Document:

Exhibit 4.6

 

MANAGEMENT STOCKHOLDERS AGREEMENT

 

MANAGEMENT
STOCKHOLDERS AGREEMENT (the “Agreement”), dated as of January 1, 2002, by and among LINCOLN
TECHNICAL INSTITUTE, INC., a New Jersey corporation (the “Company”),
the stockholders and the holders of Options under the Management Stock
Option Plan (as such terms are defined below) listed on Schedule I hereto, as
such Schedule 1 may be amended from time to time (collectively with their
respective Permitted Transferees (as defined below), the “Management
Investors” and
BACK TO SCHOOL ACQUISITION L.L.C., a Delaware limited liability corporation (“Stonington”).

 

WHEREAS, pursuant to a Recapitalization Agreement
dated as of April 26, 1999 (the “Recapitalization Agreement”), the Company was recapitalized on
behalf of Stonington;

 

WHEREAS, after the closing of the Transactions
contemplated by the Recapitalization Agreement, certain Management Investors
will purchase Shares (as defined below) of common stock, no par value per
share, of the Company (the “Common Stock”) and be granted Options (as defined below) under the
Management Stock Option Plan; and

 

WHEREAS, the Company and the Stockholders (as defined
below) wish to enter into this Agreement to provide certain rights and
obligations among them;

 

NOW, THEREFORE, in consideration of the premises and mutual
agreements, covenants and provisions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

As
used in this Agreement, the following terms shall have the meanings ascribed to
them below:

 

“Affiliate” shall mean with respect to any Person any of (a) a director or officer
of such Person, (b) a spouse, parent, sibling or descendant of such Person (or
spouse, parent, sibling or descendant of any officer or director of such
Person), (c) any other relative of such Person (or relative of any officer or
director of such Person) who has the same home as such Person (or as any
officer or director of such Person), and (d) any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person. For the purposes of this definition,
“control”
(including, with correlative meanings, the terms “controlling”, “controlled” and “under common control with”),
as used with respect to any Person, shall mans the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or agency or otherwise.

 

“Bank Credit
Agreement” shall mean a credit agreement between the
Company, and the lenders, as in effect and as amended, supplemented or
otherwise modified from time to time.

 

“Board of
Directors” shall mean the board of directors of the
Company.

 

 

“Cash
Equivalents” shall mean (a) marketable direct obligations
issued or unconditionally guaranteed by the United States government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof, (b) marketable direct obligations issued by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor s Ratings Services, a Division of The McGraw-Hill
Companies, Inc. (“S&P”) or Moody s Investors Service, Inc., or (c) commercial paper
maturing not more than one year from the date of issuance thereof and, at the
time of acquisition, having the highest rating obtainable from either S&P
or Moody s Investors Service, Inc.

 

“Cause” as used in connection with a termination of employment, consultancy or
directorship of a Management Investor shall mean (unless otherwise defined in
an agreement between such Management Investor and the Company or any of its
subsidiaries, in which case the term “Cause” as
used herein with respect to such Management Investor shall have the meaning
ascribed to it therein), (i) the Management Investor’s willful failure to
perform the duties of his or her employment, consultancy or directorship in any
material respect, (ii) malfeasance or gross negligence in the performance of a
Management Investor’s duties of employment, consultancy or directorship, (iii)
the Management Investor’s conviction of a felony under the laws of the United
States or any state thereof (whether or not in connection with his or her
employment, consultancy or directorship), (iv) the Management Investor’s
intentional or reckless disclosure of Protected Information respecting the
Company’s or any of its subsidiaries’ business to any individual or entity
which is not in the performance of the duties of his or her employment,
consultancy or directorship, (v) the Management Investor’s commission of an act
or acts of sexual harassment that would normally constitute grounds for
termination, or (vi) any other act or omission by the Management Investor
(other than an act or omission resulting from the exercise by the Management
Investor of good faith business judgment), which is materially injurious to the
financial condition or business reputation of the Company or any of its
Affiliates; provided, however, that in the case of (i) and (ii)
above, a Management Investor shall not be deemed to have been terminated for
cause unless he has received written notice of the alleged basis therefor from
the Company, and fails to remedy the matter within thirty (30) days after he
has received such notice, except that no such “cure opportunity” shall be
required in the case of two separate episodes giving the Company, the right to
terminate for cause for such reason occurring within any 12-month period.

 

“Closing” shall mean the consummation of the transactions contemplated by the
Recapitalization Agreement.

 

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

 

“Common Stock” has the meaning specified in the recitals to this Agreement.

 

“Company” has the meaning specified in the
preamble to this Agreement.

 

“Disability,” with respect to a Management Investor, shall mean (unless otherwise
defined in an agreement between such Management Investor and the Company or any
of its subsidiaries, in which case the term “Disability” as used herein with respect to
such Management Investor shall have the meaning ascribed to it therein) the
inability of such Management Investor

 

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to perform substantially
such Management Investor’s duties and responsibilities to the Company or any of
its subsidiaries by reason of a physical or mental disability or infirmity (i)
for a continuous period of six months or (ii) at such earlier time as such
Management Investor submits medical evidence of such disability satisfactory to
the compensation committee of the Board of Directors acting reasonably that
such Management Investor has a physical or mental disability or infirmity that
will likely prevent such Management Investor from substantially performing such
Management Investor’s duties and responsibilities for six months or longer. The
date of such Disability shall be on the last day of such six-month period or
the day on which the compensation committee of the Board of Directors
determines that the Management Investor has a physical or mental disability or
infirmity as provided in clause (ii) herein.

 

“Duly Endorsed” shall mean duly endorsed in blank by the person or persons in whose
name a stock certificate is registered or accompanied by a duly executed stock
or security assignment or stock transfer power separate from the certificate
with the signature(s) thereon guaranteed by a commercial bank or trust company
or a member of a national securities exchange or the National Association of
Securities Dealers, Inc. or such other executed stock or security assignment as
the compensation committee of the Board of Directors may in their sole
discretion deem acceptable, free and clear of all encumbrances.

 

“EBITDA” for any period shall mean the consolidated earnings from continuing
operations of the Company and its subsidiaries for such period before
consolidated interest, taxes, depreciation and amortization, determined in
accordance with GAAP in effect on the date hereof and consistent with the
principles utilized in connection with the preparation of the audited financial
statements of the Company for the year ended December 31, 2001, excluding (i)
extraordinary charges and gains and (ii) any charges or gains attributable to
the grant or exercise of the Options.

 

“ERISA” shall mean the federal Employee Retirement Income Security Act of 1974
or any successor statue, and the rules and regulations thereunder.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of such similar federal statute.

 

“Fair Value
Price” shall mean, with respect to each Share, as of
any date of determination, the quotient obtained by dividing (a) the excess of
(I) the product of (A) the Company’s EBITDA for the four full fiscal quarters
ending immediately preceding the date of determination, and (B) 6.0, over (II)
the excess of (C) the sum of (x) the aggregate principal amount of any
Indebtedness, determined in accordance with GAAP, as of the end of the most
recently completed fiscal quarter of the Company and (y) the aggregate
liquidation value (including any accrued dividends thereon) of any outstanding
preferred stock of the Company or any of its subsidiaries that is held by
persons or entities other than the Company or any of its subsidiaries,
determined in accordance with GAAP, as of the end of the most recently
completed fiscal quarter of the Company, over (D) the sum of the amount of cash
deemed to be on hand as of the end of such quarter as a result of the assumed
exercise of all outstanding options as described in the next paragraph and the
amount of cash and Cash Equivalents, determined in accordance with GAAP, held
by the Company or any of its subsidiaries as of the end of such quarter by (b)
the number of Shares then outstanding determined on a fully diluted basis as of
the

 

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end of its most recently
completed fiscal quarter of the Company; provided, however, if
there had been a disposition of assets representing a substantial portion of
the consolidated assets of the Company, an acquisition of assets representing a
substantial portion of the consolidated assets of the Company, a
recapitalization of the Company, or other extraordinary transaction in the
preceding four quarters then the Fair Value Price shall be adjusted as
determined by the Board of Directors in good faith.

 

In
making calculations for purposes of subclauses (a) and (b) of the preceding
paragraph it shall be assumed that all Options (whether or not then vested or
exercisable), warrants and rights to purchase Shares and securities convertible
or exchangeable into Shares, if any, outstanding on the date as of which the
calculation is being made had been exercised, converted or exchanged on such
date if the exercise price or conversion or exchange price is less than the
Fair Value Price per share and any purchase price for Shares payable upon such
exercise had been paid in cash and appropriate adjustments (including without
limitation the reflection of such cash exercise price and the issuance of such
additional Shares) made to the relevant balance sheet of the Company.

 

“Fully Diluted
Shares” shall mean the aggregate of (a) the number of
Shares issued and outstanding
(other than Shares held in the treasury of the Company or held by any Subsidiary)
and (b) the number of Shares issuable upon (i) the exercise of any then
outstanding Options, warrants or similar instruments (other than such
instruments held by the Company or any Subsidiary) and (ii) the exercise of any
conversion or exchange rights with respect to any outstanding securities or
instruments (other than such securities or instruments held by the Company or
any Subsidiary).

