--------------------------------------------------------------------------------

Exhibit 10.1
 
CREDIT AGREEMENT
 
BY AND BETWEEN
 
STERLING NATIONAL BANK

AND

LINCOLN EDUCATIONAL SERVICES CORPORATION and LINCOLN TECHNICAL INSTITUTE, INC.,
and its subsidiaries
 
Dated as of April 12, 2016
 

--------------------------------------------------------------------------------

TABLE OF CONTENTS
 
1.
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.
1
       
Section 1.1
Definitions.
1
 
Section 1.2
Accounting Terms; GAAP
7
 
Section 1.3
Principles of Construction.
7
       
2.
AMOUNT AND TERMS OF LETTERS OF CREDIT.
8
       
Section 2.1
Purpose.
8
 
Section 2.2
Letters of Credit.
8
 
Section 2.3
Issuance and Extensions and Drawings of Letters of Credit
8
 
Section 2.4
Payments under the Letters of Credit.
9
 
Section 2.5
Note.
9
 
Section 2.6
Termination, Renewal, and Reduction of Revolving Facility.
9
 
Section 2.7
Payments.
9
       
3.
INTEREST, FEES, ETC.
10
       
Section 3.1
Letter of Credit Fees.
10
 
Section 3.2
Interest Rate and Payment on Draws.
10
 
Section 3.3
Late Fee.
11
 
Section 3.4
Taxes.
11
       
4.
REPRESENTATIONS AND WARRANTIES.
12
       
Section 4.1
Existence and Power.
12
 
Section 4.2
Authority and Execution.
12
 
Section 4.3
Binding Agreement.
12
 
Section 4.4
Litigation.
12
 
Section 4.5
Required Consents.
12
 
Section 4.6
Absence of Defaults; No Conflicting Agreements.
13
 
Section 4.7
Compliance with Applicable Laws.
13
 
Section 4.8
Taxes.
13
 
Section 4.9
Financial Statements.
13
 
Section 4.10
Authorizations.
13
 
Section 4.11
No Misrepresentation.
14
 
Section 4.12
Security Documents.
14
 
Section 4.13
OFAC.
14
 
Section 4.14
Solvency.
14
       
5.
CONDITIONS TO THE LETTERS OF CREDIT.
15
       
Section 5.1
Effective Date.
15
 
Section 5.2
Each Letter of Credit.
16

 
i

--------------------------------------------------------------------------------

6.
AFFIRMATIVE COVENANTS
17
       
Section 6.1
Books and Records and Other Information.
17
 
Section 6.2
Notice of Material Events.
17
 
Section 6.3
Existence; Conduct of Business.
17
 
Section 6.4
Payment of Obligations
18
 
Section 6.5
Compliance with Laws and Regulatory Requirements.
18
 
Section 6.6
Insurance.
18
 
Section 6.7
[reserved]
18
 
Section 6.8
Further Assurances.
18
       
7.
NEGATIVE COVENANTS.
18
       
Section 7.1
Limitation on Indebtedness.
18
 
Section 7.2
Limitation on Liens.
19
       
8.
DEFAULT.
19
       
Section 8.1
Events of Default.
19
 
Section 8.2
Contract Remedies.
20
 
Section 8.3
Nonexclusive Remedies.
21
       
9.
OTHER PROVISIONS.
21
       
Section 9.1
Modifications; Consents and Waivers; Entire Agreement.
21
 
Section 9.2
Notices.
21
 
Section 9.3
No Waiver; Cumulative Remedies.
23
 
Section 9.4
Survival of Representations and Warranties and Certain Obligations.
23
 
Section 9.5
Costs; Expenses and Taxes; Indemnification.
23
 
Section 9.6
Successors and Assigns; Participation; Pledge.
24
 
Section 9.7
Counterparts; Integration.
25
 
Section 9.8
Set-off.
25
 
Section 9.9
Construction.
25
 
Section 9.10
Governing Law; Jurisdiction; Consent to Service of Process.
25
 
Section 9.11
Headings Descriptive.
26
 
Section 9.12
Severability.
26
 
Section 9.13
WAIVER OF TRIAL BY JURY.
26
 
Section 9.14
Interest Rate Limitation.
26
 
Section 9.15
Marshaling; Payments Set Aside.
27
 
Section 9.16
No Third Parties Benefited.
27
 
Section 9.17
OFAC; Bank Secrecy Act; USA Patriot Act.
27

 
- ii -

--------------------------------------------------------------------------------

[image00001.jpg]
 
CREDIT AGREEMENT
 
CREDIT AGREEMENT, dated as of April 12, 2016, by and between LINCOLN EDUCATIONAL
SERVICES CORPORATION, a New Jersey corporation and LINCOLN TECHNICAL INSTITUTE,
INC., a New Jersey corporation, and its subsidiaries (together, the "Borrower"),
and STERLING NATIONAL BANK (the "Bank").
 
The Borrower has requested the Bank to extend credit to it and the Bank is
willing to do so subject to the terms and conditions set forth herein.
 
Accordingly, for good and valuable consideration, the parties hereto agree as
follows:
 

1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

 
Section 1.1             Definitions.
 
As used in this Agreement, terms defined elsewhere in this Agreement have the
meanings therein indicated, and the following terms have the following meanings:
 
"Affiliate" means, with respect to a specified Person, another Person that
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified.  For
purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ability to exercise voting power, by
contract or otherwise. The terms "controlling" and "controlled" have meanings
correlative thereto.
 
"Agreement" means this Credit Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
 
"Assignee" has the meaning set forth in Section 9.6(b).
 
"Authorized Signatory" means, as to (i) any Person which is a corporation, the
chief executive officer, the president, any vice president, the chief financial
officer or any other officer (designated in writing by the Borrower and
acceptable to the Bank) of such Person and (ii) any Person which is not a
corporation, the general partner or other Managing Person thereof or a duly
authorized representative of such Managing Person (designated in writing by the
Borrower and acceptable to the Bank).
 
"Availability Period" means the period from and including the Effective Date to
but excluding the Revolving Maturity Date.
 
"Banking Services" means each and any of the following bank services provided to
the Borrower by the Bank or any of its Affiliates: (i) credit cards for
commercial customers (including, without limitation, "commercial credit cards"
and purchasing cards), (ii) stored value cards and (iii) treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, overdrafts and interstate depository
network services).
 
"Banking Services Obligations" of the Borrower means any and all obligations of
the Borrower, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof  and substitutions therefor) in connection with Banking
Services.
 

--------------------------------------------------------------------------------

"Beneficiary" means the person or entity named on a Letter of Credit Application
as the beneficiary or any transferee of such beneficiary.
 
"Board" means the Board of Governors of the Federal Reserve System of the United
States of America.
 
"Borrower" has the meaning ascribed thereto in the preamble to this Agreement.
 
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in the State of New York are authorized or required by
law to remain closed.
 
"Change in Law" means (i) the adoption of any law, rule or regulation after the
date of this Agreement, (ii) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (iii) compliance by the Bank (or by the Bank's holding
company, if any) with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the date of
this Agreement; provided that, notwithstanding anything herein to the contrary,
(x) the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L.
111-203 (signed into law July 21, 2010)) and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a Change in Law,
regardless of the date enacted, adopted or issued.
 
"Collateral" means any and all "Collateral", as defined in any applicable
Security Document.
 
"Control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "Controlling" and "Controlled" have meanings correlative thereto.
 
"Default" means any event or condition which constitutes an Event of Default or
that upon notice, lapse of time or both would, unless cured or waived, become an
Event of Default.
 
"DOE" means the U.S. Department of Education or any successor agency.
 
"Dollars" or "$" refers to lawful money of the United States of America.
 
"Educational Agency" means any person, entity or organization, whether
governmental, government chartered, private or quasi-private, that engages in
granting or withholding Educational Approvals for, administers financial
assistance to or for students of, or otherwise regulates private post-secondary
schools, including without limitation, the DOE, any state educational department
or agency, any guaranty agency, and any entity or organization that is
recognized as an accrediting agency by the DOE which engages in granting or
withholding accreditation or similar approval for private post-secondary
schools, in accordance with standards relating to the performance, operation,
financial condition and/or educational quality of such schools.
 
"Educational Approval" means any license, authorization, approval, certification
or accreditation, issued or required to be issued by an Educational Agency with
respect to any aspect of a Borrower's school's operations in order for such
school or any location or educational program thereof to operate or participate
in Title IV, but excluding approvals or licenses with respect to the activities
of individual recruiters at any school.
 
