long-term assets:
Interest rate swaps	$	15,289	$	6,046
Net investment cross currency swaps	121		—
Long-term liabilities:
Net investment cross currency swaps	—		1,451
Derivatives not designated as hedging instruments:
Long-term assets:
Contingent redemption features - Series A Preferred Stock	—		42,140
Current liabilities:
Interest rate swaps	72		179
Cross currency and interest rate swaps	—		4,279
Long-term liabilities:
Cross currency and interest rate swaps	7,644		7,939
Total derivative instrument assets	$	15,410	$	48,186
Total derivative instrument liabilities	$	7,716	$	13,848

Derivatives Designated as Hedging Instruments

Cash Flow Hedge - 2024 Term Loan Interest Rate Swaps

In May 2017, Laureate entered into, and designated as cash flow hedges, four pay-fixed, receive-floating amortizing interest rate swaps with notional amounts of $100,000 , $100,000 , $200,000 and $300,000 , respectively. These notional amounts match the corresponding principal of the 2024 Term Loan borrowings of which these swaps are effectively hedging the interest payments. As such, the notional values amortize annually based on the terms of the agreements to match the principal borrowings as they

are repaid. These swaps effectively fix the floating interest rate on the term loan to reduce exposure to variability in cash flows attributable to changes in the USD-LIBOR-BBA swap rate. All four swaps have an effective date of May 31, 2017 and mature on May 31, 2022. The terms of the swaps require Laureate to pay interest on the basis of fixed rates of 1.756% , 1.796% , 1.796% and 1.763% on the $100,000 , $100,000 , $200,000 and $300,000 notional values, respectively. Laureate will receive interest for all four swaps on the basis of one-month USD-LIBOR-BBA, with a floor of 1% . The swaps are determined to be 100% effective; therefore, the amount of gain or loss recognized in income on the ineffective portion of derivative instruments designated as hedging instruments was $0 . During the next 12 months, approximately $3,783 is expected to be reclassified from AOCI into income. As of June 30, 2018 and December 31, 2017 , these interest rate swaps had an estimated fair value of $15,289 and $6,046 , respectively, which was recorded in Derivative instruments as a long-term asset.

Net Investment Hedge - Cross Currency Swaps

In December 2017, Laureate entered into two EUR-USD cross currency swaps to hedge the foreign currency exchange volatility on operations of our Euro functional currency subsidiaries and better match our cash flows with the currencies in which our debt obligations are denominated. Both swaps have an effective date of December 22, 2017 and a maturity date of November 2, 2020, and were designated at inception as effective net investment hedges. At maturity on the first swap Laureate will deliver the notional amount of EUR 50,000 and receive USD $59,210 at an implied exchange rate of 1.1842 . At maturity on the second swap Laureate will deliver the notional amount of EUR 50,000 and receive USD $59,360 at an implied exchange rate of 1.1872 . Semiannually until maturity, Laureate is obligated to pay 5.63% and receive 8.25% on EUR 50,000 and USD $59,210 , respectively, on the first swap and pay 5.6675% and receive 8.25% on EUR 50,000 and USD $59,360 , respectively, on the second swap. The swaps are determined to be 100% effective; therefore, the amount of gain or loss recognized in income on the ineffective portion of derivative instruments designated as hedging instruments was $0 . As of June 30, 2018 and December 31, 2017 , these swaps had an estimated fair value of $121 and $1,451 , respectively, which was recorded in Derivative Instruments as a long-term asset at June 30, 2018 and a long-term liability at December 31, 2017 .

The table below shows the total recorded unrealized gain in Comprehensive income for the derivatives designated as hedging instruments. The impact of these derivative instruments on Comprehensive income, Interest expense and AOCI were as follows:

For the three months ended June 30:



	Gain Recognized in Comprehensive Income (Effective Portion)				Income Statement Location	Gain (Loss) Reclassified from AOCI to Income (Effective Portion)
	2018		2017		Income Statement Location	2018		2017
Interest rate swaps	$	2,556	$	3,508	Interest expense	$	260	$	(3,047	)
Net investment cross currency swaps	7,570		—		N/A	—		—
Total	$	10,126	$	3,508		$	260	$	(3,047	)

For the six months ended June 30:



	Gain Recognized in Comprehensive Income (Effective Portion)				Income Statement Location	Loss Reclassified from AOCI to Income (Effective Portion)
	2018		2017		Income Statement Location	2018			2017
Interest rate swaps	$	9,244	$	6,099	Interest expense	$	(38	)	$	(5,733	)
Net investment cross currency swaps	3,092		—		N/A	—			—
Total	$	12,336	$	6,099		$	(38	)	$	(5,733	)

Derivatives Not Designated as Hedging Instruments

Derivatives related to Series A Preferred Stock Offering

The Company identified several embedded derivatives associated with the issuance of the Series A Preferred Stock as discussed in Note 10 , Commitments and Contingencies . The embedded derivatives were related to certain contingent redemption features of the Series A Preferred Stock. As of December 31, 2017 , the total estimated fair value of these derivatives was $42,140 , which

was recorded in Derivative instruments as a long-term asset on the Consolidated Balance Sheet. These derivatives were not designated as hedges for accounting purposes thus the changes in estimated fair value were recognized as a component of earnings. As discussed in Note 10 , Commitments and Contingencies , the Series A Preferred Stock was converted into Class A common stock on April 23, 2018 . The estimated fair value of these derivatives at the conversion date was approximately $140,300 ; accordingly, the derivative assets were recorded at their estimated fair values through a corresponding gain on derivatives, a component of non-operating income. The increase in the fair value of the derivatives can be attributed to the use of the Monte Carlo Simulation Method to value the derivatives prior to the April 23, 2018 conversion date, when the probability of conversion increased to 100% and the valuation inputs became definitive. In connection with the conversion of the Series A Preferred Stock into Class A common stock, the carrying value of the derivative assets was reclassified into equity in April 2018.

THINK Interest Rate Swaps

Laureate acquired THINK on December 20, 2013, and financed a portion of the purchase price by borrowing AUD 45,000 (US $33,210 at June 30, 2018 ) under a syndicated facility agreement in the form of two term loans of AUD 22,500 each. The terms of the syndicated facility agreement required THINK to enter into an interest rate swap within 45 days from the agreement's December 20, 2013 effective date, in order to convert at least 50% of the AUD 45,000 of term loan debt from a variable interest rate based on the BBSY bid rate, an Australia bank rate, to a fixed interest rate. Accordingly, on January 31, 2014, THINK executed an interest rate swap agreement with an original notional amount of AUD 22,500 to satisfy this requirement and converted AUD 22,500 (US $16,605 at June 30, 2018 ) of the variable rate component of the term loan debt to a fixed interest rate of 3.86% . The notional amount of the swap decreases quarterly based on the terms of the agreement, and the swap matures on December 20, 2018. This interest rate swap was not designated as a hedge for accounting purposes, and had an estimated fair value of $72 and $179 at June 30, 2018 and December 31, 2017 , respectively, which was recorded in Derivative instruments as a current liability.

EUR to USD Foreign Currency Swaps

In December 2017, the Company entered into a total of six EUR to USD forward exchange swap agreements in connection with the sale of EUC and Laureate Italy, as discussed in Note 5 , Dispositions . The purpose of the swaps was to mitigate the risk of foreign currency exposure on the sale proceeds. The swaps had an aggregate notional amount of EUR 200,000 and matured on January 16, 2018, resulting in a total realized loss on derivatives of $9,960 . The swaps were not designated as hedges for accounting purposes.

CLP to Unidad de Fomento (UF) Cross Currency and Interest Rate Swaps

The cross currency and interest rate swap agreements are intended to provide a better correlation between our debt obligations and operating currencies. In 2010, one of our subsidiaries in Chile entered into four cross currency and interest rate swap agreements. One of the swaps matures on December 1, 2024, and the remaining three mature on July 1, 2025 (the CLP to UF cross currency and interest rate swaps). The UF is a Chilean inflation-adjusted unit of account. The four swaps have an aggregate notional amount of approximately $31,000 , and convert CLP-denominated, floating-rate debt to fixed-rate UF-denominated debt. The CLP to UF cross currency and interest rate swaps were not designated as hedges for accounting purposes. As of June 30, 2018 and December 31, 2017 , these swaps had an estimated fair value of $7,644 and $7,939 , respectively, which was recorded in Derivative instruments as a long-term liability.

Components of the reported (Loss) gain on derivatives not designated as hedging instruments in the Consolidated Statements of Operations were as follows:



	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
Unrealized (Loss) Gain
Contingent redemption features - Series A Preferred Stock	$	(28,607	)	$	27,219		$	(42,140	)	$	39,442
Cross currency and interest rate swaps	53			(145		)	4,358			$	(127	)
Interest rate swaps	48			45			103			71
	(28,506		)	27,119			(37,679		)	39,386
Realized Gain (Loss)
Contingent redemption features - Series A Preferred Stock	140,319			—			140,319			—
Cross currency and interest rate swaps	(217		)	(149		)	(10,384		)	(269		)
	140,102			(149		)	129,935			(269		)
Total Gain (Loss)
Contingent redemption features - Series A Preferred Stock	111,712			27,219			98,179			39,442
Cross currency and interest rate swaps	(164		)	(294		)	(6,026		)	(396		)
Interest rate swaps	48			45			103			71
Gain on derivatives, net	$	111,596		$	26,970		$	92,256		$	39,117

Credit Risk and Credit-Risk-Related Contingent Features

Laureate’s derivatives expose us to credit risk to the extent that the counterparty may possibly fail to perform its contractual obligation. The amount of our credit risk exposure is equal to the fair value of the derivative when any of the derivatives are in a net gain position. As of June 30, 2018 and December 31, 2017 , the estimated fair values of derivatives in a gain position were $15,410 and $48,186 , respectively; however, the December 31, 2017 carrying value relates primarily to the redemption rights of the holders of the Series A Preferred Stock, which did not expose us to credit risk. Our counterparty credit risk is currently limited to the 2024 Term Loan Interest Rate Swaps and the EUR-USD cross currency swaps, with aggregate fair values in a gain position of $15,410 as of June 30, 2018 .

Laureate has limited its credit risk by only entering into derivative transactions with highly rated major financial institutions. We have not entered into collateral agreements with our derivatives' counterparties. At June 30, 2018 , one institution was rated Aa2, one institution was rated Aa3, two institutions were rated A1, one institution was rated A2 and one institution was rated A3 by the global rating agency of Moody's Investors Service. These financial institutions accounted for all of Laureate's derivative credit risk exposure.

Laureate's agreements with its derivative counterparties contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to a default on the indebtedness. As of June 30, 2018 and December 31, 2017 , we had not breached any default provisions and had not posted any collateral related to these agreements. If we had breached any of these provisions, we could have been required to settle the obligations under the derivative agreements for an amount that we believe would approximate their estimated fair value of $7,716 as of June 30, 2018 and $13,848 as of December 31, 2017 .

Note 15 . Income Taxes

Laureate uses the liability method to account for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For interim purposes, we also apply ASC 740-270, "Income Taxes - Interim Reporting."

Laureate's income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the six months ended June 30, 2018 and 2017 were based on estimated full-year effective tax rates, after giving effect to significant items related specifically to the interim periods, including the mix of income for the period between higher-taxed and lower-taxed jurisdictions. Laureate has operations in multiple countries, several of which have statutory tax rates lower than the United States

or are tax-exempt entities, and other operations that are loss-making entities for which it is not more likely than not that a tax benefit will be realized on the loss.

The Tax Cuts & Jobs Act (TCJA)

TCJA was enacted in December 2017. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, requires companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred and creates new taxes on certain foreign-sourced earnings. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provides guidance on accounting for enactment effects of the TCJA. SAB 118 provides a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

Transition tax: The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, Laureate must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. Laureate was able to make a reasonable estimate of the transition tax and recorded a provisional obligation resulting in additional tax expense of $149,800 in the fourth quarter of 2017. However, Laureate was able to offset this liability with 2017 losses and, under alternative minimum tax, up to 90% of the remaining liability, with existing net operating losses, resulting in a net liability of $3,200 . Additionally, the TCJA repeals the corporate alternative minimum tax prospectively. Thus, Laureate recorded a deferred tax asset for an amount equal to the payable under the alternative minimum tax, resulting in no net income tax expense related to the transition tax. The Company is continuing to gather additional information and will consider additional technical guidance to more precisely compute and account for the amount of the transition tax. This amount may change when Laureate finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets.

Remeasurement of deferred tax assets/liabilities: Laureate remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse, which is generally 21% under the TCJA and recorded a tax benefit in the amount of $66,900 . Additionally, Laureate recorded a tax benefit related to the valuation allowance release, net of rate adjustment, on the deferred tax assets other than NOLs that, when realized, will become indefinite-lived NOLs in the amount of $70,700 . During six months ended June 30, 2018 , the company recorded an additional benefit of $500 related to release of valuation allowance for state conformity. Laureate is still analyzing certain aspects of the TCJA, including state conformity, considering additional technical guidance, and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

Permanent Reinvestment: Laureate also is considering other impacts of the 2017 enactment of the TCJA including, but not limited to, effects on the Company’s indefinite-reinvestment assertion. Laureate previously has not provided deferred taxes on unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. Laureate is still analyzing the full effects of the TCJA, which may cause some reassessment of previous indefinite-reinvestment assertions with respect to certain jurisdictions.

Global low-taxed income (GILTI): Laureate is considering the potential impacts of the GILTI provision within the TCJA on deferred tax assets/liabilities. During the second quarter of 2018, the Company estimated the GILTI provision based on guidance and data available at that time. Currently, Laureate has not yet elected a policy as to whether it will recognize deferred taxes for basis differences expected to reverse as GILTI or whether Laureate will account for GILTI as period costs if and when incurred. Laureate is not aware of other elements of the TCJA for which the Company was not yet able to make reasonable estimates of the enactment impact and for which it would continue accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the TCJA.

ICE Audit

As previously disclosed in our 2017 Form 10-K, during 2010 and 2013, Laureate was notified by the Spain Tax Authorities (STA) that two tax audits of our Spanish subsidiaries were being initiated for 2006 through 2007, and for 2008 through 2010, respectively. On June 29, 2012, the STA issued a final assessment to Iniciativas Culturales de España, S.L. (ICE), our Spanish holding company, for EUR 11,051 ( $12,900 at June 30, 2018 ), including interest, for the 2006 through 2007 period. Laureate has appealed this final

assessment related to the 2006 through 2007 period and issued a cash-collateralized letter of credit in July 2012, in order to continue the appeal process. In October 2015, the STA issued a final assessment to ICE for the 2008 through 2010 period for approximately EUR 17,187 (approximately US $20,000 at June 30, 2018 ), including interest, for those three years. In order to continue the appeals process, we issued cash-collateralized letters of credit for the 2008 to 2010 period assessment amount, plus interest and surcharges. As of December 31, 2017, we had issued total cash-collateralized letters of credit for the ICE tax audit matters of EUR 33,282 (US $39,505 at December 31, 2017), as also described in Note 10 , Commitments and Contingencies .

During the quarter ended June 30, 2015, the Company reassessed its position regarding the ICE tax audit matters as a result of recent adverse decisions from the Spanish Supreme Court and the Spanish National Court on cases for taxpayers with similar facts and determined that it could no longer support a more-likely-than-not position. As a result, during 2015, the Company recorded a provision totaling EUR 37,610 (approximately US $42,100 ). The Company plans to continue the appeals process for the periods already audited and assessed. During the second quarter of 2016, we were notified by the STA that tax audits of the Spanish subsidiaries were also being initiated for 2011 and 2012, and in July 2017 the tax audit was extended to include 2013. In July 2018, the STA issued a final assessment to ICE for the 2011 through 2013 period totaling EUR 4,066 (approximately US $4,740 ), including interest. Also, during the second quarter of 2016, the Regional Administrative Court issued a decision against the Company on its appeal. The Company has further appealed at the Highest Administrative Court level, which appeal was rejected on January 23, 2018. The Company has appealed both decisions to the National Court. In the first quarter of 2018, the Company made payments to the STA totaling approximately EUR 29,600 (approximately US $34,500 at June 30, 2018 ) in order to reduce the amount of future interest that could be incurred as the appeals process continues. The payments were made using the restricted cash that had collateralized the letters of credit discussed above and reduced the liability that had been recorded for this income tax contingency.

Note 16 . Earnings (Loss) Per Share

On January 31, 2017 our common stock was reclassified into shares of Class B common stock and, on February 6, 2017 , we completed our IPO of Class A common stock. Other than voting rights, the Class B common stock has the same rights as the Class A common stock and therefore both are treated as the same class of stock for purposes of the earnings per share calculation. Laureate computes basic earnings per share (EPS) by dividing income available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that would occur if share-based compensation awards or contingently issuable shares were exercised or converted into common stock. To calculate the diluted EPS, the basic weighted average number of shares is increased by the dilutive effect of stock options, restricted stock, and other share-based compensation arrangements determined using the treasury stock method, and contingently issuable shares using the if-converted method.

The following tables summarize the computations of basic and diluted earnings per share:



For the three months ended June 30,	2018			2017
Numerator used in basic and diluted earnings per common share:
Income from continuing operations attributable to Laureate Education, Inc.	$	224,410		$	116,386

Accretion of redemption value of redeemable noncontrolling interests and equity	882			(6,352		)
Adjusted for: accretion related to noncontrolling interests and equity redeemable at fair value	(556		)	(919		)
Accretion of Series A Preferred Stock	(4,650		)	(61,934		)
Gain upon conversion of Series A Preferred Stock	74,110			—
Distributed and undistributed earnings to participating securities	—			(7		)
Subtotal: accretion of Series A Preferred Stock, net and other redeemable noncontrolling interests and equity	69,786			(69,212		)
Net income available to common stockholders for basic earnings per share	$	294,196		$	47,174
Adjusted for: accretion of Series A Preferred Stock	4,650			—
Adjusted for: gain upon conversion of Series A Preferred Stock	(74,110		)	—
Net income available to common stockholders for diluted earnings per share	$	224,736		$	47,174

Denominator used in basic and diluted earnings per common share:
Basic weighted average shares outstanding	214,864			168,591
Dilutive effect of Series A Preferred Stock	9,135			—
Dilutive effect of stock options	—			—
Dilutive effect of restricted stock units	355			66
Diluted weighted average shares outstanding	224,354			168,657

Basic and diluted earnings per share:
Basic earnings per share	$	1.37		$	0.28
Diluted earnings per share	$	1.00		$	0.28



For the six months ended June 30,	2018			2017
Numerator used in basic and diluted earnings (loss) per common share:
Income (loss) from continuing operations attributable to Laureate Education, Inc.	$	393,289		$	(6,422	)

Accretion of redemption value of redeemable noncontrolling interests and equity	806			(530		)
Adjusted for: accretion related to noncontrolling interests and equity redeemable at fair value	(559		)	(6,357		)
Accretion of Series A Preferred Stock	(61,974		)	(101,194		)
Gain upon conversion of Series A Preferred Stock	74,110			—
Distributed and undistributed earnings to participating securities	—			—
Subtotal: accretion of Series A Preferred Stock, net and other redeemable noncontrolling interests and equity	12,383			(108,081		)
Net income (loss) available to common stockholders for basic earnings per share	$	405,672		$	(114,503	)
Adjusted for: accretion of Series A Preferred Stock	61,974			—
Adjusted for: gain upon conversion of Series A Preferred Stock	(74,110		)	—
Net income (loss) available to common stockholders for diluted earnings per share	$	393,536		$	(114,503	)

Denominator used in basic and diluted earnings (loss) per common share:
Basic weighted average shares outstanding	201,494			161,620
Dilutive effect of Series A Preferred Stock	22,564			—
Dilutive effect of stock options	—			—
Dilutive effect of restricted stock units	416			—
Diluted weighted average shares outstanding	224,474			161,620

Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share	$	2.01		$	(0.71	)
Diluted earnings (loss) per share	$	1.75		$	(0.71	)

The shares of Class A common stock that were issuable upon completion of the conversion of the Series A Preferred Stock were not included in the calculation of diluted EPS for the three and six months ended June 30, 2017 , as the effect would have been antidilutive. The shares of Class A common stock issuable upon completion of the conversion of the Series A Preferred Stock were included in the calculation of diluted EPS for the three and six months ended June 30, 2018 , as the effect was dilutive. In the calculation of diluted EPS, the conversion of the Series A Preferred Stock was assumed to have occurred as of the beginning of the period; accordingly, the effects of the accretion and the gain upon conversion of the Series A Preferred Stock were removed from net income available to common stockholders for diluted earnings per share. The following table summarizes the number of stock options and shares of restricted stock that were excluded from the diluted EPS calculations because the effect would have been antidilutive:



	For the three months ended June 30,		For the six months ended June 30,
	2018	2017	2018	2017
Stock options	9,714	13,149	9,779	12,724
Restricted stock	131	173	169	529

Note 17 . Related Party Transactions

Corporate

Transactions between Laureate and Affiliates of Wengen Alberta, Limited Partnership (Wengen)

As part of the issuance and sale of shares of the Company’s Series A Preferred Stock in December 2016, KKR and Snow Phipps, affiliates of Wengen, our controlling stockholder, purchased from the Company 60 and 15 shares of Series A Preferred Stock, respectively. During the six months ended June 30, 2018 , the Company paid cash dividends on the Series A Preferred Stock totaling

$11,103 , of which $1,822 was paid to KKR and Snow Phipps. As discussed in Note 10 , Commitments and Contingencies , all shares of Series A Preferred Stock were converted to Class A common stock on April 23, 2018 .

EMEAA

Morocco

Transactions between Laureate and Noncontrolling Interest Holder of Laureate Somed Education Holding SA (Laureate Somed)

Laureate Somed was 60% owned and consolidated by Laureate and was the entity that operated Université Internationale de Casablanca, our institution in Morocco. The 40% noncontrolling interest holder of Laureate Somed made loans to Laureate Somed, and as of December 31, 2017 , we had total related party payables of $8,953 to the noncontrolling interest holder of Laureate Somed for the outstanding balance on these loans plus accrued interest. As discussed in Note 5 , Dispositions , on April 13, 2018 , the Company, along with the noncontrolling interest holder, completed the sale of Laureate Somed and, as a result, these payables were assumed by the buyer.

Note 18 . Legal and Regulatory Matters

Laureate is subject to legal proceedings arising in the ordinary course of business. In management's opinion, we have adequate legal defenses, insurance coverage, and/or accrued liabilities with respect to the eventuality of these actions. Management believes that any settlement would not have a material impact on Laureate's financial position, results of operations, or cash flows. For further description, see our 2017 Form 10-K.

Update on Turkey Regulatory Matters

The Company previously disclosed in its 2017 Form 10-K that, on April 18, 2017, Istanbul Bilgi University (Bilgi) received from the Turkish Higher Education Council (the YÖK) the results of its 2015-2016 annual audit (the 2015-2016 Annual Audit) and that the Company was appealing the result of that audit. The YÖK also conducted a supplemental audit of the 2015-2016 academic year (the 2015-2016 Supplemental Audit) and the annual audit of the 2016-2017 academic year (the 2016-2017 Annual Audit). On April 6, 2018, Bilgi received the results of the 2015-2016 Supplemental Audit and the 2016-2017 Annual Audit by resolutions of the YÖK which, among other things, approved a portion of the payments previously made by Bilgi to a subsidiary of the Company for management, operational and student services and intellectual property and disallowed and required reimbursement of a portion of such payments. In order to comply with the resolutions of the YÖK and avoid sanctions, Bilgi has complied with those resolutions and the Company has reimbursed to Bilgi the disallowed payments; however, it has appealed the YÖK’s decision on the 2015-2016 Annual Audit in the Turkish court system and is currently considering actions to contest the YÖK’s decisions pursuant to the 2015-2016 Supplemental Audit and the 2016-2017 Annual Audit, including an appeal to the YÖK.

In May 2018, an amendment to Turkey's higher education law was passed , which could affect certain transactions of Turkish universities that are deemed to be related party transactions. In order for it to be implemented, the amendment requires the Turkish government to issue final directives, which have not yet been issued. These directives are expected to be of significant importance in determining whether the amendment will have an impact on our operations. Once the final directives are received, the Company will evaluate whether this amendment to the higher education law has an effect on our operations, including the existing contractual relationships that the Company maintains with Bilgi, our institution in Turkey. At this time, we cannot predict the impact, if any, of this amendment to our business, financial condition, results of operations or cash flows.

Note 19 . Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, which are described below:


•	Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets;


•	Level 2 – Observable inputs other than quoted prices that are either directly or indirectly observable for the asset or liability;


•	Level 3 – Unobservable inputs that are supported by little or no market activity.

These levels are not necessarily an indication of the risk of liquidity associated with the financial assets or liabilities disclosed. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement, as required under ASC 820-10, "Fair Value Measurement."

Derivative instruments

Laureate uses derivative instruments as economic hedges for bank debt, foreign exchange fluctuations and interest rate risk. Their values are derived using valuation models commonly used for derivatives. These valuation models require a variety of inputs, including contractual terms, market prices, forward-price yield curves, notional quantities, measures of volatility and correlations of such inputs. Our valuation models also reflect measurements for credit risk. Laureate concluded that the fair values of our derivatives are based on unobservable inputs, or Level 3 assumptions. The significant unobservable input used in the fair value measurement of the Company's derivative instruments is our own credit risk. Holding other inputs constant, a significant increase (decrease) in our own credit risk would result in a significantly lower (higher) fair value measurement for the Company's derivative instruments.

Laureate’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2018 were as follows:



	Total		Level 1		Level 2		Level 3
Assets
Derivative instruments	$	15,410	$	—	$	—	$	15,410
Liabilities
Derivative instruments	$	7,716	$	—	$	—	$	7,716

Laureate’s financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2017 were as follows:



	Total		Level 1		Level 2		Level 3
Assets
Derivative instruments	$	48,186	$	—	$	—	$	48,186
Liabilities
Derivative instruments	$	13,848	$	—	$	—	$	13,848

The changes in our Level 3 Derivative instruments measured at fair value on a recurring basis for the six months ended June 30, 2018 were as follows:



	Total Assets (Liabilities)
Balance December 31, 2017	$	34,338
(Loss) Gain included in earnings:
Unrealized losses, net	(37,679		)
Realized gains, net	129,935
Included in other comprehensive income	12,336
Settlements	10,384
Reclassification upon conversion of Series A Preferred Stock	(140,319		)
Currency translation adjustment and other	(1,301		)
Balance June 30, 2018	$	7,694
Unrealized loss, net, relating to derivatives held at June 30, 2018	$	(37,679	)

The following table presents quantitative information regarding the significant unobservable inputs utilized in the fair value measurements of the Company's assets/(liabilities) classified as Level 3 as of June 30, 2018 :



	Fair Value at June 30, 2018		Valuation Technique	Unobservable Input	Range/Input Value
Derivative instruments - cross currency and interest rate swaps	$	7,694	Discounted Cash Flow	Credit Risk	3.55	%

Note 20 . Supplemental Cash Flow Information

Reconciliation of Cash and cash equivalents and Restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets, as well as the June 30, 2017 balance. The June 30, 2018 and June 30, 2017 balances sum to the amounts shown in the Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 :



	June 30, 2018		June 30, 2017		December 31, 2017
Cash and cash equivalents	$	402,402	$	367,163	$	468,733
Restricted cash	182,905		193,305		224,934
Total Cash and cash equivalents and Restricted cash shown in the Consolidated Statements of Cash Flows	$	585,307	$	560,468	$	693,667

Restricted cash includes cash equivalents held to collateralize standby letters of credit in favor of the DOE. In addition, Laureate may at times have restricted cash in escrow pending potential acquisition transactions, hold a United States deposit for a letter of credit in lieu of a surety bond, or otherwise have cash that is not immediately available for use in current operations. See also Note 10 , Commitments and Contingencies .

Note 21 . Subsequent Events

Sale of Kendall

As previously disclosed in our 2017 Form 10-K, on January 15, 2018, Kendall, an Illinois limited liability company and indirect wholly owned subsidiary of Laureate, The Dining Room at Kendall NFP, an Illinois not for profit corporation, National Louis University, an Illinois not for profit corporation (NLU), and Laureate, solely as guarantor of certain of Kendall’s obligations thereunder, entered into an asset purchase agreement. On August 6, 2018 , we closed the transaction and Kendall transferred to NLU certain assets, including all of Kendall's education programs, subject to certain conditions, in exchange for consideration of one dollar. Closing of the transaction was subject to prior receipt of regulatory consents, including those of the U.S. Department of Education and the Higher Learning Commission.

As part of the agreement, at closing Laureate paid to NLU $14,000 to support NLU’s construction of facilities for the acquired culinary program on NLU’s campus, subject to possible partial recoupment under specified conditions during the 10 -year post-closing period. In addition, at closing Laureate paid approximately $2,100 to NLU for a working capital adjustment and other items provided for under the agreement. This payment will be included in the loss on sale that will be recorded during the third quarter of 2018.

Also, at the closing date of the sale, the cease-use criteria were met for a leased building that was not part of the sale transaction and that has a lease term ending in July 2028. Accordingly, during the third quarter, the Company expects to record operating expense and a corresponding liability of approximately $24,000 for the present value of the remaining lease costs, less estimated sublease income.

Inti Education Holdings Sdn. Bhd. (Inti Holdings)

As previously disclosed in our 2017 Form 10-K, on December 11, 2017, Exeter Street Holdings Sdn. Bhd., a Malaysia corporation (Exeter Street), and Laureate Education Asia Limited, a Hong Kong corporation (Laureate Asia), both of which are indirect wholly owned subsidiaries of Laureate, entered into a sale purchase agreement with Comprehensive Education Pte. Ltd., a Singapore corporation (Comprehensive, the purchaser) that is an affiliate of Affinity Equity Partners, a private equity firm based in Hong Kong. Under the sale purchase agreement, Comprehensive agreed to purchase from Exeter Street all of the issued and outstanding shares in the capital of Inti Holdings, and Laureate Asia will guarantee certain obligations of Exeter Street. Inti Holdings is the indirect owner of INTI University and Colleges, a higher education institution with five campuses in Malaysia.

In July 2018, the Company received notification from the Malaysian Ministry of Education (Malaysian MOE) that it had denied approval of the proposed sale transaction. Approval by the Malaysian MOE is a condition precedent for completion of the transactions contemplated by the sale purchase agreement. The Company and the purchaser are jointly evaluating options, including

the possibility of an appeal to the Malaysian MOE. As of June 30, 2018 , Inti Holdings continues to meet the criteria to be classified as held for sale.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains ‘‘forward-looking statements’’ within the meaning of the federal securities laws, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as ‘‘believes,’’ ‘‘expects,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘approximately,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘estimates’’ or ‘‘anticipates’’ or similar expressions that concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates, financial results and all statements we make relating to our planned divestitures, the expected proceeds generated therefrom and the expected reduction in revenue resulting therefrom, are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q, are disclosed in ‘‘Item 1—Business, Item 1A—Risk Factors’’ of our 2017 Form 10-K. Some of the factors that we believe could affect our results include:


•	the risks associated with conducting our global operations, including complex business, foreign currency, political, legal, regulatory, tax and economic risks;


•	our ability to effectively manage the growth of our business, implement a common operating model and platform, and increase our operating leverage;


•	the development and expansion of our global education network and programs and the effect of new technology applications in the educational services industry;


•	our ability to successfully complete planned divestitures and make strategic acquisitions, and to successfully integrate and operate acquired businesses;


•	the effect of existing international and U.S. laws and regulations governing our business or changes to those laws and regulations or in their application to our business;


•	changes in the political, economic and business climate in the international or the U.S. markets where we operate;


•	risks of downturns in general economic conditions and in the educational services and education technology industries, that could, among other things, impair our goodwill and intangible assets;


•	possible increased competition from other educational service providers;


•	market acceptance of new service offerings by us or our competitors and our ability to predict and respond to changes in the markets for our educational services;


•	the effect on our business and results of operations from fluctuations in the value of foreign currencies;


•	our ability to attract and retain key personnel;


•	the fluctuations in revenues due to seasonality;


•	our ability to generate anticipated savings from our Excellence in Process (‘‘EiP’’) program or our shared services organizations (‘‘SSOs’’);


•	our ability to maintain proper and effective internal controls or remediate any of our current material weaknesses necessary to produce accurate financial statements on a timely basis;


•	our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance;


•	the future trading prices of our Class A common stock and the impact of any securities analysts’ reports on these prices; and


•	our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the ‘‘MD&A’’) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc. This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are presented in U.S. dollars (USD) rounded to the nearest thousand, with the amounts in MD&A rounded to the nearest tenth of a million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may occur due to such rounding. Our MD&A is presented in the following sections:


•	Overview;


•	Results of Operations;


•	Liquidity and Capital Resources;


•	Critical Accounting Policies and Estimates;


•	Recently Issued Accounting Standards; and


•	Disposition Metrics .

Overview

Our Business

We are the largest global network of degree-granting higher education institutions with more than one million students enrolled at our 60 institutions in 20 countries on more than 200 campuses as of June 30, 2018 , which we collectively refer to as the Laureate International Universities network. We participate in the global higher education market, which was estimated to account for revenues of approximately $1.5 trillion in 2015, according to Global Silicon Valley (GSV). We believe the global higher education market presents an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for quality higher education around the world. Advanced education opportunities drive higher earnings potential, and we believe the projected growth in the middle-class population worldwide and limited government resources dedicated to higher education create substantial opportunities for high-quality private institutions to meet this growing and unmet demand. Our outcomes-driven strategy is focused on enabling millions of students globally to prosper and thrive in the dynamic and evolving knowledge economy.

In 1999, we made our first investment in higher education and, since that time, we have developed into the global leader in higher education, based on the number of students, institutions and countries making up our network. As of June 30, 2018 , our global network of 60 institutions comprised 49 institutions we owned or controlled, and an addition al 11 institutions that we managed or with which we had other relationships. We have six reporting segments as described below. We group our institutions by geography in: 1) Brazil; 2) Mexico; 3) Andean & Iberian; 4) Central America & U.S. Campuses; and 5) Europe, Middle East, Africa and Asia Pacific (EMEAA) for reporting purposes. Our sixth segment, Online & Partnerships, includes fully online institutions that operate globally.

Assets Held For Sale

As discussed in Note 4 , Assets Held for Sale , of our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the Company has identified certain subsidiaries in our EMEAA and Central America & U.S. Campuses segments that may not reach a scale that will be meaningful for Laureate, or that represent a strategic sale opportunity, and has undertaken a process to sell these entities. As described in Note 5 , Dispositions , of our consolidated financial statements included elsewhere in this Form 10-Q, several of these sale transactions closed during the first half of 2018. The sale of Kendall College, LLC (Kendall) closed during the third quarter of 2018 ; see Note 21 , Subsequent Events , of our consolidated financial statements included elsewhere in this Form 10-Q. As the sale transactions are completed in 2018 they will cause reductions to, among other things, our future institution counts, country counts, enrollment and revenues. There are notes included in various sections of the MD&A to aid in identifying these future impacts. For the sale transactions that have closed thus far in 2018, refer to the Disposition Metrics section of the MD&A for information on the historical operational metrics of the entities that we have divested.

Our Segments

* Laureate manages one institution in China through a joint venture arrangement.

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, effective August 1, 2017, we changed our operating segments in order to realign our segments according to how our chief operating decision maker allocates resources and assesses performance. The change includes the creation of three operating segments (Brazil, Mexico and Andean & Iberian) from the previous Latin America (LatAm) segment. Our institutions in Spain and Portugal (Iberian) have moved from the Europe, Middle East, Africa and Asia Pacific (EMEAA) segment and combined with our institutions in Chile and Peru to form the Andean & Iberian segment. In addition, our institutions in Central America, which were previously part of the LatAm segment, have combined with our campus-based institutions in the United States, which were previously part of the GPS segment, to form the Central America & U.S. Campuses segment. The Online & Partnerships segment consists of the online institutions that were previously part of the GPS segment. As required, the 2017 segment information that is presented for comparative purposes has also been revised to reflect this change.

Our campus-based segments generate revenues by providing an education that emphasizes professional-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. Our educational offerings are increasingly utilizing online and hybrid (a combination of online and in-classroom) courses and programs to deliver their curriculum. Many of our largest campus-based operations are in developing markets which are experiencing a growing demand for higher education based on favorable demographics and increasing secondary completion rates, driving increases in participation rates and resulting in continued growth in the number of higher education students. Traditional higher education students (defined as 18-24 year olds) have historically been served by public universities, which have limited capacity and are often underfunded, resulting in an inability to meet the growing student demand and employer requirements. This supply and demand imbalance has created a market opportunity for private sector participants. Most students finance their own education. However, there are some government-sponsored student financing programs which are discussed below. These campus-based segments include Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses and EMEAA. Specifics related to each of these campus-based segments and our Online & Partnerships segment are discussed below:

•


•	The Central America & U.S. Campuses segment includes institutions in Costa Rica, Honduras, Panama and the United States. Students in Central America typically finance their own education while students in the United States finance their education in a variety of ways, including Title IV programs.

•

Corporate is a non-operating business unit whose purpose is to support operations. Its departments are responsible for establishing operational policies and internal control standards; implementing strategic initiatives; and monitoring compliance with policies and controls throughout our operations. Our Corporate segment is an internal source of capital and provides financial, human resource, information technology, insurance, legal and tax compliance services. The Corporate segment also contains the eliminations of intersegment revenues and expenses.

The following information for our operating segments is presented as of June 30, 2018 :



	Countries ⁽²⁾	Institutions	Enrollment	2018 YTD Revenues ($ in millions) ⁽¹⁾		% Contribution to 2018 YTD Revenues
Brazil	1	13	293,700	$	348.4	16	%
Mexico	1	2	187,600	315.5		15	%
Andean & Iberian	4	15	342,100	702.7		33	%
Central America & U.S. Campuses ^{(2) (3) (4)}	4	8	75,500	157.4		7	%
EMEAA ⁽⁵⁾	9	19	83,200	285.5		13	%
Online & Partnerships ^{(2) (6)}	2	3	58,900	333.0		16	%
Total ^{(1) (2)}	20	60	1,041,000	$	2,133.2	100	%

⁽¹⁾ The elimination of intersegment revenues and amounts related to Corporate, which total $9.3 million , is not separately presented.