 

“GAAP” shall mean United States generally accepted accounting principles.

 

“Indebtedness” shall mean, without duplication, (a) all debt for money borrowed,
including accrued but unpaid interest thereon, whether direct or indirect, (b)
all liabilities secured by any mortgage, pledge, security interest, lien,
charge, or other encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have been assumed,
and (c) all guarantees, endorsements and other contingent obligations whether
direct or indirect in respect of indebtedness of others of the character
referred to in (a) or (b) above, including any obligation to supply funds to or
in any manner to invest in, directly or indirectly, any other Person, to
purchase indebtedness, or to assure any other Person against loss, and the
obligations to reimburse any other Person in respect of any letters of credit.

 

“Involuntary
Termination” shall mean, with respect to a Management
Investor, the termination of his or her employment, consultancy or directorship
with the Company or its subsidiaries (a) by the Company of its subsidiaries,
which termination is not for Cause or the result of the Management Investor’s
Retirement, death or Disability, (b) in the event that such Management Investor
has an agreement with the Company or any subsidiary thereof, and such agreement
defines a termination of employment, consultancy or directorship by the
Management Investor for “Good Reason,” by the Management Investor of Good
Reason (as such term is defined in such agreement) and (c) in the event that
such Management Investor has an agreement with the Company or any of its
subsidiaries, as may otherwise be provided in such agreement.

 

“IPO” shall have the meaning specified in Section 2.2(a)(iii)
hereof.

 

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“Management
Investors” shall have the meaning specified in the
preamble hereto. Unless the context otherwise requires, when used in this
Agreement the term Management Investors shall include any employee, consultant
or non-employee director of the Company or any of its subsidiaries who has from
time to time been granted an Option pursuant to the Management Stock Option
Plan.

 

“Management
Shares” shall mean the Shares beneficially owned from
time to time by the Management Investors or their Permitted Transferees,
including Shares acquired simultaneously with the Closing and Shares issued
upon the exercise of an Option granted under the Management Stock Option Plan.

 

“Management
Stock Option Plan” shall mean the Management Stock Option Plan
adopted by the Board of Directors as of January 1, 2002, as in effect from time
to time.

 

“Management
Subscription Agreement” shall mean the Management Stock Subscription
Agreement, dated the date hereof, among the Company and the Management
Investors named therein.

 

“Marketable
Securities” shall mean securities that are (a) (i)
securities of or other interests in any Person that are traded on a national
securities exchange, reported on the Nasdaq Stock Market System or otherwise
actively traded over-the-counter or (ii) debt securities of an issuer that has
debt or equity securities that are so traded or so reported on and which a
nationally recognized securities firm has agreed to make a market in, and (b)
not subject to restrictions on transfer as a result of any applicable
contractual provisions or the provisions of the Securities Act or, if subject
to such restrictions under the Securities Act, are also subject to registration
rights reasonably acceptable to Stonington.

 

“Option Price” shall have the meaning set forth in the Management Stock Option Plan,
determined by reference to whether such Option is a Service Option or a
Performance Option.

 

“Options” shall mean, collectively, the Service Options and the Performance
Options granted from time to time pursuant to the Management Stock Option Plan.

 

“Other Stockholders” shall mean the Management Investors and their Permitted Transferees and
each employee, consultant or non employee director of the Company who becomes a
party to this Agreement after the date of this Agreement which shall have been
granted similar rights.

 

“Performance
Options” shall mean Performance Options granted from
time to time pursuant to the Management Stock Option Plan.

 

“Permitted
Transferees” shall have the meaning specified in Section
2.2(a)(iv) hereof.

 

“Person” shall mean an individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency
thereof.

 

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“Protected
Information” shall mean trade secrets and confidential and
proprietary business information of the Company, including, but not
limited to, customers (including potential customers), sources of supply,
processes, methods, plans, apparatus, specifications, materials, pricing
information, intellectual property (including applications and rights in
discoveries, inventions or patents), internal memoranda, marketing plans,
contracts, finances, personnel, research and internal policies, other than any
such information which has entered the public domain (unless such information entered
the public domain through the efforts of or on account of the Management
Investor).

 

“Protected
Shares” shall have the meaning specified in Section
3.2(a) hereof.

 

“Public Company” shall mean the Company following an initial public offering of the Company’s
securities; that, as of the date of determination, the shares of Common Stock
that have been sold in public offerings shall equal not less than 10% of the
Fully Diluted Shares.

 

“Registrable
Securities” shall mean Shares which are Stonington Shares,
Management Shares (or which will, upon exercise of Options, become Management
Shares), or which are held by any Persons to whom incidental registration
rights may be granted after the Closing (regardless of whether such other
Persons are granted demand registration rights). As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (ii) such securities shall have been sold pursuant to
Rule 144 (or any successor provision) under the Securities Act, (iii) such
securities shall have been otherwise transferred and new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company, (iv) such securities shall have ceased to be
outstanding or (v) in the case of Shares held by a Management Investor, such
securities shall have been transferred to any Person other than a Permitted
Transferee of such Management Investor.

 

“Registration
Expenses” shall mean any and all expenses incident to
performance of or compliance with Article IV of this Agreement, including without limitation, (i) all SEC and stock exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses of complying with securities or blue sky laws
(including reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities), (iii)
all printing expenses, (iv) the fees and disbursements of counsel for the
Company, of the Company’s independent public accountants, including the
expenses of any special audits and/or “cold comfort” letters
required by or incident to such performance and compliance, and of the counsel
specified in Section 4.03, (v) any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities and the reasonable fees
and expenses of any special experts retained in connection with the requested
registration, including any fee payable to a qualified independent underwriter
within the meaning of the rules of the National Association of Securities
Dealers, Inc., but excluding underwriting discounts and commissions and
transfer taxes, if any, (vi) the fees and disbursements of counsel for the
Stockholders, and (vii) internal expenses of the Company (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties).

 

“Restrictions” shall have the meaning specified in Section 3.1(c) hereof.

 

6

 

“Retirement” shall mean with respect to any Management Investor his termination of
employment, consultancy or directorship after attainment of age 65 or such
other normal retirement age as may be in force from time to time or as may
otherwise be approved by the compensation committee of the Board of Directors.

 

“Sale” shall mean any sale, assignment, transfer, distribution or other
disposition of Shares or of a participation or other right therein, whether
voluntarily or by operation of law.

 

“SEC” shall mean the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.

 

“Securities Act” shall mean the Securities Act of 1933, as amended,
or any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.

 

“Stock Option
Agreements” shall mean each Stock Option Agreement
between the Company and the employee, consultant or director named therein
evidencing a grant of Service Options and Performance Options.

 

“Service Options” shall mean Service Options granted from time to time pursuant to the
Management Stock Option Plan.

 

“Shares” shall mean the shares of Common Stock, no par value per share, of the
Company, including, without limitation, all Shares issued in connection with
any employee benefit plan of the Company or its subsidiaries, including the
Management Stock Option Plan.

 

“Stockholders” shall mean the beneficial owners from time to time of the Management
Shares (including holders of Options granted under the Management Stock Option
Plan) and the Stonington Shares and each beneficial owner individually shall be
referred to as a “Stockholder.”

 

“Stonington
Shares” shall mean the Shares beneficially owned from
time to time by Stonington.

 

“Third Party” shall mean, with respect to any Stockholder, and Person, other than (i)
the Company, (ii) any Subsidiary of the Company or (iii) any Affiliate of such
Stockholder or, in the case of the Management Investors, any Permitted
Transferee.

 

“Voluntary
Resignation” shall mean (a) the termination of a
Management Investor’s employment, consultancy or directorship with the Company
or its subsidiaries by such Management Investor, other than for Retirement,
death or Disability and other than under circumstances that constitute
Involuntary Termination pursuant to clause (b) of the definition of such term
and (b) in the event that such Management Investor has an agreement with the Company,
as may otherwise be provided in such agreement.

 

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ARTICLE II

 

TRANSFER RESTRICTIONS ON SHARES

 

Section
2.1. General Restrictions on Transfer. No Management Investor shall,
without the prior written consent of the Company, directly or indirectly, sell,
offer, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
(collectively, the “transfers”) any
Management Shares (or interests therein) except for transfers made in
accordance with the provisions of Article III of the Management Subscription
Agreement, Section 2.5 and either Section 2.2, 2.3, 2.4 or Article III or IV
hereof. No transfer of Management Shares in violation of this Agreement shall
be made or recorded on the books of the Company and any such transfer shall be
void and of no effect. Options shall also be subject to the restrictions on
transfer set forth in the Management Stock Option Plan.