- 2 -

--------------------------------------------------------------------------------

"Effective Date" means the date on which the conditions specified in Section 5.1
are satisfied (or waived by the Bank).
 
"Event of Default" has the meaning ascribed thereto in Section 8.1.
 
"Executive Order" has the meaning ascribed thereto in Section 9.17(a).
 
"Federal Funds Effective Rate" means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Bank from three Federal funds brokers of recognized standing
selected by it.
 
"Fiscal Year" means each period from January 1 to December 31.
 
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and in the statements and pronouncements of the
Financial Accounting Standards Board or in such other statement by such other
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination,
consistently applied.
 
"Governmental Authority" means any national, state or local government (whether
domestic or foreign), any political subdivision thereof or any other
governmental, quasi‑governmental, judicial, administrative, public or statutory
instrumentality, authority, body, agency, bureau, commission, board, department
or other entity (including, without limitation, the Federal Deposit Insurance
Corporation, the Comptroller of the Currency or the Federal Reserve Board, any
central bank or any comparable authority) or any arbitrator with authority to
bind a party at law.
 
"Indebtedness" of any Person means, without duplication, (i) all obligations of
such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (iii) all obligations of such
Person under conditional sale or other title retention agreements relating to
Property used and/or acquired by such Person, (iv) all obligations of such
Person in respect of the deferred purchase price of Property or services
(excluding accounts payable incurred in the ordinary course of business), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on Property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (vi) all guarantees by such
Person of Indebtedness of others, (viii) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty, (ix) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances, and (x) all other liabilities and
obligations which would be classified in accordance with GAAP as indebtedness on
a balance sheet or to which reference should be made in footnotes thereto.  The
amount of any guarantee shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect of
which such guarantee is made and (b) the maximum amount for which the Person
giving such guarantee may be liable pursuant to the terms of the agreement
embodying such guarantee unless such primary obligation and the maximum amount
for which such Person may be liable are not stated or determinable, in which
case the amount of such guarantee shall be such Person's maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith.
 
- 3 -

--------------------------------------------------------------------------------

"Indemnified Taxes" means as to any Person, any Tax, except (i) a Tax imposed on
or measured by the income or profits of such Person or any franchise tax, or any
similar taxes, and (ii) any interest, fees or penalties for late payment thereof
imposed on such Person.
 
"Interest Payment Date" means with respect to a Letter of Credit, the first day
of each month during the Availability Period, and the Revolving Maturity Date.
 
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit or
preferential arrangement, encumbrance, lien (statutory or other), or other
security agreement or security interest of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement and any capital or financing lease having substantially the same
economic effect as any of the foregoing.
 
"Loan Documents" means this Agreement, the Note, Security Documents, and all
other agreements, instruments and documents executed or delivered in connection
herewith.
 
"Loan Party(ies)" means collectively, the Borrower and individually, any one of
them.
 
"Managing Person" means, with respect to any Person that is (i) a corporation,
its board of directors, (ii) a limited liability company, its board of control,
managing member or members, (iii) a limited partnership, its general partner,
(iv) a general partnership or a limited liability partnership, its managing
partner or executive committee or (v) any other Person, the managing body
thereof or other Person analogous to the foregoing.
 
"Material Adverse Change" means any event, development or circumstance that has
had or reasonably could be expected to have a Material Adverse Effect.
 
"Material Adverse Effect" means a material adverse effect on (i) the business,
assets, operations or condition, financial or otherwise, of the Borrower, (ii)
the ability of the Borrower to perform any of its obligations under any Loan
Document or (iii) the rights of or benefits available to the Bank under any Loan
Document.
 
"Maturity Date" means the Revolving Maturity Date, or such earlier date
following acceleration thereof or the termination of this Agreement.
 
"Note" means the Revolving Note.
 
"Obligations" means (i) the due and punctual payment of (A) draws upon, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Letters of Credit, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (B) all other monetary obligations, including fees,
commissions, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower or any other Loan Party to the Bank, or that are otherwise payable
to the Bank, under this Agreement and the other Loan Documents, (ii) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrower or any other Loan Party under or pursuant to this Agreement and
the other Loan Documents, (iii) all obligations of the Borrower, monetary or
otherwise, under each interest rate protection agreement, foreign currency
exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging arrangement entered into with
the Bank (or an Affiliate thereof) as a counterparty, and (iv) all Banking
Services Obligations.
 
- 4 -

--------------------------------------------------------------------------------

"OFAC" has the meaning set forth in Section 4.13.
 
"One Month LIBOR Rate" means, as of any date of determination, a rate of
interest per annum equal to the one month London interbank offered rate for
Dollar loans in effect two (2) Business Days prior to such date, as reported in
(i) the appropriate display page of the website of Thomson Reuters, or (ii) if
not so reported therein, then as determined by the Bank from another recognized
source or interbank quotation.  If such rate is no longer available for any
reason, the Bank will choose a new index which is based upon comparable
information.  The Bank will give Borrower notice of this choice.
 
"Organizational Documents" means as to any Person which is (i) a corporation,
the certificate or articles of incorporation and by‑laws of such Person, (ii) a
limited liability company, the certificate of formation or articles of
organization and the limited liability company agreement or operating agreement
or other similar agreement of such Person, (iii) a partnership, the partnership
agreement or similar agreement of such Person, or (iv) any other form of entity
or organization, the organizational documents analogous to the foregoing.
 
"Other Taxes" means any and all current or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery, registration or
enforcement of, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, the Loan Documents or otherwise with respect
to, the Loan Documents.
 
"Participant" has the meaning set forth in Section 9.6(c).
 
"Permitted Encumbrances" means:
 
(i)            Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 6.4;
 
(ii)           landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than ninety
(90) days or are being contested in compliance with Section 6.4;
 
(iii)         pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations; and
 
(iv)         attachment or judgment liens in respect of judgments, writs or
warrants of attachment or similar process that do not constitute an Event of
Default under clause (l) of Section 8.1.
 
"Person" means any individual, firm, partnership, limited liability company,
joint venture, corporation, association, business enterprise, joint stock
company, unincorporated association, trust, Governmental Authority or any other
entity, whether acting in an individual, fiduciary, or other capacity.
 
"Prime Rate" means the rate of interest per annum established from time to time
by the Bank as its prime lending rate for commercial loans.  Each change in the
Prime Rate shall result in a corresponding change in the Prime Rate on the
effective date of such change in the Prime Rate. The Prime Rate is a reference
rate that does not necessarily represent the lowest or best rate actually
charged to any customer.  The Bank may make commercial loans or other loans at
rates of interest at, above or below such Prime Rate.
 
- 5 -

--------------------------------------------------------------------------------

"Property" means all types of real, personal, tangible, intangible or mixed
property.
 
"Related Party(ies)" means, with respect to any specified Person, such Person's
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person's Affiliates.
 
"Revolving Facility" means the Bank's obligation to issue Letters of Credit
hereunder, in an aggregate amount not exceeding the Revolving Facility Amount,
in its sole discretion.
 
"Revolving Facility Amount" means $9,500,000.00.
 
"Revolving Maturity Date" means April 1, 2017, or such earlier date upon which
the Revolving Facility shall terminate or the Revolving Facility shall otherwise
equal zero.
 
"Revolving Note" means a promissory note evidencing the Letters of Credit
payable to the order of the Bank in form acceptable to the Bank.
 
"Security Agreement" means the Security Agreement, dated as of the Effective
Date, in form and substance satisfactory to the Bank, as amended, restated,
supplemented or otherwise modified from time to time.
 
"Security Documents" means the Security Agreement and each other security
agreement, instrument or other document executed or delivered pursuant to
Section 5.1 to secure any of the Obligations.
 
"Solvent" shall mean, with respect to any Person on a particular date, that on
such date (a) the fair value of the Property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's Property would constitute unreasonably small capital.  The amount
of contingent liabilities at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time, represents
the amount that would reasonably be expected to become an actual or matured
liability.
 
"Stated Amount" means, with respect to any Letter of Credit, the maximum Dollar
amount available to be drawn under such Letter of Credit under any circumstance,
including any amount that has been the subject of a drawing by the Beneficiary
but has not yet been paid by the Bank.
 
"Subordinated Creditor" means each Person that subordinates an obligation owed
to it by Borrower to the obligations of Borrower to the Bank.
 
"Subsidiary" means, with respect to any Person (the "parent") at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held by the parent or one or more subsidiaries of the
parent.  Unless the context otherwise requires, "Subsidiary" means any
Subsidiary of the Borrower.
 