⁽²⁾ Our Central America & U.S. Campuses and Online & Partnerships segments both have institutions located in the United States. The total reflects the elimination of this duplication.

⁽³⁾ In 2018, we entered into an agreement to sell the University of St. Augustine in our Central America & U.S. Campuses segment, which had approximately 3,500 students as of June 30, 2018 .

⁽⁴⁾ Effective August 6, 2018 , Kendall, in our Central America & U.S. Campuses, which had approximately 900 students as of June 30, 2018 , is no longer part of the Laureate International Universities network following its sale.

⁽⁵⁾ During 2017, we entered into an agreement to sell the entity that operates INTI University and Colleges (INTI) in Malaysia. INTI is included in our EMEAA segment and had a total student population of approximately 17,200 students as of June 30, 2018 . See also Note 21 , Subsequent Events , of the consolidated financial statements included elsewhere in this Form 10-Q.

⁽⁶⁾ In December 2017, we stopped accepting new enrollments at the University of Roehampton, an institution in our Online & Partnerships segment.

Challenges

Our global operations are subject to complex business, economic, legal, regulatory, political, tax and foreign currency risks, which may be difficult to adequately address. The majority of our operations are outside the United States. As a result, we face risks that are inherent in international operations, including: fluctuations in exchange rates, possible currency devaluations, inflation and hyper-inflation; price controls and foreign currency exchange restrictions; potential economic and political instability in the countries in which we operate; expropriation of assets by local governments; key political elections and changes in government policies; multiple and possibly overlapping and conflicting tax laws; and compliance with a wide variety of foreign laws. We plan to grow our business organically by: 1) adding new programs and course offerings; 2) expanding target student demographics; and 3) increasing capacity at existing and new campus locations. Our success in growing our business will depend on the ability to anticipate and effectively manage these and other risks related to operating in various countries.

Regulatory Environment and Other Matters

Our business is subject to regulation by various agencies based on the requirements of local jurisdictions. These agencies continue to review and update regulations as they deem necessary. We cannot predict the form of the rules that ultimately may be adopted in the future or what effects they might have on our business, financial condition, results of operations and cash flows. We will continue to develop and implement necessary changes that enable us to comply with such regulations. See ‘‘Risk Factors—Risks Relating to Our Business—Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations, Risk Factors—Risks Relating to Our Business—Political and regulatory developments in Turkey may materially adversely affect us, Risk Factors—Risks Relating to Our Business—Political and regulatory developments in Chile have materially adversely affected us and may continue to affect us, Risk Factors—Risks Relating to Our Business—Our ability to control our institutions may be materially adversely affected by changes in laws affecting higher education in certain countries in which we operate, Risk Factors-Risks Relating to Our Highly Regulated Industry in the United States,’’ and ‘‘Item 1—Business—Industry Regulation,’’ in our 2017 Form 10-K.

Chilean Regulatory Updates

The Company is reviewing the impact the New Law will have on its Chilean operations, including the extent to which it will affect existing contractual relationships that the Company maintains with the Chilean non-profit universities. As the New Law no longer contains provisions that prohibit Laureate from controlling the boards of the Chilean non-profit universities, but still requires the promulgation of new regulations and procedures that will be applicable to any commercial relationship that the Company has with the Chilean non-profit universities, the Company has determined that it will continue to consolidate the three Chilean non-profit universities, which are accounted for as variable interest entities, and its Chilean real estate subsidiary.

Turkey Regulatory Updates

Key Business Metrics

Enrollment

Enrollment is our lead revenue indicator and represents our most important non-financial metric. We define ‘‘enrollment’’ as the number of students registered in a course on the last day of the enrollment reporting period. New enrollments provide an indication of future revenue trends. Total enrollment is a function of continuing student enrollments, new student enrollments and enrollments from acquisitions, offset by graduations, attrition and enrollment decreases due to dispositions. Attrition is defined as a student leaving the institution before completion of the program. To minimize attrition, we have implemented programs that involve assisting students in remedial education, mentoring, counseling and student financing.

Each of our institutions has an enrollment cycle that varies by geographic region and academic program. During each academic year, each institution has a "Primary Intake" period in which the majority of the enrollment occurs. Most institutions also have one or more smaller "Secondary Intake" periods. The first calendar quarter generally coincides with the Primary Intakes for our institutions in Brazil, the Andean Region, Central America, Australia, New Zealand, South Africa and Saudi Arabia. The third calendar quarter generally coincides with the Primary Intakes for our institutions in Mexico, the Iberian Region, U.S. Campuses, Europe, India, Malaysia, Thailand and the Online & Partnerships segment.

The following chart shows our enrollment cycles. Shaded areas in the chart represent periods when classes are generally in session and revenues are recognized. Areas that are not shaded represent summer breaks during which revenues are not typically recognized. The large circles indicate the Primary Intake start dates of our institutions, and the small circles represent Secondary Intake start dates.

Pricing

We continually monitor market conditions and carefully adjust our tuition rates to meet local demand levels. We proactively seek the best price and content combinations to ensure that we remain competitive in all the markets in which we operate.

Principal Components of Income Statement

Revenues

The majority of our revenue is derived from tuition and educational services agreements with students, and thus, is recognized over time on a weekly straight-line basis over each academic session. The amount of tuition generated in a given period depends on the price per credit hour and the total credit hours or price per program taken by the enrolled student population. Deferred revenue and student deposits on our consolidated balance sheets consist of tuition paid prior to the start of academic sessions and unearned tuition amounts recorded as accounts receivable after an academic session begins. The price per credit hour varies by program, by market and by degree level. Additionally, varying levels of discounts and scholarships are offered depending on market-specific dynamics and individual achievements of our students. Revenues are recognized net of scholarships, other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. In addition to tuition revenues, we generate other revenues from student fees, dormitory/residency fees, and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. The main drivers of changes in revenues between periods are student enrollment and price.

Direct Costs

Our direct costs include labor and operating costs associated with the delivery of services to our students, including the cost of wages, payroll taxes, and benefits for institution employees, depreciation and amortization, rent, utilities, bad debt expenses and marketing and promotional costs to grow future enrollments. In general, a significant portion of our direct costs tend to be variable in nature and trend with enrollment, and management continues to monitor and improve the efficiency of instructional delivery. Conversely, as campuses expand, direct costs may grow faster than enrollment growth as infrastructure investments are made in anticipation of future enrollment growth.

General and Administrative Expenses

Our general and administrative expenses primarily consist of costs associated with corporate departments, including executive management, finance, legal, business development and other departments that do not provide direct operational services.

Factors Affecting Comparability

Acquisitions

Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets, primarily through acquisitions. Acquisitions affect the comparability of our financial statements from period to period. Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity. Therefore, changes related to such entities are considered "incremental impact of acquisitions" for the first 12 months of our ownership. We have made no acquisitions in 2018 to date and made only one small acquisition in 2017 that had essentially no impact on the comparability of the periods presented.

Dispositions

Certain strategic initiatives may include the sale of institutions such as those described in Note 5 , Dispositions , of our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Such dispositions affect the comparability of our financial statements from period to period. Dispositions completed during one period impact comparability to a prior period in which we owned the divested entity. Therefore, changes related to such entities are considered "incremental impact of dispositions" for the first 12 months subsequent to the disposition.

Foreign Exchange

The majority of our institutions are located outside the United States. These institutions enter into transactions in currencies other than USD and keep their local financial records in a functional currency other than the USD. We monitor the impact of foreign currency movements and the correlation between the local currency and the USD. Our revenues and expenses are generally denominated in local currency. The USD is our reporting currency and our subsidiaries operate in various other functional currencies, including: Australian Dollar, Brazilian Real, Chilean Peso, Costa Rican Colon, Euro, Honduran Lempira, Hong Kong Dollar, Indian Rupee, Malaysian Ringgit, Mexican Peso, New Zealand Dollar, Peruvian Nuevo Sol, Polish Złoty, Saudi Riyal, South African Rand, Thai Baht and Turkish Lira. The principal foreign exchange exposure is the risk related to the translation of revenues and expenses incurred in each country from the local currency into USD. In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year.

Seasonality

Most of the institutions in our network have a summer break during which classes are generally not in session and minimal revenues are recognized. In addition to the timing of summer breaks, holidays such as Easter also have an impact on our academic calendar. Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the institutions continue to incur expenses during summer breaks. Given the geographic diversity of our institutions and differences in timing of summer breaks, our second and fourth quarters are stronger revenue quarters as the majority of our institutions are in session for most of these respective quarters. Our first and third fiscal quarters are weaker revenue quarters because the majority of our institutions have summer breaks for some portion of one of these two quarters. Due to this seasonality, revenues and profits in any one quarter are not necessarily indicative of results in subsequent quarters and may not be correlated to new enrollment in any one quarter.

Income Tax Expense

Our consolidated income tax provision is derived based on the combined impact of federal, state and foreign income taxes. Laureate has operations in multiple countries, several of which have statutory tax rates lower than the United States. Also, discrete items can arise in the course of our operations that can further impact the Company's effective tax rate for the period. Our tax rate fluctuates from period to period due to changes in the mix of earnings between our tax-paying entities, our tax-exempt entities and our loss-making entities for which it is not more likely than not that a tax benefit will be realized on the loss.

Further Portfolio Simplification

The Company plans to divest additional business units located in Europe, Asia and Central America. The divestitures are expected to generate over $1 billion in proceeds and create a more focused and simplified business model. In aggregate, the Company anticipates that these transactions will result in a reduction in annual revenues of approximately $700 million.

After exiting the targeted geographies, the Company’s remaining markets will be Brazil, Chile, Mexico, and Peru, along with its online and hybrid educational institutions in the U.S. and Australia. The timing and ability to complete any of these transactions is uncertain, and will be subject to market and other conditions, which may include regulatory approvals and consents of third parties.

Results of Operations

The following discussion of the results of our operations is organized as follows:


•	Summary Comparison of Consolidated Results;


•	Non-GAAP Financial Measure; and


•	Segment Results.

Summary Comparison of Consolidated Results

Discussion of Significant Items Affecting the Consolidated Results for the Six Months Ended June 30, 2018 and 2017

Six Months Ended June 30, 2018

On January 11, 2018 , we sold the operations of European University-Cyprus Ltd (EUC) and Laureate Italy S.r.L. (Laureate Italy), which resulted in a gain on sale of approximately $218.0 million . This gain is included in other non-operating income in the year-to-date table below.

On January 25, 2018 , we sold the operations of LEI Lie Ying Limited (LEILY), which resulted in a gain on sale of approximately $80.0 million . This gain is included in other non-operating income in the year-to-date table below.

On February 1, 2018 , we amended our Senior Secured Credit Facility to reduce the interest rate on our 2024 Term Loan. In connection with this transaction, we also repaid $350.0 million of the principal balance of the 2024 Term Loan. As a result of this transaction, the Company recorded a $7.5 million loss on debt extinguishment related to the pro-rata write-off of the term loan's remaining deferred financing costs. This loss is included in other non-operating income in the year-to-date table below.

On April 12, 2018, we sold the operations of Laureate Germany, which resulted in a loss on sale of approximately $5.5 million . This loss is included in the non-operating income in the tables below.

On April 13, 2018 , we sold the operations of Laureate Somed. Laureate Somed is the operator of Université Internationale de Casablanca, a comprehensive campus-based university in Casablanca, Morocco and recognized a gain on the sale of Laureate Somed of approximately $17.4 million . This gain is included in the non-operating income in the tables below.

Six Months Ended June 30, 2017

During the second quarter of 2017, the Company completed refinancing transactions that resulted in repayment of the previous senior credit facility and the redemption of the 9.250% Senior Notes due 2019 (the Senior Notes due 2019) (other than $250.0 million in aggregate principal amount of the Senior Notes due 2019 that the Company exchanged on April 21, 2017 for substantially identical but non-redeemable notes issued under a new indenture (the Exchanged Notes)). As a result of the refinancing transactions, during the six months ended June 30, 2017, we recorded approximately $22.8 million in General and administrative expenses related to new third-party costs, as well as a Loss on debt extinguishment of $6.9 million.

Comparison of Consolidated Results for the Three Months Ended June 30, 2018 and 2017



							% Change
							Better/(Worse)
(in millions)	2018			2017			2018 vs. 2017
Revenues	$	1,247.9		$	1,277.4		(2	)%
Direct costs	908.9			942.2			4	%
General and administrative expenses	73.2			91.3			20	%
Operating income	265.8			243.9			9	%
Interest expense, net of interest income	(60.6		)	(94.5		)	36	%
Other non-operating income	107.6			9.8			nm
Income from continuing operations before income taxes and equity in net income of affiliates	312.8			159.1			97	%
Income tax expense	(88.9		)	(42.0		)	(112	)%
Equity in net income of affiliates, net of tax	—			—			nm
Net income	224.0			117.1			91	%
Net loss (income) attributable to noncontrolling interests	0.5			(0.7		)	(171	)%
Net income attributable to Laureate Education, Inc.	$	224.4		$	116.4		93	%

nm - percentage changes not meaningful

For further details on certain discrete items discussed below, see "Discussion of Significant Items Affecting the Consolidated Results."

Comparison of Consolidated Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017

Revenues decreased by $29.5 million to $1,247.9 million for the three months ended June 30, 2018 (the 2018 fiscal quarter) from $1,277.4 million for the three months ended June 30, 2017 (the 2017 fiscal quarter). For the 2018 fiscal quarter, the incremental impact of dispositions decreased revenues by $50.5 million . The effect of a net change in foreign currency exchange rates decreased revenues by $10.3 million compared to the 2017 fiscal quarter. These decreases in revenues were partially offset by the effects of higher average total organic enrollment at a majority of our institutions, which increased revenues by $20.5 million compared to the 2017 fiscal quarter; and the effect of changes in tuition rates and enrollments in programs at varying price points ("product mix"), pricing and timing, which increased revenues by $8.0 million . Other Corporate and Eliminations changes accounted for an increase in revenues of $2.8 million .

Direct costs and general and administrative expenses combined decreased by $51.4 million to $982.1 million for the 2018 fiscal quarter from $1,033.5 million for the 2017 fiscal quarter. The incremental impact of dispositions decreased costs by $34.9 million for the 2018 fiscal quarter compared to the 2017 fiscal quarter. The effect of a net change in foreign currency exchange rates decreased costs by $5.6 million for the 2018 fiscal quarter compared to the 2017 fiscal quarter. Changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets, resulted in a year-over-year decrease in direct costs of $1.2 million . Other Corporate and Eliminations expenses accounted for a decrease in costs of $28.4 million , primarily a result of an expense in the 2017 fiscal quarter of $22.8 million related to the portion of the refinancing transactions that was deemed to be a debt modification. Offsetting these direct costs decreases was the overall higher organic enrollments and operations, which increased costs by $18.7 million for the 2018 fiscal quarter compared to the 2017 fiscal quarter.

Operating income increased by $21.9 million to $265.8 million for the 2018 fiscal quarter from $243.9 million for the 2017 fiscal quarter. The increase in operating income was primarily the result of increased operating income in our Andean & Iberian segment

combined with decreased operating expenses at Corporate, partially offset by decreased operating income in our Brazil, Mexico and EMEAA segments.

Interest expense, net of interest income decreased by $33.9 million to $60.6 million for the 2018 fiscal quarter from $94.5 million for the 2017 fiscal quarter. The decrease in interest expense was primarily attributable to lower average debt balances and lower interest rates during the 2018 fiscal quarter resulting from reductions in debt principal balances and interest rates due to the 2017 debt refinancing transactions and the 2018 repricing transaction.

Other non-operating income increased by $97.8 million to $107.6 million for the 2018 fiscal quarter from $9.8 million for the 2017 fiscal quarter. This increase was primarily attributable to an increase of approximately $12.0 million in the net gain on sales of subsidiaries, related to the sales of our Germany and Morocco subsidiaries in the 2018 fiscal quarter; an increase in the gain on derivative instruments of $84.6 million primarily related to the Series A Preferred Stock embedded derivatives; a loss on debt extinguishment in the 2017 fiscal quarter for a change of $6.9 million ; and a change in other non-operating income of $2.5 million in the 2018 fiscal quarter compared to the 2017 fiscal quarter. These increases were partially offset by an increase in a loss on foreign currency exchange in the 2018 fiscal quarter compared to the 2017 fiscal quarter of $8.2 million .

Income tax expense increased by $46.9 million to $88.9 million for the 2018 fiscal quarter from $42.0 million for the 2017 fiscal quarter. This increase in income tax expense was primarily due to changes in the mix of pre-tax book income attributable to taxable and non-taxable entities in various taxing jurisdictions.

Comparison of Consolidated Results for the Six Months Ended June 30, 2018 and 2017



							% Change
							Better/(Worse)
(in millions)	2018			2017			2018 vs. 2017
Revenues	$	2,133.2		$	2,133.4		—	%
Direct costs	1,774.4			1,795.5			1	%
General and administrative expenses	120.5			156.9			23	%
Operating income	238.3			181.0			32	%
Interest expense, net of interest income	(123.9		)	(192.4		)	36	%
Other non-operating income	372.5			23.1			nm
Income from continuing operations before income taxes	486.9			11.7			nm
Income tax expense	(91.4		)	(14.9		)	nm
Equity in net income of affiliates, net of tax	—			—			nm
Net income (loss)	395.5			(3.3		)	nm
Net income attributable to noncontrolling interests	(2.2		)	(3.2		)	(31	)%
Net income (loss) attributable to Laureate Education, Inc.	$	393.3		$	(6.4	)	nm

nm - percentage changes not meaningful

For further details on certain discrete items discussed below, see "Discussion of Significant Items Affecting the Consolidated Results."

Comparison of Consolidated Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017

Revenues decreased by $0.2 million to $2,133.2 million for the six months ended June 30, 2018 (the 2018 fiscal period) from $2,133.4 million for the six months ended June 30, 2017 (the 2017 fiscal period). For the 2018 fiscal period, the incremental impact of dispositions decreased revenues by $79.7 million compared to the 2017 fiscal period. Offsetting this decrease in revenues was the effect of higher average total organic enrollment at a majority of our institutions, which increased revenues by $32.7 million ; the effect of product mix, pricing and timing, which increased revenues by $21.4 million ; and a net change in foreign currency exchange rates, which increased revenues by $20.2 million compared to the 2017 fiscal period. The revenues increase from product mix, pricing and timing includes a positive impact to revenues at our three Peruvian institutions of approximately $11.9 million related to revenue that was deferred from the first and second quarters of 2017 to the third quarter of 2017 as a result of class disruptions in early 2017 during a period of heavy rains and floods. Other Corporate and Eliminations changes accounted for an increase in revenues of $5.2 million .

Direct costs and general and administrative expenses combined decreased by $57.5 million to $1,894.9 million for the 2018 fiscal period from $1,952.4 million for the 2017 fiscal period. The incremental impact of dispositions decreased direct costs by $55.7 million compared to the 2017 fiscal period. For the 2018 fiscal period, reduced EiP implementation expense and share-based compensation expense decreased direct costs by $37.7 million compared to the 2017 fiscal period. Changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets, resulted in a year-over-year decrease in direct costs of $3.3 million . Other Corporate and Eliminations expenses accounted for a decrease in costs of $22.8 million in the 2018 fiscal period, primarily a result of an expense in the 2017 fiscal period of $22.8 million related to the portion of the refinancing transactions that was deemed to be a debt modification. Offsetting these direct costs decreases was the overall higher organic enrollments and expanded operations, which increased costs by $36.0 million for the 2018 fiscal period compared to the 2017 fiscal period. The effect of a net change in foreign currency exchange rates increased costs by $26.0 million for the 2018 fiscal period compared to the 2017 fiscal period.

Operating income increased by $57.3 million to $238.3 million for the 2018 fiscal period from $181.0 million for the 2017 fiscal period. The increase in operating income was primarily the result of increased operating income in our Andean & Iberian segments combined with decreased EiP, share-based compensation and debt modification expense at Corporate, partially offset by decreased operating income at our Mexico and Online & Partnership segments.

Interest expense, net of interest income decreased by $68.5 million to $123.9 million for the 2018 fiscal period from $192.4 million for the 2017 fiscal period. The decrease in interest expense was primarily attributable to lower average debt balances and lower interest rates during the 2018 fiscal period resulting from reductions in debt principal balances and interest rates due to the 2017 debt refinancing transactions and the 2018 repricing transaction.

Other non-operating income increased by $349.4 million to $372.5 million for the 2018 fiscal period from $23.1 million for the 2017 fiscal period. This increase was primarily attributable to a net gain of $310.0 million on the sales of our Cyprus, Italy, China, Germany and Morocco subsidiaries in the 2018 fiscal period; an increase in the gain on derivative instruments of $53.1 million in the 2018 fiscal period, primarily related to the Series A Preferred Stock embedded derivatives; a change in other non-operating income of $4.6 million in the 2018 fiscal period compared to the 2017 fiscal period; and a decrease in loss on debt extinguishment of $0.9 million compared to the 2017 fiscal period. These increases were partially offset by an increase in loss on foreign currency exchange of $19.2 million in the 2018 fiscal period compared to the 2017 fiscal period.

Income tax expense increased by $76.5 million to $91.4 million for the 2018 fiscal period from $14.9 million for the 2017 fiscal period. This increase in income tax expense was primarily due to a benefit recorded in the 2017 fiscal period of approximately $30 million related to intercompany loans that were converted from temporary to permanent and the impact of the mix of earnings between income and loss companies, partially offset by a discrete benefit of approximately $21 million recorded in the 2018 fiscal period related to the reversal of deferred tax liabilities associated with disposed entities.

Non-GAAP Financial Measure

We define Adjusted EBITDA as net income (loss), before equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), loss (gain) on sale of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to implementation of our EiP initiative. When we review Adjusted EBITDA on a segment basis, we exclude inter-segment revenues and expenses that eliminate in consolidation. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, Adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors and our Chief Executive Officer in connection with the payment of incentive compensation to our executive officers and other members of our management team. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

The following table presents Adjusted EBITDA and reconciles net income to Adjusted EBITDA for the three months ended June 30, 2018 and 2017 :



							% Change
							Better/(Worse)
(in millions)	2018			2017			2018 vs. 2017
Net income	$	224.0		$	117.1		91	%
Plus:
Income tax expense	88.9			42.0			(112	)%
Income from continuing operations before income taxes	312.8			159.1			97	%
Plus:
(Gain) loss on sale of subsidiaries, net	(11.8		)	0.2			nm
Foreign currency exchange loss, net	17.9			9.7			(85	)%
Other (income) expense, net	(2.1		)	0.4			nm
Gain on derivatives	(111.6		)	(27.0		)	nm
Loss on debt extinguishment	—			6.9			100	%
Interest expense	66.0			99.0			33	%
Interest income	(5.4		)	(4.5		)	20	%
Operating income	265.8			243.9			9	%
Plus:
Depreciation and amortization	62.4			67.0			7	%
EBITDA	328.2			310.9			6	%
Plus:
Share-based compensation expense ^(a)	7.7			12.9			40	%
Loss on impairment of assets	—			—			nm
EiP implementation expenses ^(b)	25.3			18.1			(40	)%
Adjusted EBITDA	$	361.2		$	341.8		6	%

nm - percentage changes not meaningful

^(a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718.

^(b) EiP implementation expenses are related to our enterprise-wide initiative to optimize and standardize our processes, creating vertical integration of procurement, information technology, finance, accounting and human resources. The first wave of EiP began in 2014 and was substantially completed in 2017, and includes the establishment of regional SSOs around the world, as well as improvements to our system of internal controls over financial reporting. Given the success of the first wave of EiP, we have expanded the initiative into other back- and mid-office areas, as well as certain student-facing activities, in order to generate additional efficiencies and create a more efficient organizational structure. Also included in EiP are certain non-recurring costs incurred in connection with the planned dispositions described in Note 4 , Assets Held for Sale , and the completed dispositions described in Note 5 , Dispositions , of our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Three Months Ended June 30, 2018 and 2017

Depreciation and amortization decreased by $4.6 million to $62.4 million for the 2018 fiscal quarter from $67.0 million for the 2017 fiscal quarter. The incremental impact of dispositions decreased depreciation and amortization expense by $3.4 million for the 2018 fiscal quarter compared to the 2017 fiscal quarter. The effects of foreign currency exchange decreased depreciation and amortization expense by $0.7 million for the 2018 fiscal quarter compared to the 2017 fiscal quarter. Other items accounted for a decrease in depreciation and amortization expense of $0.5 million .

Share-based compensation expense decreased by $5.2 million to $7.7 million for the 2018 fiscal quarter from $12.9 million for the 2017 fiscal quarter.

EiP implementation expenses increased by $7.2 million to $25.3 million for the 2018 fiscal quarter from $18.1 million for the 2017 fiscal quarter. The EiP expenses are related to an enterprise-wide initiative to optimize and standardize our processes, creating vertical integration of procurement, information technology, financing, accounting and human resources. EiP also includes the establishment of regional SSOs around the world, as well as improvements to our system of internal controls over financial reporting. The year-over-year increase in EiP expense relates primarily to compliance monitoring of information technology general controls and costs incurred in connection with the dispositions.

The following table presents Adjusted EBITDA and reconciles net income (loss) to Adjusted EBITDA for the six months ended June 30, 2018 and 2017 :



							% Change
							Better/(Worse)
(in millions)	2018			2017			2018 vs. 2017
Net income (loss)	$	395.5		$	(3.3	)	nm
Plus:
Income tax expense	91.4			14.9			nm
Income from continuing operations before income taxes	486.9			11.7			nm
Plus:
(Gain) loss on sale of subsidiaries, net	(309.8		)	0.2			nm
Foreign currency exchange loss, net	26.6			7.4			nm
Other income, net	(4.5		)	(0.1		)	nm
Gain on derivatives	(92.3		)	(39.1		)	136	%
Loss on debt extinguishment	7.5			8.4			11	%
Interest expense	135.4			201.6			33	%
Interest income	(11.6		)	(9.2		)	26	%
Operating income	238.3			181.0			32	%
Plus:
Depreciation and amortization	130.2			131.5			1	%
EBITDA	368.5			312.5			18	%
Plus:
Share-based compensation expense ^(a)	3.9			35.3			89	%
Loss on impairment of assets	—			—			nm
EiP implementation expenses ^(b)	36.3			42.6			15	%
Adjusted EBITDA	$	408.7		$	390.4		5	%

nm - percentage changes not meaningful

^(a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Six Months Ended June 30, 2018 and 2017

Depreciation and amortization decreased by $1.3 million to $130.2 million for the 2018 fiscal period from $131.5 million for the 2017 fiscal period. The incremental impact of dispositions decreased depreciation and amortization expense by $5.5 million for the 2018 fiscal period compared to the 2017 fiscal period. This decrease was partially offset by the effects of foreign currency

exchange, which increased depreciation and amortization expense by $1.4 million and other items, which accounted for an increase in depreciation and amortization expense of $2.8 million for the 2018 fiscal period compared to the 2017 fiscal period.

Share-based compensation expense decreased by $31.4 million to $3.9 million for the 2018 fiscal period from $35.3 million for the 2017 fiscal period. This decrease is mostly attributable to stock options that were granted to the Company’s then-CEO in the 2017 fiscal period under the Executive Profits Interests (EPI) agreement. The EPI options vested upon consummation of the IPO on February 6, 2017 , resulting in additional share-based compensation expense of $14.6 million during the 2017 fiscal period. In addition, the Company recorded a stock modification charge of approximately $5.1 million during 2017 fiscal period related to a repricing of stock option awards. Also, the Company recorded a correction of an immaterial error in the first quarter of 2018, which reduced share-based compensation expense for the 2018 fiscal period.

EiP implementation expenses decreased by $6.3 million to $36.3 million for the 2018 fiscal period from $42.6 million for the 2017 fiscal period. The EiP expenses are related to an enterprise-wide initiative to optimize and standardize our processes, creating vertical integration of procurement, information technology, financing, accounting and human resources. EiP also includes the establishment of regional SSOs around the world, as well as improvements to our system of internal controls over financial reporting. The year-over-year decrease in EiP expense relates primarily to severance costs that were recognized in the 2017 fiscal period, partially offset by increased EiP expenses during the 2018 fiscal period for compliance monitoring of information technology general controls and costs incurred in connection with the dispositions.

Segment Results

We have six operating segments: Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses, EMEAA, and Online & Partnerships. For purposes of the following comparison of results discussion, " segment direct costs " represent direct costs by segment as they are included in Adjusted EBITDA, such that depreciation and amortization expense, loss on impairment of assets, share-based compensation expense and our EiP implementation expenses have been excluded. For a further description of our segments, see "Overview."

The following tables, derived from our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, presents selected financial information of our segments:



(in millions)							% Change
							Better/(Worse)
For the three months ended June 30,	2018			2017			2018 vs. 2017
Revenues:
Brazil	$	225.6		$	260.6		(13	)%
Mexico	159.6			160.0			—	%
Andean & Iberian	486.5			434.4			12	%
Central America & U.S. Campuses	78.4			73.1			7	%
EMEAA	138.4			182.2			(24	)%
Online & Partnerships	165.0			175.5			(6	)%
Corporate	(5.6		)	(8.4		)	33	%
Consolidated Total Revenues	$	1,247.9		$	1,277.4		(2	)%

Adjusted EBITDA:
Brazil	$	77.9		$	91.3		(15	)%
Mexico	27.8			34.3			(19	)%
Andean & Iberian	208.9			183.8			14	%
Central America & U.S. Campuses	14.6			11.7			25	%
EMEAA	21.3			38.0			(44	)%
Online & Partnerships	45.4			48.8			(7	)%
Corporate	(34.7		)	(65.9		)	47	%
Consolidated Total Adjusted EBITDA	$	361.2		$	341.8		6	%



(in millions)							% Change
							Better/(Worse)
For the six months ended June 30,	2018			2017			2018 vs. 2017
Revenues:
Brazil	$	348.4		$	377.5		(8	)%
Mexico	315.5			310.8			2	%
Andean & Iberian	702.7			615.5			14	%
Central America & U.S. Campuses	157.4			149.5			5	%
EMEAA	285.5			342.0			(17	)%
Online & Partnerships	333.0			352.6			(6	)%
Corporate	(9.3		)	(14.5		)	36	%
Consolidated Total Revenues	$	2,133.2		$	2,133.4		—	%

Adjusted EBITDA:
Brazil	$	51.9		$	52.2		(1	)%
Mexico	58.3			72.1			(19	)%
Andean & Iberian	202.0			165.3			22	%
Central America & U.S. Campuses	32.2			28.7			12	%
EMEAA	44.5			67.8			(34	)%
Online & Partnerships	90.4			102.9			(12	)%
Corporate	(70.6		)	(98.6		)	28	%
Consolidated Total Adjusted EBITDA	$	408.7		$	390.4		5	%

Brazil

Financial Overview

Comparison of Brazil Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	260.6		$	169.3		$	91.3
Organic enrollment ⁽¹⁾	11.8
Product mix, pricing and timing ⁽¹⁾	(21.1		)
Organic constant currency	(9.3		)	(3.3		)	(6.0		)
Foreign exchange	(25.7		)	(16.8		)	(8.9		)
Acquisitions	—			—			—
Dispositions	—			—			—
Other ⁽²⁾	—			(1.5		)	1.5
June 30, 2018	$	225.6		$	147.7		$	77.9

⁽¹⁾ Organic enrollment and Product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA.

⁽²⁾ Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues decreased by $35.0 million , a 13% decrease from the 2017 fiscal quarter.


•	Decreases in revenues during the 2018 fiscal quarter due to foreign exchange, product mix, pricing and timing were partially offset by an increase in organic enrollment of 4% , which increased revenues by $11.8 million .


•	Revenues represented 18% of our consolidated total revenues for the 2018 fiscal quarter compared to 20% for the 2017 fiscal quarter.

Adjusted EBITDA decreased by $13.4 million , a 15% decrease from the 2017 fiscal quarter.

Comparison of Brazil Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	377.5		$	325.3		$	52.2
Organic enrollment ⁽¹⁾	14.1
Product mix, pricing and timing ⁽¹⁾	(12.0		)
Organic constant currency	2.1			(3.9		)	6.0
Foreign exchange	(31.2		)	(21.2		)	(10.0		)
Acquisitions	—			—			—
Dispositions	—			—			—
Other ⁽²⁾	—			(3.7		)	3.7
June 30, 2018	$	348.4		$	296.5		$	51.9

⁽²⁾ Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues decreased by $29.1 million , an 8% decrease from the 2017 fiscal period.


•	Decreases in revenues during the 2018 fiscal period due to foreign exchange, product mix, pricing and timing were partially offset by an increase in organic enrollment of 4% , which increased revenues by $14.1 million .


•	Revenues represented 16% of our consolidated total revenues for the 2018 fiscal period compared to 18% for the 2017 fiscal period.

Adjusted EBITDA decreased by $0.3 million , a 1% decrease from the 2017 fiscal period.

Mexico

Financial Overview

Comparison of Mexico Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	160.0		$	125.7		$	34.3
Organic enrollment ⁽¹⁾	(3.9		)
Product mix, pricing and timing ⁽¹⁾	8.5
Organic constant currency	4.6			10.5			(5.9		)
Foreign exchange	(5.0		)	(4.7		)	(0.3		)
Acquisitions	—			—			—
Dispositions	—			—			—
Other ⁽²⁾	—			0.3			(0.3		)
June 30, 2018	$	159.6		$	131.8		$	27.8

⁽²⁾ Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues decreased by $0.4 million from the 2017 fiscal quarter.


•	Organic enrollment decreased during the fiscal quarter by 2% , decreasing revenues by $3.9 million .


•	Revenues represented 13% of our consolidated total revenues for the 2018 fiscal quarter compared to 12% for the 2017 fiscal quarter.

Adjusted EBITDA decreased by $6.5 million , a 19% decrease from the 2017 fiscal quarter.

Comparison of Mexico Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs		Adjusted EBITDA
June 30, 2017	$	310.8		$	238.7	$	72.1
Organic enrollment ⁽¹⁾	(5.7		)
Product mix, pricing and timing ⁽¹⁾	4.4
Organic constant currency	(1.3		)	13.4		(14.7		)
Foreign exchange	6.0			4.7		1.3
Acquisitions	—			—		—
Dispositions	—			—		—
Other ⁽²⁾	—			0.4		(0.4		)
June 30, 2018	$	315.5		$	257.2	$	58.3

⁽²⁾ Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues increased by $4.7 million , a 2% increase from the 2017 fiscal period.


•	Increases in revenues during the 2018 fiscal period were partially offset by a decrease in organic enrollment of 1% , which decreased revenues by $5.7 million .


•	Revenues represented 15% of our consolidated total revenues for the 2018 period compared to 14% for the 2017 fiscal period.

Adjusted EBITDA decreased by $13.8 million , a 19% decrease from the 2017 fiscal period.

Andean & Iberian

Financial Overview

Comparison of Andean & Iberian Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



(in millions)	Revenues		Direct Costs		Adjusted EBITDA
June 30, 2017	$	434.4	$	250.6	$	183.8
Organic enrollment ⁽¹⁾	12.3
Product mix, pricing and timing ⁽¹⁾	18.0
Organic constant currency	30.3		13.2		17.1
Foreign exchange	21.8		13.8		8.0
Acquisitions	—		—		—
Dispositions	—		—		—
Other	—		—		—
June 30, 2018	$	486.5	$	277.6	$	208.9

Revenues increased by $52.1 million , a 12% increase from the 2017 fiscal quarter.


•	Organic enrollment increased during the 2018 fiscal quarter by 3% , increasing revenues by $12.3 million .


•	Revenue represented 39% of our consolidated total revenues for the 2018 fiscal quarter compared to 34% for the 2017 fiscal quarter.

Adjusted EBITDA increased by $25.1 million , a 14% increase from the 2017 fiscal quarter.


•	Foreign exchange affected the results for the 2018 fiscal quarter due to strengthening of the Chilean Peso and the Euro relative to the USD.

Comparison of Andean & Iberian Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017



(in millions)	Revenues		Direct Costs		Adjusted EBITDA
June 30, 2017	$	615.5	$	450.2	$	165.3
Organic enrollment ⁽¹⁾	20.9
Product mix, pricing and timing ⁽¹⁾	25.9
Organic constant currency	46.8		19.8		27.0
Foreign exchange	40.4		30.7		9.7
Acquisitions	—		—		—
Dispositions	—		—		—
Other	—		—		—
June 30, 2018	$	702.7	$	500.7	$	202.0

Revenues increased by $87.2 million , a 14% increase from the 2017 fiscal period.


•	Organic enrollment increased during the 2018 fiscal period by 4% , increasing revenues by $20.9 million .


•	The year-over-year increase includes a positive impact to revenues at our three Peruvian institutions of approximately $11.9 million related to revenue that was deferred from the first and second quarters of 2017 to the third quarter of 2017 as a result of class disruptions in early 2017 during a period of heavy rains and floods.


•	Revenue represented 33% of our consolidated total revenues for the 2018 fiscal period compared to 29% for the 2017 fiscal period.

Adjusted EBITDA increased by $36.7 million , a 22% increase from the 2017 fiscal period.


•	Foreign exchange affected the results for the 2018 fiscal period due to strengthening of the Chilean Peso and the Euro relative to the USD.

Central America & U.S. Campuses

Financial Overview

Comparison of Central America & U.S. Campuses Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	73.1		$	61.4		$	11.7
Organic enrollment ⁽¹⁾	6.5
Product mix, pricing and timing ⁽¹⁾	(0.7		)
Organic constant currency	5.8			2.8			3.0
Foreign exchange	(0.5		)	(0.4		)	(0.1		)
Acquisitions	—			—			—
Dispositions	—			—			—
Other	—			—			—
June 30, 2018	$	78.4		$	63.8		$	14.6

Revenues increased by $5.3 million , a 7% increase from the 2017 fiscal quarter.


•	Organic enrollment increased during the 2018 fiscal quarter by 3% , increasing revenues by $6.5 million .


•	Revenues represented 6% of our consolidated total revenues for both the 2018 and 2017 fiscal quarters.

Adjusted EBITDA increased by $2.9 million , a 25% increase from the 2017 fiscal quarter.