 

Section
2.2. Certain Permitted Transfers. (a) Each of the Stockholders and the
Company acknowledges and agrees that any of the following transfers of
Management Shares (collectively, the “Permitted Transfers”) are, subject to compliance with
Section 2.5 hereof, deemed to be permitted transfers of such securities:

 

(i)            a
transfer of Management Shares upon the death of a Management Investor to his
executors, administrators and testamentary trustees (the “Management
Investor’s Estate”);

 

(ii)           a transfer of
Management Shares to the Management Investor’s spouse, parents, children or
grandchildren or to a trust, the sole beneficiaries of which are the Management
Investor and/or such Management Investor’s spouse, parents, children or
grandchildren;

 

(iii)          following an
initial offering of Shares to the public pursuant to a securities registration
statement (other than a registration statement on Form S-8 or any successor
thereto) (an “IPO”), (1)
a transfer of Management Shares in accordance with the provisions of paragraph
(e) of Rule 144 (or any successor to such rule) promulgated under the
Securities Act (as if such Shares were “restricted” securities sold by an “affiliate”
of the Company, as such terms are defined in such rule) or (2) a pledge of
Management Shares to a financial institution as security for money borrowed
from such financial institution; provided, however, that the
restriction set forth in subclause (1) shall terminate with respect to any
Management Shares owned by a Management Investor upon the termination of such
Management Investor’s employment, consultancy or directorship with the Company;
and

 

(iv)          a transfer of
Management Shares to the Company;

 

provided that no transfers pursuant to Section
2.2(a)(i) or (a)(ii) shall be permitted (and any such transfer shall be void
and of no effect) unless and until the applicable transferee shall agree in
writing, in form and substance reasonably satisfactory to the Company, to
become bound, and becomes bound, by all the terms of this Agreement to the same
extent as a Management Investor is so bound, and unless and until the Company
is satisfied in its reasonable discretion that the certificates representing
interests of any such trust or other transferee have been legended, or other
appropriate provision has been made, to restrict the transfer of such interests
to the same

 

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extent as transfers of
Shares held by Management Investors are restricted hereunder. The Management
Investor’s Estate and each Person to whom Management Shares may be transferred
pursuant to Section 2.2(a)(i) and (a)(ii) are hereinafter
sometimes referred to as a “Permitted Transferee” of such Management Investor.

 

Section
2.3. Rights to Participate in Certain Sales.
(a) (i) So long as the Company is not a Public Company, neither Stonington nor
any of its Affiliates shall, directly or indirectly, make any Sale of Shares
held by them constituting more than thirty percent (30%) of the outstanding
Shares to any Third Party or Third Parties (a “Covered Tag-Along Transaction”), unless the terms and conditions of
such Sale shall include an offer to include, at the option of the Other
Stockholders, in such Sale to the Third Party or Third Parties, the number of
Shares then owned by such Other Stockholders, as determined by Section
2.3(a)(iii).

 

(ii)           If, so long as the Company is not a Public
Company, if Stonington and/or any of its Affiliates receives from a Third Party
or Third Parties a bona fide offer or offers to purchase or otherwise acquire
(for purposes of this Section 2.3 an “Offer”) any Shares held by Stonington or such Affiliates (for
purposes of this Section 2.3, the “Offered Shares”) that, together with Shares previously disposed of by
Stonington or any of such Affiliates to Third Parties aggregate more than
thirty percent (30%) of the than outstanding Shares (such Shares, together with
the Offered Shares, for purposes of this Section 2.3, the “Tag-Along
Shares”), and
Stonington and/or such Affiliates intends to sell such Offered Shares to such
Third Party or Third Parties, then Stonington and such Affiliate (for purposes
of this Section 2.3, the “Prospective Sellers”) shall jointly provide written
notice (for purposes of this Section 2.3, the “Offer Notice”) of such Offer to each of the Other
Stockholders not later than thirty (30) days prior to the consummation of the
Sale contemplated by the Offer. The Offer Notice shall identify the Offered
Shares, the price offered for such Offered Shares (for purposes of this Section
2.3, the “Offer Price”), all
other material terms and conditions of the Offer and, in the case of an Offer in
which the consideration payable for Offered Shares consists in whole or in part
of consideration other than cash, such information relating to such other
consideration as may be reasonably necessary to ascertain the value of such
other consideration.

 

(iii)          Each of the Other Stockholders shall
have the right and option (a “Tag-Along Right”), for the period often (10) days
after the date the Offer Notice is given (for purposes of this Section 2.3, the
“Notice
Period”), to
notify the Prospective Sellers of such Other Stockholder’s interest in selling
or otherwise disposing of up to the Pro Rata Portion of such Other Stockholder’s
Shares pursuant to the Offer. For purposes of this subsection 2.3, “Pro Rata
Portion” means,
with respect to each Other Stockholder, a number of Fully Diluted Shares equal
to the product of (x) the total number of Fully Diluted Shares then owned by
such Other Stockholder, multiplied  by (y) a fraction, the
numerator of which shall be the total number of Tag-Along Shares, and the denominator
of which shall be the total number of Shares owned by the Prospective Sellers
on the date of the first sale of Tag-Along Shares.

 

(iv)          Each Other Stockholder desiring to
sell such Other Stockholder’s Pro Rata Portion of Shares pursuant to this Section
2.3 shall, prior to the expiration of the Notice Period, provide the
Prospective Sellers with a written notice specifying the number of Shares as to
which such Other Stockholder has an interest in selling or otherwise disposing
of pursuant to the Offer (for purposes of this Section 2.3, a “Notice
of Interest”), and
shall deliver to the Prospective Sellers, to be held in trust, (A) the
certificate or certificates evidencing the Shares to be sold or

 

9

 

otherwise disposed of by
such Other Stockholder duly endorsed in blank or accompanied by written
instruments of transfer in form reasonably satisfactory to the Prospective
Sellers executed by such Other Stockholder, (B) an instrument of assignment
reasonably satisfactory to the Prospective Sellers assigning, as of the
consummation of the Sale to the Third Party or Third Parties, all of such Other
Stockholder s rights under this Agreement with respect to the Shares to be sold
or otherwise disposed of (to the extent assignable), (C) a special irrevocable
power-of-attorney authorizing the Prospective Sellers, on behalf of such Other
Stockholder, to sell or otherwise dispose of such Shares pursuant to the terms
of the Offer (at a price equal to the Offer Price) and to take all such actions
as shall be necessary or appropriate in order to consummate such Sale; provided,
however, that the Prospective Sellers shall not have the authority to
incur or create liabilities or to give representations or warranties on behalf
of such Other Stockholder, and (D) wire transfer instruction for payment of the
purchase price (if cash) for the purchase of the Other Stockholder’s Shares.
Delivery of such certificate or certificates evidencing the Shares to be sold,
the instrument of assignment, the special irrevocable power of attorney
authorizing the Prospective Sellers and wire transfer instructions, on behalf
of such Other Stockholder, to sell or otherwise dispose of such Shares shall
constitute an irrevocable election by such Other Stockholder to authorize and
permit the Prospective Sellers to sell such Shares, on behalf of such Other
Stockholder, pursuant to the Offer. The Prospective Sellers shall cause the
Third Party to whom or which the Shares of the Other Stockholders are being sold
or otherwise disposed of to deliver the appropriate purchase price for the
purchase of such Shares to the Other Stockholders, against delivery of the
Shares being sold or otherwise disposed of.

 

(v)           Each Stockholder shall bear such
Stockholder’s own expenses in connection with any such Sale pursuant to this
Section 2.3.

 

(vi)          If at the end of the Notice Period any
Other Stockholder shall not have given a Notice of Interest (and delivered all
other required documents) with respect to some or all of such Other Stockholder’s
Shares, such Other Stockholder will be deemed to have waived all of such Other
Stockholder’s rights under this Section 2.3 with respect to the portion of such
Other Stockholder’s Shares for which a Notice of Interest shall not have been
given. If, at the end of the 180-day period following the giving of the Offer
Notice, the Prospective Sellers shall not have completed the Sale of all the
Offered Shares and the Shares with respect to which any Other Stockholders
shall have given Notices of Interest pursuant to this Section 2.3, the
Prospective Sellers shall return to such Other Stockholders all certificates
evidencing the unsold Shares that such Other Stockholders delivered for Sale
pursuant to this Section 2.3 and such Other Stockholders related instruments of
assignment and powers-of-attorney and the Prospective Sellers shall not
consummate the Sale with such Third Party or Third Parties without again
complying with the terms and procedures set forth in this Section 2.3,
including providing to the Other Stockholders another Offer Notice.

 

(vii)         Except as expressly provided in this
Section 2.3, no Prospective Seller shall have any obligation to any Other
Stockholder with respect to the Sale of any Shares owned by Other Stockholder
in connection with this Section 2.3. Anything herein to the contrary
notwithstanding and irrespective of whether any Notice of Interest shall have
been given, no Prospective Seller shall have any obligation to any Other
Stockholder to sell or otherwise dispose of any Offered Shares pursuant to this
Section 2.3 as a result of any decision by such Prospective Seller not to
accept or consummate any Offer or Sale with respect to the Offered Shares (it
being understood that any and all such decisions shall be made by such
Prospective Seller in its sole

 

10

 

discretion). Except as otherwise permitted herein, no
Other Stockholder shall be entitled to sell or otherwise dispose of Shares
directly to any Third Party or Third Parties pursuant to an Offer (it being
understood that all such Sales shall be made only on the terms and pursuant to
the procedures set forth in this Section 2.3).