- 6 -

--------------------------------------------------------------------------------

"Taxes" means any and all current or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
 
"Transactions" means (i) the execution, delivery and performance by the Borrower
and of each Loan Document to which it is a party and (ii) the use of the Letters
of Credit.
 
"USA Patriot Act" means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended.
 
Section 1.2             Accounting Terms; GAAP.
 
Except as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time, provided that, if the Borrower notifies the Bank that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Bank notifies the Borrower that the
Bank requires an amendment to any provision hereof for such purpose), regardless
of whether any such notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be interpreted on the basis
of GAAP as in effect and applied immediately before such change shall have
become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.  Unless the context otherwise requires, any
reference to a fiscal period shall refer to the relevant fiscal period of the
Borrower
 
Section 1.3             Principles of Construction.
 
The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.  The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation".  The word "will" shall be construed to have the
same meaning and effect as the word "shall".  Unless the context requires
otherwise, (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified, (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
 
- 7 -

--------------------------------------------------------------------------------

2. AMOUNT AND TERMS OF LETTERS OF CREDIT

 
Section 2.1             Purpose.
 
Subject to the terms and conditions hereof, for the sole purpose of issuing
standby letters of credit for the account of the Borrower (each, a "Letter of
Credit" and collectively "Letters of Credit"), the Bank may issue Letters of
Credit from time to time during the Availability Period in an aggregate
principal amount at any one time outstanding which does not exceed the Revolving
Facility Amount.
 
Section 2.2             Letters of Credit.
 
During the Availability Period, the Bank agrees from time to time to issue or
cause an affiliate to issue Letters of Credit at one hundred percent (100%)
margin against the available funds in the Cash Collateral Account (defined
below); provided, however, that the aggregate drawn and undrawn amount of all
outstanding Letters of Credit shall not at any time exceed $9,500,000.00.  The
form and substance of each Letter of Credit shall be subject to the approval of
the Bank, in its sole discretion.  Each Letter of Credit shall be issued for a
term not to exceed three hundred sixty-five (365) days, as designated by the
Borrower; provided however, that no Letter of Credit shall have an expiration
date more than three hundred sixty-five (365) days beyond the Maturity Date. 
Standby letters of credit may include a provision providing that their expiry
date will automatically be extended each year for an additional one year period
unless the Bank delivers notice to the contrary.  The undrawn amount of all
Letters of Credit shall be reserved and such amount shall not be available for
borrowings.  Each Letter of Credit shall be subject to the additional terms and
conditions of the Letter of Credit agreements, applications, and any related
documents required by the Bank in connection with the issuance of Letters of
Credit.  The Borrower shall deposit in a cash collateral account with the Bank
(the "Cash Collateral Account"), an amount equal to the aggregate outstanding
undrawn face amount of all Letters of Credit which remain outstanding at any
time.  The Borrower grants a security interest in such Cash Collateral Account
to the Bank.  Amounts held in the Cash Collateral Account shall be applied by
the Bank to the payment of drafts drawn under such Letters of Credit and to the
obligations and liabilities of the Borrower and the Bank, in such order of
application as the Bank may in its sole discretion elect.
 
Section 2.3             Issuance and Extensions and Drawings of Letters of
Credit.
 
(a)           Borrower may from time to time during the Availability Period
request, upon at least five (5) Business Days' notice given not later than 12:00
P.M. (New York time), that the Bank issue a Letter of Credit by delivering to
the Bank (i) a Letter of Credit Application specifying the date on which such
Letter of Credit is to be issued (which shall be a Business Day), the expiration
date thereof, the Stated Amount thereof and the name and address of the
Beneficiary thereof; and (ii) such other information and documents as the Bank
reasonably requires in accordance with its customary practices for the issuance
of letters of credit.
 
(b)          The Bank shall, subject to the conditions set forth in this
Agreement, issue  the Letter of Credit on or before five (5) Business Days
following receipt of the documents last due pursuant to Section 2.3(a).  Each
Letter of Credit shall be in form and substance reasonably satisfactory to the
Bank in its reasonable discretion.  Upon the issuance of a Letter of Credit, the
Bank shall (A) deliver the original of such Letter of Credit to the Beneficiary
thereof or as Borrower shall otherwise direct and (B) furnish a copy thereof to
Borrower.
 
(c)           Borrower may from time to time during the Availability Period
request, upon at least three (3) Business Days' notice given not later than
12:00 P.M. (New York time), that the Bank extend the expiration date of an
outstanding Letter of Credit or increase (or, with the consent of the
Beneficiary, decrease) the Stated Amount of an outstanding Letter of Credit by
delivering to the Bank a written request therefor. Any request for an extension
or increase or decrease shall for all purposes hereof be treated as though
Borrower had requested the issuance of a replacement Letter of Credit (except
that the Bank may, if it elects, issue a notice of extension or increase or
decrease in lieu of issuing a new Letter of Credit in substitution for an
outstanding Letter of Credit).
 
- 8 -

--------------------------------------------------------------------------------

(d)          If any Letter of Credit provides for the automatic extension of the
expiry date thereof unless the Bank gives notice that such expiry date shall not
be extended, then the Bank shall allow such Letter of Credit to be extended;
provided that the Bank may give a notice of non-extension with respect to such a
Letter of Credit if, at the time of the giving of such notice, the conditions
precedent to the issuance of a replacement for such Letter of Credit are not
satisfied and, if the Bank gives such a notice, the Bank will concurrently
provide a copy thereof to Borrower.  The Bank shall give a notice of
non-extension with respect to such an Letter of Credit if the Bank receives, at
least ten (10) Business Days prior to the date on which such notice of
non-extension must be delivered under such Letter of Credit (or such shorter
period as may acceptable to the Bank), notice from Borrower directing the Bank
not to permit the extension of such Letter of Credit.
 
Section 2.4             Payments under the Letters of Credit.
 
Borrower acknowledges that the Bank shall be entitled to make any payment in
accordance with the terms of a Letter of Credit without any reference or further
authority from Borrower or any other investigation or inquiry.  Borrower
irrevocably authorizes the Bank to comply with any demand under a Letter of
Credit which is valid on its face.
 
Section 2.5             Note.
 
The Letters of Credit shall be evidenced by the Note.  Borrower agrees that,
absent manifest error, the records of the Bank will be conclusive with respect
to the Letters of Credit, including the amounts borrowed, the amounts repaid,
the outstanding principal balance and all interest payments.
 
Section 2.6             Termination, Renewal, and Reduction of Revolving
Facility.
 
(a)           Unless previously terminated or renewed, the Revolving Facility
shall terminate on the Revolving Maturity Date.
 
(b)          The Revolving Maturity Date will be considered renewed for an
additional twelve (12) months if and only if the Bank has sent to the Borrower a
written notice of renewal (the "Renewal Notice"), which Renewal Notice shall be
sent at least thirty (30) days prior to the Revolving Maturity Date.
 
(c)           The Borrower shall have the right, upon at least three (3)
Business Days' notice to the Bank, to terminate in whole the Revolving Facility
or reduce the Revolving Facility Amount, provided that the Borrower shall not
terminate the Revolving Facility or reduce the Revolving Facility Amount if the
aggregate drawn and undrawn amount of all outstanding Letters of Credit would
exceed the Revolving Facility Amount.  The Revolving Facility, once reduced or
terminated, may not be reinstated without approval and consent of the Bank.
 
Section 2.7             Payments.
 
(a)           The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document to which it is a party (whether of
principal of draws under the Letters of Credit, interest or fees, or of amounts
payable hereunder) prior to 3:00 p.m., New York time, on the date when due, in
immediately available funds, without setoff or counterclaim.  Any amounts
received after such time on any date may, in the discretion of the Bank, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the Bank at
its office at 400 Rella Boulevard, Montebello, NY 10901, or such other office as
to which the Bank may notify the other parties hereto.  If any payment hereunder
shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall be made in Dollars.  Without limiting
the foregoing, the Borrower hereby authorizes the Bank to charge any account of
the Borrower for each such payment on the due date therefor.  Notwithstanding
any other provisions in this Agreement or any other Loan Document, if the
Borrower fails to maintain any such account at the Bank, then all applicable
rates of interest set forth in this Agreement shall be increased by one percent
(1.0%), provided, however, such an increase does not limit or restrict any other
rights or remedies available to the Bank under this Agreement due to such
failure by Borrower to maintain such account with the Bank.
 