Comparison of Central America & U.S. Campuses Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	149.5		$	120.8		$	28.7
Organic enrollment ⁽¹⁾	12.7
Product mix, pricing and timing ⁽¹⁾	(3.8		)
Organic constant currency	8.9			5.1			3.8
Foreign exchange	(1.0		)	(0.7		)	(0.3		)
Acquisitions	—			—			—
Dispositions	—			—			—
Other	—			—			—
June 30, 2018	$	157.4		$	125.2		$	32.2

Revenues increased by $7.9 million , a 5% increase from the 2017 fiscal period.


•	Organic enrollment increased during the 2018 fiscal period by 2% , increasing revenues by $12.7 million .


•	Revenues represented 7% of our consolidated total revenues for both the 2018 and 2017 fiscal periods.

Adjusted EBITDA increased by $3.5 million , a 12% increase from the 2017 fiscal period.

EMEAA

Financial Overview

Comparison of EMEAA Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	182.2		$	144.2		$	38.0
Organic enrollment ⁽¹⁾	5.8
Product mix, pricing and timing ⁽¹⁾	2.7
Organic constant currency	8.5			2.0			6.5
Foreign exchange	(1.8		)	2.4			(4.2		)
Acquisitions	—			—			—
Dispositions	(50.5		)	(31.5		)	(19.0		)
Other	—			—			—
June 30, 2018	$	138.4		$	117.1		$	21.3

Revenues decreased by $43.8 million , a 24% decrease from the 2017 fiscal quarter.


•	The incremental impact of dispositions of our Cyprus, Italy, China, Germany and Morocco institutions decreased revenues by $50.5 million .


•	Organic enrollment increased during the 2018 fiscal quarter by 1% , increasing revenues by $5.8 million .


•	Revenues represented 11% of our consolidated total revenues for the 2018 fiscal quarter compared to 14% for the 2017 fiscal quarter.

Adjusted EBITDA decreased by $16.7 million , a 44% decrease from the 2017 fiscal quarter.


•	The incremental impact of dispositions includes the sales of our Cyprus, Italy, China, Germany and Morocco institutions and accounted for a $19.0 million decrease in Adjusted EBITDA.


•	Foreign exchange affected the results for the 2018 fiscal quarter primarily due to the strengthening of the Euro and the Malaysian Ringgit, partially offset by the weakening of the Turkish Lira relative to the USD.

Comparison of EMEAA Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	342.0		$	274.2		$	67.8
Organic enrollment ⁽¹⁾	11.0
Product mix, pricing and timing ⁽¹⁾	8.5
Organic constant currency	19.5			8.2			11.3
Foreign exchange	3.7			8.8			(5.1		)
Acquisitions	—			—			—
Dispositions	(79.7		)	(50.2		)	(29.5		)
Other	—			—			—
June 30, 2018	$	285.5		$	241.0		$	44.5

Revenues decreased by $56.5 million , a 17% decrease from the 2017 fiscal period.


•	The incremental impact of dispositions of our Cyprus, Italy, China, Germany and Morocco institutions decreased revenues by $79.7 million .


•	Organic enrollment increased during the 2018 fiscal period by 1% , increasing revenues by $11.0 million .


•	Revenues represented 13% of our consolidated total revenues for the 2018 fiscal period compared to 16% for the 2017 fiscal period.

Adjusted EBITDA decreased by $23.3 million , a 34% decrease from the 2017 fiscal period.


•	The incremental impact of dispositions includes the sales of our Cyprus, Italy, China, Germany and Morocco institutions and accounted for a $29.5 million decrease in Adjusted EBITDA.


•	Foreign exchange affected the results for the 2018 fiscal period primarily due to the strengthening of the Malaysian Ringgit, the Euro, and the Australian Dollar, partially offset by the weakening of the Turkish Lira relative to the USD.

Online & Partnerships

Financial Overview

Comparison of Online & Partnerships Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	175.5		$	126.7		$	48.8
Organic enrollment ⁽¹⁾	(12.0		)
Product mix, pricing and timing ⁽¹⁾	0.6
Organic constant currency	(11.4		)	(7.9		)	(3.5		)
Foreign exchange	0.9			0.8			0.1
Acquisitions	—			—			—
Dispositions	—			—			—
Other	—			—			—
June 30, 2018	$	165.0		$	119.6		$	45.4

Revenues decreased by $10.5 million , a 6% decrease from the 2017 fiscal quarter.


•	Organic enrollment decreased during the 2018 fiscal quarter by 8% , decreasing revenues by $12.0 million .


•	Revenues represented 13% of our consolidated total revenues for the 2018 fiscal quarter compared to 14% for the 2017 fiscal quarter.

Adjusted EBITDA decreased by $3.4 million , a 7% decrease compared to the 2017 fiscal quarter.

Comparison of Online & Partnerships Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017



(in millions)	Revenues			Direct Costs			Adjusted EBITDA
June 30, 2017	$	352.6		$	249.7		$	102.9
Organic enrollment ⁽¹⁾	(20.3		)
Product mix, pricing and timing ⁽¹⁾	(1.6		)
Organic constant currency	(21.9		)	(9.4		)	(12.5		)
Foreign exchange	2.3			2.3			—
Acquisitions	—			—			—
Dispositions	—			—			—
Other	—			—			—
June 30, 2018	$	333.0		$	242.6		$	90.4

Revenues decreased by $19.6 million , a 6% decrease from the 2017 fiscal period.


•	Organic enrollment decreased during the 2018 fiscal period by 7% , decreasing revenues by $20.3 million .


•	Revenues represented 16% of our consolidated total revenues for both the 2018 and the 2017 fiscal periods.

Adjusted EBITDA decreased by $12.5 million , a 12% decrease compared to the 2017 fiscal period.

Corporate

Corporate revenues represent amounts from our consolidated joint venture with the University of Liverpool, as well as centralized IT costs charged to various segments, offset by the elimination of intersegment revenues. The 2017 fiscal period also included revenues from contractual arrangements with UDLA Ecuador, an institution in Ecuador that was formerly consolidated into Laureate prior to 2013.

Operating results for Corporate for the three months ended June 30, 2018 and 2017 :



							% Change
							Better/(Worse)
(in millions)	2018			2017			2018 vs. 2017
Revenues	$	(5.6	)	$	(8.4	)	33	%
Expenses	29.1			57.5			49	%
Adjusted EBITDA	$	(34.7	)	$	(65.9	)	47	%

Comparison of Corporate Results for the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017

Adjusted EBITDA increased by $31.2 million , a 47% increase from the 2017 fiscal quarter.


•	The 2017 fiscal quarter included an expense of $22.8 million related to the portion of the April 2017 refinancing transactions that was deemed to be a debt modification.


•	The 2017 fiscal quarter included an expense of $4.5 million related to a transaction with a former business partner.


•	Labor costs and other professional fees increased expenses by $4.1 million for the 2018 fiscal quarter compared to the 2017 fiscal quarter.


•	The 2017 fiscal quarter included revenue from contractual arrangements with UDLA Ecuador of $1.4 million .


•	Other items accounted for an increase in Adjusted EBITDA of $9.4 million , which primarily includes a positive impact from the resolution of an earnout liability related to the 2014 acquisition of Monash South Africa.

Operating results for Corporate for the six months ended June 30, 2018 and 2017 :



							% Change
							Better/(Worse)
(in millions)	2018			2017			2018 vs. 2017
Revenues	$	(9.3	)	$	(14.5	)	36	%
Expenses	61.3			84.1			27	%
Adjusted EBITDA	$	(70.6	)	$	(98.6	)	28	%

Comparison of Corporate Results for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017

Adjusted EBITDA increased by $28.0 million , a 28% increase from the 2017 fiscal period.


•	The 2017 fiscal period included an $22.8 million related to the portion of the April 2017 refinancing transactions that was deemed to be a debt modification.


•	The 2017 fiscal period included an expense of $4.5 million related to a transaction with a former business partner.


•	Labor costs and other professional fees increased expenses by $5.8 million for the 2018 fiscal period compared to the 2017 fiscal period.


•	The 2017 fiscal quarter included revenue from contractual arrangements with UDLA Ecuador of $3.1 million .


•	Other items accounted for an increase in Adjusted EBITDA of $9.6 million , which primarily includes a positive impact from the resolution of an earnout liability related to the 2014 acquisition of Monash South Africa.

Liquidity and Capital Resources

Liquidity Sources

We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements for at least the next 12 months from the date of issuance of this report.

Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings. The majority of our students finance the cost of their own education and/or seek third-party financing programs. We anticipate generating sufficient cash flow from operations in the majority of countries where we operate to satisfy the working capital and financing needs of our organic growth plans for each country. If our educational institutions within one country were unable to maintain sufficient liquidity, we would consider using internal cash resources or reasonable short-term working capital facilities to accommodate any short- to medium-term shortfalls.

As of June 30, 2018 , our secondary source of liquidity was cash and cash equivalents of $402.4 million . Our cash accounts are maintained with high-quality financial institutions with no significant concentration in any one institution.

Sale Transactions

On January 11, 2018 , we completed the sale of European University-Cyprus Ltd (EUC) and Laureate Italy S.r.L. (Laureate Italy). Upon closing, we received gross proceeds of approximately 232.0 million Euros (EUR) (approximately US $275.5 million , or approximately $244.3 million net of cash sold and net of the $4.1 million working capital settlement between the Company and the buyer that was completed during the second quarter of 2018). The Company used the proceeds from this transaction, along with borrowings on our revolving credit facility that were subsequently repaid with the China sale proceeds discussed below, to repay $350.0 million of principal balance on our syndicated term loan that matures in April 2024 (the 2024 Term Loan).

On January 25, 2018 , we completed the sale of LEI Lie Ying Limited (LEILY). At closing, the Company received initial proceeds totaling approximately $128.8 million (approximately $110.8 million net of cash sold), net of banker transaction fees and certain taxes and duties totaling approximately $16.0 million. Six months after the closing date, the buyer was required to pay to the Company the Hong Kong Dollar (HKD) equivalent of RMB 120.0 million (the First Holdback Payment, approximately US $18.2 million at June 30, 2018 ). On July 27, 2018, the Company received the First Holdback Payment from the buyer, net of withholding taxes and agreed-upon legal fees, for a net payment of HKD 142.2 million ( $18.1 million at the date of receipt), prior to banker transaction fees. Twelve months after the closing date, the buyer is required to pay to the Company the HKD equivalent of RMB 60.0 million (the Second Holdback Payment, approximately US $9.1 million at June 30, 2018 ). Both the First Holdback Payment and the Second Holdback Payment are subject to deduction of any indemnifiable losses payable by the Company to the buyer

pursuant to the sale purchase agreement. The remainder of the transaction value was paid into an escrow account and will be distributed to the Company pursuant to the terms and conditions of the escrow agreement.

On April 12, 2018, we completed the sale of Laureate Germany and received gross proceeds of EUR 1.0 million (approximately US $1.2 million at the date of receipt). At the date of sale, Laureate Germany had approximately $12.9 million of cash and restricted cash on its balance sheet. In connection with this transaction, the Company contributed capital to Laureate Germany of approximately $3.6 million , and expects to pay estimated real estate transfer taxes of approximately $0.4 million .

On April 13, 2018, we completed the sale of Laureate Somed Holding in Morocco and received net proceeds of 300.0 million Moroccan Dirhams (approximately US $32.5 million at the date of sale, or approximately $31.1 million net of cash sold). The proceeds were used for general debt repayment across the Company rather than repayment of a specific tranche.

Liquidity Restrictions

Our liquidity is affected by restricted cash balances, which totaled $182.9 million and $224.9 million as of June 30, 2018 and December 31, 2017 , respectively.

Indefinite Reinvestment of Foreign Earnings

We earn a significant portion of our income from subsidiaries located in countries outside the United States. As part of our business strategies, we have determined that all earnings from our foreign operations will be deemed indefinitely reinvested outside of the United States. As of June 30, 2018 , $396.9 million of our total $402.4 million of cash and cash equivalents were held by foreign subsidiaries, including $187.6 million held by VIEs. These amounts above do not include $23.0 million of cash recorded at subsidiaries that are classified as held for sale at June 30, 2018 , of which $21.4 million was held by foreign subsidiaries. As of December 31, 2017, $447.9 million of our total $468.7 million of cash and cash equivalents were held by foreign subsidiaries, including $231.9 million held by VIEs. These amounts above do not include $49.2 million of cash recorded at subsidiaries that are classified as held for sale at December 31, 2017, of which $45.2 million was held by foreign subsidiaries. The VIEs' cash and cash equivalents balances are generally required to be used only for the operations of these VIEs.

Liquidity Requirements

Our short-term liquidity requirements include: funding for debt service (including capital leases); operating lease obligations; payments due to shareholders of acquired companies; payments of deferred compensation; working capital; operating expenses; payments of third-party obligations; capital expenditures; payments related to certain asset sale transactions; and business development activities.

Long-term liquidity requirements include: payments on long-term debt (including capital leases); operating lease obligations; payments of long-term amounts due to shareholders of acquired companies; payments of deferred compensation; settlements of derivatives; and payments of third-party obligations.

Debt

On February 1, 2018, we completed an amendment of our Senior Secured Credit Facility that effectively reduces the current interest rate margins applicable to the 2024 Term Loan by 100 basis points. In connection with this amendment, we repaid $350.0 million of the principal balance of the 2024 Term Loan using the proceeds from the sale of our Cyprus and Italy operations, along with borrowings on our revolving credit facility that were subsequently repaid with the China sale proceeds. As a result of the $350.0 million repayment, there will be no further quarterly principal payments required and the remaining balance will be due at maturity.

As of June 30, 2018 , senior long-term borrowings totaled $2,075.3 million and consisted of $1,275.3 million under the Senior Secured Credit Facility that matures in April 2022 and April 2024 and $800.0 million in Senior Notes due 2025 that mature in May 2025.

As of June 30, 2018 , other debt balances totaled $767.9 million and our capital lease obligations and sale-leaseback financings were $167.3 million . Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries, mortgages payable and notes payable.

Approximately $68.9 million of long-term debt, including the current portion, is included in the held-for-sale liabilities recorded on the consolidated balance sheet as of June 30, 2018 . For further description of the held-for-sale amounts see Note 4 , Assets Held for Sale in our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Senior Secured Credit Facility

As of June 30, 2018 , the outstanding balance under our Senior Secured Credit Facility was $1,275.3 million , which consisted of $48.0 million outstanding under our $385.0 million senior secured revolving credit facility and an aggregate outstanding balance of $1,227.3 million , net of a debt discount, under the term loans. As of December 31, 2017 , the outstanding balance under our previous senior credit facility was $1,625.3 million , which consisted of $52.0 million outstanding under our $385.0 million senior secured revolving credit facility and an aggregate outstanding balance of $1,573.3 million, net of a debt discount, under the term loans.

Senior Notes

As of both June 30, 2018 and December 31, 2017 , the outstanding balance under our Senior Notes due 2025 was $800.0 million .

Covenants

Under our Second Amended and Restated Credit Agreement we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant, as defined in the Second Amended and Restated Credit Agreement , unless certain conditions are satisfied. As of June 30, 2018 , these conditions were satisfied and, therefore, we were not subject to the leverage ratio covenant. The maximum ratio, as defined, is 3.50x as of the last day of each quarter ending June 30, 2018 and thereafter. In addition, notes payable at some of our locations contain financial maintenance covenants.

Leases

We conduct a significant portion of our operations from leased facilities. These facilities include our corporate headquarters, other office locations, and many of our higher education facilities.

Due to Shareholders of Acquired Companies

One method of payment for acquisitions is the use of promissory notes payable to the sellers of acquired companies. As of June 30, 2018 and December 31, 2017 , we recorded $59.9 million and $79.6 million , respectively, for these liabilities. See also Note 6 , Due to Shareholders of Acquired Companies , in our consolidated financial statements included elsewhere in this Form 10-Q.

Capital Expenditures

Capital expenditures consist of purchases of property and equipment, purchases of land use rights and expenditures for deferred costs. Our capital expenditure program is a component of our liquidity and capital management strategy. This program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment, to grow our network through the following: (1) capacity expansion at institutions to support enrollment growth; (2) new campuses for institutions entering new geographic markets; (3) information technology to increase efficiency and controls; and (4) online content development. Our non-discretionary spending includes the maintenance of existing facilities. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. We believe that our internal sources of cash and our ability to obtain additional third-party financing, subject to market conditions, will be sufficient to fund our investing activities.

Our capital expenditures, excluding receipts from the sale of subsidiaries and property equipment, were $101.5 million and $95.0 million during the six months ended June 30, 2018 , and 2017 , respectively. The 7% increase in capital expenditures for the 2018 fiscal period compared to the 2017 fiscal period was driven by the ongoing construction of a replacement campus in Costa Rica, which started this year, combined with the timing of facilities maintenance in Brazil and Peru. These increases were partially offset by lower capital expenditures in Mexico and online initiatives.

Derivatives

In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We mitigate a portion of these risks through a risk-management program that includes the use of derivatives. For further information

on our derivatives, see Note 14 , Derivative Instruments , in our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Redeemable Noncontrolling Interests and Equity

In connection with certain acquisitions, we have entered into put/call arrangements with certain minority shareholders, and we may be required or elect to purchase additional ownership interests in the associated entities within a specified timeframe. Certain of our call rights contain minimum payment provisions. If we exercise such call rights, the consideration required could be higher than the estimated put values. Upon exercise of these puts or calls, our ownership interests in these subsidiaries would increase.

Laureate Education, Inc. Deferred Compensation Plan

Laureate maintains a deferred compensation plan to provide certain executive employees and members of our Board of Directors with the opportunity to defer their salaries, bonuses, and Board of Directors' retainers and fees in order to accumulate funds for retirement on a pre-tax basis. Participants are 100% vested in their respective deferrals and the earnings thereon. Laureate does not make contributions to the plan or guarantee returns on the investments. Although plan investments and participant deferrals are kept in a separate trust account, the assets remain Laureate’s property and are subject to claims of general creditors.

As of June 30, 2018 and December 31, 2017 , plan assets included in Other assets in our Consolidated Balance Sheets were $11.6 million and $11.6 million , respectively. As of June 30, 2018 and December 31, 2017 , the plan liabilities reported in our Consolidated Balance Sheets were $14.2 million and $18.7 million , respectively. As of June 30, 2018 and December 31, 2017 , $8.3 million and $11.9 million , respectively, of the total plan liability was classified as a current liability; the remainder was noncurrent and recorded in Other long-term liabilities . During the first quarter of 2018, the Company paid $5.2 million of plan distributions with operating cash, rather than using the plan assets. An additional $8.3 million of plan distributions will be required in the twelve-month period following June 30, 2018 . The 2018 plan distributions primarily relate to several participants who retired during the fourth quarter of 2017 and are required to receive distributions of their plan balances in 2018.

Assets Held for Sale-Kendall Asset Purchase Agreement

Under the January 2018 asset purchase agreement for Kendall, we agreed to make future payments to NLU, the buyer. At the closing of the sale, Laureate will pay to NLU up to $14.0 million to support NLU’s construction of facilities for the acquired culinary program on NLU's campus, subject to possible partial recoupment under specified conditions during the 10-year post-closing period. The sale of Kendall closed during the third quarter of 2018 , as described in Note 21 , Subsequent Events of our consolidated financial statements included elsewhere in this Form 10-Q.

Cash Flows

In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes, acquisitions, and reclassifications, as these effects do not represent operating cash flows. Accordingly, the amounts in the consolidated statements of cash flows do not agree with the changes of the operating assets and liabilities as presented in the consolidated balance sheets. The effects of exchange rate changes on cash are presented separately in the consolidated statements of cash flows.

The following table summarizes our cash flows from operating, investing, and financing activities for each of the six months ended June 30, 2018 and 2017 :



(in millions)	2018			2017
Cash provided by (used in):
Operating activities	$	1.8		$	(140.8	)
Investing activities	264.3			(95.5		)
Financing activities	(393.1		)	123.2
Effects of exchange rates changes on cash	(12.7		)	19.3
Change in cash included in current assets held for sale	31.3			—
Net change in cash and cash equivalents and restricted cash	$	(108.4	)	$	(93.8	)

Comparison of Cash Flows for the Six Months Ended June 30, 2018 to the Six Months Ended June 30, 2017

Operating activities

Operating cash flows increased by $142.6 million , from an operating cash usage of $(140.8) million in the 2017 fiscal period to an operating cash inflow of $1.8 million in the 2018 fiscal period. Cash paid for interest decreased by $113.1 million , from $239.1 million for the 2017 fiscal period to $126.0 million for the 2018 fiscal period, which is primarily attributable to lower average debt balances and lower interest rates during the 2018 fiscal period resulting from reductions in debt principal balances and interest rates following the April 2017 debt refinancing transactions, the note conversion in August 2017 and the February 2018 repricing transaction, as well as the timing of interest payments. During the 2017 fiscal period we made payments of $22.8 million for third-party general and administrative expenses paid in connection with the debt refinancing. Changes in operating assets and liabilities and other working capital accounted for an increase in operating cash of $28.2 million . Partially offsetting these operating cash increases was an increase in cash paid for taxes of $21.5 million , from $61.7 million for the 2017 fiscal period to $83.2 million for the 2018 fiscal period. The increase in cash paid for taxes includes the net effect of an approximately $20 million refund received by one of our Spanish subsidiaries during the first quarter of 2018 from an estimated tax payment made in 2016, and the approximately $34.5 million of payments made to the Spanish Tax Authorities during the 2018 fiscal period, as discussed in Note 15 , Income Taxes , of our consolidated financial statements included elsewhere in this Form 10-Q.

Investing activities

Cash flows from investing activities increased by $359.8 million to an investing cash inflow of $264.3 million for the 2018 fiscal period, from an investing cash usage of $(95.5) million for the 2017 fiscal period. This change is primarily attributable to the sales of the Cyprus, Italy, China, Germany and Morocco institutions during 2018, which resulted in a $374.2 million year-over-year increase in receipts from the sale of subsidiaries and property and equipment. This increase in investing cash was partially offset by a year-over-year increase in capital expenditures of $6.4 million and a year-over-year increase in derivative settlements of $10.0 million related to the realized loss on the foreign exchange swap agreements associated with the sale of the Cyprus and Italy institutions. Other items accounted for the remaining change of $2.0 million .

Financing activities

Financing activities cash flows decreased by $516.3 million to a financing cash usage of $(393.1) million for the 2018 fiscal period, from a financing cash inflow of $123.2 million for the 2017 fiscal period. This decrease was primarily attributable to the $456.6 million of net proceeds from the IPO and net proceeds from the issuance of Series A Preferred Stock of $55.3 million in the 2017 fiscal period. Additionally, net payments of long-term debt during the 2018 fiscal period, which included the $350.0 million repayment of the 2024 Term Loan, were $68.3 million higher than in the 2017 fiscal period. The payment of dividends on Series A Preferred Stock increased by $11.1 million in the 2018 fiscal quarter since the Series A Preferred stock dividends were paid-in-kind during the 2017 fiscal quarter. Offsetting these financing cash decreases, during the 2017 fiscal period the Company paid approximately $76.2 million more in debt issuance costs and redemption and call premiums than in the 2018 fiscal period as a result of the debt refinancing that was completed during the second quarter of 2017. Other items accounted for the remaining change of $1.1 million .

Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Our significant accounting policies are discussed in Note 2 , Significant Accounting Policies , of the audited consolidated financial statements included in our 2017 Form 10-K. Our critical accounting policies require the most significant judgments and estimates about the effect of matters that are inherently uncertain. As a result, these accounting policies and estimates could materially affect our financial statements and are critical to the understanding of our results of operations and financial condition. For a complete discussion of our critical accounting policies, see the “Critical Accounting Policies and Estimates” section of the MD&A in our 2017 Form 10-K. During the six months ended June 30, 2018 , there were no significant changes to our critical accounting policies.

Recently Issued Accounting Standards

Refer to Note 2 , Significant Accounting Policies , in our consolidated financial statements included elsewhere in this Form 10-Q for recently issued accounting standards.

Disposition Metrics

As previously disclosed in our 2017 Form 10-K and as disclosed in this Form 10-Q, we have completed several dispositions in 2018. The following table presents certain historical operational metrics included in our consolidated financial statements for the institutions that have been sold in 2018, for each of the quarters in 2017 and the first two quarters of 2018. Operating income is presented excluding intercompany charges. The balances are shown in the aggregate for the entities that have been disposed of through the filing date of this Form 10-Q, including the operations in Cyprus, Italy, China, Germany and Morocco, which were all part of the EMEAA segment, and Kendall, which was part of the Central America & U.S. Campuses segment:



	For the three months ended
(in millions, except enrollment)	March 31, 2017		June 30, 2017		September 30, 2017			December 31, 2017			March 31, 2018		June 30, 2018
Total revenues	$	47.4	$	59.9	$	25.3		$	77.9		$	20.5	$	7.1
Operating income (loss)	3.6		13.7		(20.7		)	(3.8		)	0.5		(1.9		)
Depreciation and amortization	3.9		3.9		4.2			0.7			—		—
Loss on impairment of assets	—		—		—			31.2			—		—
Enrollment	43,400		42,300		43,600			44,700			4,600		900

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For information regarding our exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2017 Form 10-K. There have been no significant changes in our market risk exposures since our December 31, 2017 fiscal year end.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. The purpose of disclosure controls and procedures is to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosures.

Based on that evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective due to the four material weaknesses, which we view as an integral part of our disclosure controls and procedures, previously disclosed in Item 9A of our 2017 Form 10-K. We have commenced the remediation of these material weaknesses; however, as of June 30, 2018 the material weaknesses had not yet been remediated. Nevertheless, we believe that the consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to ‘‘Item 3. Legal Proceedings’’ in our Annual Report on Form 10-K for the year ended December 31, 2017 for information regarding material pending legal proceedings. Except as set forth therein and below, there have been no new material legal proceedings and no material developments in the legal proceedings previously disclosed.

On October 18, 2016, a former student filed suit against us and Walden University pro se in the United States District Court for the District of Maryland in the matter of Eric D. Streeter v. Walden University, et. al. (Case No. 1CCB6-CV-3460) , claiming that his progress in his program was delayed by Walden University and Laureate. The claims included unjust enrichment, breach of contract, violation of the Maryland Consumer Protection Act, violation of the Due Process Clause in the Fourteenth Amendment, libel, and violation of the False Claims Act. We filed a motion to dismiss on April 12, 2017, which was granted on December 5, 2017. On July 10, 2018, the U.S. Fourth Circuit Court of Appeals affirmed the judgment of the district court dismissing the suit.

In addition, several groups of current and former students filed separate law suits in the Seventh Judicial Circuit in and for St. Johns County, Florida against St. Augustine relating to matters arising before we acquired that institution in November 2013. The pending suits are Hemingway et al. v. University of St. Augustine for Health Sciences, Inc. filed on August 12, 2013; Johnson v. University of St. Augustine for Health Sciences, LLC filed on June 16, 2016 and Miller v. University of St. Augustine for the Health Sciences, LLC filed on February 12, 2018. The allegations in the cases relate to a program that was launched in May 2011 and, at the time, offered a ‘‘Master of Orthopaedic Physician’s Assistant Program’’ degree. The plaintiffs in these matters allege that the university misrepresented their ability to practice as licensed Physician Assistants with a heightened specialty in orthopaedics. The plaintiffs are seeking relief including refund of tuition paid to St. Augustine, as well as loan debt incurred by the plaintiffs while attending St. Augustine, loss of future earnings, litigation costs and punitive damages. The Hemingway matter is scheduled for trial in October 2018. The Johnson matter is at a preliminary stage of discovery. Motions to consolidate the Johnson and Miller cases into the Hemingway case were filed on February 12, 2018. We believe the claims in these cases are without merit and intend to defend vigorously against the allegations. With respect to the three pending St. Augustine cases, under the terms of the acquisition agreement for St. Augustine, we expect to be indemnified by the seller for substantially all of the liability with respect to any claims in these cases. We also have a right of set-off against the seller for such amounts.

As previously disclosed in the 2017 Form 10-K, Laureate has been notified by the Spain Tax Authorities (“STA”) that tax audits of its Spanish subsidiaries are being conducted for the years 2011 through 2013. In July of 2018, the STA issued a final assessment to our Spanish holding company for the 2011 through 2013 period of approximately $4.7 million .

Item 1A. Risk Factors

There have been no material changes in the Risk Factors included in Item 1A of our 2017 Form 10-K as updated in Part II, Item 1A of our Form 10-Q for the quarter ended March 31, 2018.

Item 6. Exhibits

(a) Exhibits filed with this report or, where indicated, previously filed and incorporated by reference:



Exhibit No.	Exhibit Description	Form	File Number	Exhibit Number	Filing Date
2.1#	Amended and Restated Sale and Purchase Agreement, dated as of November 22, 2017 and amended and restated on January 11, 2018, by and among LEI European Investments B.V., Laureate International B.V. and Galileo Global Education Luxco S.À R.L.	10-K	001-38002	3.1	03/20/2018
2.2#	Sale and Purchase Agreement, dated April 12, 2018, among LEI European Investments B.V., Laureate International B.V. and Global University Systems Germany B.V.	8-K	001-38002	2.1	04/18/2018
2.3#	Asset Purchase Agreement, dated January 15, 2018, among Kendall College, LLC, The Dining Room at Kendall NFP, National Louis University and Laureate Education, Inc.	8-K	001-38002	2.1	08/07/2018
2.4*#	Membership Interest Purchase Agreement, dated April 24, 2018, by and among Laureate Education, Inc., Exeter Street Holdings, LLC, University of St. Augustine for Health Sciences, LLC and University of St. Augustine Acquisition Corp.
3.1	Amended and Restated Certificate of Incorporation	S‑1/A	333‑207243	3.1	01/31/2017
3.2	Amended and Restated Bylaws	S‑1/A	333‑207243	3.2	01/31/2017
3.3	Certificate of Retirement of Convertible Redeemable Preferred Stock, Series A	8-K	001-38002	3.1	07/20/2018
4.1	Indenture, dated as of April 21, 2017, between Laureate Education, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, governing the 9.250% Replacement Senior Notes due 2019	8-K	001-38002	4.1	04/27/2017
4.2	Form of Global Note governing the 9.250% Replacement Senior Notes due 2019 (included as Exhibit A to Exhibit 4.1)	8-K	001-38002	4.1	04/27/2017
4.3	Indenture, dated as of April 26, 2017, by and among the Company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the 8.250% Senior Notes due 2025	8-K	001-38002	4.3	04/27/2017
4.4	Form of 8.250% Senior Note due 2025 (included as Exhibit A to Exhibit 4.3)	8-K	001-38002	4.3	04/27/2017
10.1†	2007 Stock Incentive Plan for Key Employees of Laureate Education, Inc. and its Subsidiaries	S‑1/A	333‑207243	10.31	11/20/2015
10.2†	2007 Stock Incentive Plan Form of Stock Option Agreement, as amended on August 31, 2010	S‑1/A	333‑207243	10.32	11/20/2015
10.3†	2013 Long-Term Incentive Plan Form of Stock Option Agreement effective as of September 11, 2013	S‑1/A	333‑207243	10.34	11/20/2015
10.4†	Laureate Education, Inc. Deferred Compensation Plan, as amended and restated effective January 1, 2009	S‑1/A	333‑207243	10.35	11/20/2015
10.5†	Form of Management Stockholder’s Agreement for equityholders	S‑1/A	333‑207243	10.36	11/20/2015
10.6†	Deferred Compensation Letter Agreement, dated August 16, 2007, by and among L Curve Sub Inc., Laureate Education, Inc. and Douglas L. Becker	S‑1/A	333‑207243	10.38	12/23/2015
10.7†	Deferred Compensation Letter Agreement, dated December 24, 2015, between Laureate Education, Inc. and Douglas L. Becker	S‑4/A	333‑208758	10.37	01/20/2016
10.8†	2nd Amended and Restated Executive Interest Subscription Agreement, dated August 31, 2010, between Wengen Alberta, Limited Partnership and Douglas L. Becker	S‑1/A	333‑207243	10.39	11/20/2015
10.9†	Employment Offer Letter, dated July 21, 2008, between Laureate Education, Inc. and Eilif Serck‑Hanssen	S‑1/A	333‑207243	10.40	11/20/2015
10.10†	Amendment to Employment Offer Letter, dated December 9, 2010, between Laureate Education, Inc. and Eilif Serck‑Hanssen	S‑1/A	333‑207243	10.41	11/20/2015
10.11†	Time‑Based Restricted Stock Agreement, effective August 5, 2008, between Laureate Education, Inc. and Eilif Serck‑Hanssen	S‑1/A	333‑207243	10.42	11/20/2015
10.12†	Form of Time‑Based Restricted Stock Units Agreement, for grants from and after September 11, 2013	S‑1/A	333‑207243	10.43	11/20/2015



Exhibit No.	Exhibit Description	Form	File Number	Exhibit Number	Filing Date
10.13	Support Services Agreement between Santa Fe University of Art and Design, LLC and Laureate Education, Inc. dated October 1, 2014	S‑1/A	333‑207243	10.44	11/20/2015
10.14	Master Service and Confidentiality Agreement, dated April 28, 2014, by and between Laureate Education, Inc. and Accenture LLP	S‑1/A	333‑207243	10.45	11/20/2015
10.15‡	System Wide Master Agreement, dated April 10, 2015, between Blackboard Inc. and Laureate Education, Inc.	S‑1/A	333‑207243	10.46	11/20/2015
10.16†	Form of Stockholders’ Agreement for Entity‑Appointed Directors	S‑1/A	333‑207243	10.47	11/20/2015
10.17†	Form of Stockholders’ Agreement for Individual Directors	S‑1/A	333‑207243	10.48	11/20/2015
10.18†	2013 Long-Term Incentive Plan Form of Restricted Stock Units Agreement	S‑1/A	333‑207243	10.49	11/20/2015
10.19†	2013 Long-Term Incentive Plan Form of Performance Share Units Agreement	S‑1/A	333‑207243	10.50	11/20/2015
10.20	Form of Laureate Education, Inc. Note Exchange Agreement dated as of April 15, 2016	S‑1/A	333‑207243	10.53	05/20/2016
10.21†	Executive Retention Agreement, dated February 25, 2016, by and between Ricardo Berckemeyer and Laureate Education, Inc., effective as of September 1, 2015	S‑1/A	333‑207243	10.54	05/20/2016
10.22†	2013 Long‑Term Incentive Plan Form of Performance Share Units Agreement for 2016 for Named Executive Officers	S‑1/A	333‑207243	10.55	05/20/2016
10.23†	2013 Long‑Term Incentive Plan Form of Performance Share Units Agreement for 2016	S‑1/A	333‑207243	10.56	05/20/2016
10.24†	2013 Long‑Term Incentive Plan Form of Stock Option Agreement for 2016 for Named Executive Officers	S‑1/A	333‑207243	10.57	05/20/2016
10.25†	2013 Long‑Term Incentive Plan Form of Stock Option Agreement for 2016	S‑1/A	333‑207243	10.58	05/20/2016
10.26†	2013 Long‑Term Incentive Plan Form of Restricted Stock Units Agreement for 2016 for Named Executive Officers	S‑1/A	333‑207243	10.59	05/20/2016
10.27†	2013 Long‑Term Incentive Plan Form of Restricted Stock Units Agreement for 2016	S‑1/A	333‑207243	10.60	05/20/2016
10.28	Subscription Agreement, dated as of December 4, 2016, by and among Laureate Education, Inc., Macquarie Sierra Investment Holdings Inc., and each of the other Persons listed on Schedule A and Schedule B thereto.	S‑1/A	333‑207243	10.63	12/15/2016
10.29	Registration Rights Agreement by and among Laureate Education, Inc., each of the Investors set forth on Schedule A thereto, Douglas L. Becker and Wengen Alberta, Limited Partnership	10-K	001-38002	10.29	03/20/2018
10.30	Investors’ Stockholders Agreement by and among Laureate Education, Inc., Wengen Alberta, Limited Partnership and the Investors set forth on Schedule A thereto	10-K	001-38002	10.30	03/20/2018
10.31†	Deferred Compensation Letter Agreement, dated December 30, 2016, between Laureate Education, Inc. and Douglas L. Becker	S‑1/A	333‑207243	10.68	01/10/2017
10.32	Exchange and Registration Rights Agreement, dated as of December 30, 2016, among Laureate Education, Inc., the guarantors listed on the signature pages thereto and the initial holders listed on the signature pages thereto	S‑1/A	333‑207243	10.69	01/10/2017
10.33†	2013 Long‑Term Incentive Plan Form of Restricted Stock Units Agreement for October 2016	S‑1/A	333‑207243	10.70	01/10/2017
10.34†	2013 Long‑Term Incentive Plan Form of Performance Share Units Agreement for Named Executive Officers for October 2016	S‑1/A	333‑207243	10.71	01/10/2017
10.35†	2013 Long‑Term Incentive Plan Form of Performance Share Units Agreement for October 2016	S‑1/A	333‑207243	10.72	01/10/2017
10.36†	Form of Cash Long‑Term Incentive Plan Agreement	S‑1/A	333‑207243	10.73	01/10/2017