 

(b)           Anything in this Section 2.3 to the
contrary notwithstanding, in the event that Stonington and/or its Affiliates
shall exercise their rights under Section 2.4, the Other Stockholders shall
thereafter have no right pursuant to this Section 2.3 to participate in any
Sale pursuant to this Section 2.3 with respect to the Sale the subject of Section
2.4. Nothing in this Section 2.3 shall affect any of the obligations of any of
the Stockholders under any other provision of this Agreement.

 

SECTION
2.4. “Drag-Along” Rights. (a) Prior to such
time as the Company is a Public Company, if Stonington and/or any of its
Affiliates shall, in any transaction or series of related transactions (a “Drag-Along
Covered Transaction”), directly
or indirectly, propose to make a Sale of Shares constituting more than thirty
percent (30%) of the Fully Diluted Shares (for purposes of this Section 2.4,
the “Controlling
Shares”) to a
Third Party or Third Parties (for purposes of this Section 2.4, an “Offer”), Stonington and/or such Affiliates
may, at their option, require each of the Other Stockholders to sell the Pro
Rata Portion of such Stockholder’s Shares to such Third Party or Third Parties
for the same consideration per Share and otherwise upon the same terms and
conditions upon which Stonington and/or such Affiliates sell their Shares (a “Drag-Along
Right”). For
purposes of this Section 2.4, “Pro Rata Portion” means, with respect to each Other
Stockholder, a number of Shares equal to the product of (x) the total number of
Fully Diluted Shares then owned by such Other Stockholder, multiplied by
(y) a fraction, the numerator of which shall be the total number of Shares
proposed to be sold by Stonington and/or such Affiliates, and the denominator
of which shall be the total number of such Stockholder’s Shares then owned by
Stonington and/or its Affiliates.

 

(b)           (i)
Stonington and/or such Affiliates shall provide a written notice (for purposes
of this Section 2.4, the “Offer Notice”) of such Offer to each of the Other Stockholders not
later than the fifteenth Business Day prior to the consummation of the Sale
contemplated by the Offer. The Offer Notice shall contain written notice of the
exercise of the “drag-along” rights of Stonington and/or its Affiliates
pursuant to Section 2.4(a), setting forth the consideration per Share to be
paid by the Third Party or Third Parties and the other material terms and
conditions of the Offer. Within ten (10) Business Days following the date the
Offer Notice is given, each of the Other Stockholders shall deliver to
Stonington and/or such Affiliates, to be held in trust, (A) the certificate or
certificates evidencing the Pro Rata Portion of Shares owned or held by such
Other Stockholder duly endorsed in blank or accompanied by written instruments
of transfer in form reasonably satisfactory to Stonington and/or such Affiliate
executed by such Other Stockholder, (B) a special irrevocable power-of-attorney
authorizing Stonington and/or such Affiliate, on behalf of such Other
Stockholder, to sell or otherwise dispose of such Shares pursuant to the terms
of the Offer and to take all such actions as shall be necessary or appropriate
in order to consummate such Sale; provided, however, that
Stonington and/or such Affiliate shall not have the authority to incur or
create liabilities or to give representations and warranties on behalf of such
Other Stockholder, and (C) wire transfer instructions for payment of the
purchase price of the Other Stockholder’s Shares; provided that no Other
Stockholder shall have any liability to any purchaser of the Shares pursuant to
the Offer in excess of the aggregate proceeds received by such Other
Stockholder in exchange for such

 

11

 

Stockholder’s Shares or in a
manner that is disproportionate or different from Stonington and its
Affiliates. Stonington and/or such Affiliate shall cause the Third Party to
whom or which the Shares of the Stockholders are being sold or otherwise
disposed to deliver the appropriate amount of immediately available funds for
the purchase of such Shares to the Other Stockholders pursuant to the wire
transfer instructions described in clause (C) above. If in connection with such
Sale, Stonington and/or such Affiliate are to receive consideration other than
cash, Cash Equivalents or Marketable Securities, each Other Stockholder shall
have the right to elect to receive in lieu thereof cash or Cash Equivalents
equal to the Fair Value of the consideration otherwise payable to such Other
Stockholder. Such Other Stockholder shall make such election in a written
notice to Stonington and/or such Affiliate within ten (10) Business Days
following the date the Offer Notice is provided to such Other Stockholder.

 

(ii)           Each Stockholder shall bear such
Stockholder’s own expenses incurred in connection with a Sale pursuant to this
Section 2.4.

 

(iii)          If, at the end of the 180-day period
following the giving of the Offer Notice, Stonington and/or its Affiliates
shall not have completed the Sale of all the Controlling Shares and the Other
Stockholders’ Shares delivered pursuant to Section 2.4(b)(i), Stonington and/or
its Affiliates shall return to each of the Other Stockholders all certificates
evidencing unsold Shares and related powers-of-attorney that such Other
Stockholder delivered pursuant to this Section 2.4.

 

(iv)          Except as expressly provided in this
Section 2.4, Stonington and its Affiliates shall have no obligation to any
Other Stockholder with respect to the Sale of any Shares owned by any Other
Stockholder in connection with this Section 2.4. Anything herein to the
contrary notwithstanding, Stonington and/or its Affiliates shall have no
obligation to any Stockholder to sell or otherwise dispose of any Controlling
Shares pursuant to this Section 2.4 as a result of any decision by Stonington
and/or its Affiliates not to accept or consummate any Offer or Sale with respect
to the Controlling Shares (it being understood that any and all such decisions
shall be made by Stonington and/or its Affilaites in their sole discretion). No
Other Stockholder shall be entitled to make any Sale of Shares directly to any
Third Party pursuant to an Offer (it being understood that all such Sales shall
be made only on the terms and pursuant to the procedures set forth in this
Section 2.4). Nothing in this Section 2.4 shall affect any of the obligations
of any of the Stockholders under any other provision of this Agreement.

 

(c)           For purposes of Sections 2.3(a) or
(b) and 2.4(a) or (b), to the extent that Shares issuable upon exercise of a
vested Option granted under the Management Stock Option Plan are to be sold
pursuant to the exercise of a Tag-Along Right or Drag-Along Right, the holders
of such vested Options shall be required to exercise their vested Options, but
not until all conditions to the commitment by the Third Party to purchase the
Shares into which such vested Options are exercisable pursuant to the exercise
of a Tag-Along Right or Drag-Along Right have been satisfied or waived; provided,
however, that in the event that the consideration to be paid in as a
result of the occurrence of the Tag-Along Covered Transaction and the Drag-Along
Covered Transaction consists of cash, the holders of vested Options, in lieu of
exercise thereof, may deliver such vested Options to the Third Party and
receive in exchange therefor an amount equal to the amount paid per Share less
the then applicable Option Price in respect of such vested Option.

 

12

 

(d)           Notwithstanding anything to the
contrary contained in Section 2.3 or this Section 2.4, a Management Investor
shall not be entitled to exercise any Tag-Along Rights on and after the date of
such Management Investor’s termination of employment, consultancy or
directorship for Cause or Voluntary Resignation with the Company or any of its
subsidiaries. Notwithstanding anything to the contrary, nothing contained in
Section 2.3 or this Section 2.4 should be construed as resulting in accelerated
vesting of Service Options or Performance Options.

 

Section
2.5. Securities Law Restriction, Legend on Certificates. Without
limiting the provisions of Section 2.1 or 2.2 hereof, no Stockholder shall make
any transfer of any shares of capital stock of the Company (or interest
therein) if such action would constitute a violation of any federal or state
securities or blue sky laws, or if (other than in the case of a transfer by
Stonington) such transfer would subject the Company to any reporting
obligations under the Exchange Act. No transfer of any shares of capital stock
of the Company shall be effective (other than in connection with transfers
pursuant to Article IV hereof) unless the Company, upon its request, has been
furnished with an opinion of counsel for the Stockholder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that
such transfer is exempt from the registration provisions of Section 5 of the
Securities Act and the rules and regulations in effect thereunder and such
transfer can be effected without similar registration under applicable state
securities or “blue sky” laws. Any such opinion may be delivered by counsel to
the Company, and, in the case of any transfer pursuant to a Drag-Along Right,
shall be delivered by counsel to the Company. Any attempt to transfer any
Shares (or interest therein) not in accordance with this Agreement shall be
null and void and neither the Company nor any transfer agent of such securities
shall transfer upon the books of the Company any shares of capital stock of the
Company to any Person unless such transfer or attempted transfer is permitted
by this Agreement. Each certificate representing Shares shall bear the
following legend, in addition to any legends required under any applicable
state securities or “blue sky” laws:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (AND ANY INTEREST THEREIN) MAY NOT
BE TRANSFERRED, OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR
OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, OFFER, ASSIGNMENT, PLEDGE,
HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF
A MANAGEMENT STOCKHOLDERS AGREEMENT DATED AS OF [Date] (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
LINCOLN TECHNICAL INSTITUTE, INC. AND WILL BE MAILED TO A STOCKHOLDER WITHOUT
CHARGE WITHIN FIVE DAYS AFTER RECEIPT BY LINCOLN TECHNICAL INSTITUTE, INC. OF A
WRITTEN REQUEST THEREFOR FROM SUCH STOCKHOLDER). NO TRANSFER, OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (OR INTEREST THEREIN) MAY BE MADE
EXCEPT AS OTHERWISE PROVIDED IN SUCH MANAGEMENT STOCKHOLDERS AGREEMENT AND (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 (THE “ACT”) AND
ANY APPLICABLE STATE SECURITIES

 

13

 

AND
“BLUE SKY” LAWS, OR (B) IF LINCOLN TECHNICAL INSTITUTE, INC., UPON ITS REQUEST,
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO LINCOLN TECHNICAL INSTITUTE, INC.,
TO THE EFFECT THAT SUCH TRANSFER, SALE, OFFER, ASSIGNMENT, PLEDGE,
HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION IS EXEMPT FROM THE REGISTRATION
PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT
THEREUNDER AND ANY SIMILAR REGISTRATION REQUIREMENT UNDER SUCH STATE SECURITIES
OR “BLUE SKY” LAWS.