- 9 -

--------------------------------------------------------------------------------

(b)          So long as no Default or Event of Default shall have occurred and
be continuing, if at any time insufficient funds are received by and available
to the Bank to pay fully all amounts of outstanding draws on any Letter of
Credit, interest and fees, if any, then due hereunder, such funds shall be
applied (i) first, to the payment of all fees and expenses due from the Borrower
to the Bank, other than late fees; (ii) second, to the payment of accrued and
unpaid interest; (iii) third, to the payment of the outstanding draws on any
Letter of Credit then due hereunder, and (iv) fourth, to the payment of all late
fees due from the Borrower to the Bank.
 

3. INTEREST, FEES, ETC.

 
Section 3.1             Letter of Credit Fees.
 
Upon the issuance of each Letter of Credit, the Borrower shall pay a Letter of
Credit fee calculated at the rate per annum equal to one and three-quarters
percent (1.75%) on the daily amount available to be drawn under such Letter of
Credit.  For purposes of computing the daily amount available to be drawn under
any Letter of Credit, (i) if such Letter of Credit by its terms or the terms of
the Letter of Credit Application or any other document related thereto provides
for one or more automatic increases in the stated amount thereof, then the
amount of such Letter of Credit shall be deemed to be the maximum stated amount
of such Letter of Credit after giving effect to all such increases, whether or
not such maximum stated amount is in effect at such time and (ii) if the stated
amount of any Letter of Credit has been permanently reduced, then the stated
amount of such Letter of Credit shall be reduced by the amount of such permanent
reduction.  Such fees shall be payable in quarterly installments in arrears with
respect to each Letter of Credit on the last business day of each March, June,
September, and December.
 
Borrower shall pay the Bank, in U.S. dollars, the customary issuance,
presentation, amendment and other processing fees, and other standard costs and
charges, of the Bank relating to Letters of Credit as from time to time in
effect.  Such customary fees and standard costs and charges are due and payable
on demand and are nonrefundable.
 
Section 3.2             Interest Rate and Payment on Draws.
 
(a)           In the event that any amount is drawn under a Letter of Credit by
the Beneficiary thereof, the Borrower shall immediately pay to the Bank the full
amount drawn, which amount shall be withdrawn immediately by the Bank from the
Cash Collateral Account.  If the full amount drawn cannot be paid immediately
from the Cash Collateral Account, interest will accrue at a rate per annum equal
to the One-Month LIBOR Rate plus four percent (4.0%).  In such event, the
Borrower agrees that the Bank, it its sole discretion, may debit any account
maintained by the Borrower with the Bank for the amount of any such drawing.
 
- 10 -

--------------------------------------------------------------------------------

(b)          Notwithstanding the foregoing, if an Event of Default has occurred
and is continuing, then, so long as such Event of Default is continuing, the
aggregate amount of all outstanding draws on the Letters of Credit and each fee
and other amount then due and payable by the Borrower hereunder shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of aggregate amount of all outstanding Letters of Credit, five percent
(5%) plus the rate otherwise applicable to a draw as provided in Section 3.2(a),
or (ii) in the case of any other amount, five percent (5%) plus the Prime Rate.
 
(c)           All interest hereunder shall be computed on the basis of a year of
360 days, and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
 
Section 3.3             Late Fee.
 
If the Bank has not received the full amount of any payment on or before the
date it is due (including as a result of funds not available to be automatically
debited on the date on which any such payment is due), the Borrower shall pay a
late fee to the Bank in an amount equal to six percent (6%) of such overdue
payment.  Such late fee shall be paid promptly but only once with respect to
each late payment.
 
Section 3.4             Taxes.
 
(a)           All payments by or on account of the Borrower or any other Loan
Party under any Loan Document to the Bank shall be made free and clear of, and
without any deduction or withholding for or on account of, any and all present
or future Indemnified Taxes or Other Taxes, provided that if the Borrower or any
other Person is required by any law, rule, regulation, order, directive, treaty
or guideline to make any deduction or withholding in respect of such Indemnified
Tax or Other Tax from any amount required to be paid by the Borrower or any
other Loan Party to the Bank under any Loan Document (each, a "Required
Payment"), then (i) the Borrower shall notify the Bank of any such requirement
or any change in any such requirement promptly after the Borrower become aware
thereof, (ii) the Borrower shall pay such Indemnified Tax or Other Tax prior to
the date on which penalties attach thereto, such payment to be made (to the
extent that the liability to pay is imposed on the Borrower) for its own account
or (to the extent that the liability to pay is imposed on the Bank) on behalf
and in the name of the Bank, (iii) the Borrower shall pay to the Bank an
additional amount such that the Bank shall receive on the due date therefor an
amount equal to the Required Payment had no such deduction or withholding been
made or required, and (iv) the Borrower shall, within thirty (30) days after
paying such Indemnified Tax or Other Tax, deliver to the Bank satisfactory
evidence of such payment to the relevant Governmental Authority.
 
(b)          The Borrower shall reimburse the Bank for the full amount of all
Indemnified Taxes or Other Taxes paid by the Bank on or with respect to any
payment by or on account of any obligation of the Borrower under the Loan
Documents (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and expenses arising therefrom or with respect thereto (other than any such
penalties, interest or expenses that are incurred by the Bank's unreasonably
taking or omitting to take action with respect to such Indemnified Taxes or
Other Taxes), within thirty (30) days after written demand therefor, setting
forth in reasonable detail the basis for and calculation of such amounts,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to
the amount of such payment or liability delivered to the Borrower by the Bank
shall be conclusive absent manifest error.  In the event that the Bank
determines that it received a refund or credit for Indemnified Taxes or Other
Taxes paid by the Borrower under this Section, the Bank shall promptly notify
the Borrower of such fact and shall remit to the Borrower the amount of such
refund or credit.
 
- 11 -

--------------------------------------------------------------------------------

4. REPRESENTATIONS AND WARRANTIES

 
In order to induce the Bank to enter into this Agreement and to make the Letters
of Credit, the Borrower makes the following representations and warranties to
the Bank:
 
Section 4.1             Existence and Power.
 
The Borrower is duly organized and validly existing in good standing under the
laws of the State of New Jersey, has all requisite power and authority to own
its Property and to carry on its business as now conducted, and is in good
standing and authorized to do business in each jurisdiction in which the nature
of the business conducted therein or the Property owned by it therein makes such
qualification necessary.
 
Section 4.2             Authority and Execution.
 
The Borrower has full legal power and authority to enter into, execute, deliver
and perform the terms of the Loan Documents to which it is a party, all of which
have been duly authorized by all proper and necessary corporate or other
applicable action and are in full compliance with its Organizational Documents. 
The Borrower has duly executed and delivered the Loan Documents to which it is a
party.
 
Section 4.3             Binding Agreement.
 
The Loan Documents (other than the Note) constitute, and the Note, when issued
and delivered pursuant hereto for value received, will constitute, the valid and
legally binding obligations of the Borrower party thereto, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally.
 
Section 4.4             Litigation.
 
There are no actions, suits or proceedings at law or in equity or by or before
any Governmental Authority (whether purportedly on behalf of the Borrower)
pending or, to the knowledge of the Borrower, threatened against the Borrower or
maintained by the Borrower or which may affect the Borrower or any of its 
Properties or rights, which (i) could reasonably be expected to have a Material
Adverse Effect, (ii) call into question the validity or enforceability of, or
otherwise seek to invalidate, any Loan Document, or (iii) might, individually or
in the aggregate, materially and adversely affect any of the transactions
contemplated by any Loan Document.
 
Section 4.5             Required Consents.
 
Except for information filings required to be made in the ordinary course of
business which are not a condition to the performance by the Borrower under the
Loan Documents, and, except to the extent already obtained, no consent,
authorization or approval of, filing with, notice to, or exemption by, members
or holders of any other equity interest, any Governmental Authority or any other
Person is required to authorize the Borrower to execute the Loan Documents to
which it is a party or to perform its obligations thereunder, or is required in
connection with the execution, delivery and performance of the Loan Documents by
the Borrower or is required as a condition to the validity or enforceability of
the Loan Documents.
 
- 12 -

--------------------------------------------------------------------------------

Section 4.6             Absence of Defaults; No Conflicting Agreements.
 
(a)           The Borrower is not in default under any mortgage, indenture,
contract or agreement to which it is a party or by which it or any of its
Property is bound.  The execution, delivery or carrying out of the terms of the
Loan Documents will not constitute a default under, or result in the creation or
imposition of, or obligation to create, any Lien upon any Property of the
Borrower or result in a breach of or require the mandatory repayment of or other
acceleration of payment under or pursuant to the terms of any such mortgage,
indenture, contract or agreement.
 
(b)           The Borrower is not in default with respect to any judgment,
order, writ, injunction, decree or decision of any Governmental Authority.
 