Exhibit No.	Exhibit Description	Form	File Number	Exhibit Number	Filing Date
10.37	Amended and Restated Securityholders Agreement by and among Wengen Alberta, Limited Partnership, Laureate Education, Inc. and the other parties thereto	8‑K	001‑38002	10.1	02/06/2017
10.38	Amended and Restated Registration Rights Agreement by and among Wengen Alberta, Limited Partnership, Wengen Investments Limited, Laureate Education, Inc. and the other parties thereto	8‑K	001‑38002	10.2	02/06/2017
10.39†	Amendment to the 2007 Stock Incentive Plan for Key Employees of Laureate Education, Inc. and its Subsidiaries	10-K	001-38002	10.76	03/29/2017
10.40†	CEO Option Award Agreement, $17.00 per share exercise price	8-K	001-38002	10.3	02/06/2017
10.41†	CEO Option Award Agreement, $21.32 per share exercise price	8-K	001-38002	10.4	02/06/2017
10.42	Form of Confirmation Letter, dated April 21, 2017, between Laureate Education, Inc. and the other party thereto	8-K	001-38002	10.1	04/27/2017
10.43†	Separation Agreement and General Release, dated March 28, 2017, between Enderson Guimarães and Laureate Education, Inc., effective as of March 23, 2017	10-Q	001-38002	10.80	05/11/2017
10.44	Seventh Amendment to Amended and Restated Credit Agreement, Amendment to Security Documents, and Release of Foreign Obligations and Certain Credit Parties, dated April 26, 2017, among Laureate Education, Inc., Iniciativas Culturales de España S.L., as the foreign subsidiary borrower, certain domestic subsidiaries of Laureate Education, Inc., Citibank, N.A., as administrative agent and collateral agent, certain financial institutions, and others party thereto	10-Q	001-38002	10.81	05/11/2017
10.45	Second Amended and Restated Credit Agreement, dated as of April 26, 2017, among Laureate Education, Inc., the lending institutions party thereto from time to time, and Citibank, N.A., as administrative agent and collateral agent	10-Q	001-38002	10.82	05/11/2017
10.46	Amended and Restated Guarantee, dated as of April 26, 2017, by Laureate Education, Inc. and certain domestic subsidiaries of Laureate Education, Inc. party thereto from time to time, as guarantors, in favor of Citibank, N.A., as collateral agent	10-Q	001-38002	10.83	05/11/2017
10.47	Amended and Restated Pledge Agreement, dated as of April 26, 2017, among Laureate Education, Inc. and certain domestic subsidiaries of Laureate Education, Inc. party thereto from time to time, as pledgors, and Citibank, N.A., as collateral agent	10-Q	001-38002	10.84	05/11/2017
10.48	Amended and Restated Security Agreement, dated as of April 26, 2017, among Laureate Education, Inc. and certain domestic subsidiaries of Laureate Education, Inc. party thereto from time to time, as grantors, and Citibank, N.A., as collateral agent	10-Q	001-38002	10.85	05/11/2017
10.49	Second Amended and Restated Collateral Agreement, dated as of April 26, 2017, between Walden University, LLC, certain other domestic subsidiaries of Laureate Education, Inc. from time to time, and Citibank, N.A., as collateral agent	10-Q	001-38002	10.86	05/11/2017
10.50†	Laureate Education, Inc. Amended and Restated 2013 Long-Term Incentive Plan	8-K	001-38002	10.1	06/20/2017
10.51†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Annual Performance Share Units Notice and Agreement for 2017	10-Q	001-38002	10.51	08/08/2017
10.52†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Performance-based Stock Option Agreement for 2017	10-Q	001-38002	10.52	08/08/2017
10.53†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Time-based Stock Option Agreement for 2017	10-Q	001-38002	10.53	08/08/2017
10.54†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Restricted Stock Units Notice and Agreement for 2017	10-Q	001-38002	10.54	08/08/2017
10.55†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Performance Share Units Notice and Agreement for 2017	10-Q	001-38002	10.55	08/08/2017



Exhibit No.	Exhibit Description	Form	File Number	Exhibit Number	Filing Date
10.56†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Performance-based Stock Option Agreement for 2017 for Certain Executives	10-Q	001-38002	10.56	08/08/2017
10.57†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Time-based Stock Option Agreement for 2017 for Certain Executives	10-Q	001-38002	10.57	08/08/2017
10.58†	Amended and Restated 2013 Long‑Term Incentive Plan Form of Restricted Stock Units Notice and Agreement for 2017 for Certain Executives	10-Q	001-38002	10.58	08/08/2017
10.59†	Form of 2017-2018 Laureate Executive Cash Long-Term Bonus Plan for Certain Executives	10-Q	001-38002	10.59	08/08/2017
10.61†	Employment Offer Letter, dated August 15, 2017, between Laureate Education, Inc. and Victoria Silbey	10-Q	001-38002	10.61	11/08/2017
10.62†	Separation Agreement and General Release, dated July 11, 2017, between Timothy F. Daniels and Laureate Education, Inc., effective December 31, 2017	10-Q	001-38002	10.62	11/08/2017
10.63†	Separation Agreement and General Release, dated August 28, 2017, between Robert W. Zentz and Laureate Education, Inc., effective December 31, 2017	10-Q	001-38002	10.63	11/08/2017
10.64†	Form of Stock Option Agreement with exercise price of $18.36 for certain executives	10-Q	001-38002	10.64	11/08/2017
10.65†	Form of Stock Option Agreement with exercise price of $21.00 for certain executives	10-Q	001-38002	10.65	11/08/2017
10.66	First Amendment to Second Amended and Restated Credit Agreement, dated as of February 1, 2018 among Laureate Education, Inc., Citibank, N.A., as administrative agent and collateral agent, the other parties and financial institutions party thereto	8-K	001-38002	10.1	02/01/2018
10.67†	Employment Offer Letter, dated November 6, 2017, between Laureate Education, Inc. and Jean-Jacques Charhon	10-K	001-38002	10.67	03/20/2018
10.68†	Transitional Employment Agreement, effective as of November 9, 2017, between Paula Singer and Laureate Education, Inc.	10-K	001-38002	10.68	03/20/2018
10.69†	Release Agreement, dated November 9, 2017, between Enderson Guimarães and Laureate Education, Inc.	10-K	001-38002	10.69	03/20/2018
10.70†	Chairman Compensation Agreement, dated December 29, 2017, between Douglas Becker and Laureate Education, Inc.	10-K	001-38002	10.70	03/20/2018
10.71	Stock Option Agreement, dated as of January 2, 2018, between Jean-Jacques Charhon and Laureate Education, Inc.	10-Q	001-38002	10.71	05/09/18
10.72*†	Employment Offer Letter, dated May 3, 2018, between Timothy Grace and Laureate Education, Inc.
21.1*	List of Subsidiaries of the Registrant
31.1*	Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
31.2*	Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
32*	Certifications pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
Ex. 101.INS*	XBRL Instance Document
Ex. 101.SCH*	XBRL Taxonomy Extension Schema Document
Ex. 101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
Ex. 101.LAB*	XBRL Taxonomy Extension Label Linkbase Document



Exhibit No.	Exhibit Description	Form	File Number	Exhibit Number	Filing Date
Ex. 101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
Ex. 101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

*	Filed herewith.
#	Laureate Education, Inc. hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit to such agreement to the U.S. Securities and Exchange Commission upon request.
†	Indicates a management contract or compensatory plan or arrangement.
‡	Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the U.S. Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 9, 2018 .

/s/ JEAN-JACQUES CHARHON

Jean-Jacques Charhon

Executive Vice President and Chief Financial Officer

/s/ TAL DARMON

Tal Darmon

Senior Vice President, Chief Accounting Officer

and Global Controller

EXECUTION VERSION
CONFIDENTIAL

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

LAUREATE EDUCATION, INC.

EXETER STREET HOLDINGS, LLC

UNIVERSITY OF ST. AUGUSTINE FOR HEALTH SCIENCES, LLC

AND

UNIVERSITY OF ST. AUGUSTINE ACQUISITION CORP.

Dated as of April 24, 2018


ARTICLE I DEFINITIONS	1


ARTICLE II SALE AND PURCHASE	13


2.1	Sale and Purchase of Interests 13


2.2	Purchase Price 13


2.3	Purchase Price Adjustment 14


2.4	Withholding 15


ARTICLE III CLOSING AND DELIVERIES	16


3.1	Closing 16


3.2	Deliveries by Seller 16


3.3	Deliveries by Buyer 17


ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY	18


4.1	Organization and Standing; Authority 18


4.2	Capitalization 18


4.3	No Subsidiaries 19


4.4	No Conflict; Required Filings and Consents 19


4.5	Financial Statements 19


4.6	Taxes 20


4.7	Personal Property 21


4.8	Real Property 22


4.9	Sufficiency of Assets 22


4.10	Compliance with Law 23


4.11	Compliance with Educational Laws 23


4.12	Permits 26


4.13	Insurance 27


4.14	Material Contracts 27


4.15	Legal Proceedings 29


4.16	Intellectual Property 29


4.17	Personnel; Employee Benefit Plans 31


4.18	Conduct of Business Since the Balance Sheet Date 33


4.19	Affiliated Transactions 33


4.20	Environmental 34


4.21	Suppliers 34


4.22	Illegal Payments 34


4.23	No Brokers 35


4.24	No Other Representations or Warranties 35


ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER	35


5.1	Investment Intent 35


5.2	Organization and Standing 35


5.3	Authority, Validity and Effect 35


5.4	No Conflict; Required Filings and Consents 36


5.5	Compliance with Educational Laws 36


5.6	Independent Investigation; No Reliance 37


5.7	Sufficiency of Funds 37


5.8	Equity Commitment 37


5.9	Solvency 38


5.10	No Brokers 38


ARTICLE VI COVENANTS AND AGREEMENTS	38


6.1	Interim Operations of the Company 38


6.2	Reasonable Access; Confidentiality 40


6.3	Publicity 42


6.4	Records 42


6.5	Insurance 42


6.6	Commercially Reasonable Efforts; Cooperation 43


6.7	Employee Matters 44


6.8	No Negotiation 46


6.9	Regulatory Authorizations; Consents 47


6.10	Satisfaction of DOE and Related Requirements 48


6.11	R&W Policy 48


6.12	Financing 48


6.13	Tax Sharing Agreements 50


6.14	Equity Commitment Letter 50


6.15	Intercompany Loan 50


6.16	Assignment of Austin Building C Lease 50


ARTICLE VII CONDITIONS TO CLOSING	51


7.1	Conditions to Obligation of each Party 51


7.2	Conditions to Obligations of Seller 52


7.3	Conditions to Obligations of Buyer 52


7.4	Frustration of Closing Conditions 53


ARTICLE VIII TERMINATION OF AGREEMENT	53


8.1	Termination 53


8.2	Effect of Termination 53


ARTICLE IX REMEDIES	54


9.1	Survival 54


9.2	Indemnification by Buyer 55


9.3	Indemnification by Seller 55


9.4	Exclusive Remedy 55


9.5	Limitations on Indemnification Payments 55


9.6	Procedures 58


9.7	Specific Performance 60


9.8	Subrogation 61


9.9	Adjustment to Purchase Price 61


ARTICLE X TAX MATTERS	61


10.1	Cooperation; Audits 61


10.2	Tax Returns 62


10.3	Proration; Property Taxes 62


10.4	Controversies 63


10.5	Amendment of Tax Returns 63


10.6	Certain Taxes 63


10.7	Refunds or Credits 64


10.8	Allocation 64


ARTICLE XI MISCELLANEOUS AND GENERAL	64


11.1	Expenses 64


11.2	Non-Recourse 64


11.3	Projections 64


11.4	Exhibits and Schedules 65


11.5	Successors and Assigns 65


11.6	Third Party Beneficiaries 65


11.7	Notices 65


11.8	Complete Agreement 66


11.9	Captions 66


11.10	Time 67


11.11	Amendment 67


11.12	Waiver 67


11.13	Choice of Law; Venue 67


11.14	Waiver of Jury Trial 67


11.15	Severability 68


11.16	Counterparts; Facsimile or Electronic Signatures 68


11.17	Construction 68


11.18	Conflict of Interest 68


11.19	Parent Guarantee 69

Exhibits

Exhibit A - Form of Transition Services Agreement

Exhibit B - Form of Restrictive Covenant Agreement

Exhibit C - Form of Release Agreement

Exhibit D - Form of IP License Agreement

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (this “ Agreement ”), dated as of April 24, 2018, is entered into by and among Laureate Education, Inc., a Delaware public benefit corporation (“ Parent ”), Exeter Street Holdings, LLC, a Maryland limited liability company (“ Seller ”), the University of St. Augustine for Health Sciences, LLC, a California limited liability company (the “ Company ”) and the University of St. Augustine Acquisition Corp., a Delaware corporation (“ Buyer ”).

RECITALS

WHEREAS, Seller is the record and beneficial owner of all of the issued and outstanding limited liability company membership interests of the Company (the “ Company LLC Interests ”);

WHEREAS, Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller, all of the Interests upon the terms set forth in this Agreement;

WHEREAS, in order to induce Buyer to enter into this Agreement, simultaneously with the execution of this Agreement Parent and Seller have executed and delivered to Buyer a restrictive covenant agreement, attached hereto as Exhibit B (the “ Restrictive Covenant Agreement ”), which Restrictive Covenant Agreement shall become effective only upon the Closing Date;

WHEREAS, in order to induce the parties to enter into this Agreement, simultaneously with the execution of this Agreement Parent, Seller and Buyer have executed and delivered a general release, attached hereto as Exhibit C (the “ Release Agreement ”), which Release Agreement shall become effective only upon the Closing Date; and

WHEREAS, immediately prior to the execution and delivery of this Agreement, Buyer has obtained a representation and warranty insurance policy providing coverage in the amount of $30,000,000 (the “ R&W Policy ”).

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, subject to the terms and conditions set forth herein and intending to be legally bound, Seller, the Company and Buyer hereby agree as follows:

Article I
DEFINITIONS

For purposes of this Agreement:

“ Accrediting Body ” means ACOTE, CAPTE and WASC.

“ ACOTE ” means the Accreditation Council for Occupational Therapy Education.

“ Action ” means any claim, cause of action, action, complaint, audit, hearing, suit, proceeding, investigation (formal or informal) or arbitration proceeding by or before any Governmental Authority or Educational Agency.

“ Affiliate ” means with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with that Person. For purposes of this definition, the terms “controls”, “controlled by” and “under common control with” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. An Affiliate of any natural person also includes that Person’s immediate family members.

“ Affiliate Contracts ” has the meaning set forth in Section 4.19 .

“ Agreement ” has the meaning set forth in the preamble.

“ Antitrust Laws ” has the meaning set forth in Section 4.4(b) .

“ Arbitration Firm ” has the meaning set forth in Section 2.3(c) .

“ Assignment Agreement ” has the meaning set forth in Section 3.2(m) .

“ Assumed Company Benefit Plan ” has the meaning set forth in Section 4.17(b) .

“ Audited Closing Balance Sheet ” has the meaning set forth in Section 2.3(c) .

“ Audited Financial Statements ” has the meaning set forth in Section 4.5(a) .

“ Austin C Lease ” has the meaning set forth in Section 6.16 .

“ Balance Sheet Date ” has the meaning set forth in Section 4.5(a) .

“ Basket ” has the meaning set forth in Section 9.5(d) .

“ Business Day ” means any day other than a Saturday, Sunday or a day on which banks in New York, New York are authorized or obligated by Law or executive order to close.

“ Buyer ” has the meaning set forth in the preamble.

“ Buyer Claim ” has the meaning set forth in Section 9.6(b) .

“ Buyer Claim Notice ” has the meaning set forth in Section 9.6(b) .

“ Buyer Disclosure Schedules ” means the Schedules delivered by Buyer pursuant to ARTICLE V .

“ Buyer Indemnitees ” has the meaning set forth in Section 9.3 .

“ Buyer’s Knowledge ” means the actual knowledge of Andrew Sheiner, Paul Nicoletti and Scott Werry, after due inquiry.

“ Cap ” has the meaning set forth in Section 9.5(d) .

“ CAPTE ” means the Commission for Accreditation of Physical Therapy Education.

“ Cash ” means, without duplication, as of the date in question and determined in accordance with GAAP, all cash and cash equivalents, marketable securities and short term investments (including the amount of all checks and other wire transfers and drafts deposited, but excluding the amounts of all issued but uncleared checks and drafts and other restricted cash balances). Any monetary conversion from the currency of a foreign country to United States dollars shall be calculated using the applicable exchange rates set forth in The Wall Street Journal, Eastern Edition, on the Business Day prior to the Closing Date.

“ Cash Statement ” has the meaning set forth in Section 2.3(b) .

“ CCNE ” means the Commission on Collegiate Nursing Education.

“ Claim ” has the meaning set forth in Section 9.6(a) .

“ Claim Response ” has the meaning set forth in Section 9.6(a) .

“ Claims Notice ” has the meaning set forth in Section 9.6(a) .

“ Closing ” has the meaning set forth in Section 3.1 .

“ Closing Date ” has the meaning set forth in Section 3.1 .

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Collection and Use ” has the meaning set forth in Section 4.16(e) .

“ Collective Bargaining Agreement ” has the meaning set forth in Section 4.14(i) .

“ Company ” has the meaning set forth in the preamble.

“ Company Benefit Plan ” has the meaning set forth in Section 4.17(b) .

“ Company Debt ” means, without duplication, all amounts, contingent or otherwise, of the Company for: (a) senior debt, including subordinated debt and any drawn letters of credit (up to the amount drawn); (b) borrowed money for the deferred purchase price of property or services (other than trade payables), lease obligations that are required to be classified as capitalized lease obligations in accordance with GAAP, conditional sale, earn-out or other title retention agreements, except for amounts payable under leases of automobiles leased by the Company for use by its employees; (c) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument; (d) deferred rent, including obligations related to tenant improvement allowances, calculated in accordance with GAAP; (e) any interest rate swap, forward contract or other hedging arrangement of the Company; (f) any accrued interest, fees or penalties in respect of any of the foregoing; (g) any prepaid student deposits or student tuition and fees for services to be rendered more than one year after payment; and (h) any amounts owed to employees for compensation or benefits recorded or administered by Seller, including the pro-rated portion of any annual bonuses for the fiscal years ended December 31, 2018 and/or December 31, 2019 (including any payroll, employment or similar Taxes imposed with respect to such payments), but excluding an undrawn letter of credit in the amount of approximately $15,000, and the items, if any, listed on Schedule 1 . Notwithstanding anything to the contrary herein nor any changes in applicable Laws or accounting rules between the date hereof and the Closing Date, the capital lease obligations set forth on Schedule 1 will be treated as “Company Debt” as of the Closing Date.

“ Company Disclosure Schedules ” means the Schedules delivered by the Company pursuant to ARTICLE IV .

“ Company Financial Statements ” has the meaning set forth in Section 4.5(a) .

“ Company Intellectual Property ” means all Intellectual Property owned, used or held for use by the Company.

“ Company LLC Units ” has the meaning set forth in the recitals.

“ Company Software ” has the meaning set forth in Section 4.16(h) .

“ Company Systems ” has the meaning set forth in Section 4.16(d) .

“ Compliance Date ” means July 1, 2015.

“ Confidentiality Agreement ” has the meaning set forth in Section 6.2(a) .

“ Consent ” means any notice, consent, approval, authorization, qualification, waiver or registration required to be obtained from, filed with or delivered to any Person in connection with the consummation of the transactions contemplated hereby.

“ Continuation Period ” has the meaning set forth in Section 6.7(a) .

“ Contracts ” means all contracts, leases, licenses and other commitments or agreements (including any amendments and other modifications thereto) to which the Company is a party, whether written or oral, that are in effect on the date hereof.

“ Copyrights ” means all copyrights and copyrightable works, whether in published or unpublished form; rights to compilations, educational works and materials, collective works and derivative works of any of the foregoing and moral rights in any of the foregoing; and registrations and applications for registration for any of the foregoing and any renewals or extensions thereof.

“ Data Security Requirements ” means, collectively, all of the following to the extent relating to privacy, security, or security breach notification requirements applicable to the Company or to the conduct of the Company’s business: (a) the Company’s own rules, policies, and procedures; (b) all applicable laws and legal requirements (including data protection and privacy laws and regulations such as the Federal Education Rights and Privacy Act (FERPA), Health Insurance Portability and Accountability Act (HIPAA), and its associated privacy and security rules); (c) the Payment Card Industry Data Security Standard (PCI DSS), to the extent applicable; and (d) contracts into which the Company has entered or by which it is otherwise bound.

“ Debt Financing ” has the meaning set forth in Section 6.12 .

“ DBR ” means Drinker Biddle & Reath LLP.

“ Dispute Notice ” has the meaning set forth in Section 9.6(b) .

“ Dispute Period ” has the meaning set forth in Section 9.6(b) .

“ DOE ” means the United States Department of Education and any successor agency administering student financial assistance under Title IV.

“ Domain Names ” means Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith registered with or assigned by any domain name registration authority as part of an electronic address on the Internet and all applications for any of the foregoing.

“ Educational Agency ” means DOE, U.S. Department of Veterans’ Affairs, and any Accrediting Body, or State Educational Agency that engages in granting or withholding Educational Approvals in accordance with standards relating to the performance, operation, financial condition, or academic standards of such schools and programs.

“ Educational Approval ” means any license, permit, authorization, certification, accreditation, or similar approval, issued or required to be issued by an Educational Agency including any such approval for (a) the School to operate and offer its educational programs in all jurisdictions in which it physically operates or is required to be authorized; or (b) for the School to participate in any program of Student Financial Assistance, but excluding any license for persons engaged in recruiting.

“ Educational Consents ” means any approval, authorization or consent by any Educational Agency, or any notification to be made by the parties to an Educational Agency, with regard to the transactions contemplated by this Agreement and the Transaction Documents, whether pre-Closing or post-Closing, which is necessary under applicable Educational Law in order to maintain or continue any Educational Approval presently held by the School, as set forth on Schedule 6.9 .

“ Educational Law ” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Educational Agency, or any Accrediting Body standard applicable to the School, including without limitation the provisions of Title IV of the HEA.

“ Employee ” has the meaning set forth in Section 6.7(a) .

“ Environmental Law ” means any Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal, handling, release or remediation of any Hazardous Materials.

“ Equity Commitment Letter ” has the meaning set forth in Section 5.8(a) .

“ ERISA ” means the United States Employee Retirement Income Security Act of 1974, as amended to date.

“ ERISA Affiliate ” means each entity that is treated as a single employer with the Company for purposes of Section 414 of the Code.

“ Estimated Cash ” has the meaning set forth in Section 2.3(a) .

“ Estimated Working Capital ” has the meaning set forth in Section 2.3(a) .

“ Final Closing Statement ” has the meaning set forth in Section 2.3(b) .

“ Final Purchase Price ” has the meaning set forth in Section 2.3(b) .

“ Financing Source ” means the Persons that have committed to provide or have otherwise entered into agreements in connection with the Debt Financing in connection with the transactions contemplated hereby, and any joinder agreements, indentures or credit agreements entered into pursuant thereto, together with their Affiliates and representatives involved in the Debt Financing and their successors and assigns.

“ Fund ” has the meaning set forth in Section 5.8(a) .

“ Fundamental Representations ” refers to the representations and warranties of Seller and the Company contained in Section 4.1 (Organization and Standing; Authority), Section 4.2 (Capitalization), Section 4.3 (No Subsidiaries), Section 4.19 (Affiliated Transactions) and Section 4.23 (No Brokers), and the representations and warranties of Buyer set forth in Section 5.1 (Investment Intent), Section 5.2 (Organization and Standing), Section 5.3 (Authority, Validity and Effect) and Section 5.10 (No Brokers).

“ GAAP ” means United States generally accepted accounting principles as in effect on the date hereof.

“ General Enforceability Exceptions ” has the meaning set forth in Section 4.1(c)

“ Governmental Antitrust Authority ” has the meaning set forth in Section 6.6(b) .

“ Governmental Authority ” means any government, governmental or regulatory body or political subdivision, whether federal, state, local or foreign, or any agency, commission, instrumentality, authority or department of any such government, governmental or regulatory body or political subdivision, or any federal, state, local or foreign court, tribunal or arbitrator (public or private),but excluding any Educational Agency.

“ Governmental Consent ” means a Consent required by a Governmental Authority.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination, permit, assessment or award entered by or with any Governmental Authority or Educational Agency.

“ Hazardous Materials ” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that presents a risk to human health or the environment or is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws or is otherwise governed, regulated or for which liability or standards of conduct may be imposed under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

“ HEA ” means the Higher Education Act of 1965, 20 U.S.C. § 1001 et seq., as amended, and any successor statute thereto.

“ HSR Act ” has the meaning set forth in Section 4.4(b) .

“ Indemnifying Party ” has the meaning set forth in Section 9.6(c) .

“ Indemnitees ” has the meaning set forth in Section 9.5 .

“ Insurance Policies ” has the meaning set forth in Section 6.5(b) .

“ Intellectual Property ” means Copyrights, Domain Names, Patents, Trademarks, Trade Secrets, software (including data, databases and documentation), and all other intellectual property rights throughout the world, including the right to sue for past, present and future infringement, misappropriation or other violation thereof.

“ Intercompany Loan ” means the loan due under that certain Loan Agreement, dated as of June 10, 2016, by and between the Company and Parent.

“ Interests ” has the meaning set forth in the recitals.

“ Interim Financial Statements ” has the meaning set forth in Section 4.5(a) .

“ IP License Agreement ” has the meaning set forth in Section 3.2(j) .

“ IRS ” means the United States Internal Revenue Service.

“ Law ” means any federal, state, local or foreign law (including common law), statute, code, ordinance, rule or regulation, Governmental Order or other requirement of any Governmental Authority in effect on or prior to the Closing Date.

“ Leased Real Property ” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by the Company.

“ Leases ” means all leases, subleases, licenses, concessions and other agreements (written or oral) pursuant to which the Company holds any Leased Real Property, including the right to all security deposits and other amounts and instruments deposited by or on behalf of the Company thereunder.

“ Lien ” means any mortgage, lien, security interest, option, pledge, mechanic’s lien, deed of trust, claim, lease, charge, right of first refusal, easement, servitude, transfer restriction or other similar encumbrance, excluding Permitted Liens.

“ Material Adverse Effect ” means any change, occurrence, event or development that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on: (a) the business, results of operations or condition (financial or otherwise) of the Company; or (b) the ability of Seller or the Company to perform its obligations under this Agreement or to consummate the transactions contemplated hereby; provided , however , that none of the following, either alone or in combination, shall be deemed to constitute, or be taken into account in determining whether there has been, such a material adverse effect: any change, occurrence, event or development: (i) resulting from general economic, political, financial, banking, credit or securities market conditions, including any disruption thereof and any interest or exchange rate fluctuations; (ii) affecting companies in the industry in which the Company conducts its business generally; (iii) resulting from the announcement or performance of, or compliance with, or the public or industry knowledge of this Agreement or the transactions contemplated hereby; (iv) resulting from any changes in applicable Laws or accounting rules; or (v) resulting from natural disasters, acts of terrorism or war (whether or not declared), or epidemic or pandemic; provided , further , however , that any change, occurrence, event or development referred to in clauses (i) , (ii) , (iv) and (v) shall be taken into account in determining whether a Material Adverse Effect has occurred if such change, occurrence, event or development has a disproportionate adverse impact on the Company relative to similarly situated Persons operating in the industries in which the Company operates.

“ Material Contracts ” has the meaning set forth in Section 4.14 .

“ Net Working Capital ” means: (a) the Company’s current assets, excluding Cash, the amounts of all issued but uncleared checks and drafts and other restricted cash balances, intercompany receivables and any current income Tax assets; minus (b) the Company’s current liabilities, excluding current liabilities for any income Taxes, intercompany payables, obligations and liabilities arising under Affiliate Contracts, Selling Expenses and the current portion of Company Debt, calculated in accordance with GAAP and the principles, policies, practices, procedures, classifications, and judgment and estimation methodologies set forth on Schedule 1 , to the extent consistent with GAAP. For the avoidance of doubt, “Net Working Capital” shall not include any amounts included in the calculation of Cash, including restricted cash, Company Debt or Selling Expenses.

“ Notice ” has the meaning set forth in Section 9.6(b) .

“ Parent ” has the meaning set forth in the recitals.

“ Paris ” has the meaning set forth in the definition of the Paris Purchase Agreement.

“ Paris Purchase Agreement ” means the Stock Purchase Agreement dated June 28, 2013 by and among Patris of St. Augustine, Inc., Dr. Stanley V. Paris, the Stanley V. Paris Revocable Trust (jointly and severally, “ Paris ”), the Company and Seller.

“ Patents ” means all patents, industrial and utility models, industrial designs, petty patents, patents of importation, patents of addition, certificates of invention, and any other indicia of invention ownership issued or granted by any Governmental Authority, including all provisional applications, priority and other applications, divisionals, continuations (in whole or in part), extensions, reissues, reexaminations or equivalents or counterparts of any of the foregoing.

“ Payoff Letters ” means the letters provided to the Company by the lenders or other holders of certain Company Debt in connection with the repayment in full of the outstanding Company Debt (other than with respect to the Leases) due thereunder as contemplated by this Agreement.

“ Permit ” means any license, permit, authorization, certificate of authority, qualification, franchise, order, approval, concession, registration, variance or exemption or similar document or authority that has been issued or granted or required to be issued by any Governmental Authority.

“ Permitted Liens ” means: (a) Liens arising under or related to the Company Debt that are disclosed in the Company Financial Statements and that will be released on or prior to the Closing; (b) Liens for Taxes, assessments and other charges of Governmental Authorities not yet due and payable or being contested in good faith by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP; (c) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Liens arising or incurred in the ordinary course of business for amounts which are not due and payable; (d) the Liens set forth on Schedule 1 ; and (e) with respect to the Leased Real Property: (i) easements, encroachments, restrictions, rights-of-way and any other non-monetary title defects or anything which may be shown by a current, accurate survey; and (ii) zoning, building and other similar regulations; provided , however , that none of the foregoing described in this clause (e) will: (A) render title unmarketable; or (B) individually or in the aggregate materially impair the continued use and operation of the property to which they relate in the business of the Company as presently conducted.

“ Person ” means any individual, sole proprietorship, partnership, corporation, limited liability company, joint venture, unincorporated society or association, trust or other legal entity or Governmental Authority.

“ Personal Data ” means information that would identify or that is associated with any natural person and that has been collected or otherwise obtained by the Company, including all such information subject to any applicable Law respecting the privacy of student, financial, credit, medical or other information, including name, address, telephone number, fax number, electronic mail address or other contact information, geographic locations, IP addresses, facial likenesses, social security or insurance numbers, bank account number or credit card numbers, racial or ethnic origin, political opinions, religious or philosophical beliefs, trade or labor union membership, physical or mental health, sexual orientation, criminal offenses or any data that would identify any natural person, together with any other information about a natural person which is combined with or linked to any of the foregoing information, but excluding all de-identified data and all aggregated data derived from any of the foregoing information.

“ PPPA ” means a Provisional Program Participation Agreement issued to the School post-Closing and countersigned by or on behalf of the Secretary of the DOE, evidencing the DOE’s certification of the School to continue its Title IV Program participation following consummation of the transactions contemplated by this Agreement.

“ Pre-Closing Claim ” has the meaning set forth in Section 6.5(b) .

“ Pre-Closing Tax Periods ” has the meaning set forth in Section 10.1(a) .

“ Purchase Price ” has the meaning set forth in Section 2.2(a) .

“ R&W Insurance Amount ” means 50% of the total cost attributable to the R&W Policy.

“ R&W Policy ” has the meaning set forth in the recitals.

“ Reference Date ” means December 13, 2016.

“ Reference Material Contracts ” has the meaning set forth in Section 4.14 .

“ Release Agreement ” has the meaning set forth in the recitals.

“ Required Post-Closing Educational Consents ” means those Educational Consents that must be effectuated or obtained after the Closing, as identified on Schedule 6.9(b) .

“ Required Pre-Closing Educational Consents ” means those Educational Consents that applicable Educational Laws require to be effectuated or obtained prior to the Closing, as identified on Schedule 6.9(a) .

“ Response Period ” has the meaning set forth in Section 9.6(a) .

“ Responsible Party ” has the meaning set forth in Section 9.6(c) .

“ Restrictive Covenants Agreement ” has the meaning set forth in the recitals.

“ School ” means the institution of higher education owned and operated by the Company which has been issued Office of Postsecondary Education Identification Number 03171300 by the DOE, including the main campus and any other campus, branch, satellite location, or other facility leased by the Company at which it offers 50% or more of an educational program, and any education programs offered via online delivery, but excluding sites used by the institution for the purposes of offering students clinical rotations.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Seller ” has the meaning set forth in the preamble.

“ Seller’s 401(k) Plan ” has the meaning set forth in Section 6.7(f) .

“ Seller Indemnitees ” has the meaning set forth in Section 9.2 .

“ Seller’s Knowledge ” means the actual knowledge of Vivian Sanchez, Divina Grossman, Jennifer Briar, Jeffrey Lagasse, Terry Rakosky, Karen Gersten and Susan Waugh after due inquiry.

“ Selling Expenses ” means all of the unpaid fees and expenses incurred by Seller and/or the Company prior to the Closing relating to the negotiation, preparation and execution of this Agreement and the Transaction Documents and the completion of the transactions contemplated hereby and thereby, including: (a) amounts owed to attorneys, accountants and investment banks, including DBR and Macquarie Capital (USA) Inc.; (b) the R&W Insurance Amount; and (c) (i) all sale, “stay-around”, retention or similar bonuses or payments; and (ii) all separation, severance, redundancy, termination or similar-type payments, in each case to current or former directors, officers, employees and consultants paid as a result of or in connection with the transactions contemplated hereby, in the case of clauses (c)(i) , and (c)(ii) , together with the employee’s portion (together with any employer’s portion, to the extent payable by the Company) of payroll, employment or similar Taxes imposed with respect to such payments. For the avoidance of doubt, “Selling Expenses” shall include any unpaid fees and expenses related to the prior sale process for the Company in 2016 and any other abandoned transaction processes.

“ Seller Obligations ” has the meaning set forth in Section 11.19 .

“ Sensitive Company Data ” means confidential and proprietary information of the Company (including, without limitation, any Personal Data).

“ State Educational Agency ” means any state licensing agency that regulates educational institutions offering educational programs via residential or online delivery or otherwise operating within such agency’s jurisdiction, including, but not limited to, the California Bureau for Private Postsecondary Education, the Florida Department of Education Commission for Independent Education, the Texas Higher Education Coordinating Board, and the Texas Workforce Commission.

“ Straddle Period ” has the meaning set forth in Section 10.3 .

“ Student Financial Assistance ” means any form of financial assistance, grants or loans provided to any student pursuant to: (i) the Title IV Programs and any other program authorized by the HEA and administered by the DOE; (ii) any educational assistance program for military service members and families administered by the U.S. Department of Defense and the military service branches thereof; and (iii) any educational assistance program for veterans administered by the U.S. Department of Veterans Affairs and the designated state approving agencies for the supervision of such programs.

“ Target Working Capital ” means $0.

“ Tax ” means all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, or other tax, similar governmental fee or other similar assessment or similar charge, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts imposed by any Taxing Authority.

“ Tax Matter ” has the meaning set forth in Section 10.4 .

“ Tax Return ” means any return, statement, report or form filed or required to be filed with any Taxing Authority, including any amendments thereof or exhibits thereto.

“ Taxing Authority ” means any Governmental Authority responsible for the administration or imposition of any Tax.

“ Termination Date ” has the meaning set forth in Section 8.1(d) .

“ Title IV ” means Title IV of the HEA, except as specifically provided otherwise, and any amendments or successor statutes to it.

“ Title IV Program ” means any program of student financial assistance administered pursuant to Title IV.

“ TPPPA ” means a Temporary Provisional Program Participation Agreement issued to the School post-Closing and countersigned by or on behalf of the Secretary of the DOE continuing the School’s certification to participate in the Title IV Programs on an interim basis following the Closing.

“ Trademarks ” means trademarks, service marks, fictional business names, trade names, commercial names, trade dress, certification marks, collective marks and other proprietary rights to any words, names, slogans, symbols, logos, devices or combinations thereof used to identify, distinguish and indicate the source or origin of goods or services; registrations, renewals, applications for registration, equivalents and counterparts of the foregoing; and the business goodwill associated with each of the foregoing.

“ Trade Secrets ” means trade secrets and confidential business information, including ideas, research and development, know-how, formulae, compositions, processes, methods and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals.

“ Transaction Documents ” has the meaning set forth in Section 4.1(b) .

“ Transaction Value ” means $400,000,000.

“ Transfer Taxes ” has the meaning set forth in Section 10.6 .

“ Transition Services Agreement ” has the meaning set forth in Section 3.2(i) .

“ User Data ” means any Personal Data or other data or information collected by or on behalf of the Company from users of the Company systems or of any Company website.

“ WASC ” means the Accrediting Commission for Senior Colleges and Universities of the Western Association of Schools and Colleges.

“ Working Capital Statement ” has the meaning set forth in Section 2.3(b) .

ARTICLE II
SALE AND PURCHASE

2.1 Sale and Purchase of Interests . At the Closing, Seller shall sell, assign and transfer to Buyer, free and clear of all Liens, and Buyer shall purchase and acquire from Seller, all of the Interests.

2.2 Purchase Price .

(a) Computation and Payment . Subject to adjustment following the Closing as set forth in Section 2.3 , in full consideration for the Interests, Buyer shall pay to or for the benefit of Seller an amount equal to the Transaction Value,

(i) plus the amount of Estimated Cash immediately prior to the Closing;

(ii) minus the amount of Company Debt outstanding immediately prior to the Closing;

(iii) plus the amount, if any, by which the Estimated Working Capital is greater than the Target Working Capital;

(iv) minus the amount, if any, by which the Estimated Working Capital is less than the Target Working Capital; and

(v) minus the Selling Expenses, if any, to be paid by Buyer on behalf of Seller or the Company,

(such result, the “ Purchase Price ”), payable at the Closing in cash to Seller as described below in Section 3.3 .

(b) Other Settlements. At the Closing:

(i) Buyer shall, on behalf of the Company, cause the Company Debt outstanding immediately prior to the Closing, other than with respect to the Leases, to be repaid in full to the Persons entitled thereto pursuant to the Payoff Letters; and

(ii) Buyer shall pay or cause to be paid all unpaid Selling Expenses by wire transfer of immediately available funds to an account designated prior to the Closing by the Persons to whom such expenses are payable.

2.3 Purchase Price Adjustment .

(a) Estimated Closing Statement . At least three days prior to the Closing Date, Seller shall cause to be prepared and delivered to Buyer: (i) a statement setting forth the Company’s good faith estimate of: (A) the Net Working Capital as of the close of business on the Closing Date (the “ Estimated Working Capital ”); (B) the Cash as of the close of business on the Closing Date (the “ Estimated Cash ”); (C) the Company Debt as of the close of business on the Closing Date (the “ Estimated Company Debt ”); and (D) the Selling Expenses as of the close of business on the Closing Date (the “ Estimated Selling Expenses ” and, together with the Estimated Working Capital, the Estimated Cash and the Estimated Company Debt, the “ Estimated Adjustment Items ”); and (ii) a calculation of the Purchase Price using the Estimated Adjustment Items (such calculation of the Purchase Price, the “ Estimated Purchase Price ”). The Estimated Adjustment Items will be prepared in accordance with the definitions thereof, GAAP (and applicable Tax Law in the case of any Taxes) and the principles, policies, practices, procedures, classifications, and judgment and estimation methodologies set forth on Schedule 1 , to the extent consistent with GAAP.