 

ARTICLE III

 

PUT AND CALL RIGHTS

 

Section
3.1. Put Rights, (a) Upon termination of a Management Investor’s
employment, consultancy or directorship with the Company or any of its
subsidiaries due to death, Disability, Retirement or Involuntary Termination of
the Management Investor (but not for any other reason) (a “Put
Event”) prior
to an IPO, such Management Investor and his Permitted Transferees shall have
the right (the “Put Right”), exercisable by delivery of a written notice (the “Put
Notice”) to the
Company within a period of 290 calendar days after the date of occurrence of
the Put Event (the “Put”
Notice Period”), subject
to Section 3.1(c) hereof, to require the Company to purchase all, but not less
than all, of the Management Shares, provided that any Management Shares
granted pursuant to Options have to be held for at least six months by such
Management Investor, the Management Investor’s Estate and his Permitted
Transferees (the “Put Shares”), as of the date of the occurrence of the Put Event,
at a price per Put Share equal to the Share Put Price, and upon receipt of such
notice the Company shall purchase such Put Shares, subject to the terms hereof.
For purposes of this Section 3.1, the term “Share Put Price” shall mean the Fair Value Price of
each Put Share on the date of occurrence of such Put Event.

 

(b)           The Put Notice shall specify the
number of Put Shares to be sold and shall contain an irrevocable offer (subject
to the last sentence of this paragraph (b)) to sell the Put Shares to the
Company in the manner set forth below at the applicable Share Put Price. The
closing of the purchase by the Company of Put Shares shall take place at the
principal executive office of the Company on a date selected by the Company as
soon as practicable after the date of the Put Notice. At such closing, the
Company shall deliver to the Management Investor, Management Investor’s Estate,
or his or her Permitted Transferees against delivery of Duly Endorsed
certificates representing such Put Shares, either (i) a certified check or checks
in the amount of the product of (x) the applicable Share Put Price and (y) the
number of Put Shares to be sold or (ii) a junior subordinated note of the
Company, maturing no later than the fifth anniversary of the closing referred
to in this paragraph, bearing a market rate of interest as determined by the
Board of Directors, as of the date of such note (the “Company Note Interest Rate”) (which such interest shall be
payable at the option of the Company in cash or in additional junior
subordinated notes of like terms and tenor), (a “Company Note”) with an original principal amount
equal to the product of (x) the applicable Share Put Price and (y) the number
of Put Shares to be sold or (iii) any combination of (i) and (ii) above as may
be selected by the

 

14

 

Company, provided
that the sum of (x) the amount of cash and (y) the original principal amount of
the Company Note equals the product of (u) the applicable Share Put Price and
(v) the number of Put Shares to be sold; and provided  further, however,
that the Company shall pay cash for the Put Shares to the extent that no
Restriction (as defined in Section 3. l(c) below) exists or would result. As
soon as practicable prior to such closing, the Company shall notify the
Management Investor whether any part of the consideration to be paid by the
Company at such closing will be a Company Note. If any portion of such
consideration will be paid by a Company Note, the Management Investor may
withdraw all (but not less than all) of his Put Shares and the Put Right
related to such Put Shares shall be deemed not to have been exercised until
such time as the Company (or its designee pursuant to Section 3.1(f) hereof)
acquires such Put Shares for cash, pursuant to Section 3.1(e) hereof.

 

(c)           Notwithstanding anything to the
contrary contained in this Agreement, (i) to the extent that the payment for
Put Shares with either cash or through the incurrence of indebtedness pursuant
to the issuance of a Company Note (x) would constitute or cause a breach of, or
default (immediately or with notice or the lapse of time or both) under any
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective assets is bound (including, without limitation, the Bank Credit
Agreement (and including, without limitation, any financial covenant contained in
either thereunder)) and any refinancings of any of the foregoing, or under any
preferred stock of the Company or any of its subsidiaries, or (y) would violate
any law, regulation, order, statute, writ, injunction, decree, rule, policy or
guideline promulgated, or judgment entered by any federal, state, local or
foreign court or governmental authority then applicable to the Company or any
of its subsidiaries or by or to which any of their respective assets is
subject, or (ii) if any default, event of default or breach then exists under
any of the foregoing agreements, instruments or preferred stock (collectively,
the “Restrictions”), subject to the further provisions
of this Section 3.1, the Company shall not be required to purchase such Put
Shares.

 

(d)           To the extent that the Restrictions
limit but do not preclude the Company from acquiring any Put Shares (and if no
default, event of default or breach referred to in clause (ii) of the
definition of Restrictions then exists), the Company shall acquire such Put
Shares on the date specified herein to the extent permitted pro rata from each
Management Investor or Permitted Transferee who or which has exercised a Put
Right on such date pursuant to Section 3.1(a) hereof in accordance with the
number of such Put Shares the Company is required to purchase from each such
Management Investor or Permitted Transferee, and to the extent that there is no
Restriction, the Company shall pay for such Put Shares by certified check.

 

(e)           To the extent that Put Shares as to
which a Put Notice has been delivered are not purchased by the Company in
accordance with Section 3.1(c) and (d) hereof or are not purchased because the
Management Investor has withdrawn the related Put Notice pursuant to Section
3.1(b) hereof, the Company shall acquire such Put Shares on the tenth business
day after such date as the Company learns that it is no longer restricted by
such Restriction from acquiring (for cash, in the event of a withdrawal
pursuant to Section 3.1(b) hereof) all such Put Shares. The price to be paid to
acquire such Put Shares shall be the amount that would have been paid pursuant
to Section 3.1(a) hereof if such acquisition had not been delayed plus interest
at the Company Note Interest Rate, compounded annually, from such date of
exercise.

 

15

 

(f)            Notwithstanding anything to the contrary
contained in this Section 3.1, to the extent a Restriction then exists, the
Company may, but shall not be required to, at any time prior to the
consummation of the purchase of the Put Shares pursuant to this Section 3.1,
cause its designee or designees (which may include, without limitation,
Stonington or any of its Affiliates) to consummate all or a portion of such
purchase pursuant to the terms and conditions of this Section 3.1, and, in such
event, such designee or designees shall purchase such Put Shares by delivering
to the Management Investors or Permitted Transferees a certified check in the
amount of the product of (x) the applicable Share Put Price and (y) the number
of Put Shares to be sold. If the Company does not elect to cause its designee
or designees to consummate all or a portion of the purchase of the Put Shares,
the Company shall provide notice to all the Management Investors and permit
them to consummate all or a portion of the purchase of the Put Shares. Each
Management Investor desiring to purchase Put Shares shall indicate the number
of Put Shares he or she is interested in purchasing (the “Accepted
Put Shares”), and
shall be required to purchase such number of Accepted Put Shares, or if the
aggregate number of Accepted Put Shares requested to be purchased by all the
Management Investors exceeds the number of Put Shares available for purchase,
such lesser number of Accepted Put Shares determined by multiplying the number
of Put Shares available for purchase by a fraction, the numerator of which is
the number of Accepted Put Shares and the denominator of which is the aggregate
number of Accepted Put Shares of all of the Management Investors.