Section 4.7             Compliance with Applicable Laws.
 
The Borrower is in compliance in all material respects with all statutes,
regulations, rules and orders of all Governmental Authorities which are
applicable to the Borrower.
 
Section 4.8             Taxes.
 
The Borrower has filed or caused to be filed all tax returns required to be
filed and have paid, or have made adequate provision for the payment of, all
taxes shown to be due and payable on said returns or in any assessments made
against it (other than those being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside on
its books in accordance with GAAP) which would be material to the Borrower, and
no tax Liens have been filed with respect thereto.  The charges, accruals and
reserves on the books of the Borrower with respect to all taxes are, to the
knowledge of the Borrower, adequate for the payment of such taxes, and the
Borrower knows of no unpaid assessment which is due and payable against the
Borrower or any claims being asserted, except such thereof as are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been set aside in accordance with GAAP.
 
Section 4.9             Financial Statements.
 
The Borrower has heretofore delivered to the Bank the balance sheet of the
Borrower as of the December Fiscal Year end and the related statements of
income, retained earnings and cash flows (or changes in financial position, as
the case may be) for such Fiscal Year (the "Financial Statements"), each of
which fairly present the financial condition of the Borrower and its
consolidated Subsidiaries on such dates and results of operations for the years
ended on such dates, and have been prepared in conformity with GAAP.  Except as
reflected in the Financial Statements or in the notes thereto, the Borrower does
not have any obligation or liability of any kind (whether fixed, accrued,
contingent, unmatured or otherwise) which, in accordance with GAAP, should have
been shown on the Financial Statements and was not.  Since the date of the
Financial Statements, the Borrower has conducted its business only in the
ordinary course and there has been no Material Adverse Change.
 
Section 4.10          Authorizations.
 
The Borrower possesses or has the right to use all franchises, licenses and
other rights as are material and necessary for the conduct of its business, and
with respect to which it is in compliance, with no known conflict with the valid
rights of others which could reasonably be expected to have a Material Adverse
Effect.  The Borrower has not received any notice that any event has occurred
which permits or, to the knowledge of the Borrower, after notice or the lapse of
time or both, or any other condition, could reasonably be expected to permit,
the revocation or termination of any such franchise, license or other right
which revocation or termination could reasonably be expected to have a Material
Adverse Effect.
 
- 13 -

--------------------------------------------------------------------------------

Section 4.11          No Misrepresentation.
 
No representation or warranty contained in any Loan Document and no certificate
or report from time to time furnished by the Borrower in connection with the
transactions contemplated thereby, contains a misstatement of material fact, or,
to the best knowledge of the Borrower, omits to state a material fact required
to be stated in order to make the statements therein contained not misleading in
the light of the circumstances under which made, provided that any projections
or pro‑forma financial information contained therein are based upon good faith
estimates and assumptions believed by the Borrower to be reasonable at the time
made, it being recognized by the Bank that such projections as to future events
are not to be viewed as facts, and that actual results during the period or
periods covered thereby may differ from the projected results.
 
Section 4.12          Security Documents.
 
The Security Documents are effective to create in favor of the Bank a legal,
valid and enforceable security interest in the Collateral except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and, when (i) financing statements in appropriate form are
filed in the offices of the secretary of state of the jurisdiction of
organization of the Borrower or such other office specified by the Uniform
Commercial Code and (ii) all other applicable filings under the Uniform
Commercial Code or otherwise that are required or permitted under the Loan
Documents are made, the Security Documents shall constitute a fully perfected
Lien on, and security interest in, all right, title and interest of the Borrower
thereunder in the Collateral, in each case prior and superior in right to the
rights of any other Person, other than with respect to Liens expressly permitted
by Section 7.2 or otherwise consented to by the Bank in writing.
 
Section 4.13          OFAC.
 
None of the Borrower, any of the other Loan Parties or any other Affiliate of
the Borrower: (i) is a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by the U.S. Department of the Treasury's
Office of Foreign Assets Control ("OFAC") available at
http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise
published from time to time; (ii) is (A) an agency of the government of a
country, (B) an organization controlled by a country, or (C) a person resident
in a country that is subject to a sanctions program identified on the list
maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise
published from time to time, as such program may be applicable to such agency,
organization or person; or (iii) derives any of its assets or operating income
from investments in or transactions with any such country, agency, organization
or person; and none of the proceeds from the Letters of Credit will be used to
finance any operations, investments or activities in, or make any payments to,
any such country, agency, organization, or person.
 
Section 4.14          Solvency.
 
After giving effect to the transactions contemplated by this Agreement, and
before and after giving effect to the issuance of each Letter of Credit, the
Borrower is Solvent. No transfer of Property has been or will be made by the
Borrower and no obligation has been or will be incurred by the Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of the Borrower.
 
- 14 -

--------------------------------------------------------------------------------

5. CONDITIONS TO THE LETTERS OF CREDIT

 
Section 5.1             Effective Date.
 
The effectiveness of this Agreement, and the obligation of the Bank to issue the
initial Letters of Credit is subject to the fulfillment of the following
conditions prior to or simultaneously therewith:
 
(a)           The Bank shall have received from the Borrower a counterpart of
this Agreement signed on behalf of the Borrower.
 
(b)          The Bank shall have received the Revolving Note signed on behalf of
the Borrower.
 
(c)           The Bank shall have received counterparts of the Security
Agreement, signed on behalf of the Borrower, together with the following:
 
(i)               instruments constituting Collateral, if any, duly indorsed in
blank, if necessary, by an Authorized Signatory of the Borrower;
 
(ii)             all instruments and other documents, including, without
limitation, Uniform Commercial Code financing statements, required by law or
requested by the Bank to be filed, registered or recorded to create or perfect
the Liens intended to be created under the Security Documents; and
 
(iii)           such other documents as the Bank may reasonably require in
connection with the perfection of its security interests in the Collateral.
 
(d)           The Bank shall have received Uniform Commercial Code, tax and
judgment lien search reports with respect to each applicable public office where
Liens are or may be filed disclosing that there are no Liens of record in such
official's office covering any Collateral or showing the Borrower as debtor
thereunder (other than Permitted Encumbrances or such other Liens consented to
by the Bank in writing) and a certificate of the Borrower signed by an
Authorized Signatory thereof, dated the Effective Date, certifying that, upon
the issuance of the Letters of Credit there will exist no Liens on the
Collateral other than Permitted Encumbrances or such other Liens consented to by
the Bank in writing.
 
(e)           The Bank shall have received a certificate from the secretary or
executive officer of the Borrower (i) attaching a true and complete copy of the
resolutions of its Managing Person and of all documents evidencing all necessary
action (in form and substance satisfactory to the Bank) taken by it to authorize
the Loan Documents to which it is a party and the transactions contemplated
thereby, (ii) attaching a true and complete copy of its Organizational
Documents, (iii) setting forth the incumbency of its officer or officers or
other analogous counterpart who may sign the Loan Documents, including therein a
signature specimen of such officer or officers, and (iv) attaching a recently
dated certificate of good standing (or the equivalent) issued by the secretary
of state (or the equivalent Governmental Authority) of its jurisdiction of
organization and each jurisdiction in which it is qualified to do business as a
foreign corporation.
 
- 15 -

--------------------------------------------------------------------------------

(f)            All approvals and consents of all Persons required to be obtained
in connection with the consummation of the transactions contemplated hereby
shall have been obtained and shall be in full force and effect, and all required
notices shall have been given and all required waiting periods shall have
expired (or have been waived), and the Bank shall have received a certificate,
in all respects satisfactory to the Bank, of an Authorized Signatory of the
Borrower that all such approvals and consents required to have been obtained by
the Borrower shall have been obtained and shall be in full force and effect and
that all such notices required to be given by the Borrower shall have been given
and all such waiting periods of which the Borrower has knowledge shall have
expired (or have been waived).
 
(g)           The Bank shall be reasonably satisfied that there shall be no
litigation or administrative proceeding, or regulatory development, which would
be expected to have a Material Adverse Effect.
 
(h)           The Bank shall be reasonably satisfied that no Material Adverse
Change has occurred since September 1, 2015.
 
(i)            The Bank shall have received evidence satisfactory to it that all
liens (other than Permitted Encumbrances or other Liens consented to by the Bank
in writing), if any, covering the Collateral shall have been released or
terminated and that all other obligations, if any, with respect thereto shall
have been fully and finally extinguished.
 
(j)            The Bank shall have received all amounts due and payable by the
Borrower on or prior to the Effective Date, including, to the extent invoiced,
reimbursement or payment of all out‑of‑pocket expenses required to be reimbursed
or paid by the Borrower hereunder.
 