(b) Final Closing Statement . Within 75 days after the Closing Date, Buyer shall prepare and deliver, or cause to be prepared and delivered, to Seller: (i) a statement (the “ Final Closing Statement ”) setting forth: (A) the Net Working Capital as of the close of business on the Closing Date (the “ Closing Working Capital ”); (B) the Cash as of the close of business on the Closing Date (the “ Closing Cash ”); (C) the Company Debt as of the close of business on the Closing Date (the “ Closing Company Debt ”); and (D) the Selling Expenses as of the close of business on the Closing Date (the “ Closing Selling Expenses ” and, together with the Closing Working Capital, the Closing Cash and the Closing Company Debt, the “ Closing Adjustment Items ”); and (ii) a calculation of the Purchase Price using the Closing Adjustment Items (such calculation of the Purchase Price, the “ Final Purchase Price ”). The Closing Adjustment Items will be prepared in accordance with the definitions thereof, GAAP (and applicable Tax Law in the case of any Taxes) and the principles, policies, practices, procedures, classifications, and judgment and estimation methodologies set forth on Schedule 1 , to the extent consistent with GAAP.

(c) Dispute . Within 45 days following receipt by Seller of the Final Closing Statement, Seller shall deliver written notice to Buyer of any dispute it has with respect to the Final Closing Statement. If Seller does not so notify Buyer of a dispute within the applicable 45-day period, the Final Closing Statement shall be deemed final, conclusive and binding on the parties. If notice of a dispute has been given as provided herein, Seller and Buyer shall negotiate in good faith to resolve it. If they fail to do so within 15 days after Seller advises Buyer of its objections, then they jointly shall engage the firm of Ernst & Young or another mutually agreeable firm (the “ Arbitration Firm ”) to resolve the dispute. As promptly as practicable thereafter, Seller and Buyer shall each prepare and submit a presentation to the Arbitration Firm. The presentations shall set forth in reasonable detail the proposed calculation by each party of the items in dispute. As soon as practicable thereafter, Seller and Buyer shall cause the Arbitration Firm to choose one of the parties’ positions based solely upon the presentation by Seller and Buyer. The party whose position is not accepted by the Arbitration Firm shall be responsible for all of the fees and expenses of the Arbitration Firm. All determinations made by the Arbitration Firm shall be final, conclusive and binding on the parties.

(d) Access . For purposes of complying with the terms set forth in this Section 2.3 , each party, at its own cost, shall cooperate with and make available to the other parties and their respective representatives all information, records, data and working papers, and shall permit access to its facilities and personnel, at reasonable times during normal business hours, as may be reasonably required in connection with, or reasonably related to, the analysis of the Final Closing Statement and the resolution of any disputes thereunder.

(e) Downward Adjustment . If the Final Purchase Price (as finally determined pursuant to Section 2.3(c) ) is less than the Estimated Purchase Price (the amount by which the Final Purchase Price is less than the Estimated Purchase Price, the “ Downward Adjustment Amount ”), then Seller shall pay or caused to be paid an amount of cash equal to the Downward Adjustment Amount to Buyer, by bank wire transfer of immediately available funds to an account designated in writing by Buyer to Seller prior to the date such payment is due hereunder.

(f) Upward Adjustment . If the Final Purchase Price (as finally determined pursuant to Section 2.3(c) ) is greater than the Estimated Purchase Price (the amount by which the Final Purchase Price exceeds the Estimated Purchase Price, the “ Upward Adjustment Amount ”), then Buyer shall pay or cause to be paid an amount in cash equal to the Upward Adjustment Amount to Seller, by bank wire transfer of immediately available funds to an account designated in writing by Seller to Buyer prior to the date such payment is due hereunder.

(g) Payment and Adjustment Mechanics . Any payments and any distributions under this Section 2.3 shall be made or effected within five business days after the final determination of the Final Purchase Price pursuant to Section 2.3(c) .

2.4 Withholding . Buyer and the Company shall be entitled to deduct and withhold from the amounts paid under this Agreement any Taxes required to be deducted and withheld therefrom under applicable Law. Any Taxes so deducted and withheld (and paid over to the applicable Taxing Authority) shall be treated as made to the Person in respect of which such deduction or withholding was made; provided that Buyer shall use commercially reasonable efforts to provide advance notice to Seller of any such withholding in respect of a non-compensatory payment.

ARTICLE III
CLOSING AND DELIVERIES

3.1 Closing . The closing of the transactions contemplated hereby (the “ Closing ”) will take place at 11:59 p.m. local time at the offices of Drinker Biddle & Reath LLP, 1500 K Street, NW, Suite 1100, Washington, DC 20005: (a) no later than seven Business Days after the conditions set forth in ARTICLE VIII have been satisfied or waived by the applicable party (other than those conditions which by their terms are not to be satisfied until the Closing, but subject to the waiver or fulfillment of those conditions at the Closing); provided, however, that if the Closing would occur after the 10 ^th day of any month, the Closing shall occur on the first Business Day of the next succeeding month, or (b) at such other place, time and date as may be mutually agreed upon by Buyer and Seller in writing (including by means of facsimile, e-mail or other electronic transmission) (the date on which the Closing occurs, the “ Closing Date ”). All proceedings to be taken and all documents to be executed and delivered by all parties at the Closing will be deemed to have been taken and executed simultaneously and no proceedings will be deemed to have been taken nor documents executed or delivered until all have been taken, executed and delivered. The effective time of the closing will be 11:59 p.m. (Eastern Time) on the Closing Date.

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

(a) The Interests, by means of a written assignment transferring ownership of the Interests, duly executed by Seller in favor of Buyer;

(b) The Payoff Letters with respect to all outstanding Company Debt as of the Closing Date (copies of which shall be provided to Buyer at least two Business Days prior to Closing), other than with respect to the Leases;

(c) Certificate of the Secretary of State of California as to the good standing of the Company as of a date not more than 10 Business Days before the Closing;

(d) Certificate of the Secretary of the Company, certifying as to its articles of organization and operating agreement;

(e) Certified copies of the resolutions duly adopted by the members of each of the Company and Seller authorizing the execution and delivery of this Agreement and the other Transaction Documents and the performance and consummation by it of the transactions contemplated hereby and thereby;

(f) Written resignations of the directors and officers of the Company identified on Schedule 3.2(f) ( it being understood that Buyer shall have the right to update Schedule 3.2(f) between the date hereof and May 7, 2018 upon written notice to the Company);

(g) Original corporate record books and equity record books of the Company to the extent not already in the possession of the Company as of the Closing;

(h) Evidence of the termination of all Affiliate Contracts;

(i) The Transition Services Agreement, substantially in the form of Exhibit A (the “ Transition Services Agreement ”);

(j) The Intellectual Property License Agreement, substantially in the form of Exhibit D (the “ IP License Agreement ”);

(k) A certificate of non-foreign status executed by Seller and prepared in accordance with Treasury Regulations Section 1.1445-2(b);

(l) A certificate signed by an officer of the Company to the effect that the full amount of indebtedness due under the Intercompany Loan has been repaid or otherwise satisfied in full;

(m) An assignment agreement, in a form acceptable to Buyer and Seller, assigning, conveying and transferring from Seller to Buyer the Paris Purchase Agreement (the “ Assignment Agreement ”);

(n) Such other documents, certificates and instruments necessary or reasonably requested by Buyer to consummate the transactions contemplated by this Agreement and the other Transaction Documents.

3.3 Deliveries by Buyer . At the Closing, Buyer shall:

(a) Pay the Purchase Price to Seller as described in Section 2.2 , as adjusted pursuant to Section 2.3 , by wire transfer of immediately available funds to Seller’s account, details of which shall be provided to Buyer at least two Business Days before the Closing;

(b) Pay the Company Debt outstanding immediately prior to the Closing, other than with respect to the Leases, to the Persons entitled thereto pursuant to and in accordance with the Payoff Letters;

(i) The Transition Services Agreement;

(ii) The Restrictive Covenant Agreement;

(iii) The Release Agreement;

(iv) The IP License Agreement;

(v) The Assignment Agreement;

(vi) Such other documents, certificates and instruments necessary or reasonably requested by Seller to consummate the transactions contemplated by this Agreement and the other documents contemplated hereby.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY

Except as set forth on the Company Disclosure Schedules, Seller and the Company hereby represent and warrant to Buyer that the statements contained in this ARTICLE IV are true and correct as of the date hereof and as of the Closing Date:

4.1 Organization and Standing; Authority .

(a) The Company is a limited liability company validly existing and in good standing under the laws of California. It is duly qualified to do business in each jurisdiction in which the character of the properties owned or leased by it or in which the conduct of its business require it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect.

(b) Each of Seller and the Company has the requisite limited liability company or partnership power and authority, as applicable, to execute and deliver this Agreement and all agreements and documents contemplated hereby (collectively, the “ Transaction Documents ”) to be executed and delivered by it, to consummate the transactions contemplated hereby and thereby, and to carry on the business in which it is engaged and to own, lease and use the assets and properties owned, leased and used by it.

(c) The execution and delivery of this Agreement and the Transaction Documents to which Seller or the Company is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary limited liability company or partnership, as applicable, action. This Agreement and the Transaction Documents to which either of them is a party have been (or will be at the Closing) duly and validly executed and delivered by it and constitute the legal, valid and binding obligations of Seller or the Company, as applicable, enforceable against it in accordance with their respective terms, except as limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar Laws affecting the enforcement of creditors’ rights generally from time to time in effect and the availability of equitable remedies (regardless of whether enforceability is considered in a proceeding at law or in equity) (collectively, the “ General Enforceability Exceptions ”).

4.2 Capitalization .

(a) There is a total of 800 issued and outstanding common units of limited liability company membership interests of the Company, all of which are owned beneficially and of record by Seller, and they comprise all of the Company LLC Units. The Company LLC Units are duly authorized, validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights.

(b) There are no: (i) outstanding securities or other interests convertible or exchangeable into membership interests of the Company; (ii) preemptive rights, options, warrants, calls, subscriptions or other rights, agreements or commitments obligating Seller or the Company to issue, transfer or sell any membership interests of the Company or any security that is convertible, exchangeable or exercisable for such membership interests; or (iii) voting trusts or other agreements or understandings with respect to the voting, transfer or other disposition of membership interests of the Company.

(c) Seller: (i) is the sole record and beneficial owner of the Company LLC Units; (ii) has full power, right and authority, and any approval required by Law, to make and enter into this Agreement; (iii) has good and valid title to the Company LLC Units.

4.3 No Subsidiaries . The Company does not own, of record or beneficially, any direct or indirect interest or any right to acquire the equity interests of any Person.

4.4 No Conflict; Required Filings and Consents .

(a) Except as set forth on Schedule 4.4 , neither the execution and delivery by Seller or the Company of this Agreement or the other Transaction Documents to which it is a party, nor the consummation by either of them of the transactions contemplated hereby or thereby, nor compliance by any of them with any of the provisions hereof or thereof (i) conflicts with or results in a breach of any provisions of the articles of organization or operating agreement of Seller or the Company or (ii) results in a breach of or a default (with or without due notice or lapse of time or both) under, or gives rise to any right of modification, termination, cancellation or acceleration, requires the consent of or any notification to, any third party to any Material Contract, Lease or under any Permit; or (iii) results in the imposition or creation of any Lien upon or with respect to any equity interests, assets or properties of the Company, except, in the case of clauses (ii) and (iii) , for conflicts, violations, breaches, or defaults that are not material, individually or in the aggregate, to the business of the Company.

(b) No Governmental Consent is required to be obtained by Seller or the Company (i) for the execution and delivery by any of them of this Agreement or the Transaction Documents to which they are a party, (ii) compliance by any of them with any of the provisions hereof or thereof, or (iii) the consummation by any of them of the transactions contemplated hereby or thereby except for (A) such Governmental Consents as may be required under (x) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) or (y) any other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or creation or strengthening of a dominant position through merger or acquisition (such Laws, together with the HSR Act, the “ Antitrust Laws ”), (B) Governmental Consents that have been obtained and Governmental Consents that, if not obtained, would not materially and adversely affect the business of the Company or the ability of Seller or the Company to perform its obligations under this Agreement and the Transaction Documents to which it is a party or to consummate the transactions contemplated hereby and thereby.

(c) The representations and warranties in this Section 4.4 shall not apply to Educational Approvals or Educational Consents, which are addressed in Section 4.11 (Compliance with Educational Laws).

4.5 Financial Statements .

(a) Complete copies of the following financial statements have been made available to Buyer for its review: (i) the audited consolidated balance sheets of the Company as of December 31, 2015 and December 31, 2016, and the related audited consolidated statements of operations, changes in shareholders’ equity and cash flows for the fiscal year then ended, together with the notes thereto (the “ Audited Financial Statements ”); and (ii) the unaudited consolidated balance sheets of the Company as of December 31, 2017 and February 28, 2018 (the “ Balance Sheet Date ”), and the related unaudited consolidated statements of income for the twelve and two‑month periods then ended (the “ Interim Financial Statements ” and, together with the Audited Financial Statements, the “ Company Financial Statements ”).

(b) The Audited Financial Statements have been prepared in accordance with GAAP and fairly present, in all material respects, the financial position, the results of operations, changes in members’ equity and cash flows of the Company as of the dates and for the periods indicated. Interim Financial Statements have been prepared by management of the Company in accordance with GAAP (except for the absence of footnote disclosures, and in the case of the February 28, 2018 balance sheet, customary year-end audit adjustments) and fairly present, in all material respects, the financial position and results of operations of the Company as of the date and for the periods indicated.

(c) The February 28, 2018 balance sheet Interim Financial Statements reflected or reserved against all liabilities of the Company that have arisen since the Balance Sheet Date and that would be required to be included on a balance sheet prepared in accordance with GAAP, other than: (i) those that have been incurred in the ordinary course of business consistent with past practice; (ii) those that are disclosed in this Agreement or the Company Disclosure Schedules, and that have been incurred since the Balance Sheet Date; (iii) obligations required to be performed after the date hereof under any Contract; and (iv) current liabilities that would be included in the calculation of Estimated Working Capital, Estimated Company Debt and Estimated Selling Expenses.

4.6 Taxes .

(a) The Company has timely filed (or has had timely filed on its behalf) all income and other material Tax Returns that it was required to file and has paid all Taxes required to be paid whether or not shown thereon as due and owing. All such Tax Returns are true, correct and complete in all material respects. No extensions or waivers of statutes of limitations have been given or requested with respect to any Tax matters of the Company that will extend past the Closing Date. The Company currently is a disregarded entity for federal income tax purposes and has been a pass-through entity for federal income tax purposes at all times since its formation, and no entity classification election has been filed by or with respect to the Company.

(b) The Company is not a party to any Tax allocation, Tax sharing or Tax indemnification agreement and has no liability for Taxes of any other Person as a transferee or successor, by reason of assumption or by operation of Law (other than pursuant to customary Tax indemnity provisions in agreements that are not principally related to Taxes).

(c) The Company has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, Seller or other third party.

(d) There are no Liens for unpaid Taxes on the assets of the Company except Liens for current Taxes not yet due and payable.

(e) There is no Action or dispute pending with respect to the Company in respect of any Tax. The Company has not received any written notice of deficiency or assessment from any Taxing Authority for any amount of Tax that has not been fully settled and satisfied, and to Seller’s Knowledge, no such deficiency or assessment is proposed. No written claim has been made by any Taxing Authority in a jurisdiction in which the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

(f) The Company has not engaged in any “listed transaction,” as defined in Section 6707A(c)(2) of the Code and Treasury Regulations Section 1.6011-4(b)(2).

(g) The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of Law) executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made on or prior to the Closing Date, or (iv) prepaid amount received on or prior to the Closing Date.

(h) The Company is treated for U.S. federal income tax purposes as the owner of the property described on the Company Financial Statements as being part of a sale leaseback transaction.

(i) Except for Section 4.6(g) and the last sentence of Section 4.6(a) , no representation or warranty is made regarding Taxes that may accrue in any taxable period (or portion thereof) beginning after the Closing Date.

4.7 Personal Property .

(a) The Company has good and marketable title to all of the material assets, tangible or intangible, reflected in the Interim Financial Statements as being owned by the Company and in all material properties and assets acquired by it since the Balance Sheet Date, in each case, free and clear of all Liens, excluding assets acquired since the Balance Sheet Date and inventory and assets sold or disposed of by the Company in the ordinary course of business consistent with past practice since the Balance Sheet Date.

(b) The Company has a valid license or leasehold interest in all of the material assets and properties reasonably necessary to conduct the business of the Company consistent with past practice and as currently conducted, except for assets and properties that are held by its Affiliates and used to provide services to the Company under the agreements and arrangements set forth on Schedule 4.9 .

4.8 Real Property .

(a) The Company does not currently own and has not owned since the Compliance Date any real property. Schedule 4.8(a) sets forth the address of each Leased Real Property, and a true and complete list of all Leases (including all amendments, extensions, renewals, guaranties and other agreements with respect thereto) for each such Leased Real Property (including the date and name of the parties to such Lease document). The Company has delivered to Buyer a true and complete copy of each such Lease document, and in the case of any oral Lease, a written summary of the material terms of such Lease.

(b) Except as set forth in Schedule 4.8(b) , with respect to each of the Leases: (i) such Lease is legal, valid, binding, enforceable and in full force and effect; (ii) the Company’s possession and quiet enjoyment of the Leased Real Property under such Lease has not been disturbed, and to the Seller’s Knowledge, there are no disputes with respect to such Lease; (iii) neither the Company nor, to the Seller’s knowledge, any other party to the Lease is in material breach or default under such Lease, and to the Seller’s Knowledge, no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such a material breach or default, or permit the termination, modification or acceleration of rent under such Lease; (iv) the Company has not subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof; and (v) the Company has not collaterally assigned or granted any other security interest in such Lease or interest therein.

(c) Except as set forth in Schedule4.8(c) , all Leased Real Property is held by the Company free and clear of all Liens, except for Liens on the applicable landlord’s interest in the underlying property. To Seller’s Knowledge, the buildings, structures and other material assets and properties of the Company are in good operating condition and repair, ordinary wear and tear excepted.

(d) The Leased Real Property identified on Schedule 4.8(a) comprises all of the real property used in the Company’s business as of the date hereof.

4.9 Sufficiency of Assets . Except as set forth in Schedule 4.9 and in the Service Exhibits to the Transition Services Agreement, the assets and properties reflected in the Interim Financial Statements: (a) constitute all of the material assets and properties used in the conduct of the business of the Company as that business is currently conducted, except for properties and assets disposed of or acquired in the ordinary course of business consistent with past practice since the Balance Sheet Date; and (b) are adequate in all material respects to conduct the business of the Company in substantially the same manner as currently conducted.

4.10 Compliance with Law .

(a) The Company is and has been since the Compliance Date in material compliance with all Laws applicable to its businesses and properties. To Seller’s Knowledge, no event has occurred or circumstance exists that could reasonably be expected to constitute or result in a material violation by the Company of any Law applicable to its businesses and properties.

(b) As of the date hereof, the Company has not received since the Compliance Date any written or, to Seller’s Knowledge, oral notification from any Governmental Authority asserting that it is not in compliance in any material respect with any Law applicable to its business or properties.

(c) This Section 4.10 shall not apply to the matters referred to in Section 4.6 (Taxes) and Section 4.11 (Compliance with Educational Laws).

4.11 Compliance with Educational Laws .

(a) Except as set forth on Schedule 4.11(a) , the School is, and since the Compliance Date has been, in compliance in all material respects with all applicable Educational Laws and has obtained and held all material Educational Approvals necessary to conduct its operations as then or currently conducted. Except as set forth on Schedule 4.11(a) , the School is and, since the Compliance Date has been, in compliance in all material respects with the terms and conditions of all such Educational Approvals.

(b) Schedule 4.11(b) sets forth a correct and complete list of all Educational Approvals currently held by the School.

(c) The Required Pre-Closing Educational Consents and Required Post-Closing Educational Consents listed on Schedule 6.9(a) and Schedule 6.9(b) are the only consents from Educational Agencies that are required for the transaction contemplated by this Agreement; provided that the Parties may contact certain additional Educational Agencies listed on Schedule 6.9(c) and Schedule 6.9(d) to determine whether any additional pre-closing approvals or other filings are required.

(d) Except as set forth on Schedule 4.11(d) , since the Compliance Date, the School has been: (i) licensed or exempt from licensure by each State Educational Agency; (ii) accredited by each Accrediting Body; and (iii) certified by the DOE as an eligible institution of higher education and a party to a PPPA agreement with the DOE.

(e) Except as set forth on Schedule 4.11(e) , each current Educational Approval listed on Schedule 4.11(b) is in full force and effect, and no Action to materially limit, suspend, revoke, terminate or cancel any Educational Approval is pending or, to Seller’s Knowledge, threatened. Except as disclosed on Schedule 4.11(e) , since the Compliance Date, the School has not, with respect to each Educational Approval currently held by the School: (i) been on or received written notice or, to the Seller’s Knowledge, received oral notice that the School will be placed on probation, monitoring, or warning status, or subject to any material additional reporting requirements, with any Educational Agency; (ii) had any application made by the School to any Educational Agency denied or withdrawn; (iii) been subject to any adverse action by any Educational Agency to revoke, withdraw, deny, suspend, materially condition, or materially limit an Educational Approval (including being directed to show cause why an Educational Approval should not be revoked, withdrawn, conditioned, suspended, or limited); (iv) received written notice or, to the Seller’s Knowledge, received oral notice that any of the Educational Approvals will not be renewed; or (v) received written notice that the School is in violation in any material respect with the terms or conditions of any Educational Approval.

(f) Except as set forth on Schedule 4.11(f) , since the Compliance Date, the School has not received written notice from an Educational Agency alleging failure to hold or obtain any Educational Approval.

(g) Since the Compliance Date, the Company and the School are and have been in compliance in all material respects with the requirements set forth at 20 U.S.C. § 1094(a)(20) and 34 C.F.R. § 668.14(b)(22) regarding payments based directly or indirectly on success in securing enrollments or financial aid to covered persons.

(h) Since the Compliance Date, the Company and the School have complied in all material respects with Educational Law with respect to its recruitment, marketing, and enrollment practices, including with respect to the licensure of individuals and agents engaged in recruitment and enrollment activities by applicable State Educational Agencies.

(i) Since the Compliance Date, the School has complied in all material respects with Educational Law regarding misrepresentations, as that term is defined at 34 C.F.R. Part 668 Subpart F and the consumer disclosure requirements in 34 C.F.R. Part 668 Subpart D, as in effect for the applicable period.

(j) Since the Compliance Date, the School has complied in all material respects with the obligations set forth in its enrollment agreement and related agreements with students.

(k) Except as set forth in Schedule 4.11(k) , since the Compliance Date, no Educational Agency has required the School to post a letter of credit for any reason, including any request for a letter of credit based on late refunds pursuant to 34 C.F.R. § 668.173, or required or requested that the School process its Title IV Program funding under the reimbursement or heightened cash monitoring procedures set forth at 34 C.F.R. § 668.162. Schedule 4.11(k) sets forth a list of current sureties or bonds required by any Educational Agency.

(l) Since the Compliance Date, the School has disclosed and timely reported, in compliance in all material respects with the applicable provisions of 34 C.F.R. Part 600: (i) the addition of any new educational programs or locations; and (ii) changes to any educational programs or locations.

(m) Since the Compliance Date, the School has complied in all material respects with all Educational Laws related to the calculation of Title IV Program and other Student Financial Assistance Program awards and disbursement to students and refunds to or on behalf of students.

(n) Since the Compliance Date, the School has materially complied with the applicable requirements of any Educational Agency concerning the proper and accurate calculation and timely reporting of student outcomes, including, but not limited to, retention, completion, and placement rates, graduation examination and professional licensure pass rates.

(o) Except as set forth on Schedule 4.11(o) , to the Seller’s Knowledge, since the Compliance Date, neither the Company or the School has been the subject of an investigation or lawsuit initiated by the Consumer Financial Protection Bureau, Federal Trade Commission, Securities and Exchange Commission, U.S. Department of Education Office of Inspector General, any state attorney general, state consumer protection bureau, or other Governmental Authority with regard to the operation of the School, participation in any Student Financial Assistance Program, or private educational loan program.

(p) Except as set forth on Schedule 4.11(p) , since the Compliance Date, to the extent any state requires the graduates of any of the School’s educational programs to: (i) obtain a license or similar credential to work in their field; or (ii) pass a licensing examination to work in their field, to Seller’s Knowledge, no state has notified the School to raise questions about whether the School’s programs allow the School’s graduates to obtain such license or sit for such examination; provided , however , the School makes no representation regarding the individual attributes or prerequisites regarding any individual student.

(q) Since the Compliance Date, the School has been in material compliance with the applicable standards of ACOTE and CAPTE with respect to its clinical training and fieldwork sites and to Seller’s Knowledge, the School has not received any written notice from any Educational Agency that the School must cease placing students at clinical sites in any state.

(r) Except as set forth on Schedule 4.11(r) , the School has resolved and/or disclosed to the Buyer all student complaints that were forwarded to it by any Educational Agency.

(s) Except as set forth on Schedule 4.11(s) , the School is not providing any educational instruction or services on behalf of any other institution or organization of any sort (whether or not participating in the Title IV Programs), and except for activities conducted pursuant to a clinical training agreement, no other institution or organization of any sort is providing any educational instruction or services on behalf of the School.

(t) The School has made available to the Buyer correct and complete copies of material and substantive correspondence and documents received from, or sent by or on behalf of the School to the DOE or any Educational Agency, excluding general correspondence routinely received from or sent to any Educational Agency by institutions participating in Title IV programs or approved by such Educational Agency and including correspondence and documents that were (i) sent or received since the Compliance Date or relate to any issue which remains pending and (ii) relate to (1) any written notice that any Educational Approval is not in full force and effect or that an event has occurred which constitutes or, with the giving of notice or the passage of time or both, would reasonably be expected to result in the revocation of such Educational Approval; (2) any written notice that the Company or the School has violated or is violating any Educational Law; (3) any compliance audit, program review, or other compliance review; (4) any written notice of an intent to limit, show cause, suspend, terminate, revoke, cancel, not renew or materially condition (including any action placing the School or any location or campus thereof on probation) the accreditation of the School, any location, or campus thereof; (5) any written notice of an intent or threatened intent to condition the provision of Title IV program funds to the School, or the continued operation of the educational programs offered by the School on the posting of a letter of credit or other surety in favor of the DOE or any Educational Agency; (6) any written notice of an intent to provisionally certify the eligibility of the School to participate in the Title IV programs; or (7) the placement or removal of the School on or from the reimbursement or cash monitoring method of payment under the Title IV programs.

(u) The School has made available to the Buyer the internal student census report for March 2018 and redacted versions of the student rosters that were submitted to the DOE for the months of December, 2016 through February, 2018.

(v) The representations and warranties in this Section 4.11 are the only representations and warranties with respect to the School’s compliance with Educational Laws.

4.12 Permits . Schedule 4.12 contains a complete list of all material Permits issued to the Company as of the Reference Date and that are currently used by the Company in connection with its business that are necessary for the ownership and use of its properties and assets or the conduct of its business as presently conducted. Since the Reference Date, the Company has obtained all material Permits, if any, not then required to be held by it but that are now necessary for the ownership and use of its properties and assets or the conduct of its business as presently conducted. With respect to each Permit listed on Schedule 4.12 and each Permit that is currently necessary for the ownership and use of the Company’s properties and assets or the conduct of the Company’s business as presently conducted or that has been obtained since that date and that is so necessary: (a) the Company is in material compliance with all of the terms and requirements thereof; (b) to Seller’s Knowledge, since the Compliance Date, no event has occurred or circumstance exists that could be reasonably be expected to constitute or result in a material violation of or a material failure to comply with any term or requirement thereof; and (c) since the Compliance Date, the Company has not received any written notice from any Governmental Authority regarding any failure to comply with any term or requirement thereof. This Section 4.12 shall not apply to the matters referred to in Section 4.11 (Compliance with Educational Laws).

4.13 Insurance . Schedule 4.13 sets forth, a true and correct list of all material policies of insurance maintained by or for the benefit of the Company and covering the Company and its business. Such insurance policies: (a) are in full force and effect, and the Company has not received written notice of cancellation of any of them; (b) are sufficient for compliance with applicable Laws and Material Contracts to which the Company is a part; and (c) will not continue after the Closing. As of the date hereof, there are no material claims pending as to which coverage has been denied or disputed. Since November 13, 2014, the Company has not maintained, established, sponsored or participated in or contributed to any self-insurance plan.

4.14 Material Contracts . Set forth on Schedule 4.14 is a list of each of the following Contracts to which the Company was a party as of the Reference Date (collectively, the “ Reference Material Contracts ” and together with the Subsequent Material Contracts (as defined in Section 4.14(q) below), the “ Material Contracts ”.)

(a) Each partnership or joint venture Contract or similar arrangement;

(b) Each Contract limiting the right of the Company to engage in or compete with any Person in any business or in any geographic area;

(c) Each Contract (other than intercompany loan Contracts that will be repaid in full at or before Closing) for indebtedness for borrowed money in excess of $500,000, including letters of credit, guaranties, indentures, swaps and similar agreements, including capitalized lease obligations;

(d) Each Contract for the lease of personal property to or from any Person providing for lease payments in excess of $100,000 per year;

(e) Each Lease providing for rental payments in excess of $500,000 per year;

(f) Each Contract with respect to any Intellectual Property owned by the Company or held by the Company under a lease or license, except as set forth in Schedule 4.9 (other than licenses and agreements for commercially available, off the shelf software involving up-front or annual payments of less than $50,000);

(g) Each Contract with a customer of, or vendor to, the Company under which the Company was paid (or made payments of) more than $250,000 in either 2016 or 2017, or expects to be paid (or expects to make payments of) more than $250,000 in 2018;

(h) Each Contract for the employment or engagement of any individual, whether on a full‑time, part‑time, consulting, or other basis, under which annual payments by the Company exceed $150,000 and that: (i) is not terminable by the Company on 30 days’ or less notice and without liability; (ii) provides for severance or other similar payments after termination; or (iii) provides for payment of any compensation or benefits in connection with the consummation of the transactions contemplated hereby;

(i) Each Contract with any labor union, or labor organization (“ Collective Bargaining Agreement ”);

(j) Each Contract under which the Company has advanced or loaned any amount to any of its former or current directors, officers or employees or any of their respective Affiliates except for advances and loans that will be fully repaid on or before the Closing;

(k) Each Affiliate Contract;

(l) Each Contract with any Governmental Authority;

(m) Each Contract that provides for the guarantee or assumption by the Company of any Tax or other liability of any Person other than the Company;

(n) Each Contract settling claims that were threatened or subject to litigation pursuant to which the Company is obligated to pay consideration in excess of $250,000 after the date hereof or that imposes any continuing material obligation on the Company;

(o) The Paris Purchase Agreement and all ancillary agreements or arrangements (including any promissory notes) entered into in connection therewith;

(p) Each Contract not otherwise required to be listed pursuant to the foregoing subsections of this Section 4.14 that requires the Company to make payments of more than $250,000 per year and that is not terminable upon less than 60 days prior written notice by the Company without penalty or premium.;

(q) Except as set forth on Schedule 4.4(q) , since the Reference Date the Company has not entered into any Contract that requires the Company to make payment of more than $1,000,000 in any year and that is not terminable on 60 days or fewer notice without penalty or premium (a “ Subsequent Material Contract ”) or any Contract that would have been required to be included on subparts (a), (b), (e), (h), (i), (j), (m), or (n) of Schedule 4.14 .

Each of the Material Contracts has (i) either expired and terminated in accordance with its terms or (ii) is in full force and effect and is a legal, valid and binding agreement of the Company and, to Seller’s Knowledge, the other parties thereto, subject only to the General Enforceability Exceptions. The Company is not and, to Seller’s Knowledge, no other party is in material default under or in material breach of any Material Contract to which it is a party as of the date hereof and, as of the date hereof, the Company is not in receipt of any written claim of default or breach under, any Material Contract to which it is a party. No event has occurred and is continuing which, with the passage of time or the giving of notice or both, would result in a material default or material breach by the Company under any Material Contract. As of the date hereof, the Company has not received written notice of any termination, non-renewal or cancellation by another party to any Material Contract to which it is a party, or of such party’s intention to terminate, fail to renew or cancel any Material Contract, to which the Company is a party. The Company has made available to Buyer a complete copy of each written Material Contract, together with amendments, written waivers or other changes thereto in its possession, and an accurate description of the material terms and conditions of each oral binding Material Contract, including any waivers or other changes thereto, whether written or oral.

4.15 Legal Proceedings . Except as set forth in Schedule 4.15 , there are no Actions pending or, to Seller’s Knowledge, threatened against the Company that: (a) would reasonably be expected to be material to the Company; or (b) questions or challenges the validity of this Agreement or any of the other Transaction Documents, or any action taken or to be taken by the Company in connection with this Agreement or any of the other Transaction Documents. There is no Governmental Order outstanding against the Company nor, to Seller’s Knowledge, is any Governmental Order threatened. There is no unsatisfied judgment or award against the Company or any of its properties or assets.

4.16 Intellectual Property .

(a) Schedule 4.16 sets forth, with the application number, application date, registration/issue number, registration/issue date, title or mark, country or other jurisdiction and owner(s) (and with respect to Domain Names, the registrar), as applicable, a complete and correct list of all the following Intellectual Property owned by, registered to or pending in the name of the Company as of the date of this Agreement: (i) Patents and applications therefor; (ii) registered Trademarks and applications therefor; (iii) registered Copyrights and applications therefor; and (iv) Domain Names. All Company Intellectual Property, if any, that is owned by the Company, is valid, subsisting and, to the Seller’s Knowledge, enforceable. To the Seller’s Knowledge, all Company Intellectual Property that is not owned by the Company is valid, subsisting and enforceable.

(b) The Company owns or has the valid right to use all of the material Intellectual Property that is owned, leased or licensed by it, free and clear of all Liens, licenses or other restrictions other than Permitted Liens or license terms previously disclosed to Buyer, and, except for software systems to which the Company will have access pursuant to the Transition Services Agreement, such Intellectual Property owned or for which the Company has a valid right to use constitutes all Intellectual Property necessary for the Company’s conduct of its business as currently conducted.

(c) To Seller’s Knowledge, the Company Intellectual Property as currently licensed or used by the Company, and the Company’s conduct of its business as currently conducted: (A) do not infringe, misappropriate or otherwise violate, in any material respect, the Intellectual Property of any Person; and (B) no Person is infringing, misappropriating or otherwise violating, in any material respect, any Company Intellectual Property. There are no claims pending or, to Seller’s Knowledge, threatened in writing, and no claims have been brought in writing in the past four years: (1) alleging that the Company infringes, misappropriates or otherwise violates the Intellectual Property of any Person; or (2) challenging the validity, enforceability, ownership or use of any Intellectual Property owned by the Company or, to the Seller’s Knowledge, material Company Intellectual Property that is not owned by the Company.

(d) Except as set forth on Schedule 4.9 , the Company owns, or validly leases or licenses, all software and computer systems, including hardware, electronic data processing, networks, interfaces, platforms, servers, and peripherals (collectively, “ Company Systems ”) that are necessary for the Company’s conduct of its business as currently conducted. The Company maintains commercially reasonable security, disaster recovery and business continuity plans, procedures and facilities, and in the last 12 months, there has not been any material failure with respect to any of the Company Systems that has not been remedied or replaced in all material respects.

(e) Since November 13, 2013, the Company has been in material compliance with all Data Security Requirements governing the collection, interception, storage, receipt, purchase, sale, transfer, processing and use (“ Collection and Use ”) of all information constituting Personal Data. The Company’s Collection and Use of Personal Data is in accordance in all material respects with the Company’s privacy policies and applicable terms of use.

(f) Since November 13, 2013, the Company has maintained commercially reasonable practices to protect and secure all Sensitive Company Data.

(g) Since November 13, 2013, the Company has taken reasonable steps to protect its software, databases, systems, networks and Internet sites and all information stored or contained therein or transmitted thereby from unauthorized or improper Collection and Use including appropriate backup, security, and disaster recovery technology, and, except as described in Schedule 4.16(g) , to Seller’s Knowledge, no Person has gained unauthorized access to any Company software, hardware, firmware, servers, databases, systems, networks, network equipment, interfaces, applications or Internet sites or to any information stored or contained therein or transmitted thereby. Except as described in Schedule 4.16(g) , the Company has not experienced within the past two years any material disruption to, or material interruption in, the conduct of its business attributable to a defect, error, or other failure or deficiency of any Company system. The Company is operated in accordance with and to Seller’s Knowledge, is in material compliance with a written information security program established by Parent.

(h) To Seller’s Knowledge, neither the execution, delivery, or performance of this Agreement (or any of the Ancillary Agreements) nor the consummation of any of the transactions contemplated by this Agreement, will result in any violation of any Company privacy policy or any legal requirement pertaining to privacy, security, User Data, or Personal Data.

(i) To Seller’s Knowledge, none of the software (including firmware and other software embedded in hardware devices) owned by the Company (the “ Company Software ”) contains any bug, defect, or error that materially and adversely affects the use, functionality, or performance of such Company Software or any product or system containing or used in conjunction with such Company Software.

4.17 Personnel; Employee Benefit Plans .

(a) The Company is not a party to or subject to any Collective Bargaining Agreement. Since November 13, 2014: (i) no labor union, trade union, group of employees or other collective bargaining unit has represented, or claimed to represent, or made a demand for recognition or certification with respect to, any of the Company’s employees; (ii) there has been no actual or, to Seller’s Knowledge, threatened union activity or union-related organizing activity or campaign with respect to any employees of the Company; and (iii) there has been no actual or, to Seller’s Knowledge, threatened unfair labor practice charges, material grievances, material arbitrations, strikes, lockouts, work stoppages, slowdowns, picketing, hand billing or other labor disputes against or affecting the Company. The Company is not delinquent in any payments or reimbursements owed to, and are not in breach of any applicable Laws requiring payments or reimbursements to, any current or former employees, independent contractors or other service providers. The Company is not and has not been: (A) a “contractor” or “subcontractor” (as defined by Executive Order 11246); (B) required to comply with Executive Order 11246; (C) required to maintain an affirmative action plan; or (D) party to, or bound by, any federal, state or local government contracts requiring the payment of prevailing wage rates and/or benefits to workers.