 

Section
3.2. Call Rights. (a) Subject to any applicable Restriction, upon
termination of a Management Investor’s employment, consultancy or directorship
with the Company or any of its subsidiaries for any reason (a “Call
Event”), prior
to an IPO, the Company shall have the right (the “Call Right”), exercisable by delivery of a
written notice (the “Call Notice”) to such Management Investor or such Management
Investor’s Estate or Permitted Transferee within a period of one year after the
date of occurrence of any Call Event arising other than as a result of the
death of the Management Investor and within a period of six months of the death
of the Management Investor in the event of a Call Event arising, as a result of
the death of the Management Investor (subject, in either such case, to
extension for up to three months in the event any Restriction is then
in effect or for such other period as provided in Section 3.2(d) hereof) (the “Call
Notice Period”), to
require such Management Investor or such Management Investor’s Estate and
Permitted Transferees to sell all or any portion of the Management Shares, provided
that any such Management Shares received pursuant to the grant of Options have
been held for at least six months owned by such Management Investor or
Permitted Transferees (the “Call Shares”) at a price per Call Share equal to the Share Call Price,
and upon receipt of such notice the Management Investor who receives such
notice shall sell such Call Shares subject to the terms hereof. For purposes of
this Section 3.2. the term “Share Call Price” shall mean, as determined as of
the date of the delivery of the applicable Call Notice, (i) in the event of a
termination for Cause, the lesser of the original per share purchase price and
the Fair Value Price of the Call Shares; (ii) in the event of a Voluntary
Resignation (y) as to Call Shares that are Protected Shares (as defined below)
on the date of the occurrence of the Call Event, the Fair Value Price of the
Call Shares determined as of the date of the occurrence of the Call Event and
(z) as to Call Shares that are not Protected Shares on the date of the
occurrence of the Call Event, the lesser of the original per share purchase
price and the Fair Value Price; and (iii) in the event of a termination of
employment due to death, Disability, Retirement or Involuntary Termination, the
Fair Value Price of the Call Shares. Twenty percent of each Management Investor’s
Management Shares shall become “Protected Shares” on each of the first through
fifth anniversaries of the date the Shares are issued, (the “Protected
Shares”); provided,

 

16

 

however, that the Board of Directors may in its sole
discretion, provide that twenty-five percent of certain management Investor’s
Management Shares shall become protected Shares on each of the first through
the fourth anniversaries of the date such shares are issued. All Management
Shares received pursuant to the exercise of Vested Options shall immediately be
Protected Shares. In the event of a Change in Control (as defined in the
Management Stock Option Plan) all of the Management Investor’s Management
Shares will immediately become Protected Shares.

 

(b)           The Call Notice shall specify the
number of Call Shares to be purchased and shall contain an offer to purchase
the Call Shares at the applicable Share Call Price. The closing of the
acquisition by the Company of Call Shares shall take place at the principal executive
office of the Company on a date selected by the Company as soon as practicable
after the date of the Call Notice. At such closing, the Company shall deliver
to the Management Investor or such Management Investor’s Estate or Permitted
Transferees, against delivery of Duly Endorsed certificates representing such
Call Shares a certified check or checks in the amount of the product of (x) the
applicable Share Call Price and (y) the number of Call Shares to be purchased; provided,
however, that in the case of termination of employment, consultancy or directorship
of a Management Investor for Cause, the Company may acquire Call Shares for a Company
Note with an aggregate principal amount equal to the product of (x) the
applicable Share Call Price and (y) the number of Call Shares and/or Call
Options to be purchased. The Company shall not be required to consummate any
purchase or acquisition of any Call Shares if any Restriction is then in effect
and all of the Company’s obligations with respect thereto shall thereupon
cease.

 

(c)           Notwithstanding anything to the
contrary contained in this Section 3.2, if a Restriction prevents the
acquisition by the Company of Call Shares the Company may, but shall not be
required to, at any time prior to the consummation of the purchase of the Call
Shares pursuant to this Section 3.2 cause its designee or designees to
consummate all or a portion of such purchase pursuant to the terms and conditions
of this Section 3.2 and, in such event, such designee or designees shall
purchase such Call Shares by delivering to the Management Investor or Permitted
Transferees a certified check in the amount of the product of (x) the
applicable Share Call Price and (y) the number of Call Shares to be purchased.

 

Section
3.3. Termination of Put and Call Rights. Notwithstanding anything to the
contrary contained herein, no Put Right or Call Right shall be exercisable
after an IPO.

 

ARTICLE IV

 

REGISTRATION RIGHTS

 

SECTION 4.01. Incidental Registration.

 

If at any time the Company determines that it shall
file a registration statement under the Securities Act (other than a
registration statement on a Form S-4 or S-8 or filed in connection with an
exchange offer or an offering of securities solely to the Company’s employee
benefit plans) on any form that would also permit the registration of the
Registrable Shares and such filing is to be on behalf of the Company and/or on
behalf of selling holders of its securities for the general registration of its
Common Stock to be sold for cash, the Company shall each such time promptly
give each Other Stockholder written notice of such determination setting

 

17

 

forth
the date on which the Company proposes to file such registration statement,
which date shall be no earlier than thirty (30) days from the date of such
notice, and advising each Other Stockholder of its right to have such Other
Stockholder’s Registrable Shares included in such registration; provided
that the Other Stockholders shall not have any right to have their Registrable
Shares included in the initial public offering of the Company if no other
Stockholder has its Registrable Shares so included. Upon the written request of
any Other Stockholder received by the Company no later than fifteen (15) days
after the date of the Company’s notice, the Company shall use all reasonable
efforts to cause to be registered under the Securities Act all of the
Registrable Shares that each Other Stockholder has so requested to be
registered. If, in the written opinion of the managing underwriter (or, in the
case of a non-underwritten offering, as reasonably determined by the Board and
communicated in writing to the Stockholders), the total amount of such
securities to be so registered, including such Registrable Shares, will exceed
the maximum amount of the Company’s securities which can be marketed (i) at a
price reasonably related to the then current market value of such securities,
or (ii) without otherwise materially and adversely affecting the entire
offering, then the Company shall be entitled to reduce the number of
Registrable Shares to be sold in the offering by the Other Stockholders, and
any other stockholders of the Company exercising incidental registrations
rights similar to those set forth herein, to that number which in the written
opinion of the managing underwriter (or, in the case of a non-underwritten
offering, as reasonably determined by the Board and communicated in writing to
the Other Stockholders) would permit all such securities (including Shares held
by any other stockholder of the Company who proposes to exercise such
incidental registration rights) to be so marketed. Such reduction shall be
allocated among the Other Stockholders in proportion (as nearly as practicable)
to the amount of Registrable Shares owned by each such Other Stockholder and
the number of Shares owned by any other stockholders of the Company which are
sought to be included in the registration statement by such other stockholders
of the Company, all measured at the time of filing the registration statement.

 

SECTION
4.02. Furnish Information.

 

It shall be a condition precedent to the obligations
of the Company to take any action pursuant to Section 4.01 that the Other
Stockholders shall furnish to the Company such information regarding
themselves, the Registrable Shares held by them, and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.

 

SECTION
4.03. Expenses of Registration.

 

All expenses incurred in connection with each registration pursuant to
Section 4.01, excluding underwriters’ discounts and commissions, but including
without limitation all registration, filing and qualification fees, word
processing, duplicating, printers’ and accounting fees (including the expenses
of any special audits or “cold comfort” letters required by or incident to such
performance and compliance), fees of the National Association of Securities
Dealers, Inc. or listing fees, messenger and delivery expenses, all fees and
expenses of complying with state securities or blue sky laws, fees and
disbursements of counsel for the Company, and the fees and disbursements of one
counsel for the selling Other Stockholders (which counsel shall be selected by
the Other Stockholders holding a majority in interest of the Registrable Shares
being registered), shall be paid by the Company. The Other Stockholders shall
bear and pay the underwriting commissions and discounts applicable to
securities offered

 

18

 

for their account in
connection with any registrations, filings and qualifications made pursuant to
this Agreement.

 

SECTION
4.04. Underwriting Requirements.

 

In connection with any underwritten offering, the
Company shall not be required under Section 4.01 to include Registrable Shares
in such underwritten offering unless the Other Stockholders holding such
Registrable Shares accept the terms of the underwriting of such offering that
have been reasonably agreed upon between the Company and the underwriters
selected by the Company and which are customary with respect to such an
offering and not inconsistent with this Article IV. No such Other Stockholder
shall be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Other Stockholder, such Other Stockholders’
Registrable Shares and such Stockholders’ intended method of distribution
customarily given to underwriters and any other representation required by law.

 

SECTION
4.05. Registration Procedures.

 

If and whenever the Company is required by the
provisions of Section 4.01 to effect the registration of any Registrable Shares
under the Securities Act, the Company shall, as expeditiously as possible:

 

(a)         furnish to each Other
Stockholder of Registrable Shares covered by such registration statement and
each underwriter thereof, if any, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement filed under Rule 424 under the
Securities Act, and such other documents, as such Other Stockholder and
underwriter may reasonably request in order to facilitate the public sale or other
disposition of such Registrable Shares;

 

(b)         use all reasonable
efforts to register or qualify all Registrable Shares covered by such
registration statement under such other securities laws or blue sky laws of
such jurisdictions as any Other Stockholder thereof and any underwriter thereof
shall reasonably request; and

 

(c)         notify each Other
Stockholder of Registrable Shares covered by such registration statement and
each underwriter thereof, if any, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the Company’s
discovery that, or upon the happening of any event of which the Company has
knowledge as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such Other Stockholder or such
underwriter promptly prepare and furnish to such Other Stockholder or such
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.

 

19

 

SECTION
4.06. Rule 144 Information.

 

With
a view to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Registrable Shares to
the public without registration, at all times after ninety (90) days after any
registration statement covering a public offering of securities of the Company
under the Securities Act shall have become effective, the Company agrees to:

 

(i)          make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act;

 

(ii)         use
its reasonable efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act; and

 

(iii)        furnish
to each Other Stockholder holding Registrable Shares forthwith upon request a
written statement by the Company as to its compliance with the reporting requirements
of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as such Other Stockholder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
such Other Stockholder to sell any Registrable Shares without registration.