(k)           The Bank shall have received all documentation and other
information required by regulatory authorities under applicable "know your
customer" and anti-money laundering rules and regulations, including the USA
Patriot Act.
 
(l)            The Bank shall have received such other approvals, opinions or
documents, each in form and substance satisfactory to the Bank, as the Bank
shall reasonably require in connection with the issuance of the Letters of
Credit.
 
Section 5.2             Each Letter of Credit.
 
The obligation of the Bank to issue any Letter of Credit is subject to the
satisfaction of the following conditions:
 
(a)           The representations and warranties of the Borrower set forth in
each Loan Document shall be true and correct in all material respects (provided
that if any representation or warranty is by its terms qualified by concepts of
materiality, such representation or warranty shall be true and correct in all
respects) on and as of the date of such Letter of Credit, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case the accuracy of such representations and warranties shall be
determined as of such earlier date.
 
(b)           At the time of and immediately after giving effect to such Letter
of Credit, no Default or Event of Default shall have occurred and be continuing
and the aggregate amount of all outstanding Letters of Credit shall not exceed
the Revolving Facility Amount.
 
- 16 -

--------------------------------------------------------------------------------

(c)           The aggregate amount of all outstanding Letters of Credit plus the
requested Letter of Credit shall not exceed the amount in the Cash Collateral
Account at the time the Letter of Credit will be issued.
 
(d)           The Bank shall have received a Letter of Credit Application and
any other required documentation meeting the requirements of Section 2.3(a).
 
(e)           The Bank shall have received such other documentation and
assurances as shall be reasonably required by it in connection with such Letter
of Credit.
 
Each Letter of Credit shall be deemed to constitute a representation and
warranty by the Borrower on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section 5.2.
 

6. AFFIRMATIVE COVENANTS

 
The Borrower covenants and agrees that so long as any of the Obligations remains
unpaid:
 
Section 6.1             Books and Records and Other Information.
 
The Borrower shall keep proper books of record and account in which full, true
and correct entries shall be made in accordance with GAAP throughout the periods
involved, and the Borrower shall furnish to the Bank promptly following any
request therefor, (A) all documentation and other information that the Bank
reasonably requests as necessary in order for it to comply with its ongoing
obligations under applicable "know your customer" and anti-money laundering
rules and regulations, including the USA Patriot Act, and (B) such other
information regarding the operations, business affairs and financial condition
of the Borrower, or compliance with the terms of the Loan Documents, as the Bank
may reasonably request.
 
Section 6.2             Notice of Material Events.
 
The Borrower shall furnish to the Bank prompt written notice of the following:
 
(a)           the occurrence of any Default;
 
(b)          the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, could in the
good faith opinion of the Borrower be expected to result in a Material Adverse
Effect; and
 
(c)           any other development that results in, or could be expected to
result in, a Material Adverse Effect.
 
Each notice delivered under this Section 6.2 shall be accompanied by a statement
of the chief financial officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
 
Section 6.3             Existence; Conduct of Business.
 
The Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and do or cause to
be done all things reasonably necessary to preserve, renew and keep in full
force and effect the rights, licenses, permits, privileges, franchises,
trademarks, copyrights and patents material to the conduct of its business.
 
- 17 -

--------------------------------------------------------------------------------

Section 6.4             Payment of Obligations.
 
The Borrower shall pay its obligations, including tax liabilities, before the
same shall become delinquent, except where (i) the validity or amount thereof is
being contested diligently and in good faith by appropriate proceedings, (ii)
the Borrower has set aside on its books adequate reserves with respect thereto
in accordance with GAAP and no notice of Lien with respect thereto has been
filed or recorded and (iii) the failure to make payment pending such contest
could not be expected to result in a Material Adverse Effect.
 
Section 6.5             Compliance with Laws and Regulatory Requirements.
 
The Borrower shall comply, in all material respects, with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
Property.  Without limiting the generality of the foregoing and notwithstanding
any limitation contained therein, the Borrower shall maintain all Educational
Approvals and specialized accrediting agency approvals necessary to conduct its
operations and offer its educational programs, except where the failure to
maintain such Educational Approvals or specialized accrediting agency approvals
could not reasonably be expected to result in a Material Adverse Effect.
 
Section 6.6             Insurance.
 
The Borrower shall maintain, with financially sound and reputable insurance
companies, (i) adequate insurance for its insurable properties, all to such
extent and against such risks, including fire, casualty, business interruption
and other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or similar
locations, and (ii) such other insurance as is required pursuant to the terms of
any Security Document.
 
Section 6.7             [reserved]
 
Section 6.8             Further Assurances.
 
The Borrower shall execute any and all further documents, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, and other documents), that
may be required under any applicable law, or which the Bank may reasonably
request, to effectuate the transactions contemplated by the Loan Documents or to
grant, preserve, protect or perfect the Liens created or intended to be created
by the Security Documents or the validity or priority of any such Lien, all at
the expense of the Borrower.  The Borrower shall provide to the Bank, from time
to time upon request, evidence reasonably satisfactory to the Bank as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents.
 

7. NEGATIVE COVENANTS

 
The Borrower hereby covenants and agrees that so long as any of the Obligations
remains unpaid:
 
Section 7.1             Limitation on Indebtedness.
 
The Borrower shall not create, incur, assume or permit to exist any
Indebtedness, without the written consent of the Bank, except
 
- 18 -

--------------------------------------------------------------------------------

(a)           Indebtedness permitted pursuant to the "Credit Agreement by and
among Lincoln Educational Services Corporation and its Subsidiaries, the Lenders
that are Signatories Hereto, HPF Service, LLC, and Alostar Bank of Commerce"
dated as of July 31, 2015, as same may be amended from time to time; and
 
(b)          Indebtedness to the Bank or any Affiliate of the Bank.
 

Section 7.2             Limitation on Liens.
 
The Borrower shall not create, incur, assume or permit to exist any Lien on the
Cash Collateral Account with the exception of the Liens created under the
Security Documents or otherwise in favor of the Bank.
 

8. DEFAULT

 
Section 8.1             Events of Default.
 
Each of the following shall constitute an "Event of Default" hereunder:
 
(a)           the Borrower shall fail to pay any principal on any Obligation
when and as the same shall become due and payable; or
 
(b)           the Borrower shall fail to pay any interest on any Obligation or
any fee, or any other amount payable under any Loan Document, when and as the
same shall become due and payable; or
 
(c)           any statement, representation or warranty made or deemed made by
or on behalf of any Loan Party in or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with any Loan Document or any amendment or modification thereof or
waiver thereunder, shall prove to have been incorrect or misleading (whether
because of misstatement or omission) in any material respect when made or deemed
made; or
 
(d)          the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 6.1, Section 6.3, or in Article 7;
or
 
(e)           the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document to which it is a party
(other than those specified in clauses (a), (b) or (d) of this Section 8.1), and
such failure shall continue unremedied for a period of thirty (30) days after
notice thereof shall have been given by the Bank to the Borrower (or such longer
cure period in the event the failure to observe or perform is not reasonably
susceptible of being cured with the exercise of due diligence during such thirty
(30) day period); or
 
(f)            [reserved]
 
(g)           [reserved]
 
(h)            an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or its or his debts, or of a substantial part of its
or his assets, under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or for a substantial part of its or his assets, and, in any
such case, such proceeding or petition shall continue undismissed for sixty (60)
days or an order or decree approving or ordering any of the foregoing shall be
entered; or
 
- 19 -

--------------------------------------------------------------------------------

(i)            the Borrower shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any
federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (h) of this Section 8.1, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or for a substantial part of its or his assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing; or
 
(j)            the Borrower shall become unable, admit in writing its inability
or fail generally, to pay its debts as they become due; or
 
(k)           [reserved]
 
(l)            one or more arbitration awards, judgments, or decrees or order
for the payment of money in an aggregate amount in excess of $1,000,000.00
(except to the extent fully covered [other than to the extent of customary
deductibles] by insurance pursuant to which the insurer has not denied coverage)
shall be rendered against the Borrower or any combination thereof  and the same
is not discharged, satisfied, vacated or bonded pending appeal for a period of
sixty (60) consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower to enforce any such judgment; or
 
(m)          [reserved]
 
(n)           an Event of Default as defined in any of the other Loan Documents
shall occur; or
 
(o)           any Loan Document shall cease, for any reason (other than as a
result of the action or failure to act on the part of the Bank), to be in full
force and effect, or any Loan Party shall so assert in writing or shall disavow
any of its obligations thereunder; or
 
(p)           any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by any Loan Party not to be, a valid and
perfected Lien on any Collateral, with the priority required by the applicable
Security Document; or
 
 
(q)            any subordination agreement shall at any time and for any reason
cease to be in full force and effect, or shall be declared null and void, or the
validity or enforceability thereof shall be contested by the applicable
Subordinated Creditor, or any Subordinated Creditor shall deny it has any
further liability or obligation under its subordination agreement, or any
Subordinated Creditor shall fail to perform any of its obligations under its
subordination agreement.
 