(b) Schedule 4.17(b) lists each “ Company Benefit Plan ” and identifies each such Company Benefit Plan under which was sponsored or maintained by the Company at the Reference Date or under which the Company will have any liability with respect to on or after the Closing Date (each such plan an “ Assumed Company Benefit Plan ”). For purposes of this Agreement, the term Company Benefit Plan shall mean each “employee benefit plan” as that term is defined in Section 3(3) of ERISA, incentive, bonus, compensation, deferred compensation, performance, phantom equity, stock purchase, stock or stock-based, change in control, employment, severance, separation, retention, vacation, fringe benefit, tax gross-up and other similar agreements, and any other employee plans, policies, agreements or arrangements maintained or sponsored at the Reference Date for the benefit of the Company’s former or current employees, officers, directors or independent contractors or with respect to which the Company may have any liability.

(c) Except as set forth in Schedule 4.17(c) , with respect to each Company Benefit Plan, Seller has made available to Buyer accurate, current and complete copies of each of the following, in each case, as of the Reference Date: (i) the current plan document together with all amendments; (ii) where applicable, copies of any trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar agreements, and investment management or investment advisory agreements; (iii) copies of any summary plan descriptions, summaries of material modifications, employee handbooks and any other material written communications; (iv) in the case of any Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (v) in the case of any Company Benefit Plan for which a Form 5500 is required to be filed, a copy of the three most recently filed Forms 5500, with schedules and financial statements attached; and (vi) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or other Governmental Authority. Since the Reference Date, the Company has not adopted any new benefit plan that would materially affect its operations or amended or modified any Company Benefit Plan, except as required by Law or the express terms of the relevant plan.

(d) Except as set forth on Schedule 4.17(d) : (i) each Company Benefit Plan (and each related trust, insurance contract or fund) has been maintained, funded and administered in accordance with its terms and complies in form and in operation with all applicable requirements of ERISA, the Code and other applicable Laws; and (ii) no act or omission has occurred and no condition exists with respect to any Company Benefit Plan that would subject the Company, Buyer or any of their Affiliates to any material fine, penalty, tax or other liability imposed under ERISA, the Code or other applicable Law.

(e) With respect to each Company Benefit Plan, all contributions (including all employer contributions and employee salary reduction contributions) that are due have been made within the time periods prescribed by ERISA and the Code, and all contributions for any period ending on or before the Closing Date that are not yet due have been made or properly accrued in accordance with GAAP.

(f) Neither the Company nor any ERISA Affiliate maintains, sponsors, contributes to, has any obligation to contribute to, or has any liability or potential liability under or with respect to: (i) any “defined benefit plan” as defined in Section 3(35) of ERISA or any other plan subject to the funding requirements of Section 412 of the Code or Section 302 of Title IV of ERISA; (ii) any “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA, Code); (iii) “multiple employer welfare arrangement” (as such term is defined in Section 3(40) of ERISA); (iv) any “multiple employer plan: within the meaning of 210 of ERISA or Section 413(c) of the Code; or (v) any employee benefit plan, program or arrangement that provides for post-retirement medical, life insurance or other welfare-type benefits (other than health continuation coverage required by COBRA). The Company does not have any liability with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) solely by reason of being treated as a single employer under Section 414 of the Code with any trade, business or entity other than the Company.

(g) With respect to each Company Benefit Plan: (i) to Seller’s Knowledge, there have been no non-exempt “prohibited transactions” (as defined in Section 406 of ERISA or Section 4975 of the Code); (ii) no “fiduciary” (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of such Company Benefit Plan; and (iii) no action, investigation, suit, proceeding, hearing or claim with respect to the assets thereof (other than routine claims for benefits) is pending or threatened, and neither the Company nor Seller have any knowledge of any facts that would give rise to or could reasonably be expected to give rise to any such action, suit or claim.

(h) The Company has no material liability by reason of (i) any individual who performs services for the Company and who is not treated as an employee for federal income tax purposes by the Company being an employee under applicable law or for any purpose including, without limitation, for Tax withholding purposes or Company Benefit Plan purposes or (ii) an individual who performs or performed services for the Company in any capacity being improperly excluded from participating in a Company Benefit Plan or being improperly allowed to participate in any Company Benefit Plan. Each employee of the Company has been properly classified as “exempt” or “non-exempt” under Applicable Law.

(i) The Company does not have any obligation to gross-up or indemnify any individual with respect to any tax, interest or penalty under Sections 409A or 4999 of the Code.

(j) Neither the consummation of the transactions contemplated by this Agreement nor the execution and delivery of this Agreement or the Transaction Documents will (alone or in combination with any other event, whether contingent otherwise), directly or indirectly: (i) result in, or accelerate the time of payment or provision, funding or vesting of, any payment (whether in cash, property or the vesting of property), benefit or other right becoming due from the Company to any former or current employee, officer, director or independent contractor under any Company Benefit Plan or otherwise; (ii) increase any compensation, benefit or other right payable by the Company to any former or current employee, officer, director or independent contractor; (iii) trigger the funding, setting aside of assets or any other obligation by the Company under any Company Benefit Plan; (iv) limit the right of the Company or its successors to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust; or (v) as of or following the Closing, result in any amount being nondeductible under Section 280G of the Code or subject to an excise tax under Section 4999 of the Code.

4.18 Conduct of Business Since the Balance Sheet Date . Except for actions taken in connection with the process of selling the Company or as set forth on Schedule 4.18 , since the Balance Sheet Date, the Company has conducted its business and operations in the ordinary course of business consistent with past practices and there has not been: (a) any material damage, destruction, casualty or loss with respect to any material assets or properties of the Company; and (b) any action taken by the Company that, if taken after the date hereof, would constitute a violation of Section 6.1 , and since December 31, 2017, there has not been any Material Adverse Effect.

4.19 Affiliated Transactions . Except as set forth on Schedule 4.19 and subject to the last sentence of this Section 4.19 : (a) no current or former officer, director or Affiliate of the Company (including Seller), and no entity in which such individual owns a controlling interest; and (b) to Seller’s Knowledge, no individual in such officer’s, director’s, shareholder’s or Affiliate’s (including Seller’s) immediate family, in each case: (i) is party to any agreement (other than for employment) with the Company; (ii) has an interest in any material tangible or intangible assets used or held for use by the Company; or (iii) owns, directly or indirectly, any financial interest in, or is a director, officer or employee of any Person that is a supplier, lessor, lessee or competitor of the Company (“ Affiliate Contracts ”). For the purposes of this Section 4.19 and the definition of “Affiliate Contracts,” the term “Affiliate” shall include only Persons that are directly or indirectly controlled by Parent, Persons that hold of record 25% or more of the voting or economic interests in Parent, and, in the case of any such Person, any other Persons holding of record 51% or more of the voting or economic interests in such material Person.

4.20 Environmental .

(a) The Company is currently and at all times since November 13, 2013 has been in material compliance with all applicable Environmental Laws which compliance has included obtaining, and complying in all material respects with, the terms and conditions of, all material Permits required pursuant to Environmental Laws for the occupation of its properties or facilities and the operation of its business, except where such non-compliance would not result in the Company incurring material liabilities. The Company has not received from any Governmental Authority or any other Person any written or, to Seller’s Knowledge, verbal notice, written report or other written information regarding any actual or alleged violation by the Company of, or liability of the Company under, any Environmental Laws that remains outstanding or unresolved.

(b) Since November 21, 2013, neither the Company nor any other Person (to the extent giving rise to liability for the Company) has: (i) treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, exposed any Person to, or released any Hazardous Material in violation of Environmental Laws; or (ii) owned or operated any facility or property (including the Leased Real Property) contaminated by any Hazardous Material, in either case of clause (i) or (ii) so as to give rise to any material liabilities to the Company, including any investigative, corrective or remedial obligations, pursuant to Environmental Laws.

(c) The Company has furnished to Buyer all final material environmental assessments, audits, reports and other material environmental, health or safety documents relating to the past or current properties, facilities or operations of the Company, to the extent such documents are in the Company’s or Seller’s possession.

4.21 Suppliers . Schedule 4.21 sets forth a complete and accurate list of the 20 largest suppliers of products or services to the Company (measured by the aggregate amount purchased by the Company) during the fiscal year ended on December 31, 2017. Since the Balance Sheet Date, none of such suppliers has cancelled, terminated or materially and adversely changed its business relationship with the Company or notified the Company in writing of any intention to cancel, terminate or materially and adversely change its business relationship with the Company.

4.22 Illegal Payments . None of the Company or Seller nor, to Seller’s Knowledge, any of their respective directors, officers, employees, agents or members, has used any corporate funds of the Company for unlawful gifts, contributions, payments or similar benefits relating to political activity, or made any direct or indirect unlawful payments to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds of the Company, established or maintained any unlawful or unrecorded funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, made any bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment or agreed to give any gift or similar benefit to any customer, student, supplier, governmental employee or other Person.

4.23 No Brokers . Except for Macquarie Capital (USA) Inc., no broker, finder or similar agent has been employed by or on behalf of Seller or the Company, and no Person is entitled to any brokerage commission, finder’s fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby based on any agreement made by or on behalf of the Company or Seller.

4.24 No Other Representations or Warranties . Except for the representations and warranties contained in this ARTICLE IV (in each case, as modified by the Schedules), none of Seller, the Company or any of their respective Affiliates, employees or representatives are making or have made any representations or warranties of any sort to or for the benefit of Buyer, whether oral or written, express or implied, including any implied warranty of merchantability or of fitness for a particular purpose, and each of them expressly disclaims any such other representations and warranties.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth on the Buyer Disclosure Schedules, Buyer represents and warrants to Seller that the statements contained in this ARTICLE V are true and correct as of the date hereof and as of the Closing Date.

5.1 Investment Intent . The Company LLC Units are being purchased for Buyer’s own account and not with the view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act and the rules and regulations promulgated thereunder. Buyer acknowledges that the Interests will not be registered under the Securities Act or any state securities laws, and that the Company LLC Units may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. Buyer is able to bear the economic risk of holding the Company LLC Units for an indefinite period (including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment.

5.2 Organization and Standing . Buyer is a Delaware corporation validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization. Buyer is duly qualified to do business in each jurisdiction in which the character of the properties owned or leased by it or in which the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not have or could not reasonably be expect to have a material adverse effect on Buyer.

5.3 Authority, Validity and Effect . Buyer has the requisite power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party to be executed and delivered by it, and to consummate the transactions contemplated hereby and thereby and to carry on the business in which it is engaged and to own, lease and use the properties owned, leased and used by it. The execution and delivery of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate or other action on the part of Buyer. This Agreement and the Transaction Documents to which it is party have been duly and validly executed and delivered by Buyer and constitutes the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms, except as limited by the General Enforceability Exceptions.

5.4 No Conflict; Required Filings and Consents .

(a) Neither the execution and delivery of this Agreement or the other Transaction Documents by Buyer, nor the consummation by Buyer of the transactions contemplated hereby or thereby will (i) conflict with or result in a breach of any provisions of the certificate of incorporation, bylaws (or equivalent organizational documents of Buyer), (ii) with or without the giving of notice or the passage of time or both, constitute or result in the breach of or default under, or give rise to any right of termination, cancellation or acceleration with respect to, violate or conflict with, require any consent under any note, bond, mortgage, indenture, license, agreement, lease, or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be subject, or (iii) violate any Governmental Order or Law applicable to Buyer or any of its properties or assets, where, in any such case, the conflict, violation, breach, default or other action would adversely the ability of Buyer to perform its obligations under this Agreement or any Transaction Document executed by it.

(b) No consent is required to be obtained by Buyer for the execution and delivery of this Agreement or the Transaction Documents or compliance by Buyer with any of the provisions hereof or thereof, for the consummation of the transactions contemplated by this Agreement or the Transaction Documents or the taking of any action contemplated hereby or thereby that if not obtained would adversely affect the ability of Buyer to perform its obligations hereunder or thereunder.

(c) There are no Actions pending, and to the knowledge of Buyer, threatened, that question any of the transactions contemplated by, or the validity of, this Agreement or the other Transaction Documents or which, if adversely determined, would affect the ability of Buyer to enter into or perform its obligations under this Agreement or any Transaction Document.

5.5 Compliance with Educational Laws. To Buyer’s Knowledge, there exists no material facts or circumstances attributable to Buyer, or other Person that exercises substantial control (as the term “substantial control” is defined in 34 C.F.R. § 668.174(c)(3)) with respect to Buyer, that would, individually or in the aggregate, materially adversely affect the Company’s or the School’s ability to obtain any Educational Consent, and there are no material outstanding Governmental Orders and no material unsatisfied judgments, penalties or awards against or affecting Buyer or other Person that exercises substantial control with respect to Buyer or any of their properties or assets that would materially and adversely affect the ability of Buyer to consummate the transaction contemplated hereby or perform its obligations hereunder.

5.6 Independent Investigation; No Reliance . In connection with its investment decision, Buyer and/or its representatives have inspected and conducted such reasonable independent review, investigation and analysis (financial and otherwise) of the Company as desired by Buyer. The purchase of the Interests by Buyer and the consummation of the transactions contemplated hereby by Buyer are not done in reliance upon any representation or warranty by, or information from, Seller, the Company or any of their respective Affiliates, employees or representatives, whether oral or written, express or implied, including any implied warranty of merchantability or of fitness for a particular purpose, except for the representations and warranties specifically and expressly set forth in ARTICLE IV (in each case, as modified by the Company Disclosure Schedules), and Buyer acknowledges that Seller and the Company expressly disclaim any other representations and warranties. Such purchase and consummation are instead done entirely on the basis of Buyer’s own investigation, analysis, judgment and assessment of the present and potential value and earning power of the Company, as well as those representations and warranties, specifically and expressly set forth in ARTICLE IV (in each case, as modified by the Company Disclosure Schedules). Buyer acknowledges that neither Seller nor the Company has made any representations or warranties to Buyer regarding the probable success or profitability of the Company. Neither Seller, the Company nor any other Person will have or be subject to any liability to Buyer or any other Person resulting from the distribution to Buyer or its representatives or Buyer’s use of any information regarding any of them, including any confidential information memoranda distributed on their behalf relating to their respective businesses or other publications or data room (including any electronic or “virtual” data room) information provided or made available to Buyer or its representatives, or any other document or information in any form provided or made available to Buyer or its representatives, including management presentations, in connection with the purchase and sale of the Interests and the transactions contemplated hereby.

5.7 Sufficiency of Funds. At the Closing, Buyer will have sufficient cash on hand or other sources of immediately available funds to pay the Purchase Price and consummate the transactions contemplated by this Agreement.

5.8 Equity Commitment .

(a) Buyer has delivered to Seller and the Company a duly executed, true, complete, and correct copy (including all exhibits, schedules, and annexes thereto) (collectively, the “ Equity Commitment Letter ”) dated as of the date hereof, by and between Altas Partners Holdings LP (the “ Fund ”) and Buyer, pursuant to which the Fund has committed, subject to the terms thereof, to invest in Buyer at the Closing the cash amount set forth therein, and of which Seller is a third party beneficiary.

(b) The Equity Commitment Letter is in full force and effect and has not been amended, waived or modified. It constitutes the legal, valid, binding and enforceable obligation of the Fund. There are no conditions precedent or other contingencies related to the funding of the Equity Commitment Letter except those expressly set forth in it, and there are no contractual or other contingencies under any agreement which would permit the Fund to reduce the amount of the commitment thereunder.

(c) Subject to the terms and conditions of the Equity Commitment Letter, and subject to the terms and conditions of this Agreement, the net proceeds contemplated by the Equity Commitment Letter, will provide funds to Buyer sufficient to pay the Purchase Price and the other amounts payable under Section 2.2 at the Closing.

5.9 Solvency . Assuming that (i) the representations and warranties set forth in ARTICLE IV are true and correct in all material respects; (ii) no condition or event has caused or no event or condition exists that could reasonably be expected to cause a Material Adverse Effect; and (iii) Seller and the Company have complied with the covenants set forth in Section 6.1 , after giving effect to the transactions contemplated by this Agreement, the Company (a) will be solvent (in that both the fair value of its assets will not be less than the sum of its liabilities and that the present saleable value of its assets will not be less than the amount required to pay its probable liabilities as they become absolute and matured), (b) will have adequate capital with which to engage in its business, and (c) will not have incurred and will not plan to incur liabilities beyond its ability to pay as they become absolute and matured.

5.10 No Brokers . No broker, finder or similar agent has been employed by or on behalf of Buyer, and no Person is entitled to any brokerage commission, finder’s fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby based on any agreement made by or on behalf of Buyer.

ARTICLE VI
COVENANTS AND AGREEMENTS

6.1 Interim Operations of the Company . From the date of this Agreement and until the Closing Date or the earlier termination of this Agreement, except as set forth on Schedule 6.1 , or as contemplated in the Company’s 2018 and 2019 annual budgets, or as expressly provided for by this Agreement, unless Buyer gives its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed): (a) the Company shall (i) conduct its business in the ordinary course of business consistent with past practice; (ii) make capital and other expenditures in accordance with the Company’s 2018 budget set forth on Schedule 6.1 and implemented in a matter consistent with the Company’s past practices (it being understood that if the amount of capital expenditures made in 2018, prior to Closing, is less than 90% of budgeted capital expenditures during the same period, then the difference between capital expenditures made and 90% of budgeted capital expenditures will be deemed to increase Company Debt on a dollar-for-dollar basis); and (iii) use commercially reasonable efforts to maintain and preserve intact the current organization, business and franchise of the Company and to preserve its relationships with its employees, students, customers, lenders, suppliers, Educational Agencies and other regulators and others having business relationships with the Company to the extent permitted by applicable Law; and (b) the Company shall not:

(a) (i) transfer, license, abandon, acquire or dispose of or lease, license or sublicense any material property (personal, intangible or real) or assets or (ii) mortgage or encumber any material property (personal, intangible or real) or assets other than by Permitted Liens;

(b) acquire (whether by merger, consolidation, sale of stock, sale of assets or otherwise), in a single transaction or a series of related transactions, any Person or the material assets thereof;

(c) enter into, modify, amend, or terminate: (i) any Material Contracts or Leases other than in the ordinary course of business consistent with past practice; or (ii) any Contract with any Governmental Entity, other than in the ordinary course of business consistent with past practice;

(d) take any action to: (i) enter into, modify, amend, or terminate any Collective Bargaining Agreement, except to the extent required by Law or any existing Contract disclosed to Buyer prior to the date hereof; (ii) amend, terminate, enter into or adopt any employee benefit plan or enter into any employment arrangement except in the ordinary course of business consistent with past practice or any severance, change in control, retention or similar arrangement other than arrangements that will be discharged by the Company or Seller at or before Closing; (iii) grant any increase in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable or to be provided to its former or current employees, officers, directors or independent contractors or establish or increase any compensation or benefits under any employee benefit plan, other than customary cost of living adjustments and increases in the ordinary course of business consistent with past practice; (iv) hire or terminate without cause any individual with annual compensation that exceeds $150,000; (v) engage in any action requiring notice to employees in the event of an employment loss or layoff under the WARN Act; or (vi) recognize any labor union, labor organization or group of employees as the collective bargaining representatives for any employees of the Company;

(e) make any material change to its accounting methods, principles, policies or practices, except as may be required by changes to GAAP or applicable Law;

(f) make any material amendment to its articles of organization or operating agreement (or equivalent organizational documents);

(g) except as specifically contemplated hereby issue, sell, redeem or otherwise acquire any membership interests or other equity interests or options, warrants, calls, subscriptions or other rights to purchase any membership interests or other equity interests of any Person or split, combine, subdivide or otherwise reclassify their capital stock or other equity;

(h) declare, set aside, make or pay any dividend or other distribution (in cash or otherwise) on any of the Company LLC Units or the Interests to any Person (other than cash dividends to Seller or distributions to Seller and its Affiliates effected by issuing or forgiving intercompany debt);

(i) (i) make any commitment for any capital expenditure that would result in monetary payments in excess of $500,000 in the aggregate by the Company after the Closing, or make any material capital investment in, or any loan to, any other Person;

(j) create, incur, assume or guarantee any indebtedness for borrowed money except draws under existing lines of credit and revolving loans, unsecured current obligations, liabilities incurred in the ordinary course of business consistent with past practice, indebtedness that will be repaid at or before Closing, and capital leases for equipment in the ordinary course of business consistent with past practice;

(k) enter into any new intercompany loan Contract or Contract under which the Company advances or loans any amounts to any of its former or current directors, officers, employees or any of their respective Affiliates, in each case except for loans and advances that will be repaid at or before the Closing;

(l) make, revoke or change any Tax election or accounting method, settle or compromise any liability with respect to Taxes or consent to any claim or assessment relating to Taxes that, in any such case, would reasonably be expected to have the effect of materially increasing any Tax liability in respect of any taxable period beginning after the Closing Date or that otherwise would be borne by Buyer (taking into account the effect of the indemnity provisions of this Agreement);

(m) institute or settle any Action (i) involving equity or injunctive relief or (ii) that would require a monetary payment of more than $250,000 by the Company after the Closing;

(n) adopt any plan of liquidation or dissolution or file a petition in bankruptcy or consent to the filing of any bankruptcy;

(o) fail to maintain the Leased Real Property in substantially the same condition as of the date of this Agreement, ordinary wear and tear, casualty and condemnation excepted;

(p) agree to take any of the actions described in clauses (a) through (o) above or take any action or resolve that would result in the foregoing;

(q) consistent with the schedule set forth on Schedule 6.1 , make a material change to its plan to open new campuses or add new educational programs, or fail to take commercially reasonable steps to maintain all Educational Approvals or seek new approvals for educational programs or new campuses; or

(r) materially change the nature of its business (including enter into new jurisdictions and change its regulatory status).

For the purpose of obtaining Buyer’s consent pursuant to this Section 6.1 , Seller shall provide a written notice setting forth in reasonable detail the contemplated action. Failing any answer from Buyer within five Business Days after receipt of Seller’s notice, Buyer shall be deemed to have given its consent with respect to such matter.

6.2 Reasonable Access; Confidentiality .

(a) From the date of this Agreement until the Closing or the earlier termination of this Agreement, and subject to applicable Law, Seller and the Company shall give Buyer and its representatives, upon reasonable advance notice, reasonable access, during normal business hours, to their assets, properties, books, records, agreements and employees and shall permit Buyer to make such inspections as Buyer may reasonably require and to make available to Buyer during such period all such information as Buyer may from time to time reasonably request. Any request for information made by Buyer shall be made only to those persons that Seller designates, and Buyer’s access to the property and employees of Seller shall be subject to such reasonable restrictions as Seller may impose to avoid disruption of Seller’s business. Notwithstanding anything to the contrary in this Agreement, neither Seller nor the Company shall be required to disclose any information to Buyer if such disclosure would, in Seller’s sole discretion: (x) cause significant competitive harm to Seller, the Company and their respective businesses if the transactions contemplated by this Agreement are not consummated; (y) jeopardize any attorney-client or other privilege; or (z) contravene any applicable Law, fiduciary duty or binding agreement entered into prior to the date of this Agreement. Prior to the Closing, without the prior written consent of Seller, which may be withheld for any reason, Buyer shall not contact any suppliers to, or customers of, the Company and Buyer shall have no right to perform invasive or subsurface investigations of the Leased Real Property.

(b) From the date of this Agreement until the Closing or the earlier termination of this Agreement, Seller and the Company shall use their commercially reasonable efforts to provide Buyer with copies of material and substantive correspondence to or from all Educational Agencies and respond to reasonable inquiries from Buyer with respect to: (i) the application for initial licensure from any Educational Agency, CCNE, the Accreditation Review Commission on Education for the Physician Assistant, or the Council on Academic Accreditation; (ii) renewal of any existing Educational Approval; (iii) the School’s efforts to add new campuses, add new educational programs or modify existing educational programs; (iv) new applications or modifications to existing applications filed with any Educational Agency; and (v) any interim reports to be filed with any Educational Agencies. Seller and Company shall meet this obligation by uploading copies of such correspondence into the diligence data site that has been established for the transaction contemplated by this Agreement.

(c) From the date of this Agreement until the Closing or the earlier termination of this Agreement, Seller and the Company shall provide Buyer with prompt notice of any material developments, including but not limited to new claims or the addition of new plaintiffs and any filings, orders, judgments, or settlements, in connection with the Master Orthopedic Physician Assistant program or any cases listed on Schedule 6.2(c) .

(d) Any information provided to or obtained by Buyer or its representatives pursuant to Section 6.2(a) above will be subject to the Confidentiality Agreement entered into between Parent and Altas Partners Corporation on September 8, 2016 for the benefit of the Company (the “ Confidentiality Agreement ”), and must be held by Buyer in accordance with and be subject to the terms of the Confidentiality Agreement. Buyer agrees to be bound by and comply with the provisions set forth in the Confidentiality Agreement as if such provisions were set forth in full herein, and such provisions are hereby incorporated herein by reference.

6.3 Publicity . Except as may be required to comply with the requirements of any applicable Law or applicable rules and regulations of any exchange on which the securities of a party may be listed, prior to the Closing Date, no party will issue any press release or other public announcement relating to the subject matter of this Agreement or the transactions contemplated hereby without the prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed) of Buyer, on the one hand, and Seller, on the other hand.

6.4 Records . Subject to ARTICLE X , with respect to the financial books and records and minute books of the Company relating to matters on or prior to the Closing Date: (i) for a period of seven years after the Closing Date, Buyer shall not cause or permit their destruction or disposal without first offering to surrender them to Seller; and (ii) where there is a legitimate purpose, including an audit of Seller by an Educational Agency, the IRS or any other Taxing Authority or an Action involving Seller or a claim or dispute relating to this Agreement, Buyer shall allow Seller and its representatives reasonable access to such books and records during regular business hours, except as prohibited by Law.

6.5 Insurance .

(a) Buyer acknowledges and agrees that, except as expressly provided in this Section 6.5 , effective at the time of the Closing, the Company will cease to be insured by any Insurance Policies.

(b) Seller agrees to cause the interest and rights of Seller and its Affiliates as of the Closing Date as insureds or beneficiaries under occurrence based insurance policies and claims based insurance policies of Seller or any of its Affiliates in connection with the Company in respect of periods prior to the Closing Date (collectively, the “ Insurance Policies ”) to survive the Closing for the period for which such interests and rights would have survived without regard to the transactions contemplated by this Agreement to the extent provided under the Insurance Policies. Each claim, act, omission, event, circumstance, occurrence or loss that is or may be covered by an Insurance Policy (each, a “ Pre-Closing Claim ”) shall be administered by the Company, subject to reimbursement by Buyer for Seller’s actual out-of-pocket costs associated therewith.

(c) Upon Buyer’s reasonable request, Seller shall, and shall cause its Affiliates to, reasonably cooperate with Buyer and its Affiliates in connection with the administration of claims contemplated by this Section 6.5 (including timely presenting any claims tendered to it by Buyer or its Affiliates to all appropriate insurers). Any sums paid by an insurer to Seller shall be paid over to Buyer by Seller within five business days of receipt.

(d) Seller shall not release, commute, buy-back or otherwise eliminate the coverage under any Insurance Policies without the written consent of Buyer.

6.6 Commercially Reasonable Efforts; Cooperation .

(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement and to obtain satisfaction or waiver of the conditions precedent to the consummation of the transactions contemplated hereby, including (i) obtaining all of the necessary Consents from Governmental Authorities and the making of all filings and the taking of all steps as may be necessary to obtain Consent from, or to avoid an Action by, any Governmental Authority; and (ii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Notwithstanding the foregoing, in no event shall either party’s cooperation require such party to expend significant cash, to undertake litigation, agree to any amendment or modification of any Material Contract or material Permit or limit, relinquish or divest any material benefit, right or property it has or would acquire in connection with the transactions contemplated hereby.

(b) Without limiting the generality of the undertakings pursuant to Section 6.6(a) , the parties shall (i) provide or cause to be provided as promptly as reasonably practicable to Governmental Authorities with jurisdiction over the Antitrust Laws (each such Governmental Authority, a “ Governmental Antitrust Authority ”) information and documents requested by any Governmental Antitrust Authority as necessary, proper or advisable to permit consummation of the transactions contemplated by this Agreement, including preparing and filing any notification and report form and related material required under the HSR Act and any additional consents and filings under any other Antitrust Laws as promptly as practicable following the date of this Agreement ( provided that in the case of the filing under the HSR Act, such filing shall be made within 20 Business Days after the date of this Agreement) and thereafter to respond as promptly as practicable to any request for additional information or documentary material that may be made under the HSR Act or any other applicable Antitrust Laws and (ii) subject to the terms set forth in Sections 6.6(a) and 6.6(c) hereof, use their reasonable best efforts to take such actions as are necessary or advisable to obtain prompt approval of the consummation of the transactions contemplated by this Agreement by any Governmental Authority or expiration of applicable waiting periods. Neither Buyer, on the one hand, nor Seller, on the other hand, shall commit to or agree with any Governmental Authority to stay, toll or extend any applicable waiting period under the HSR Act or other applicable Antitrust Laws, without the prior written consent of the other (such consent not to be unreasonably withheld, conditioned or delayed). Buyer shall pay all filing fees relating to filings under the HSR Act and any other applicable Antitrust Laws.

(c) If any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by a Governmental Authority or private party challenging any transaction contemplated by this Agreement, or any other agreement contemplated hereby, Seller and the Company shall cooperate, at the expense of Buyer, in all respects with Buyer and shall use their reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any Governmental Order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement.

(d) Parent and Seller acknowledge and agree that the provision by Parent and its Affiliates of transition services to the Company are necessary to: (i) support the operation of the Company following Closing; (ii) assist in an orderly transfer of the Company as a result of its change of ownership; and (iii) permit the Company to obtain alternate sources of supply of services. In furtherance of the foregoing, from the date of this Agreement to the Closing Date, each of Parent, Seller and Buyer shall use its commercially reasonable efforts to: (A) identify, recruit, hire and train personnel to provide the services contemplated by the Transition Services Agreement; (B) obtain licenses for software and software packages to replace those required for the provision of services under the Transition Services Agreement; and (C) otherwise prepare for an orderly and reasonably expeditious transfer of services from Parent to the Company. Nothing in this Section 6.6(d) shall permit Seller to enter into any such arrangements on behalf of Buyer.

6.7 Employee Matters .

(a) During the period commencing at Closing and ending on December 31, 2019 (or if earlier, the date of the employee’s termination of employment with the Company) (the “ Continuation Period ”), Buyer shall, and shall cause the Company to, provide each employee of the Company as of the date hereof who remains employed immediately after the Closing (an “ Employee ”) with: (i) base salary or hourly wages which are no less than the base salary or hourly wages provided by the Company immediately prior to the Closing; (ii) target annual cash bonus opportunities (excluding equity-based compensation), if any, which are the same as the target annual bonus opportunities (excluding equity-based compensation) provided by the Company immediately prior to the Closing; (iii) retirement and welfare benefits (but in each case, excluding any defined benefit pension plan benefits, retire health and welfare benefits and non-qualified deferred compensation or retirement benefits) that are substantially similar in the aggregate to those provided by or on behalf of the Company immediately prior to the Closing under the Company Benefit Plans; and (iv) severance compensation that is no less favorable than the severance compensation provided under any Company Benefit Plan that is a severance practice, plan or policy in effect for such Employee immediately prior to the Closing and set forth on Schedule 4.17 .

(b) To the extent not otherwise required by or resulting from the operation of Law, Buyer shall, and shall cause its Affiliates to, recognize the service of each Employee with the Company, as of the Closing, as service with Buyer or its Affiliates for purposes of vesting and eligibility to participate in any applicable qualified retirement plan or welfare benefit plan of Buyer or its Affiliates in which such Employee will be entitled to participate on and after the Closing Date (but not for purposes of benefit accrual under any plan, program or arrangement of any kind, other than vacation or severance benefits), but only to the extent such prior service is credited under the corresponding Company Benefit Plan as of the Closing.

(c) With respect to any welfare benefit plans of Buyer or any of its Affiliates (other than any long-term disability plan), Buyer shall use commercially reasonable efforts to cause any pre‑existing conditions, limitations, eligibility waiting periods or required physical examinations to be waived with respect to the Employees and their eligible dependents to the extent waived under the corresponding Company Benefit Plan in which the applicable Employee participated immediately prior to the Closing.

(d) Effective as of the Closing Date or such other date set forth in the Transition Services Agreement, each Employee shall cease participation under each Company Benefit Plan that is not an Assumed Company Benefit Plan. Except as specifically set forth herein or under the Transition Services Agreement, any claim or liability under each Assumed Company Benefit Plan that is incurred or accrued prior to or as of the Closing Date shall be retained by Seller and its Affiliates on or after the Closing Date. For purposes of this Section 6.7(d) , a claim is deemed incurred when the services that are the subject of the claim are performed, in the case of life insurance, when the death occurs and, in the case of a hospital stay, when the employee first enters the hospital.

(e) Any current or former employee of the Company who: (i) as of the Closing Date is receiving or entitled to receive short term disability benefits and who subsequently becomes eligible to receive long term disability benefits; or (ii) as of the Closing Date is receiving or entitled to receive long term disability benefits, shall become eligible or continue to be eligible, as applicable, to receive long term disability benefits under the Company Benefit Plan that is a long term disability if allowed under the terms of such Company Benefit Plan.

(f) As soon as administratively practicable following the Closing Date, the Buyer and Seller shall take all commercially reasonably actions necessary to permit Employees who have an account balance under any Company Benefit Plan that is a tax-qualified defined contribution retirement plan (the “ Seller’s 401(k) Plan ”) to rollover (whether by direct or indirect rollover, as selected by such Employee) his or her “eligible rollover distribution” (as defined under Section 402(c)(4) of the Code) in the form of cash, a promissory note (in the case of loans) or any combination thereof from the Seller’s 401(k) Plan to a tax-qualified defined contribution retirement plan maintained by Buyer, the Company or their Affiliate for the benefit of the Employees. As of or as soon as a practicable following the Closing Date, to the extent allowed under applicable Law, the Seller shall: (i) fully vest each Employee in his or her account balance under the Seller’s 401(k) Plan; and (ii) make all contributions required under the Seller’s 401(k) Plan for the Employees who are participants in the Seller’s 401(k) Plan for all periods of time up to the Closing Date and shall waive any last-day or 1,000-hour requirements for purposes of any such employer contributions with respect to such Employees allocable during the plan year containing the Closing Date.

(g) Seller shall take all actions necessary to allow each Employee who remains employed by the Company (and each applicable dependent or family member thereof) who is a participant as of the Closing Date in either the Higher Education Tuition Reduction Program (for U.S. Based Employees) or the Tuition Reimbursement Program, as described in the Laureate Education, Inc. Benefits Guide 2018 and as further described in Schedule 4.17(b) , to continue to participate in the Higher Education Tuition Reduction Program or Tuition Reimbursement Program as applicable, and shall bear all costs and obligations associated with providing such benefits during the period beginning on the Closing Date and ending on the earlier of the date such individual either: (i) withdrawals from their current degree program; (ii) completes their current degree program; or (iii) ceases to be an employed by the Company (or a family member of a Company employee).

(h) No provision in this Section 6.7 or elsewhere in this Agreement is intended to or shall be construed to: (i) create any third-party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of the Company or any other Person other than the parties hereto and their respective successors and permitted assigns; or (ii) constitute or create or be deemed to constitute or create an employment agreement, consulting, independent contractor or similar agreement or arrangement, or any right to employment or continued employment for any period of time by reason of this Agreement, or any right to a particular term or condition of employment; or (iii) constitute or be deemed to constitute an amendment to any Company Benefit Plan or other employee benefit plan, program, agreement or arrangement sponsored or maintained by Buyer, the Company or any of their respective Affiliates or shall in any way be construed to limit Buyer, the Company or any of their respective Affiliates from amending modifying or terminating any such plan, program or agreement.

6.8 No Negotiation .

(a) From the date of this Agreement until the Closing or the earlier termination of this Agreement, none of Seller nor the Company or their respective representatives and Affiliates, directly or indirectly, shall solicit or initiate any inquiries or proposals from, or discuss or negotiate with or provide any information to, any third Person (other than Buyer and its representatives) relating to any transaction involving the sale of the business or significant portion of the assets of the Company, or the Company LLC Units or the Interests, or any merger, consolidation, business combination or similar transaction involving the Company or enter into agreements or other instruments, whether or not binding, with respect to such an inquiry or proposal.

(b) Seller and the Company agree that the rights and remedies for noncompliance with this Section 6.8 shall include having such provision specifically enforced by any court having jurisdiction, it being acknowledged and agreed that any such breach would cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to Buyer.

6.9 Regulatory Authorizations; Consents .

(a) The parties shall cooperate and use their respective commercially reasonable efforts to obtain the consents necessary for the performance of their obligations under this Agreement, including obtaining the Required Pre-Closing Educational Consents listed on Schedule 6.9(a) . Prior to the Closing, the parties will coordinate regarding the submission to all applicable Educational Agencies of all letters, notices, applications or other documents required to obtain the Required Pre-Closing Educational Consents as listed on Schedule 6.9(a) , including the pre-acquisition review applications with the DOE and, no later than May 7, 2018 (unless a later date is mutually agreed to in writing by the parties), the submission of a substantive change application to WASC. Each party shall provide the other with: (i) reasonable advance review and consultation regarding any notices or applications to be filed with any Educational Agency with respect to any Required Pre-Closing Educational Consent listed on Schedule 6.9(a) ; and (ii) a copy of any notice or application as filed with, or any notice received from, any Educational Agency with respect to any Required Pre-Closing Educational Consent, as listed on Schedule 6.9(a) . To the extent practical, prior to attending any meetings, telephone calls or discussions with any Educational Agency concerning the transactions contemplated by the Transaction Documents, the parties shall discuss and agree upon strategy and issues to be pursued and responses to likely questions. The parties will use their respective commercially reasonable efforts to ensure that their appropriate officers and employees shall be available to attend, as any Educational Agency may reasonably request, any scheduled meetings or telephone calls in connection with the transactions contemplated hereby.