 

SECTION
4.07. Indemnification.

 

In the event any Registrable Shares are included in a registration
statement under Section 4.01:

 

(a)         The Company shall
indemnify and hold harmless each Other Stockholder, such Other Stockholder’s
managers, directors and officers, each Person who participates in the offering
of such Registrable Shares, including underwriters (as defined in the
Securities Act), and each Person, if any, who controls such Stockholder or
participating Person within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or proceedings in respect thereof) arise out of
or are based on any untrue or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any prospectus filed under Rule 424 under the Securities Act or any
amendments or supplements thereto) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder, and shall reimburse each such Other Stockholder, such Other
Stockholder’s managers, directors and officers, such participating person or
controlling person for any legal or other expenses reasonably incurred by them
(but not in excess of expenses incurred in respect of one counsel for all of
them unless there is an actual conflict of interest between any indemnified
parties, which indemnified parties may be represented by separate counsel) in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity
agreement contained in this Section 4.07(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be

 

20

 

unreasonably
withheld); provided  further that the Company shall not be liable
to any Other Stockholder, such Other Stockholder’s managers, directors and
officers, participating person or controlling person in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Other Stockholder,
such Other Stockholder’s directors and officers, participating, person or
controlling person. Such indemnity shall remain in full force regardless of any
investigation made by or on behalf of any such Other Stockholder, such Other
Stockholder’s directors and officers, participating person or controlling
person, and shall survive the transfer of such securities by such Other
Stockholder.

 

(b)         Each
Other Stockholder joining in a registration severally and not jointly shall
indemnify and hold harmless the Company, each of its directors and officers,
each person, if any, who controls the Company within the meaning of the
Securities Act, and each agent and any underwriter for the Company (within the
meaning of the Securities Act) against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director, officer,
controlling person, agent or underwriter may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement on the effective date thereof (including any prospectus
filed under Rule 424 under the Securities Act or any amendments or supplements thereto)
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by or on behalf of such Other Stockholder
expressly for use in connection with such registration; and each such Other Stockholder
shall reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, controlling person, agent or underwriter (but
not in excess of expenses incurred in respect of one counsel for all of them
unless there is an actual conflict of interest between any indemnified parties,
which indemnified parties may be represented by separate counsel) in connection
with investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this
Section 4.07(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of such Other Stockholder (which consent shall not be unreasonably
withheld), and provided  further that the liability of each Other
Stockholder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that the
net proceeds from the sale of the Shares sold by such Other Stockholder under
such registration statement bears to the total net proceeds from the sale of
all securities sold thereunder, but not in any event to exceed the net proceeds
received by such Other Stockholder from the sale of Registrable Securities
covered by such registration statement.

 

(c)        Promptly after receipt
by an indemnified party under this Section 4.07 of notice of the commencement
of any action, such indemnified party shall, if a claim in respect thereof is
to be made against any indemnifying party under this Section 4.07, notify the

 

21

 

indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and assume the defense thereof with counsel selected by
the indemnifying party and reasonably satisfactory to the indemnified party; provided,
however, that an indemnified party shall have the right to retain its
own counsel, with all reasonable fees and expenses thereof to be paid by such
indemnified party, and to be apprised of all progress in any proceeding the
defense of which has been assumed by the indemnifying party. The failure to
notify an indemnifying party promptly of the commencement of any such action,
if and to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 4.07, but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.07.

 

(d)         To the extent any
indemnification by an indemnifying party is prohibited or limited by law, the
indemnifying party, in lieu of indemnifying such indemnified party, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

 

The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.07(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent misrepresentation (within
the meaning of Section 1l(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

ARTICLE V

 

MISCELLANEOUS

 

Section 5.1. Binding Effect. The provisions
of this Agreement shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns.

 

Section 5.2. No Right of Employment; Consultancy
or Directorship. Neither this Agreement nor any purchase or sale of
Management Shares shall create, or be construed or deemed to create, any right
of employment in favor of any person or any right to be elected a director of
the Company’s Board of Directors by the Company or any of its subsidiaries or
limit in any respect the right of the Company or any of its subsidiaries to
terminate any person’s employment, consultancy or directorship at any time.

 

22

 

Section
5.3. Recapitalizations, Exchanges. Etc.
Affecting Shares.
The provisions of this Agreement regarding Shares shall apply to any and all
shares of capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets, reorganization or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the Shares by reason of any stock dividend, stock split, stock
issuance, reverse stock split, combination, recapitalization, reclassification,
merger, consolidation or otherwise. Upon the occurrence of any of such events,
amounts hereunder shall be appropriately adjusted. Subject only to the
provisions of the preceding sentence, nothing contained in this Agreement shall
prohibit or restrict the Company from taking any corporate action, including,
without limitation, declaring any dividend (whether in cash or stock) or
engaging in any corporate transaction of any kind, including, without
limitation, any merger, consolidation, liquidation or sale of assets.

 

Section 5.4. Waiver and Amendment. Any party
hereto may waive its rights under this Agreement at any time, and the Company
may waive its rights under this Agreement with respect to any Stockholder or
group of Stockholders at any time, and no such waiver shall operate to waive
the Company’s rights under this Agreement with respect to any other Stockholder
or group of Stockholders. Any agreement on the part of any such party to any
such waiver shall be valid only if set forth in an instrument in writing signed
by such party. This Agreement may be amended only by a written instrument signed
by (i) the Company, (ii) Stonington and (iii) Management Investors or Permitted
Transferees beneficially owning at least a majority of the then outstanding
Management Shares.

 

Section 5.5. Notices. All notices and other communications
provided for herein shall be dated and in writing and shall be deemed to have
been duly given when delivered, if delivered personally, or when deposited in
the mail if sent by registered or certified mail, return receipt requested,
postage prepaid and when received if delivered otherwise, to the party to whom
it is directed:

 

(a)         if to the Company, to:

 

Lincoln
Technical Institute, Inc.

200
Executive Drive

West
Orange, NJ 07052

Telecopy:
(973) 243-0841

Attention:
David F. Carney

 

with
a copy to:

 

Stonington
Partners, Inc.

767
Fifth Avenue, 48th Floor

New
York, New York 10153

Attention:
James J. Burke, Jr.

 

and
a copy to:

 

Shearman
& Sterling

599
Lexington Avenue

New
York, New York 10022

Attention:

 

23

 

(b)                                 if to any of the Management Investors, to the
address of such Management Investor as shown in the stock record book of the
Company;

 

(c)                                  if to Stonington to:

 

Stonington
Partners, Inc.

767
Fifth Avenue 48th Floor

New
York, New York 10153

Attention:
James J. Burke, Jr.

 

with
a copy to:

 

Shearman
& Sterling

599
Lexington Avenue

New
York, New York 10022

Attention:
John J. Cannon, III, Esq.

 

Section
5.6. Applicable Law. The laws of the State of New York without reference
to the choice of law principles thereof shall govern the interpretation,
validity and performance of the terms of this Agreement, regardless of the law
that might be applied under principles of conflicts of law.

 

Section 5.7. Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and in the Management Subscription
Agreement, the Management Stock Option Plan, the Stock Option Agreements, and,
if any, the employment agreement between a Management Investor and the Company
or one of its subsidiaries. It is understood that each employee, consultant or
non-employee director of the Company who is from time to time granted an option
pursuant to the Management Stock Option Plan shall be deemed a Management
Investor hereunder. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter other
than such agreements and understandings set forth in the Management
Subscription Agreement, the Management Stock Option Plan, the Stock Option Agreements
and any such employment agreement.

 

Section 5.8. Descriptive Headings, Etc. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning of terms contained herein. Unless the
context of this Agreement otherwise requires, (i) words of any gender shall be
deemed to include each other gender; (ii) words using the singular or plural
number shall also include the plural or singular number, respectively; and
(iii) references to “hereof,” “herein,” “hereby” and similar terms shall refer
to this entire Agreement.

 

Section 5.9. Counterparts. This Agreement may
be executed in multiple counterparts, each of which shall be deemed an
original, but all of which shall constitute one and

 

24

 

the
same instrument, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.

 

Section 5.10. Successors, Assigns and Transferees. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, assigns and transferees except to the
extent that the terms of this Agreement limit or otherwise restrict the
transferability of any rights or obligations hereunder.

 

Section 5.11. Severability. In the event that
any one or more of the provisions, paragraphs, words, clauses, phrases or
sentences contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision, paragraph, word,
clause, phrase or sentence in every other respect and of the other remaining
provisions, paragraphs, words, clauses, phrases or sentences hereof shall not
be in any way impaired, it being intended that all rights, powers and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.

 

Section 5.12. Termination. This Agreement
shall terminate, and thereby become null and void, on the tenth anniversary of
the date hereof.

 

Section 5.13. Injunctive Relief. It is hereby agreed and
acknowledged that it will be impossible to measure in money the damages that
would be suffered if the parties fail to comply with any of the obligations
herein imposed on them and that in the event of any such failure, an aggrieved
person will be irreparably damaged and will not have an adequate remedy at law.
Any such person shall, therefore, be entitled to injunctive relief, including
specific performance, to enforce such obligations, without the posting of any
bond and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.