Section 8.2             Contract Remedies.
 
(a)           Upon the occurrence of an Event of Default or at any time
thereafter during the continuance thereof, (i) in the case of an Event of
Default specified in clauses (h) or (i) of Section 8.1, without declaration or
notice to the Borrower, the Revolving Facility shall immediately and
automatically terminate, and any draws on any Letters of Credit, all accrued and
unpaid interest thereon and all other amounts owing under the Loan Documents
shall immediately become due and payable, and (ii) in all other cases, the Bank
may, by notice to the Borrower, declare any draws upon any outstanding Letters
of Credit, all accrued and unpaid interest thereon and all other amounts owing
under the Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable forthwith.
 
- 20 -

--------------------------------------------------------------------------------

(b)           In the event that any draws upon any outstanding Letters of
Credit, all accrued and unpaid interest thereon and all other amounts owing
under the Loan Documents shall have been declared due and payable pursuant to
the provisions of Section 8.2(a), the Bank may: (i) immediately withdraw the
amount of any draws upon any outstanding Letters of Credit all accrued and
unpaid interest thereon and all other amounts owing under the Loan Documents
from the Cash Collateral Account; (ii) enforce its rights as the holder of the
Note by suit in equity, action at law and/or other appropriate proceedings,
whether for payment or the specific performance of any covenant or agreement
contained in the Loan Documents; and (iii) exercise any and all rights and
remedies provided to the Bank by the Loan Documents and applicable law.  Except
as otherwise expressly provided in the Loan Documents, the Borrower expressly
waives presentment, demand, protest and all other notices of any kind in
connection with the Loan Documents.  The Borrower hereby further expressly
waives and covenants not to assert any appraisement, valuation, stay, extension,
redemption or similar laws, now or at any time hereafter in force which might
delay, prevent or otherwise impede the performance or enforcement of any Loan
Document.
 
(c)           In the event that any draws upon any outstanding Letters of
Credit, all accrued and unpaid interest thereon and all other amounts owing
under the Loan Documents shall have been declared due and payable pursuant to
the provisions of this Section, any funds received by the Bank from or on behalf
of the Borrower shall be applied by the Bank in liquidation of any obligations
of the Borrower under the Loan Documents in such order and manner as the Bank
determines in its sole discretion, any statute, custom or usage to the contrary
notwithstanding.
 
Section 8.3             Nonexclusive Remedies.
 
All of the Bank's rights and remedies not only under the provisions of this
Agreement but also under any other agreement or transaction shall be cumulative
and not alternative or exclusive, and may be exercised by the Bank at such time
or times and in such order of preference as the Bank in its sole discretion may
determine.
 

9. OTHER PROVISIONS

 
Section 9.1             Modifications; Consents and Waivers; Entire Agreement.
 
No modification or waiver of or with respect to any provision of this Agreement,
the Note, and all other agreements, instruments and documents delivered pursuant
hereto or thereto, nor consent to any departure by the Borrower from any of the
terms or conditions thereof, shall in any event be effective unless it shall be
in writing and signed by both parties, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.  No
notice to or demand on the Borrower (not otherwise required by the terms hereof)
shall, of itself entitle the Borrower to any other or further notice or demand
in similar or other circumstances.  This Agreement embodies the entire agreement
and understanding between the Bank and the Borrower and supersedes all prior
agreements and understandings relating to the subject matter hereof.
 
Section 9.2             Notices.
 
Except in the case of notices and other communications expressly permitted to be
given by telephonic or electronic communications, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, or mailed by certified or registered mail, as
follows:
 
- 21 -

--------------------------------------------------------------------------------

The Borrower:
 
Lincoln Educational Services Corporation
200 Executive Drive
Suite 340
West Orange, New Jersey 07052
Attention: General Counsel

Lincoln Technical Institute, Inc.
200 Executive Drive
Suite 340
West Orange, New Jersey 07052
Attention: General Counsel
 
with a copy to:
 
McCarter & English, LLP
100 Mulberry Street
Four Gateway Center
Newark, New Jersey 07102-4096
Attention: Veronica Montagna, Esq.
 
The Bank:
 
Sterling National Bank
400 Rella Blvd., P.O. Box 600
Montebello, New York 10901
Attention: Commercial Loan Department
 
with a copy to:
 
Bressler, Amery & Ross, P.C.
325 Columbia Turnpike
Florham Park, New Jersey 07932
Attention:  Michael L. Ostrowsky, Esq.
 
Any notice, request, demand or other communication hereunder shall be deemed to
have been given on: (x) the day on which it is delivered by receipted hand or
such commercial messenger service or nationally recognized overnight courier
service to such party at its address specified above; or (y) on the third (3rd)
Business Day after the day deposited in the mail, postage prepaid, if sent by
mail.  Any party hereto may change the Person or address to whom or which
notices are to be given hereunder, by notice duly given hereunder; provided that
any such notice shall be deemed to have been given hereunder only when actually
received by the party to which it is addressed.
 
- 22 -

--------------------------------------------------------------------------------

Section 9.3             No Waiver; Cumulative Remedies.
 
No failure to exercise and no delay in exercising, on the part of the Bank, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right.
 
Section 9.4         Survival of Representations and Warranties and Certain
Obligations.
 
All covenants, agreements, representations and warranties made by the Borrower
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Bank and shall survive the
execution and delivery of any Loan Document and the issuance of any Letter of
Credit, regardless of any investigation made by the Bank or on its behalf and
notwithstanding that the Bank may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Letter of Credit or any fee or any other
amount payable under the Loan Documents is outstanding and unpaid and so long as
the Revolving Facility has not expired or terminated. The provisions of Section
9.5 shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of
outstanding draws under any Letters of Credit and the termination of the
Revolving Facility or the termination of this Agreement or any provision hereof.
 
Section 9.5             Costs; Expenses and Taxes; Indemnification.
 
(a)           The Borrower shall pay (i) all out‑of‑pocket expenses incurred by
the Bank and its Affiliates, including the customary and reasonable fees,
charges and disbursements of counsel for the Bank, in connection with
preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions of any Loan Document (whether or not
the transactions contemplated thereby shall be consummated) and (ii) all
expenses incurred by the Bank, including the customary and reasonable fees,
charges and disbursements of any counsel (including any in-house counsel,
whether or not on an out-of-pocket basis) for the Bank, in connection with the
enforcement or protection of its rights in connection with the Loan Documents,
including its rights under this Section 9.5, or in connection with the Letters
of Credit issued hereunder, including all such out‑of‑pocket expenses incurred
during any workout, restructuring or negotiations in respect of such Letters of
Credit or during any proceeding under any federal, state or foreign bankruptcy,
insolvency, reorganization, receivership or similar law now or hereafter in
effect.
 
(b)           The Borrower shall indemnify the Bank, its directors, officers,
employees, agents and advisors, and the Related Parties (each such Person being
called an "Indemnitee") against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
customary and reasonable fees, charges and disbursements of any counsel for any
Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of any Loan
Document or any agreement or instrument contemplated thereby, the performance by
the parties to the Loan Documents of their respective obligations thereunder or
the consummation of the Transactions or any other transactions contemplated
thereby, (ii) any Letters of Credit or the use of the proceeds, (iii) any actual
or prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.
 
- 23 -

--------------------------------------------------------------------------------

(c)           To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, any Loan Document or any agreement, instrument or other document
contemplated thereby, the Transactions or any Letter of Credit or the use of the
proceeds thereof.
 
(d)          All amounts due under this Section 9.5 shall be payable promptly
but in no event later than thirty (30) days after written demand therefor.
 
Section 9.6             Successors and Assigns; Participation; Pledge.
 
(a)           This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Bank, all future holders of the Note and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of their respective rights under this Agreement without prior written consent of
the Bank.
 