(b) The parties shall cooperate to send courtesy notices to each of Educational Agencies listed on Schedule 6.9(b) , and to the extent that any such agencies shall have identified a material impediment to issuing their Required Post-Closing Educational Consent according to their customary procedures, the parties shall use commercially reasonable efforts to remove or mitigate such impediments. Prior to the Closing, the parties will coordinate regarding the submission to all applicable Educational Agencies of all letters, notices, applications or other documents required to obtain the Required Post-Closing Educational Consents as listed on Schedule 6.9(b) , Each party shall provide the other with: (i) reasonable advance review and consultation regarding any notices or applications to be filed with any Educational Agency with respect to any Required Post-Closing Educational Consent listed on Schedule 6.9(b) ; and (ii) a copy of any notice or application as filed with, or any notice received from, any Educational Agency with respect to any Required Post-Closing Educational Consent, as listed on Schedule 6.9(b) . To the extent practical, prior to attending any meetings, telephone calls or discussions with any Educational Agency concerning the transactions contemplated by the Transaction Documents, the parties shall discuss and agree upon strategy and issues to be pursued and responses to likely questions. The parties will use their respective commercially reasonable efforts to ensure that their appropriate officers and employees shall be available to attend, as any Educational Agency may reasonably request, any scheduled meetings or telephone calls in connection with the transactions contemplated hereby.

(c) The parties shall cooperate and use their respective commercially reasonable efforts prior to the Closing to provide notices to the Educational Agencies listed on Schedule 6.9(c) .

(d) The parties shall cooperate and use their respective commercially reasonable efforts prior to the Closing to obtain approval, if applicable, from the Educational Agencies listed on Schedule6.9(d) .

(e) The parties shall cooperate and use their respective commercially reasonable efforts prior to the Closing to provide courtesy notices to the Educational Agencies listed on Schedule 6.9(e) .

6.10 Satisfaction of DOE and Related Requirements . Subject to Section 7.1(d) , Buyer shall take all such actions as may be required or requested by any Educational Agency to complete and effectuate the transfer of the operations of the School hereby to Buyer.

6.11 R&W Policy . Buyer will not amend, waive or otherwise modify any provision of the R&W Policy in any manner that would allow the insurer thereunder or any other Person to subrogate or otherwise make or bring any action or proceedings against Seller or any Affiliate thereof or any past, present or future director, manager, officer, employee or advisor of any of the foregoing based upon, arising out of, or related to this Agreement, or the negotiation, execution or performance of this Agreement, except in the case of actual fraud or willful misconduct.

6.12 Financing .

(a) Each of Seller and the Company shall use commercially reasonable efforts to, and to cause its Representatives, including legal and accounting, at Buyer’s sole expense to, provide such cooperation as is reasonably necessary in connection with the arrangement of any debt financing to be provided by a Financing Source for the purpose of providing funding for the transactions contemplated hereby (“ Debt Financing ”) and as may be reasonably requested by Buyer, including using commercially reasonable efforts in: (a) providing to Buyer from time to time information regarding the Company and its industry reasonably requested by the lenders providing the Debt Financing, including providing reasonable access to such lenders and their advisors to books and records and contracts of the Company at reasonable times and upon reasonable notice and assisting with the identification of any portion of such information that constitutes material non-public information and using commercially reasonable efforts to update any such information to the extent contained in an offering document if the Company becomes aware of any new material information; (b) facilitating negotiations between Buyer and its Financing Sources by making senior management of the Company reasonably available for drafting sessions, road shows, meetings, syndication presentations, due diligence sessions, lender or proposed Financing Source meetings and sessions with rating agencies so long as the foregoing does not unreasonably interfere with the conduct of the Company’s business; (c) assisting with the preparation of customary materials for rating agency presentations, offering documents, bank information memoranda, business projections and similar marketing documents required in connection with the Debt Financing including providing customary authorization letters related thereto and information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules, regulations and legal requirements; (d) (i) delivering to Buyer as soon as available, but in any event, within 90 days after the end of each fiscal year ending after the date hereof, audited financial statements of the Company; (ii) delivering to Buyer as soon as available, but in any event within 45 days after the end of the second and third fiscal quarters of the 2018 fiscal year and the first three fiscal quarters of each fiscal year ending after the date hereof, unaudited interim financial statements of the Company; and (iii) as promptly as practicable, furnishing Buyer and its Financing Sources all information other reasonably requested by Buyer and its Financing Sources (including in connection with Buyer’s preparation of pro forma financial statements) (all such information in this clause (d) is referred to collectively as the “ Required Information ”) and such other financial and other pertinent information regarding the Company as shall exist and be reasonably requested by Buyer; (e) helping to procure, and executing and delivering (effective as of the Closing Date), other definitive financing documents or other reasonably requested certificates or documents, including pledge and security agreements, subordination agreements, customary certificates (including a certificate of the chief financial officer (or other comparable officers) of the Company with respect to solvency matters), customary legal opinions and, if applicable, real estate surveys and title documentation; (f) as of the Closing Date, taking all corporate actions reasonably requested by the Buyer to authorize the consummation of the Debt Financing; (g) request from the Company’s existing lenders such customary documents in connection with refinancings as requested by Buyer in connection with the Debt Financing and collateral arrangements, including customary payoff letters, lien releases and instruments of termination or discharge; and (h) providing all such other reasonable assistance as necessary in order for Buyer to satisfy the conditions to the consummation of the Debt Financing. Seller and the Company hereby consent to the use of the Company’s names and logos in connection with the Debt Financing; provided , that such names and logos are used solely in a manner that is not intended to or reasonably likely to harm or disparage the Company or its reputation or goodwill or infringe rights of others. Notwithstanding the foregoing: (i) neither Seller nor the Company shall be required to become subject to any obligations or liabilities with respect to the Debt Financing prior to the Closing; (ii) neither Seller nor the Company shall be required to provide cooperation under this Section 6.12 that unreasonably interferes with the ongoing business of the Company; and (iii) neither Seller nor the Company shall be required to pay any commitment or other similar fee or enter into any definitive agreement or incur any other liability or obligation of any kind prior to the Closing.

(b) Promptly upon request by Seller, Buyer shall reimburse Seller and the Company for all of their reasonable documented out-of-pocket costs and expenses (including attorneys’ fees) incurred by them in connection with the cooperation of Seller and the Company contemplated by this Section 6.12 . In addition, Buyer shall indemnify and hold harmless Seller and the Company, and their respective directors, officers, employees, representatives and advisors from and against any and all losses suffered or incurred by any of them in connection with the Financing and any information shared or utilized in connection therewith, except to the extent resulting from the gross negligence or willful misconduct of such parties.

(c) Nothing in this Section 6.12 shall require Seller or the Company to: (i) waive or amend any terms of this Agreement; (ii) take any action that could reasonably be expected to result in a breach of a Contract; (iii) take any action that would reasonably be expected to subject it to any actual liability or require it to pay or reimburse any fees or expenses for which it would not be entitled to reimbursement or is not otherwise indemnified by or on behalf of Buyer, or to give any indemnities that are effective prior to the Closing; or (iv) obtain approval of its board of directors or similar governing body for any resolutions or authorizations relating to the Financing.

(d) All non-public or other confidential information provided by Seller or the Company or any of their representatives pursuant to this Section 6.12 shall be kept confidential in accordance with the Confidentiality Agreement; provided , however , that Buyer shall be permitted to disclose such information to any debt provider or prospective debt providers and other financial institutions that are or may become parties to the Debt Financing (and to their respective counsel and auditors) so long as: (i) the recipients of such information agree to customary confidentiality arrangements; and (ii) Buyer will be responsible for any actions (or inactions) by such recipients that would be deemed a breach of the Confidentiality Agreement as if Buyer had so acted (or not acted).

6.13 Tax Sharing Agreements . The Company’s participation in the Amended and Restated Tax Sharing Agreement of Parent and its subsidiaries (and in any other tax sharing or similar agreement to which the Company, on the one hand, and Parent or Seller or any of their respective Affiliates, on the other hand, are parties) shall be terminated as of the Closing Date. After the Closing, the Company shall not have any further rights or liabilities thereunder or attributable thereto.

6.14 Equity Commitment Letter . Buyer shall not agree to any amendments or modifications to, or grant any waivers of, any condition or other provisions under the Equity Commitment Letter or take any action, or fail to take any action, that would adversely impact the ability of Buyer or Seller to enforce its rights under the Equity Commitment Letter.

6.15 Intercompany Loan . Parent shall pay or cause to be paid in full the amount of indebtedness outstanding immediately prior to the Closing under the Intercompany Loan and shall settle or cause to be settled any other intercompany balances prior to the Closing.

6.16 Assignment of Austin Building C Lease . At the Closing, Seller shall assign to the Company, the Buyer or any designee of the Buyer the Standard Industrial Commercial Multi-Tenant Lease – Net dated September 29, 2014, by and between Seller and LaCross Medical, L.P. (pertaining to the premises located on the first floor of Building C, 5401 La Crosse Avenue, Austin, Texas 78739) (the “ Austin C Lease ”), and the Company, Buyer or designee of the Buyer shall accept such assignment and assume all obligations thereunder. Buyer and Seller shall use their reasonable best efforts to cause the landlord under such lease to consent to such assignment prior to the Closing. If such consent is not obtained prior to the Closing, Buyer and Seller shall continue to use their commercially reasonable efforts, for a period of two years following the Closing, to cause the landlord under such lease to consent to such assignment and, until such consent is obtained, Buyer and Seller will use commercially reasonable efforts to establish (at Buyer’s cost) an arrangement reasonably satisfactory to Buyer and Seller under which Buyer (or one of its subsidiaries, as applicable) would obtain the rights and benefits under the Austin C Lease.

ARTICLE VII
CONDITIONS TO CLOSING

7.1 Conditions to Obligation of each Party . The respective obligations of each party to this Agreement to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver (if permitted by applicable Law) on or prior to the Closing of each of the following conditions:

(a) The waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act (or any extension thereof) shall have expired or been terminated.

(b) No Governmental Authority shall have issued a Governmental Order that has become final, including any permanent injunction, restraining or enjoining the transactions contemplated by this Agreement. To the extent that there is a Governmental Order restraining or enjoining the transactions contemplated by this Agreement that is not final, the parties’ obligations to consummate the transactions contemplated by this Agreement will be held in abeyance such time as the applicable court makes a determination as to whether or not such Governmental Order will be granted (subject to satisfaction or waiver of the other conditions in this ARTICLE VII ).

(c) Seller and Buyer shall have received the Required Pre-Closing Educational Consents listed on Schedule 6.9(a) and shall have provided ACOTE and CAPTE with written notice of the transactions contemplated by this Agreement.

(d) Seller and Buyer shall have received a DOE Pre-Acquisition Review Letter that does not: (i) require the Buyer or the School to post a letter of credit or similar form of financial protection in an amount exceeding 25% of the Title IV Program funds received by the School in its most recently completed fiscal year; or (ii) restrict the ability of the School to add new Title IV-eligible campuses, add new Title IV-eligible educational programs, or modify existing Title IV-eligible educational programs for a period not longer than is required for the DOE to accept and review the School’s financial statements and Title IV compliance audit covering one complete fiscal year of the School’s uninterrupted Title IV Program participation under the ownership of Buyer, with such fiscal year commencing following the issuance by DOE of a PPPA.

(e) No Required Pre-Closing Educational Consent from any Educational Agency other than the DOE shall include conditions that would substantially, materially and adversely affect the operation and business of the Company as presently operated and conducted. For example and the avoidance of doubt, growth restrictions would not constitute such a condition.

7.2 Conditions to Obligations of Seller . The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver (if permitted by applicable Law) at or prior to the Closing of each of the following conditions:

(a) The Fundamental Representations made by Buyer shall have been true and correct in all material respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date;

(b) Buyer will have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing Date;

(c) Seller will have received a certificate signed by an appropriate representative of Buyer to the effect that the conditions in Sections 7.2(a) and 7.2(b) have been satisfied; and

(d) Buyer shall have delivered or caused to be delivered each of the items specified in Section 3.3 to Seller.

7.3 Conditions to Obligations of Buyer . The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions:

(a) (i) The representations and warranties of Seller and the Company contained in ARTICLE IV (excluding the Fundamental Representations) shall be true and correct (without giving effect to any materiality or Material Adverse Effect qualifications therein) on and as of the date hereof and on and as of the Closing Date as though made at and as of such date, except for such failures to be true and correct, as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and (ii) the Fundamental Representations made by Seller and the Company shall be true and correct on and as of the date hereof and on and as of the Closing Date as though made at and as of such date; provided , however , that representations and warranties that are made as of a particular date or covering a particular period will be true and correct (in the manner set forth above) only as of such date of for such period;

(b) Each of Seller and the Company will have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing Date;

(c) Since the date of this Agreement, there shall not have occurred and be continuing any event, occurrence or development that, individually or in the aggregate, has had a Material Adverse Effect;

(d) Buyer will have received a certificate signed by an appropriate representative of the Company and by an appropriate representative of Seller to the effect that the conditions in Sections 7.3(a) , 7.3(b) and 7.3(c) have been satisfied; and

(e) Seller and the Company shall have delivered or caused to be delivered to Buyer each of the items required by Section 3.2 .

7.4 Frustration of Closing Conditions . No party hereto may rely on the failure of any condition set forth in Section 7.1 , Section 7.2 or Section 7.3 , as the case may be, to be satisfied if such failure was caused by such party’s failure to comply with its obligations to consummate the transactions contemplated by this Agreement.

ARTICLE VIII
TERMINATION OF AGREEMENT

8.1 Termination . Notwithstanding any other provision of this Agreement, this Agreement may be terminated at any time prior to the Closing:

(a) By mutual written consent of Seller and Buyer;

(b) By Buyer if a material breach of any provision of this Agreement has been committed by Seller or the Company and such breach has not been waived in writing or, if capable of being cured, cured within 15 days after notice of such breach is delivered by Buyer;

(c) By Seller if a material breach of any provision of this Agreement has been committed by Buyer and such breach has not been waived in writing or, if capable of being cured, cured within 15 days after notice of such breach is delivered by Seller;

(d) By Buyer or Seller, if Closing has not been consummated by December 31, 2018 (the “ Termination Date ”); provided , however , that if the only conditions to Closing not satisfied are the conditions set forth in Section 7.1(b) , Section 7.1(c) , and/or Section 7.1(d) , then either party may extend the Termination Date by written notice to the other party to a date not later than April 11, 2019, so long as the party seeking to extend this Agreement is not then in material breach of or default of any of its covenants, agreements or other obligations contained in this Agreement;

(e) By Buyer or Seller, if: (i) any Educational Agency has definitively determined that it will not issue any of the Pre-Closing Educational Consents on Schedule 6.9(a) , and such determination is not subject to Educational Agency appeal or reconsideration; or (ii) a court of competent jurisdiction has issued an order prohibiting the consummation of the transaction and that order has become final, including a permanent injunction; or

(f) By Buyer or Seller on or after April 11, 2019, if the Closing shall not have been consummated.

8.2 Effect of Termination .

(a) If this Agreement is terminated pursuant to this ARTICLE VIII , (a) each party will redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same, and (b) all further obligations of the parties under this Agreement shall terminate without further liability of any party to any other party, except that each party shall have all rights and remedies permitted hereunder and under the other Transaction Documents in respect of any losses resulting from any breach (other than a breach of a representation and warranty that arises from an event occurring or facts first becoming known after the date hereof and that is not the result of a breach by a party of its covenants hereunder) or failure by another party hereto or thereto to perform its obligations hereunder or thereunder prior to the termination of this Agreement; provided , however , that the rights and obligations of the parties under ARTICLE I (Definitions), Section 6.2 (Confidentiality), this Section 8.2 (Effect of Termination), Section 9.7(b) (Specific Performance) and ARTICLE XI (Miscellaneous) shall survive such termination.

(b) If this Agreement is terminated pursuant to this ARTICLE VIII , then any claim by a party under this Agreement or and under the Transaction Documents in respect of any losses resulting from any breach (other than a breach of a representation and warranty that arises from an event occurring or facts first becoming known after the date hereof and that is not the result of a breach by a party of its covenants hereunder) or failure by another party hereto or thereto to perform its obligations hereunder or thereunder must be made in writing to the other party within 45 days of the termination of this Agreement.

ARTICLE IX
REMEDIES

9.1 Survival . The representations, warranties, covenants and agreements of Seller, the Company and Buyer, as applicable, contained in this Agreement will survive the Closing Date but only to the extent specified below:

(a) (i) all covenants and agreements that contemplate the performance thereof prior to the Closing Date will survive the Closing Date until the 12-month anniversary of the Closing Date, at which point such covenants and agreements and any claim for indemnification brought by Buyer or Seller, as applicable, on account thereof will expire and terminate, except for pending Claims and pending Buyer Claims, as applicable; and (ii) all covenants and agreements that contemplate the performance thereof following the Closing Date will survive the Closing Date in accordance with their respective terms; and

(b) all representations and warranties will survive the Closing Date until the 12-month anniversary of the Closing Date, at which point such representations and warranties and any claim for indemnification brought by Buyer or Seller, as applicable, on account thereof will expire and terminate, except for pending Claims and pending Buyer Claims, as applicable; provided , however , that: (i) the Fundamental Representations shall survive indefinitely; (ii) the representations and warranties set forth in Section 4.6 (Taxes) (and so much of Section 4.17 as relates to Taxes) shall survive until 30 days after the expiration of the applicable Tax statute of limitations (or, if earlier, seven years); and (iii) the representations and warranties set forth in Section 4.11 (Compliance with Educational Laws) shall survive until the 30-month anniversary of the Closing Date.

9.2 Indemnification by Buyer . Subject to the limitations set forth in this ARTICLE IX , from and after the Closing, Buyer will indemnify and hold harmless Seller and its successors and permitted assigns, and the officers, employees, directors, managers, members, partners and stockholders of Seller and their heirs and personal representatives, and their respective Affiliates (collectively, “ Seller Indemnitees ”) from and against, and will pay to Seller Indemnitees the amount of, any actual damages incurred by any Seller Indemnitee following the Closing Date caused by (a) any breach of or inaccuracy in the representations and warranties of Buyer contained in this Agreement, or (b) any non-performance or breach of the covenants or agreements of Buyer contained in this Agreement.

9.3 Indemnification by Seller . Subject to the limitations set forth in this ARTICLE IX , from and after the Closing, Seller shall indemnify and hold harmless Buyer and its successors and permitted assigns, and the officers, employees, directors and stockholders of Buyer, and its and their respective Affiliates (collectively, the “ Buyer Indemnitees ”), from and against, and will pay to the Buyer Indemnitees the amount of, any actual damages incurred by any of the Buyer Indemnitees following the Closing Date caused by (a) any breach of or inaccuracy in the representations and warranties contained in ARTICLE IV of this Agreement, (b) any failure of Seller or the Company to perform its covenants and agreements hereunder or under any Transaction Document, and (c) the case captioned “Hemingway et al v. University of St. Augustine for Health Sciences, Inc. (Circuit Court of St. John’s County, Florida, Case No. CA13-1255)” and any existing or future claims relating to the Company’s Master of Orthopedic Physician’s Assistant program, but only to the extent the Company has first sought indemnification for such damages from Paris under Section 12.01 of the Paris Purchase Agreement and been unable to collect after using its reasonable best efforts, and then in such case only to the extent of any such unpaid amount.

9.4 Exclusive Remedy . From and after the Closing, except for claims arising from actual fraud, the sole and exclusive remedies of the parties for any losses based upon, arising out of or otherwise in respect of the matters set forth in this Agreement (including representations, warranties, covenants and agreements) and the transactions contemplated hereby, whether based in contract or tort, or whether at law or in equity, are the indemnification and reimbursement obligations of the parties set forth in this ARTICLE IX . The provisions of this Section 9.4 shall not, however, prevent or limit a cause of action under Section 9.7 or to obtain an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the terms and provisions hereof.

9.5 Limitations on Indemnification Payments . Notwithstanding anything in this Agreement to the contrary, the right of Seller Indemnitees and the Buyer Indemnitees (collectively, the “ Indemnitees ”) to indemnification is limited as follows:

(a) Indemnification payments to an Indemnitee in respect of any loss shall be: (i) limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment received or reasonably expected to be received by the Indemnitee in respect of any such claim; and (ii) reduced by the amount of any net cash Tax benefit realized by such Indemnitee as a result of such loss (taking into account any decreased amortization arising from the receipt of the related indemnity payment). The Indemnitee shall use its reasonable best efforts to recover under insurance policies or indemnity, contribution or other similar agreement for any losses.

(b) The Indemnitees shall not be entitled to indemnification for losses that are not reasonably foreseeable as of the date hereof.

(d) Subject to Section 9.5(e) , the indemnification provided for in Section 9.3(a) shall be subject to the following limitations:

(i) the Buyer Indemnitees shall be entitled to indemnification pursuant to Section 9.3(a) on account of any losses to the extent (but only to the extent) that the aggregate amount of all losses actually incurred by the Buyer Indemnitees exceeds $2,000,000 (the “ Basket ”), and then only to the extent of the excess up to a maximum of $2,000,000 (the “ Cap ”);

(ii) with respect to any claim as to which an Indemnitee may be entitled to indemnification hereunder, the Indemnifying Party shall not be liable for any individual or series of related losses that do not exceed $150,000 (which losses shall not be counted toward the Basket); and

(iii) the Buyer Indemnitees shall be entitled to indemnification for losses in excess of the Cap exclusively from the insurer pursuant to the R&W Policy and from no other source or Person.

(e) The limitations set forth in Section 9.5(d) shall be increased as follows in respect of indemnification for:

(i) losses caused by a breach of or inaccuracy in a representation or warranty due to a fact becoming known or an event occurring or not occurring after the date hereof to be breached or inaccurate as of the Closing Date, to the extent (but only to the extent) that the aggregate amount of all such losses actually incurred by the Buyer Indemnitees exceeds the Basket and then only to the extent of the excess up to a maximum of the amount that is equal to $7,000,000 plus the amount, if any, of the $2,000,000 indemnification provided for in Section 9.5(d)(i) that is not used (at any time) to satisfy other indemnification claims made by Buyer Indemnitees; and

(ii) losses caused by any breach of or inaccuracy in Section 4.11 (Compliance with Education Laws) to the extent (but only to the extent) that the aggregate amount of all losses actually incurred by the Buyer Indemnitees exceeds the Basket and then only to the extent of the excess up to a maximum of $2,500,000, plus the amount, if any, of the $2,000,000 indemnification provided for in Section 9.5(d)(i) and of the $7,000,000 indemnification provided for in Section 9.5(e)(i) that are not used (at any time) to satisfy other claims made by Buyer Indemnitees; and

(iii) losses caused by any breach of or inaccuracy in a representation or warranty set forth in Section 4.11 (Compliance with Education Laws) that is excluded from the coverage provided by the R&W Policy pursuant to Section 4(f) thereof, to the extent (but only to the extent) that the aggregate amount of all losses actually incurred by the Buyer Indemnitees exceeds the Basket and then only to the extent of the excess up to a maximum of $10,000,000, plus the amount, if any, of the $2,000,000 indemnification provided for in Section 9.5(d)(i) , of the $7,000,000 indemnification provided for in Section 9.5(e)(i) and of the $2,500,000 indemnification provided for in Section 9.5(e)(ii) that are not used (at any time) to satisfy other claims made by Buyer Indemnitees; and

(iv) losses caused by: (x) any breach of or inaccuracy in the Fundamental Representations or in Section 4.6 (Taxes) (and so much of Section 4.18 as relates to Taxes); (y) the matters referred to in Sections 9.3(b) and 9.3(c) ; or (z) in the case of Seller’s or the Company’s actual fraud (in each case, it being understood that there shall be no limitation on the liability of Seller).

For the avoidance of doubt, in no event shall Seller’s aggregate liability for indemnification under Section 9.3(a) exceed $25,000,000, except for losses described in Section 9.5(e)(iv) .

(f) For purposes of this ARTICLE IX , any inaccuracy in or breach of any representation or warranty, other than the representations and warranties set forth in Section 4.5 (Financial Statements), Section 4.14 (Material Contracts) (but only as it relates to the definition of Material Contracts) and Section 4.18 (a) (Conduct of Business), shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.

(g) The Buyer Indemnitees shall not be entitled to indemnification pursuant to Section 9.2 for losses to the extent that any Buyer Indemnitee has been compensated therefor pursuant to Section 2.3 .

(h) After becoming aware of any event or occurrence that could reasonably be expected to give rise to an indemnification right hereunder, each Person entitled to indemnification shall take commercially reasonable steps to mitigate all losses arising therefrom.

(i) After becoming aware of any loss giving rise to a claim for indemnification, each person entitled to indemnification shall use its reasonable best efforts to pursue any recovery to which it may be entitled under the R&W Policy; provided , however , that a failure to recover under the R&W Policy shall not prevent any Buyer Indemnified Party from asserting any claim for losses against Seller pursuant to and in accordance with this ARTICLE IX .

9.6 Procedures .

(a) Notice of Losses by Seller Indemnitee . As soon as reasonably practicable after a Seller Indemnitee has actual knowledge of any claim pursuant to Section 9.2 (but in any event, within 30 days) that may result in a loss (a “ Claim ”), Seller shall give notice thereof (a “ Claims Notice ”) to Buyer. A Claims Notice must describe the Claim in reasonable detail, include written evidence thereof, and set forth Seller’s good faith calculation of the loss that has been suffered by the applicable Seller Indemnitee. No delay in or failure to give a Claims Notice by Seller to Buyer pursuant to this Section 9.6(a) will adversely affect any of the other rights or remedies that Seller Indemnitees have under this Agreement, or alter or relieve Buyer of its obligation to indemnify the applicable Seller Indemnitee subject to the limitations set forth in ARTICLE IX , except to the extent that Buyer is materially prejudiced thereby. Buyer shall respond to Seller (a “ Claim Response ”) within 30 days (the “ Response Period ”) after the date that the Claims Notice is received by Buyer. Any Claim Response must specify whether Buyer disputes the Claim described in the Claims Notice (or the amount of losses set forth therein). If Buyer fails to give a Claim Response within the Response Period, Buyer will be deemed not to dispute the Claim described in the related Claims Notice. If Buyer elects not to dispute a Claim described in a Claims Notice, whether by failing to give a timely Claim Response or otherwise, then the amount of losses alleged in such Claims Notice with respect to such undisputed Claim will be conclusively deemed to be an obligation of Buyer, and Buyer shall pay, in cash, to Seller (for the benefit of the applicable Seller Indemnitee(s)) within 10 days after the last day of the applicable Response Period, the amount specified in the Claims Notice with respect to such undisputed Claim. If Buyer delivers a Claim Response within the Response Period indicating that it disputes one or more of the Claims identified in the Claims Notice, Buyer and Seller shall promptly meet and use their commercially reasonable efforts to settle the dispute. If Buyer and Seller are unable to reach agreement within 30 days after the conclusion of the Response Period, then either Buyer or Seller may resort to other legal remedies subject to the limitations contained in this ARTICLE IX .

(b) Notice of Losses by Buyer Indemnitee . As soon as reasonably practicable after a Buyer Indemnitee has actual knowledge of any claim pursuant to Section 9.3 (but in any event within 30 days) that may result in a loss (a “ Buyer Claim ”), then Buyer shall give notice thereof (a “ Buyer Claim Notice ” and together with a Claims Notice, a “ Notice ”) to Seller. A Buyer Claim Notice must describe the Buyer Claim in reasonable detail, include written evidence thereof and set forth Buyer’s good faith calculation of the loss that has been suffered by a Buyer Indemnitee. No delay in or failure to give a Buyer Claims Notice by Buyer to Seller pursuant to this Section 9.6(b) will adversely affect any of the other rights or remedies that a Buyer Indemnitee has under this Agreement, or alter or relieve Seller of its obligation to indemnify a Buyer Indemnitee subject to the limitations set forth in this ARTICLE IX , except to the extent that Seller is materially prejudiced thereby. Seller shall respond to Buyer (a “ Dispute Notice ”) within 30 days (the “ Dispute Period ”) after the date the Buyer Claim Notice is received by Seller. Any Dispute Notice must specify whether Seller disputes a Buyer Claim described in a Buyer Claim Notice (or the amount of losses set forth therein). If Seller fails to give a Dispute Notice within the Dispute Period, Seller will be deemed not to dispute the Buyer Claim described in the Buyer Claim Notice. If Seller elects not to dispute a Buyer Claim described in a Buyer Claim Notice, whether by failing to give a timely Dispute Notice or otherwise, then the amount of losses alleged in such Buyer Claims Notice with respect to such undisputed Buyer Claim will be conclusively deemed to be an obligation of Seller, and Seller shall pay, in cash, to Buyer (for the benefit of the applicable Buyer Indemnitee(s)) within 10 days after the last day of the applicable Response Period, the amount specified in the Buyer Claims Notice with respect to such undisputed Buyer Claim. If Seller delivers a Dispute Notice to Buyer within the Dispute Period, Buyer and Seller shall promptly meet and use their commercially reasonable efforts to settle the dispute as to whether and to what extent the Buyer Indemnitees are entitled to reimbursement on account of such Buyer Claim. If Buyer and Seller are unable to reach an agreement within 30 days after Buyer receives such Dispute Notice, then either Buyer or Seller may resort to other legal remedies subject to the limitations contained in this ARTICLE IX . For all purposes of this ARTICLE IX (including those pertaining to disputes under Section 9.6(a) and this Section 9.6(b) ), Buyer and Seller shall cooperate with, and make available to, each other and their respective representatives all information, records and data, and shall permit reasonable access to their respective facilities and personnel, as may be reasonably required in connection with the resolution of such disputes.

(c) Opportunity to Defend Third Party Claims . Subject to Section 10.4 , in the event of any claim by a third party against a Buyer Indemnitee or Seller Indemnitee for which indemnification is available hereunder, the party from whom indemnification is being sought (the “ Indemnifying Party ”), has the right, exercisable by notice to Buyer or Seller, as applicable, within 60 days of receipt of a Notice from Buyer or Seller, as applicable, to assume and conduct the defense of such claim with counsel selected by the Indemnifying Party. If the Indemnifying Party has assumed such defense, the Indemnitee shall have the right to participate in the defense thereof, it being understood that the Indemnifying Party will not be liable for any legal expenses subsequently incurred by any Indemnitee in connection with the defense of such claim. If, under applicable standards of professional conduct, a conflict with respect to any significant issue between any Indemnifying Party and any Indemnitee exists in respect of such third party claim or there are legal defenses available to an Indemnitee that are different from or additional to those available to the Indemnifying Party, the Indemnifying Party shall pay the reasonable fees and expenses of one counsel retained by such Indemnitee. If the Indemnifying Party does not assume the defense of any third party claim in accordance with this Section 9.6(c) , fails to properly notify the other party of its election to defend as provided in this Section 9.6(c) , or fails to diligently prosecute the defense of such third‑party claim, the Indemnitee may continue to defend such claim at the sole cost and expense of the Indemnifying Party (subject to the limitations set forth in this ARTICLE IX ) and the Indemnifying Party may still participate in, but not control, the defense of such third party claim at the Indemnifying Party’s sole cost and expense. In such case, t he Indemnitee will not consent to the entry of any judgment arising from any such claim without the prior written consent of the Indemnifying Party (such consent not to be unreasonably withheld, conditioned or delayed). Except with the prior written consent of the Indemnitee (such consent not to be unreasonably withheld, conditioned or delayed), no Indemnifying Party, in the defense of any claim, will consent to the entry of any judgment that: (i) provides for injunctive or other nonmonetary relief affecting the Indemnitee; or (ii) does not include as an unconditional term thereof the giving by each claimant or plaintiff to such Indemnitee of a release from all liability with respect to such claim. The party responsible for the defense of such third party claim (the “ Responsible Party ”) shall, to the extent reasonably requested by the other party, keep such other party informed as to the status of such claim. With respect to a third party claim, Buyer and Seller shall make reasonably available to each other and their representatives all books and records relating to such third party claim and shall reasonably cooperate with each other in the defense of the third party claim.

Notwithstanding anything else in this Agreement, any claims asserted by an Educational Agency or Governmental Authority for which indemnification may be available hereunder, shall be controlled and managed jointly by the Parties, with counsel reasonably acceptable to each of them. In connection with the management of any such claim, the Parties shall enter into a joint defense agreement in customary form reasonably acceptable to each of them to protect privileged communications and confidential information. No such claim may be settled without the prior written consent of each of the indemnified and indemnifying parties, which consents shall not be unreasonably withheld, conditioned or delayed.

(d) Settlement . The Responsible Party shall promptly notify the other party of each settlement offer with respect to a third party claim. Such other party shall promptly notify the Responsible Party whether it is willing to accept the proposed settlement offer. If the Responsible Party is willing to accept the proposed settlement offer but the other party refuses to accept it, then if: (i) such settlement offer requires only the payment of money damages and provides a complete release of all Indemnitees that are a party to such third party claim with respect to the subject matter thereof; and (ii) the Responsible Party agrees in writing that the amount of such proposed settlement constitutes losses that are reimbursable, subject to the other provisions of this Agreement, then the amount payable to the Indemnitees with respect to such third party claim will be limited to the amount of such settlement offer.

9.7 Specific Performance .

(a) Each party’s obligations under this Agreement (including the obligation to consummate the Closing assuming that all applicable conditions have been met or waived) are unique. If any party should breach this Agreement, the parties each acknowledge that it would be extremely impracticable to measure the resulting damages; accordingly, subject to Section 9.7(b) , the nonbreaching party or parties, in addition to any other available rights or remedies they may have under the terms of this Agreement or that are available at law or equity, shall be entitled to specific performance and/or to obtain an injunction or injunctions (without the posting of any bond) to compel the other party or parties to perform its obligations under this Agreement (including to close, assuming that all applicable conditions have been met or waived), and each party expressly waives the defense that a remedy in damages will be adequate.

(b) In furtherance of the foregoing, the parties hereby further acknowledge and agree that prior to the valid termination of this Agreement, Seller shall be entitled to specific performance to cause Buyer to draw down the full proceeds of the Equity Commitment Letter and to cause Buyer to consummate the transactions contemplated hereby including to effect the Closing in accordance with Section 2.1 , on the terms and subject to the conditions in this Agreement and the Equity Commitment Letter, if (and only if): (i) all conditions in Sections 7.1 and 7.3 (other than those conditions that by their nature are to be satisfied at the Closing, but each of which is capable of being satisfied at the Closing) have been satisfied or waived on the date the Closing is required to have occurred pursuant to Section 3.1 ; (ii) Seller has provided written notice to Buyer confirming that it is ready, willing and able for the Closing to occur and the transactions contemplated hereby to be consummated; and (iii) Buyer fails to complete the Closing by the date the Closing is required to have occurred pursuant to Section 3.1 .

(c) The parties hereby agree that the provisions set forth in Section 8.2 : (i) are not intended to and do not adequately compensate for the harm that would result from a breach of this Agreement; and (ii) shall not be construed to diminish or otherwise impair in any respect any party’s right to specific performance.

9.8 Subrogation . Upon making any indemnity payment pursuant to Section 9.2 or Section 9.3 , as applicable, the Indemnifying Party shall be subrogated to all rights of the Indemnitee, as applicable, against any third party in respect of the losses to which the payment related (including against Paris under the Paris Purchase Agreement). The parties hereto will execute upon request all instruments reasonably necessary to evidence and perfect the above described subrogation rights.

9.9 Adjustment to Purchase Price . All indemnification payments made pursuant to this ARTICLE IX will be treated as an adjustment to the Purchase Price unless otherwise required by applicable Law.

ARTICLE X
TAX MATTERS

10.1 Cooperation; Audits .

(a) In connection with the preparation of Tax Returns, audit examinations, and any administrative or judicial proceedings relating to the Tax liabilities imposed on or with respect to the Company for all Tax periods ending on or before the Closing Date (“ Pre-Closing Tax Periods ”), Buyer, on the one hand, and Seller, on the other hand, shall reasonably cooperate with each other, including the furnishing or making available during normal business hours of records, personnel (as reasonably required), books of account, powers of attorney or other materials necessary or helpful for the preparation of such Tax Returns, the conduct of audit examinations or the defense of claims by Taxing Authorities as to the imposition of Taxes. Buyer shall and shall cause the Company to (i) retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the applicable statute of limitations (and, to the extent notified by Seller, any extension thereof) for the respective taxable periods, and to abide by all record retention agreements entered into with any Taxing Authority and (ii) give Seller reasonable notice prior to transferring, destroying or discarding any such books and records and shall allow Seller to take possession of such books and records.

(b) Buyer and Seller shall, upon the other’s request, use their commercially reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated hereby.

10.2 Tax Returns . Seller shall cause to be prepared all income or similar Tax Returns, if any, required to be filed by the Company for any Pre-Closing Tax Period as promptly as practicable after the Closing Date. Such Tax Returns shall be prepared in a manner consistent with past practices, unless otherwise required by applicable Law. At least 30 calendar days prior to the due date of any such Tax Return, Seller shall provide to Buyer for review and comment drafts of all such Tax Returns required to be filed after the Closing Date. Seller shall consider in good faith any change reasonably requested by Buyer to such draft Tax Returns. Buyer shall cause the Company to timely file such Tax Returns. Seller shall cause to be timely paid all Taxes shown as due and owing on such Tax Returns, but only to the extent such Taxes for any such Tax Return exceed the accrual for such Taxes included as a liability in the computation of Closing Working Capital.

10.3 Proration; Property Taxes . For purposes of this Agreement, in the case of any Tax period beginning before and ending after the Closing Date (“ Straddle Period ”), the portion of Taxes imposed with respect to the portion of such period ending on the Closing Date shall: (a) in the case of ad valorem or similar Taxes imposed on a periodic basis, be equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction the numerator of which is the number of calendar days during the portion of such Straddle Period ending on the Closing Date and the denominator of which is the number of calendar days in the entire Straddle Period; and (b) in the case of other Taxes, be computed as if such Straddle Period period ended as of the end of the day on the Closing Date on a deemed closing of the books basis; provided, that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) shall be allocated between the period ending on the Closing Date and the period beginning after the Closing Date in proportion to the number of days in each period. Buyer shall prepare, or cause to be prepared, all non-income Tax Returns, if any, required to be filed by the Company, but not filed as of the Closing Date, for any Pre-Closing Tax Period and any Straddle Period. Such Tax Returns shall be prepared and filed in accordance with Section 10.2 , mutatis mutandis . Seller shall timely pay to Buyer the amount of Taxes shown as due and owing on such Tax Returns for any Pre-Closing Tax Period, and the amount allocable to a Pre-Closing Tax Period for any Straddle Period, but only to the extent such Taxes for any such Tax Return exceed the accrual for such Taxes included as a liability in the computation of Closing Working Capital.

10.4 Controversies . Notwithstanding Section 9.6(c) , this Section 10.4 shall control any inquiries, assessments, proceedings or similar events with respect to Taxes. Buyer shall promptly notify Seller: (a) upon receipt by Buyer or any Affiliate of Buyer of any notice of any inquiries, assessments, proceedings or similar events received from, or on behalf of, any Taxing Authority with respect to Taxes of the Company for which Seller may be required to reimburse any Buyer Indemnitee pursuant to this Agreement; or (b) prior to Buyer or any Affiliate of Buyer making any voluntary contact with any Taxing Authority relating to a failure of the Company to file a Tax Return or pay Taxes for any Pre-Closing Tax Period (any matter set forth in clause (a) or (b), a “ Tax Matter ”); provided, however, that the failure to provide such notice with respect to subclause (a) will not affect Buyer’s right to indemnification under this Agreement except to the extent that Seller’s defense of such Tax Matter is prejudiced by such failure. Seller may participate in and, if such Tax Matter relates solely to a Tax for which Seller may be liable and upon notice to Buyer within 30 days of receipt of Buyer’s original notice, assume the defense of such Tax Matter. If Seller assumes such defense: (i) Seller shall have the authority, with respect to such Tax Matter, to represent, at its own expense, the interests of the Company before the relevant Taxing Authority and Seller shall have the right to control the defense, compromise or other resolution of any such Tax Matter subject to the limitations contained herein, including responding to inquiries, and contesting, defending against and resolving any assessment for additional Taxes or notice of Tax deficiency or other adjustment of Taxes of, or relating to, such Tax Matter; (ii) Buyer shall have the right (but not the duty) to participate in the defense of such Tax Matter and to employ counsel, solely at its own expense, separate from the counsel employed by Seller; (iii) Seller shall not enter into any settlement of or otherwise compromise such Tax Matter to the extent that it materially adversely affects the Tax liability of Buyer, the Company or any Affiliate of the foregoing without the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed; and (iv) Seller, if it has assumed the defense, shall keep Buyer informed with respect to the commencement, status and nature of such Tax Matter, and will reasonably cooperate with Buyer and consult with it regarding the conduct of or positions taken in any such proceeding. If Seller does not assume the defense of any Tax Matter, or if any Tax Matter does not relate solely to a Tax for which Seller may be liable, then: (A) Buyer shall not enter into any settlement or otherwise compromise such Tax Matter to the extent it adversely affects the Tax liability of Seller without the prior written consent of Seller, which consent shall not be unreasonably withheld, conditioned or delayed; (B) Seller shall have the right (but not the duty) to participate in the defense of such Tax Matter and to employ counsel, solely at its own expense, separate from counsel employed by Buyer, and (C) Buyer shall keep Seller informed with respect to the commencement, status and nature of such Tax Matter, and will reasonably cooperate with Seller and consult with it regarding the conduct of or positions taken in such Tax Matter.

10.5 Amendment of Tax Returns . Except as provided by Sections 10.2 and 10.4 , neither Buyer nor any of its Affiliates shall amend, refile, revoke or otherwise modify any Tax Return or Tax election of the Company with respect to a Pre‑Closing Tax Period to the extent that such amendment, refiling, revocation or modification could increase Seller’s liability for income Taxes for Pre‑Closing Tax Periods without the prior written consent of Seller, which consent shall not be unreasonably withheld, conditioned or delayed.

10.6 Certain Taxes . All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement (collectively, “ Transfer Taxes ”) will be borne by Buyer, when due, and all necessary Tax Returns and other documentation with respect to Transfer Taxes will be prepared and filed by Buyer at its expense.

10.7 Refunds or Credits . Buyer shall pay to Seller all Tax refunds or credits received by it for any Pre-Closing Tax Period (including interest paid therewith), if any, except to the extent such amounts are included in the Closing Working Capital. Buyer shall pay to Seller the amount of any such refund or credit, net of any Taxes and/or reasonable expenses incurred in connection with the filing, receipt or payment thereof, within 10 days after receipt of such refund or use of such credit. Buyer shall reasonably cooperate, and shall cause the Company to reasonably cooperate, with Seller in claiming such Tax refunds, credits or reductions reasonably requested by Seller in writing in specific detail.

10.8 Allocation . Buyer and Seller agree that the Purchase Price and the liabilities of the Company shall be allocated among the assets of the Company for all purposes (including Tax and financial accounting) in accordance with Schedule 10.8 . Each party agrees that neither it nor the Company will, in Tax Returns or elsewhere, take a position inconsistent with the allocation provided in Schedule 10.8 .

ARTICLE XI
MISCELLANEOUS AND GENERAL

11.1 Expenses . Except as otherwise specifically provided in this Agreement, the parties shall bear their own respective expenses incurred in connection with the preparation, execution and performance of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, all fees and expenses of their respective representatives.

11.2 Non-Recourse . No past or present director, officer, employee, incorporator, agent, attorney or other representative of the Company or Seller shall have any personal liability for any representations, warranties, obligations or liabilities of the Company or Seller under this Agreement, the Schedules or any certificate delivered pursuant to this Agreement. No past or present director, officer, employee, incorporator, agent, attorney or other representative of Buyer shall have any personal liability for any representations, warranties, obligations or liabilities of Buyer under this Agreement, the Schedules or any certificate delivered pursuant to this Agreement

11.3 Projections . In connection with Buyer’s investigation of the Company, Buyer may have received, or may receive, from Seller, the Company and/or their respective representatives certain estimates, projections and other forecasts for the Company’s business, and certain business plan and budget information. Buyer acknowledges that (a) there are uncertainties inherent in attempting to make such estimates, projections, forecasts, plans and budgets, (b) Buyer is familiar with such uncertainties, (c) Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections, forecasts, plans and budgets so furnished to it, and (d) Buyer will not assert any claim against, or attempt to hold liable, Seller, the Company or any of their respective directors, officers, employees, Affiliates or representatives with respect thereto.

11.4 Exhibits and Schedules . The Exhibits and Schedules to this Agreement constitute an integral part of this Agreement and are hereby incorporated and made a part hereof as if set forth in full herein. No disclosure on a Schedule relating to a possible breach or violation of any Contract, Law or Governmental Order shall be construed as an admission or indication that such breach of violation exists or has occurred. The Schedules may include items and information that are not “material” relative to the entire business of the Company, taken as a whole, and such inclusion shall not be deemed to be an acknowledgment or agreement that any such item or information (or any non-disclosed item or information of comparable or greater significance) is “material” or to further define the meaning of such term for purposes of this Agreement or otherwise. Matters reflected in the Schedules are not necessarily limited to matters required by this Agreement to be disclosed in the Schedules. The Company Disclosure Schedules are arranged in paragraphs corresponding to the lettered and/or numbered paragraphs contained in ARTICLE IV ; provided, however, that any information disclosed in the Company Disclosure Schedules under any section number will be deemed to be disclosed and incorporated into any other section of the Schedules where such disclosure would be appropriate and reasonably apparent on its face. Any headings set forth in the Schedules are for convenience of reference only and shall not affect the meaning or interpretation of any of the disclosures set forth in the Schedules. All references to Schedules in this Section 11.4 shall be to the Schedules as the same may be modified or supplemented hereunder.

11.5 Successors and Assigns . This Agreement is binding upon and inures to the benefit of the parties hereto and their respective successors and permitted assigns, but is not assignable by any party without the prior written consent of the other parties hereto; provided, however, that Buyer may assign its rights and obligations under this Agreement to any of its current or future Affiliates who assume all obligations of Buyer under this Agreement and agree to be bound by the terms hereof; provided, further, however, that no such assignment shall relieve Buyer of its obligations under this Agreement or any of the other Transaction Documents.

11.6 Third Party Beneficiaries . Except as set forth in Section 6.5 , each party hereto intends that this Agreement not benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto.

11.7 Notices . Unless otherwise provided in this Agreement, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earlier of (a) personal delivery to the party to be notified, (b) the next Business Day after dispatch via nationally recognized overnight courier, all addressed to the party to be notified at the address indicated for such party below, or at such other address as such party may designate by 10 Business Days’ advance written notice to the other parties or (c) if receipt is confirmed (whether electronically, automatically or otherwise), by telecopier or e-mail. Notices should be provided in accordance with this Section 11.7 at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.7 ):

If to the Company (prior to Closing) or Seller:

Exeter Street Holdings, LLC

c/o Laureate Education, Inc.

650 South Exeter Street

Baltimore, Maryland 21202

Attention: General Counsel

Facsimile: (410) 843-8544

E-mail:

victoria.sibley@laureate.net

with a copy (which shall not constitute notice) to:

Drinker Biddle & Reath LLP

1500 K Street, NW – Suite 1100

Washington, DC 20005

Attention: John R. Przypyszny, Esq.

Facsimile: (202) 842-8465

E-mail: john.przypyszny@dbr.com

If to the Company (after Closing) or Buyer:

University of St. Augustine Acquisition Corp.

c/o Altas Partners LP

79 Wellington Street West

Suite 3500, P.O. Box 357

Toronto, ON M5K 1K7

Attention: Andrew Sheiner and Scott Werry

Facsimile No.: (416) 775-8257

Email:

asheiner@altaspartners.com ; swerry@altaspartners.com

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

Attention: Michael E. Weisser, P.C. and Sarah Stasny, P.C.

Facsimile: (212) 446-4900

E-mail: michael.weisser@kirkland.com ; sarah.stasny@kirkland.com

11.8 Complete Agreement . This Agreement, together with the exhibits and schedules hereto and the letter agreement, dated as of the date hereof, by and among Buyer, Parent and Seller, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior understandings and agreements, whether written or oral, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein. In the event of any inconsistency between the statements in the body of this Agreement, the exhibits and schedules (other than an exception expressly set forth as such in the Company Disclosure Schedules), the statements in the body of this Agreement will control.

11.9 Captions . The table of contents, titles and captions used in this Agreement are used for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

11.10 Time . Time is of the essence with respect to this Agreement.

11.11 Amendment . This Agreement may be amended or modified only by an instrument in writing duly executed by Seller and Buyer.

11.12 Waiver . At any time prior to the Closing Date, Seller and Buyer may (i) extend the time for the performance of any of the obligations or other acts of the parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of the covenants, agreements or conditions contained herein, to the extent permitted by applicable Law. Any agreement to any such extension or waiver will be valid only if set forth in a writing signed by Seller and Buyer. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

11.13 Choice of Law; Venue .

(a) This Agreement shall be governed by and construed under and the rights of the parties determined in accordance with the Laws of the State of Delaware (without reference to the choice of Law provisions of the State of Delaware).

(b) Each of the parties hereto irrevocably consents to the service of any process, pleading, notices or other papers by the mailing of copies thereof by registered, certified or first class mail, postage prepaid, to such party at such party’s address set forth herein, or by any other method provided or permitted under the Laws of Delaware.

(c) To the extent that a party hereto has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such party hereby irrevocably waives such immunity in respect of its obligations pursuant to this Agreement.

(d) Each party hereby irrevocably submits to the jurisdiction of any federal or state court located in the State of Delaware (and any appellate court therefrom) over any action or proceeding arising out of or relating to this Agreement and the other Transaction Documents. Each party hereby irrevocably and unconditionally waives and agrees not to plead, to the fullest extent provided by Law, any objection it may have to venue and the defense of an inconvenient forum to the maintenance of such action or proceeding in such courts.

11.14 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF

11.15 Severability . Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.

11.16 Counterparts; Facsimile or Electronic Signatures . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile or electronic signatures and signatures of a party to this Agreement or other documents executed in connection herewith that are sent to the other parties by facsimile transmission or pdf shall be deemed originals for all purposes.

11.17 Construction . The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. The words “include,” “includes” or “including” (or any other tense or variation of the word “include”) in this Agreement shall be deemed to be followed by the words “without limitation.” When reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article, Section, Exhibit or Schedule of this Agreement unless otherwise indicated. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The definitions contained in this Agreement are applicable to the singular as well as to the plural forms of such terms and to the masculine as well as the feminine and neuter genders of such terms.

11.18 Conflict of Interest . If Seller so desires, and without the need for any consent or waiver by the Company or Buyer, DBR is permitted to represent Seller after the Closing in connection with any matter, including without limitation anything related to the transactions contemplated by this Agreement or any disagreement or dispute relating thereto. Without limiting the generality of the foregoing, after the Closing, DBR is permitted to represent Seller or any of its agents and Affiliates in connection with any negotiation, transaction or dispute (“dispute” includes litigation, arbitration or other adversary proceeding) with Buyer, the Company or any of their respective agents or Affiliates under or relating to this Agreement, any transaction contemplated by this Agreement, and any related matter, such as claims for indemnification and disputes involving employment or other agreements entered into in connection with this Agreement. Upon and after the Closing, the Company shall cease to have any attorney-client relationship with DBR, unless and to the extent DBR is specifically engaged in writing by the Company to represent the Company after the Closing and either such engagement involves no conflict of interest with respect to Seller, or Seller consents in writing at the time to such engagement. Any such representation of the Company by DBR after the Closing will not affect the foregoing provisions hereof. For example, and not by way of limitation, even if DBR is representing the Company after the Closing, DBR is permitted simultaneously to represent Seller in any matter, including any disagreement or dispute relating hereto. Furthermore, DBR is permitted to withdraw from any representation of the Company to be able to represent or continue so representing Seller, even if such withdrawal causes the Company or Buyer additional legal expense (such as to bring new counsel “up to speed”), delay or other prejudice.

11.19 Parent Guarantee . Parent unconditionally and irrevocably guarantees as a continuing obligation, the due and punctual payment by Seller of all of the indemnification obligations of Seller to Buyer pursuant to ARTICLE IX up to a maximum aggregate amount of $15,000,000 (the “ Seller Obligations ”), and if Seller fails to pay any Seller Obligations when due in accordance with the terms and conditions of ARTICLE IX , Parent shall pay such amount (subject to the aggregate limitation of $15,000,000) to Buyer forthwith upon receiving written demand therefor from Buyer. Parent shall be liable under this guarantee as if it were a primary obligor and not merely as a surety. The guarantee hereunder shall be a continuing guarantee and shall remain in full force and effect until all Seller Obligations have been paid in full. More than one demand may be made under this guarantee subject to its aggregate limitation. Demands made from time to time under this guarantee may be enforced irrespective of whether any steps or proceedings are or will be taken against Buyer to recover the indebtedness claimed under this guarantee or whether any other guarantee or security to which Buyer may be entitled in respect thereof is or will be enforced. In furtherance of the foregoing and not in limitation thereof, Parent shall cause Seller to maintain assets that exceed the potential indemnification obligations of Seller to Buyer pursuant to ARTICLE IX .

[Signatures on Following Page]

IN WITNESS WHEREOF, Buyer, Seller, and the Company have caused this Agreement to be executed as of the day and year first above written.

PARENT: LAUREATE EDUCATION, INC.

By: /s/ Eilif Serck-Hanssen
Name: Eilif Serck-Hanssen
Title: Chief Executive Officer

IN WITNESS WHEREOF, Buyer, Seller, and the Company have caused this Agreement to be executed as of the day and year first above written.

SELLER: EXETER STREET HOLDINGS, LLC

By: /s/ Victoria E. Silbey
Name: Victoria E. Silbey
Title: Senior Vice President, Secretary, and Chief Legal Officer

IN WITNESS WHEREOF, Buyer, Seller, and the Company have caused this Agreement to be executed as of the day and year first above written.

COMPANY: UNIVERSITY OF ST. AUGUSTINE FOR HEALTH SCIENCES, LLC

By: /s/ Vivian Sanchez
Name: Vivian Sanchez
Title: Chief Executive Officer

IN WITNESS WHEREOF, Buyer, Seller, and the Company have caused this Agreement to be executed as of the day and year first above written.

BUYER: UNIVERSITY OF ST. AUGUSTINE ACQUISITION CORP.

By: /s/ Andrew Sheiner
Name: Andrew Sheiner
Title: President

May 3, 2018

Timothy Grace

10 Exeter Lane

Morristown, NJ 07960

Dear Timothy,

It is our pleasure to extend to you our offer of employment to join Laureate Education, Inc. (the “Company”) as Chief Human Resources Officer reporting to me, Eilif Serck-Hanssen. This position is based in Baltimore and your start date will be June 4, 2018.

This offer is contingent upon satisfactory reference checks, completion of a thorough background check, work documents, and submission of the appropriate paperwork. As a condition to employment, you will be required to sign our Confidentiality, Non-Disclosure and Covenant Not to Compete Agreement (“NDA”). Your employment will be on an "at will" basis, and will be subject to the terms and conditions contained in our Employee Handbook, our general employment policies and practices, and such other reasonable and lawful policies, practices and restrictions as the Company shall from time to time establish for its similarly situated executives. Offer of employment is not a contract, either express or implied. Your first 90 days of employment are considered an introductory period.

Laureate is centered on the premise of being “Here for Good,” reflecting our goal of operating with purpose and permanence. We believe that you will be an excellent addition to our organization, thus helping us to achieve this common goal. In return, we believe our culture will offer an excellent growth platform for your career.

For this opportunity, we have prepared the following competitive offer:

Position: Chief Human Resources Officer


Base Salary:	$500,000/annually, subject to review and adjustment by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”).

Annual Bonus:

Your target annual bonus is 80% of Base Salary, payable in the year following the performance year, customarily in March, upon meeting the applicable performance criteria established by the Compensation Committee. Your payment (if any) will be based 80% on Company business results and 20% on your individual results versus pre-determined objectives. You must remain continuously employed through the bonus payment date to receive any payment. Performance criteria for the 2018 Annual Incentive Plan will be determined at the same time they are determined for other similarly situated executives. Any bonus payment shall be subject to the terms of any applicable incentive compensation plan adopted by the Company. You will be eligible to receive a full bonus for 2018.

Benefits:

You will be eligible for the standard Laureate United States employee benefits package on the first day of the month following one full calendar month of employment. The Company reserves the right to add, terminate and/or amend any employee benefit plans, policies, programs and/or arrangements from time to time in accordance with the terms thereof and applicable law. Additionally, you will be entitled to the same executive benefits as provided to the other Leadership Team members as a group.


Vacation:	4 weeks / 20 days paid vacation, which will accrue at the rate of 13.34 hours per month.

Long Term Incentive (LTI):

Subject to the approval of the Compensation Committee, you will be eligible to participate in our annual equity-based compensation program with an annual target of 80% of your base salary. Awards may be a mix of: i) restricted stock units, (ii) performance share units, and (iii) stock options, each with respect to the Company’s Class A common stock, par value $0.004 per share (the “Class A Common Stock”). The exercise price of any stock options will be greater than or equal to the fair market value of the Class A Common Stock on the grant date.

As soon as practicable following your start date, the Company will recommend to the Compensation Committee that it grant you a full 2018 equity award under our annual equity-based program.

In addition, as soon as practicable on or after your start date, management will recommend to the Compensation Committee that the Company grant you a one-time equity award of 19,920 performance share units (“PSUs”) and 10,680 performance stock options with a strike price per share equal to the higher of (i) $17.89 or (ii) the fair market value of the Class A Common Stock on the grant date. One-third of each of the performance stock options and PSUs granted under this award will be eligible to vest after December 31, 2018 and the remainder of the options and units will be eligible to vest after December 31, 2019, in each case subject to the Compensation Committee’s determination that (A) the applicable 2018 and 2019 Adjusted EBITDA targets have been achieved (as defined in the June 2017 Special Retention Awards, also known as the “Accelerator Plan Targets”), and (B) Management’s annual report on its internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) and the Company’s independent registered public accounting firm’s audit report on the effectiveness of the Company’s internal control over financial reporting included in the Company’s audited financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, do not disclose any material weaknesses, and otherwise will contain the Company’s customary terms and conditions for such grants. The Compensation Committee will consider additional equity awards to you in future years, in its sole discretion.

Awards will be subject to the terms and conditions of the Laureate 2013 Long-Term Incentive Plan (the “2013 Plan” as the same may be amended from time to time) and one or more award agreements that you must sign and accept in order to receive the awards.

Relocation:

The Company will provide relocation assistance for you and your family, subject to the terms and conditions of the Company’s relocation policy and an Employee Reimbursement Agreement, which you must sign and accept. Laureate’s Human Resources department will assist you with your relocation activities and will work with the Company’s relocation provider to process relocation related expense reimbursement. Relocation assistance includes:


•	Five days of destination services to assist with area orientation, home finding, and settling in.


•	Final move of household goods from your current residence to Baltimore, MD.


•	Reimbursement of final move transportation fare, mileage, meals and incidentals incurred during final trip, for you and your family, to Baltimore, MD.


•	Temporary living reimbursement for up to 60 days


•	Home sale and home purchase assistance will be provided, if you are a current homeowner, and only to sell or buy a primary residence. This benefit must be utilized within 12 months of your hire date.


•	If the home in New Jersey does not sell, Laureate will provide a housing allowance equal to the lesser of $5,000 per month or temporary living expenses in Baltimore, MD for a period not to exceed five months.


•	A miscellaneous, non-accountable allowance of $10,000 net, to be used for any relocation expenses you may incur upon relocating to the Baltimore area.


•	Payment or reimbursement of all taxes on your relocation benefits (by December 31 of the year following the year in which you remit the taxes)


•	If you voluntarily terminate employment or your employment is terminated by the Company for Cause (as defined in the Plan) within 12 months after receiving any assistance, you are responsible for reimbursing the company 100% of the relocation costs.

Section 409A: Tax:

This offer letter is intended to comply with Section 409A of the Internal Revenue Code (“Section 409A”) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this offer letter, payments provided under this offer letter may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this offer letter that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this offer letter shall be treated as a separate payment. Any payments to be made under this offer letter upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this offer letter comply with Section 409A and in no event shall the Company be liable for all of any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A.

Notwithstanding any other provision of this offer letter, if any payment or benefit provided to you in connection with termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and you are determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of your termination date (the “Specified Employee Payment Date”) or, if earlier, on the date of your death. The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to you in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid in accordance with their original schedule.

With respect to any reimbursement of expenses of, or any provision of in-kind benefits to you, such reimbursement of expenses or provisions of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

Compensation paid by the Company shall be reduced by applicable withholdings and payroll taxes.

This letter will be governed by and construed in accordance with the laws of the State of Maryland without giving effect to any choice of law provisions or principles thereof.

People come to us because we think differently. We teach bigger thinking. We foster game changers. We light fuses on ideas that take off. We are Laureate and we are transforming the world of education for the better. We welcome your spark!

Please indicate your acceptance of this offer by signing in the space provided below and returning it to my attention, retaining a copy for your files.

By signing below, you confirm that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

We are looking forward to you joining our team. If you have any unanswered questions or if there is any way we can assist you further, please do not hesitate to contact me.

Sincerely,

/s/ Eilif Serck-Hanssen

Eilif Serck-Hanssen

President & Chief Administrative Officer

Laureate Education, Inc.

Accepted: /s/ Timothy Grace Date: : 5/2/18

Timothy Grace

650 S. EXETER STREET • BALTIMORE, MD 21202 • TEL: (410) 843-6100 • WWW.LAUREATE.NET

Exhibit 21.1

Laureate Education, Inc.

List of Subsidiaries as of July 25, 2018



Company	Jurisdiction of Organization	D/B/A
Blue Mountains International Hotel Management School Pty Limited	Australia
BM Hospitality Holdings Pty Ltd	Australia
GNUCO Pty Ltd	Australia
Laureate Education Services Australia Pty. Ltd.	Australia
LEI Australia Education, Pty. Ltd.	Australia
LEI Australia Holdings Pty Ltd	Australia
LEI Higher Education Holdings Pty Ltd	Australia
LESA Education Services Holding Pty Ltd	Australia
Monash South Africa Ltd	Australia
Think: Colleges Pty Ltd	Australia	APM College of Business and Communication, Australasian College of Natural Therapies, Billy Blue College of Design, Jansen Newman Institute, Southern School of Natural Therapies, William Blue College of Hospitality Management, Australian National College of Beauty, CATC Design School
Think: Education Group Pty Ltd	Australia
Think: Education Services Pty Ltd	Australia
Torrens University Australia Limited	Australia
AUBH Management SPC	Bahrain
Educacao Interativa do Brasil, Ltda.	Brazil
FACS Serviços Educacionais Ltda.	Brazil	Universidade Salvador
Faculdades Metropolitanas Unidas Educacionais Ltda.	Brazil	Centro Universitario das Faculdades Metropolitanas Unidas (“FMU”)
FADERGS—Faculdade de Desenvolvimento do Rio Grande do Sul Ltda.	Brazil
Fundaçao Encontro das Aguas	Brazil	Centro Universitario do Norte
Instituto Brasileiro de Medicina de Reabilitação, Ltda.	Brazil	Centro Universitario IBMR
ISCP—Sociedade Educacional Ltda.	Brazil	Universidade Anhembi Morumbi
Rede Internacional de Universidades Laureate Ltda.	Brazil
Sociedade Capibaribe de Educação e Cultura Ltda.	Brazil	Faculdade dos Guararapes
Sociedade de Cultura e Ensino Ltda.	Brazil	Faculdades Integradas: Alcântara Machado—Faculdade de artes Alcântara Machado—Centro Universitário
Sociedade de Desenvolvimento Cultural do Amazonas Ltda.	Brazil	Centro Universitario do Norte—UniNorte
Sociedade de Educação Ritter dos Reis Ltda	Brazil	Centro Universitario Ritter dos Reis—Uniritter
Sociedade de Ensino Superior da Bahia	Brazil
Sociedade Educacional Luiz Tarquinio	Brazil
Sociedade Educacional Sul‑Rio‑Grandense Ltda.	Brazil	Faculdade Porto‑Alegrense—FAPA
Sociedade Paraibana de Educação e Cultura Ltda.	Brazil	Faculdade Internacional da Paraiba
Sociedade Potiguar de Educação e Cultura Ltda.	Brazil	Universidade Potiguar
Uniao Educacional de Sao Paulo Ltda.	Brazil	Faculdades Integradas de São Paulo
LEI Combination Holdings Limited	Cayman Islands
LE University Holding Company Limited	Cayman Islands
CAMPVS Mater, SpA	Chile
Center for Executive Education IEDE SpA	Chile
Centro de Formación Técnica Instituto AIEP Regional SpA	Chile
Centro de Formación Técnica Instituto AIEP SpA	Chile
Centro de Innovación y Emprendimiento UVV Limitada	Chile
Corporación Universidad Nacional Andrés Bello	Chile	Universidad Andrés Bello
Fleet Street Development Company SpA	Chile
IEDE Chile Institute for Executive Development SpA	Chile
Inmobiliaria e Inversiones San Genaro Dos SpA	Chile
Inmobiliaria e Inversiones San Genaro SpA	Chile
Inmobiliaria Educacional SpA	Chile
Instituto Nacional de Computación y Administración de Empresas INDAE Limitada	Chile
Instituto Profesional AIEP SpA	Chile
Instituto Profesional Escuela Moderna de Musica SpA	Chile
Laureate Chile II SpA	Chile
Laureate Desarrollos Educacionales SpA	Chile
Servicios Andinos SpA	Chile
Servicios Profesionales Andrés Bello SpA	Chile
Sociedad Educacional Campvs SpA	Chile
Universidad de Las Américas	Chile
Universidad de Viña del Mar	Chile	Universidad Viña del Mar
Beijing INTI Management College	China
Blue Mountains Hotel Management Consulting (Shanghai) Co. Ltd.	China	Blue Mountains International Hotel Management School
DeZen Education Training (China) Co., Ltd	China
Laureate Investment Consulting (Shanghai) Co., Ltd.	China
Laureate Holding Costa Rica S.R.L.	Costa Rica
Lusitania S.R.L.	Costa Rica	Universidad Latina de Costa Rica
Universidad Americana UAM S.R.L.	Costa Rica
Universidad U Latina S.R.L.	Costa Rica	Universidad Latina de Costa Rica
Servicios Profesionales Ad Portas Cia. Ltda.	Ecuador
Fleet Street Development Company Honduras, S. de R.L. de C.V.	Honduras
Fundación Para el Desarollo de la Educación y Fomento de la Iniciativa Empresarial	Honduras
Laureate Honduras, S. de R.L. de C.V.	Honduras
Universidad Tecnológica Centroamericana	Honduras	Universidad Tecnológica Centroamericana; Centro Universitario Tecnológico
INTI College Hong Kong Ltd	Hong Kong
INTI Education (International) Ltd	Hong Kong
Jia Yue Investment Limited	Hong Kong
Laureate Education Asia Limited	Hong Kong
LEI China Limited	Hong Kong
LEI Holdings, Limited	Hong Kong
Merit International (HK) Limited	Hong Kong
Academe Education Private Limited	India
Collegiate Educational Services Private Limited	India
Creative Arts Education Society	India	Pearl Academy of Fashion; Pearl Academy of Fashion Management
Data Ram Sons Private Limited	India
Energy Education	India
Hydrocarbons Education & Research Society	India
India Centric Education Hub Private Limited	India
Laureate Education India Private Limited	India
M‑Power Energy India Private Limited	India
NuovoEtude Intellect Advisory Services Private Limited	India
Pearl Retail Solutions Private Limited	India	Indian Retail School
Sagacity Education Solutions Private Limited	India
Scholastic Knowledge Private Limited	India
South Asia International Institute Charitable Society	India
Sylvan Learning India Private Limited	India
University of Petroleum and Energy Studies	India
LEI Japan Holdings K.K.	Japan
Fleet Street Investments Sarl	Luxembourg
Erti Utama Sdn Bhd	Malaysia
Exeter Street Holdings Sdn. Bhd.	Malaysia
Genting INTI Education Sdn. Bhd.	Malaysia	Genting INTI International College
Human Capital Development Academy Sdn Bhd	Malaysia
INTI Asset Management Sdn Bhd	Malaysia
INTI Assets Holdings Sdn Bhd	Malaysia
INTI Education Holdings Sdn Bhd	Malaysia
INTI Education Sdn Bhd	Malaysia
INTI Higher Learning Centre Sdn Bhd	Malaysia
INTI IABS Sdn. Bhd	Malaysia	INTI College Sarawak
INTI Instruments (M) Sdn Bhd	Malaysia	INTI International College Subang
INTI International College Kuala Lumpur Sdn Bhd	Malaysia	INTI International College Kuala Lumpur
INTI International College Penang Sdn Bhd	Malaysia	INTI International College Penang
INTI International Education Sdn Bhd	Malaysia	INTI International University
INTI Kinabalu Sdn Bhd	Malaysia	INTI College Sabah
INTI Management Services Sdn Bhd	Malaysia
INTI Universal Holdings Sdn. Bhd.	Malaysia
LEI Management Asia, Sdn Bhd	Malaysia
MIM‑IMS Education Sdn Bhd	Malaysia	MIM‑INTI Management Institute
PJ College of Art & Design Sdn Bhd	Malaysia
Colegio Americano de Veracruz, S.C.	Mexico	Universidad del Valle de Mexico
Colegio Villa Rica Coatzacoalcos, S.C.	Mexico	Universidad del Valle de Mexico
Colegio Villa Rica, S.C.	Mexico	Universidad del Valle de Mexico
Corparación Educativa de Celaya, S.C.	Mexico
Fundación Laureate S.C.	Mexico
Estrater, S.A. de C.V. SOFOM ENR	Mexico
Grupo Educativo UVM, S.C.	Mexico	Universidad del Valle de Mexico
Institute for Executive Development Mexico S.A. de C.V.	Mexico
Laureate Education Mexico, S. de R.L. de C.V.	Mexico
LE Proteccion Contigo Agente de Seguros, SA de CV	Mexico
Planeacion de Sistemas, S.A.P.I. de C.V.	Mexico
Servicios Regionales Universitarios LE, S.C.	Mexico
Universidad Autónoma de Veracruz, S.C.	Mexico	Universidad del Valle de Mexico
Universidad del Valle de Mexico del Noreste, S.C.	Mexico	Universidad del Valle de Mexico
Universidad del Valle de México, S.C.	Mexico	Universidad del Valle de Mexico
Universidad Tecnológica de Mexico, S.C.	Mexico	Universidad Tecnológica de México; Universidad del Valle de Mexico
UVM Educación, S.C.	Mexico	Universidad del Valle de Mexico
UVM Formación, S.C.	Mexico	Universidad del Valle de Mexico
CH Holding Netherlands B.V.	Netherlands
Education Trademark B.V.	Netherlands
Fleet Street International Universities C.V.	Netherlands
Hispano Trademark Holding, B.V.	Netherlands
Laureate I B.V.	Netherlands
Laureate Coöperatie U.A.	Netherlands
Laureate Education—Turkey B.V.	Netherlands
Laureate International B.V.	Netherlands
Laureate Middle East Holdings B.V.	Netherlands
Laureate Online Education B.V.	Netherlands	University of Liverpool; University of Roehampton
Laureate Real Estate Holdings B.V.	Netherlands
Laureate Trademark Holding B.V.	Netherlands
Laureate‑University of Liverpool Ventures B.V.	Netherlands
LEI AMEA Investments B.V.	Netherlands
LEI Bahrain Investments B.V.	Netherlands
LEI European Investments, B.V.	Netherlands
LEI New Zealand Holdings B.V.	Netherlands
Online Higher Education B.V.	Netherlands
LEI New Zealand	New Zealand
Media Design School	New Zealand
Visam Properties Limited	New Zealand
Castro Harrigan Asociados Panamá, S. de R.L.	Panama
Desarrollos Urbanos Educativas, S. de R.L.	Panama
Laureate Panamá S. de R.L.	Panama
Ulatec, S. de R.L.	Panama
Universidad Interamericana de Panamá, S. de. R.L.	Panama
Cibertec Perú S.A.C.	Peru	CIBERTEC; Instituto Technologico del Norte
Inversiones Educacionales Perú S.R.L.	Peru
Laureate Education Perú S.R.L.	Peru
Metramark S.A.C.	Peru
Universidad Peruana de Ciencias Aplicadas S.A.C.	Peru
Universidad Privada del Norte S.A.C.	Peru
OIE Support spółka z ograniczoną odpowiedzialnością w organizacji	Poland
Associação de Estudos e de Investigação	Portugal	Cientifica do Isla Lisboa
Ensilis—Educação e Formacão, Ltda.	Portugal	Universidade Europeia
Europeia ID—Associação para a Investigação em Design, Marketing e Comunicação	Portugal
Laureate Vocational Saudi Limited	Saudi Arabia
Laureate Middle East Saudi Arabia Limited	Saudi Arabia
LEI Singapore Holdings Pte. Ltd.	Singapore
Laureate South Africa Pty. Ltd.	South Africa
Fundacion General de la Universidad Europea de Madrid	Spain
ICE Inversiones Brazil, S.L.	Spain
Iniciativa Educativa UEA, SLU.	Spain
Iniciativas Culturales de España SL	Spain
Iniciativas Educativas de Mallorca, SLU.	Spain
Universidad Europea de Canarias S.L.U.	Spain
Universidad Europea de Madrid, S.L.U.	Spain	Universidad Europea de Madrid; IEDE Business School; Collaboration with Real Madrid International School
Universidad Europea de Valencia S.L.U.	Spain	Universidad Europea de Valencia; Escuela de Negocios Estema; Centro Superior de Edificacion, Arquitectura e Ingenieria (PROY3CTA)
Stamford International University	Thailand
Thai Education Holdings Company Limited	Thailand
Bilgi Egitim Ve Kultur Vakfi	Turkey
Bilgili Halkla İlişkiler ve İletişim Limited Şirketi	Turkey
Bilgi Iletişim Grubu Yayincilik Müzik Yapim Ve Haber Ajansi Ltd. Şti	Turkey
Bilgili Temizlik ve Tadilat Hizmetleri Limited Şirketi	Turkey
Bilgili Yapımcılık Ticaret Limited Şirketi	Turkey
Istanbul Bilgi University	Turkey
Media Com Halkla Ilişkiler Ve Iletişim Limited Şirketi	Turkey
Öztan Temizlik Ve Tadilat Hizmetleri Ticaret Ltd. Şti	Turkey
Ulet Uluslararasi Danişmanlik Eğitim Teknolojileri Sanayi ve Ticaret Limited Şirketi Ortaklar Kurulu Karari	Turkey
Laureate‑Obeikan, Ltd.	United Arabs Emirates
Canter and Associates, LLC	Delaware, USA
Educational Satellite Services, Inc.	Delaware, USA
Exeter Street Holdings LLC	Maryland, USA
Fleet Street Aviation, LLC	Washington, USA
Fleet Street International University Holdings, LLC	Maryland, USA
FSIUH Holding Company	Maryland, USA
Kendall College LLC	Illinois, USA
LEI Administration, LLC	Maryland, USA
National Hispanic University, LLC	California, USA
NewSchool of Architecture and Design, LLC	California, USA
Post‑Secondary Education Acquisition Corporation	Delaware, USA
The Canter Group of Companies, LLC	California, USA
University of St. Augustine for Health Sciences, LLC	California, USA
Walden e‑Learning, LLC	Delaware, USA
Walden University, LLC	Florida, USA
Wall Street International Holdings‑US I, Inc.	Maryland, USA

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eilif Serck-Hanssen, certify that:

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


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


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


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


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


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


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2018

/s/ EILIF SERCK-HANSSEN

Eilif Serck-Hanssen

Chief Executive Officer

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jean-Jacques Charhon, certify that:

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


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


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


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


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


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


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2018

/s/ JEAN-JACQUES CHARHON

Jean-Jacques Charhon

Executive Vice President and Chief Financial Officer

Exhibit 32

Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Laureate Education, Inc. on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of Laureate Education, Inc. does hereby certify, to the best of such officer’s knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018

/s/ EILIF SERCK-HANSSEN

Eilif Serck-Hanssen

Chief Executive Officer

/s/ JEAN-JACQUES CHARHON

Jean-Jacques Charhon

Executive Vice President and Chief Financial Officer

The certification set forth above is being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report as a separate disclosure document of Laureate Education, Inc. or the certifying officers.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Laureate Education, Inc. and will be retained by Laureate Education, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.