(b)          The Bank shall have the right at any time or from time to time to
assign all or any portion of its rights and obligations hereunder to one or more
banks or other financial institutions (each, an "Assignee").  The Borrower
agrees that, upon written request of the Bank, it shall execute or cause to be
executed, such documents, including, without limitation, amendments to this
Agreement and to any other documents, instruments and agreements executed in
connection herewith as the Bank shall deem necessary to effect the foregoing. 
In addition, at the request of the Bank and any such Assignee, the Borrower
shall issue one or more new promissory notes, as applicable, to any such
Assignee and, if the Bank has retained any of its rights and obligations
hereunder following such assignment, to the Bank, which new promissory notes
shall be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by the Bank prior to such assignment and
shall reflect the amount of the respective facilities and loans held by such
Assignee and the Bank after giving effect to such assignment.  Upon the
execution and delivery of appropriate assignment documentation, amendments and
any other documentation required by the Bank in connection with such assignment,
and the payment by the Assignee of the purchase price agreed to by the Bank, and
such Assignee, such Assignee shall be a party to this Agreement and shall have
all of the rights and obligations of the Bank hereunder (and under any and all
other guaranties, documents, instruments and agreements executed in connection
therewith) to the extent that such rights and obligations have been assigned by
the Bank pursuant to the assignment documentation between the Bank and such
Assignee, and the Bank shall be released from its obligations hereunder and
thereunder to a corresponding extent.  The Bank may furnish any information
concerning the Borrower in its possession from time to time to prospective
Assignees, provided that the Bank shall require any such prospective Assignees
to agree in writing to maintain the confidentiality of such information pursuant
to a confidentiality agreement reasonably acceptable to the Borrower.
 
(c)           The Bank shall have the unrestricted right at any time and from
time to time, and without the consent of, or notice to, the Borrower, to grant
to one or more banks or other financial institutions (each, a "Participant")
participating interests in the Bank's obligation to lend hereunder and/or any or
all of the Letters of Credit hereunder.  In the event of any such grant by the
Bank of a participating interest to a Participant, whether or not upon notice to
the Borrower, the Bank shall remain responsible for the performance of its
obligations hereunder and the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
hereunder.  The Bank may furnish any information concerning the Borrower in its
possession from time to time to prospective Participants, provided that the Bank
shall require any such prospective Participant to agree in writing to maintain
the confidentiality of such information pursuant to a confidentiality agreement
reasonably acceptable to the Borrower.
 
- 24 -

--------------------------------------------------------------------------------

(d)          The Bank may at any time pledge all or any portion of its rights
under the  Loan Documents including any portion of the Note to any Federal
Reserve Banks organized under section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341.  No such pledge or enforcement thereof shall release the Bank from
its obligations under any of the Loan Documents.
 
Section 9.7             Counterparts; Integration.
 
This Agreement may be executed in counterparts (and by different parties hereto
on different counterparts), each of which shall constitute an original, but all
of which, when taken together, shall constitute but one contract.  This
Agreement and any separate letter agreements with respect to fees payable to the
Borrower constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. 
Delivery of an executed counterpart of this Agreement by facsimile transmission
or other electronic means shall be effective as delivery of a manually executed
counterpart of this Agreement.
 
Section 9.8             Set-off.
 
If an Event of Default shall have occurred and be continuing, the Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
applicable law, to setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at
any time owing by it to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under
this Agreement held by it, irrespective of whether or not it shall have made any
demand under this Agreement and although such obligations may be unmatured.  The
rights of the Bank under this Section 9.8 are in addition to other rights and
remedies (including other rights of setoff) that they may have.
 
Section 9.9             Construction.
 
Each party to a Loan Document represents that it has been represented by counsel
in connection with the Loan Documents and the transactions contemplated thereby
and that the principle that agreements are to be construed against the party
drafting the same shall be inapplicable.
 
Section 9.10          Governing Law; Jurisdiction; Consent to Service of
Process.
 
(a)           This Agreement and the Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
 
(b)           Each Loan Party hereby irrevocably and unconditionally submits,
for itself and its Property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in New York
County or Rockland County or Westchester County, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each Loan Party hereby irrevocably and unconditionally agrees
that, to the extent permitted by applicable law, all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by applicable law, in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this Agreement
shall affect any right that any party hereto may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents in
the courts of any jurisdiction.
 
- 25 -

--------------------------------------------------------------------------------

(c)           Each Loan Party hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any court referred to in Section 9.10(b).  Each Loan Party hereby
irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
 
(d)          Each Loan Party irrevocably consents to service of process in the
manner provided for notices in Section 9.2.  Nothing in this Agreement will
affect the right of the Bank to serve process in any other manner permitted by
law.
 
Section 9.11          Headings Descriptive.
 
Article and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
 
Section 9.12          Severability.
 
In the event any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction). 
The parties shall endeavor in good‑faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
 
Section 9.13          WAIVER OF TRIAL BY JURY.
 
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
 
Section 9.14          Interest Rate Limitation.
 
Notwithstanding anything herein to the contrary, if at any time the interest
rate applicable to any Letter of Credit, together with all fees, charges and
other amounts that are treated as interest on such Letter of Credit under
applicable law (collectively the "charges"), shall exceed the maximum lawful
rate (the "maximum rate") that may be contracted for, charged, taken, received
or reserved by the Bank in accordance with applicable law, the rate of interest
payable in respect of such Letter of Credit hereunder, together with all of the
charges payable in respect thereof, shall be limited to the maximum rate and, to
the extent lawful, the interest and the charges that would have been payable in
respect of such Letter of Credit but were not payable as a result of the
operation of this Section 9.14 shall be cumulated, and the interest and the
charges payable to the Bank in respect of other Letters of Credit or periods
shall be increased (but not above the maximum rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by the Bank.
 
- 26 -

--------------------------------------------------------------------------------

Section 9.15          Marshaling; Payments Set Aside.
 
The Bank shall not be under any obligation to marshal any assets in favor of the
Borrower or any other Person or against or in payment of any or all of the
Obligations.  To the extent that the Borrower makes a payment or payments to the
Bank, or the Bank enforces its Liens or exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Bank in its discretion) to be repaid to a trustee, receiver or any other party
in connection with any proceeding under any federal, state or foreign
bankruptcy, insolvency, reorganization, receivership or similar law now or
hereafter in effect, or otherwise, then, to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
 
Section 9.16          No Third Parties Benefited.
 
This Agreement is made and entered into for the sole protection and legal
benefit of the Borrower and the Bank, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with,
this Agreement or any of the other Loan Documents.  The Bank shall not have any
obligation to any Person not a party to this Agreement or other Loan Documents.
 
Section 9.17          OFAC; Bank Secrecy Act; USA Patriot Act.
 
(a)            The Borrower shall (i) ensure that no person who owns a
controlling interest in or otherwise controls the Borrower is or shall be listed
on the Specially Designated Nationals and Blocked Person List or other similar
lists maintained by OFAC, the Department of the Treasury or included in any
Executive Orders of the President of the United States of America ("Executive
Orders"), that prohibits or limits the Bank from making any advance or extension
of credit to the Borrower or from otherwise conducting business with the
Borrower, and (ii) ensure that any draws under any Letters of Credit shall not
be used to violate any of the foreign asset control regulations of OFAC or any
enabling statute or Executive Order relating thereto.  Further, the Borrower
shall comply, and cause its Subsidiaries to comply, with all applicable Bank
Secrecy Act laws and regulations, as amended.
 
(b)            The Bank hereby notifies the Borrower that pursuant to the
requirements of the USA Patriot Act, it is required to obtain, verify and record
information that identifies the Borrower and the other Loan Parties, which
information includes the name and address of the Borrower and the other Loan
Parties and other information that will allow the Bank to identify the Borrower
and the other Loan Parties in accordance with the USA Patriot Act.
 
- 27 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
 

 
LINCOLN EDUCATIONAL SERVICES CORPORATION
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
Chief Executive Officer
       
LINCOLN TECHNICAL INSTITUTE, INC.
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
SOUTHWESTERN ACQUISITION, L.L.C.
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
NEW ENGLAND ACQUISITION, LLC
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
NASHVILLE ACQUISITION, L.L.C.
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
EUPHORIA ACQUISITION, LLC
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
LCT ACQUISITION, LLC
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President

 

--------------------------------------------------------------------------------

 
NN ACQUISITION, LLC
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
NEW ENGLAND INSTITUTE OF TECHNOLOGY AT PALM BEACH, INC.
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
LTI HOLDINGS, LLC
     
By:
/s/Scott M. Shaw
 
Name:
Scott M. Shaw
 
Title:
President
       
STERLING NATIONAL BANK
     
By:
/s/Charles W. Jones
 
Name:
Charles W. Jones
 
Title:
Managing Director

 
 

--------------------------------------------------------------------------------