 

Section 5.14. Amendment of Schedules. In the
event that an individual who is an officer, employee, consultant or
non-employee director of the Company or any of its subsidiaries shall at any
time acquire any Shares or any Option, it shall be a condition to the issuance
of any such Shares or the grant of any such Option that such individual duly
execute and deliver a counterpart to this Agreement. Following such execution
and delivery, Schedule I hereto shall be amended to reflect the addition of
such individual as a Management Investor and such individual shall thereafter
be deemed to be a Management Investor for all purposes of this Agreement.

 

Section 5.15. Tax Withholding. No later than
the date as of which an amount first becomes includible in the gross income of
a Management Investor for Federal income tax purposes with respect to any
Management Shares, such Management Investor shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount. The obligations of the Company hereunder shall be
conditional on such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Management Investor.

 

Section 5.16. Consent to Jurisdiction. (a)
Each party hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of any state or federal court whose situs is

 

25

 

within
New York City in any action or proceeding arising out of or relating to this
Agreement, and each party hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in any federal court
sitting in New York that possesses subject matter jurisdiction over the
asserted claims or by any state court sitting in New York City.

 

(b)         Each party further
irrevocably agrees that venue for any action or proceeding arising out of or
relating to this Agreement shall be proper in any state or federal court
located in New York City, and each party irrevocably waives any right it may
have to transfer or change the venue of any such action or proceeding brought
against it in a state or federal court located in New York City. Each party
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.

 

(c)          Nothing in this
Section 5.16 shall affect the right of any party to serve legal process in any
other manner permitted by law or affect the right of any party to bring any action
or proceeding against any other party or its property in the courts of other
jurisdictions.

 

Section 5.17. WAIVER OF JURY TRIAL. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 5.18. Legal Prohibitions. No Stockholder shall be
required by any provision of this Agreement to take any action prohibited by
applicable law, including ERISA. To the extent that the exercise of any right
or the performance of any obligation by any Stockholder under this Agreement
shall be prohibited by law, such Stockholder and the other parties hereto agree
to cooperate in good faith in any reasonable and lawful alternative
arrangements designed to provide such Stockholder or such other parties, as the
case may be, the economic benefit from the exercise of such right or the
performance of such obligation.

 

26

 

IN
WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused
this Agreement to be executed on its behalf as of the date first above written.

 

	
   

  	
  LINCOLN TECHNICAL
  INSTITUTE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David F. Carney

  	
   

  
	
   

  	
   

  	
  Name: David F. Carney

  
	
   

  	
   

  	
  Title: Chairman & CEO

  
	
   

  	
   

  
	
   

  	
  BACK TO SCHOOL
  ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James J. Burke, Jr.

  	
   

  
	
   

  	
   

  	
  Name: James J. Burke, Jr.

  
	
   

  	
   

  	
  Title: President

  

 

27

 

Revised 7/01/03

 

Schedule 1

MANAGEMENT INVESTORS

 

Adele Stavish

Alan Lampert

Alexandra Luster

Barbara Kahnchak

Brian Sant’Angelo

David L. Evans

David F. Carney

Deborah Ramentol

Donna Corrieri

Donna Oliviera

Dorothy Gillard

Ed Abrams

Ed Stranix

Edna Higgins

Eric Jacobs

Helen Carver

Jeffrey Malkin

James Kuntz

James T. Morrissey

James Tolbert

Joseph Chalupa

Joseph Reichasrd

John Curtin

John Willie

Kristin Vega

Laurie Brown

Lawrence E. Brown

Lisa Kuntz

Louis Ammerata

Marie Acker

Mark Enea

Mark McGinnis

Michael Ackerman

Miryam Knutson

Nelson Comparetto

Nicholas Raspa

Nicole Ziccherri

Paul Bahr

Rachelle Haywood

Ronald Beall

Scott Shaw

Sean Quinn

Stephen Buchenot

Steven Lee

Tammy-Sue Jackson

Thomas McHugh

Thomas E. Lynch

Vivian Ballargeon

Vivian Wagner

William Alford

Bryan Gulebian

Keiko Shimado

Jerry Rubenstein

Roy Keith

James Moore

Peter Mosely

Karin Cogswell

George Hantzios

Rajat Shah

Jeremy Gibson

Walter Pruitt

Brian Meyers

Ami Bhandari

Charles Lyon

Steve Dill

Allan ShortExhibit
10.1

 

 

Credit
Agreement

 

 

Dated
as of February 15, 2005

 

 

among

 

 

Lincoln
Educational Services Corporation

 

 

The
Guarantors from time to time parties hereto,

 

 

The
Lenders from time to time parties hereto,

 

 

and

 

 

Harris
Trust and Savings Bank,

as Administrative Agent

 

 

 

 

Table of Contents

 

	
  Section

  	
   

  	
  Heading

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  The Credit
  Facilities

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
   

  	
  Revolving Credit Commitments

  	
   

  	
   

  
	
  Section 1.2.

  	
   

  	
  Letters of Credit

  	
   

  	
   

  
	
  Section 1.3.

  	
   

  	
  Applicable Interest Rates

  	
   

  	
   

  
	
  Section 1.4.

  	
   

  	
  Minimum Borrowing Amounts; Maximum
  Eurodollar Loans

  	
   

  	
   

  
	
  Section 1.5.

  	
   

  	
  Manner of Borrowing Loans and
  Designating Applicable Interest Rates

  	
   

  	
   

  
	
  Section 1.6.

  	
   

  	
  Interest Periods

  	
   

  	
   

  
	
  Section 1.7.

  	
   

  	
  Maturity of Loans

  	
   

  	
   

  
	
  Section 1.8.

  	
   

  	
  Prepayments

  	
   

  	
   

  
	
  Section 1.9.

  	
   

  	
  Default Rate

  	
   

  	
   

  
	
  Section 1.10.

  	
   

  	
  The Notes

  	
   

  	
   

  
	
  Section 1.11.

  	
   

  	
  Funding Indemnity

  	
   

  	
   

  
	
  Section 1.12.

  	
   

  	
  Commitment Terminations

  	
   

  	
   

  
	
  Section 1.13.

  	
   

  	
  Substitution of Lenders

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Fees

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
   

  	
  Fees

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Place and
  Application of Payments

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
   

  	
  Place and Application of Payments

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  The Collateral
  and Guaranties

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
   

  	
  Collateral

  	
   

  	
   

  
	
  Section 4.2.

  	
   

  	
  Liens on Real Property

  	
   

  	
   

  
	
  Section 4.3.

  	
   

  	
  Guaranties

  	
   

  	
   

  
	
  Section 4.4.

  	
   

  	
  Further Assurances

  	
   

  	
   

  
	
  Section 4.5.

  	
   

  	
  Collections

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Definitions;
  Interpretation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
   

  	
  Definitions

  	
   

  	
   

  
	
  Section 5.2

  	
   

  	
  Interpretation

  	
   

  	
   

  
	
  Section 5.3.

  	
   

  	
  Change
  in Accounting Principles

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Representations
  and Warranties

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
   

  	
  Organization
  and Qualification

  	
   

  	
   

  
	
  Section 6.2.

  	
   

  	
  Subsidiaries

  	
   

  	
   

  
	
  Section 6.3.

  	
   

  	
  Authority
  and Validity of Obligations

  	
   

  	
   

  
	
  Section 6.4.

  	
   

  	
  Use
  of Proceeds; Margin Stock

  	
   

  	
   

  

 

 

	
  Section 6.5.

  	
   

  	
  Financial
  Reports

  	
   

  	
   

  
	
  Section
  6.6.

  	
   

  	
  No Material Adverse Effect

  	
   

  	
   

  
	
  Section
  6.7.

  	
   

  	
  Full Disclosure

  	
   

  	
   

  
	
  Section 6.8.

  	
   

  	
  Trademarks,
  Franchises, and Licenses

  	
   

  	
   

  
	
  Section 6.9.

  	
   

  	
  Governmental
  Authority and Licensing

  	
   

  	
   

  
	
  Section 6.10.

  	
   

  	
  Good
  Title

  	
   

  	
   

  
	
  Section 6.11.

  	
   

  	
  Litigation
  and Other Controversies

  	
   

  	
   

  
	
  Section 6.12.

  	
   

  	
  Taxes

  	
   

  	
   

  
	
  Section 6.13.

  	
   

  	
  Approvals

  	
   

  	
   

  
	
  Section 6.14.

  	
   

  	
  Affiliate
  Transactions

  	
   

  	
   

  
	
  Section 6.15.

  	
   

  	
  Investment
  Company; Public Utility Holding Company

  	
   

  	
   

  
	
  Section 6.16.

  	
   

  	
  ERISA

  	
   

  	
   

  
	
  Section 6.17.

  	
   

  	
  Compliance with Laws

  	
   

  	
   

  
	
  Section 6.18.

  	
   

  	
  Other Agreements

  	
   

  	
   

  
	
  Section
  6.19.

  	
   

  	
  Solvency

  	
   

  	
   

  
	
  Section 6.20.

  	
   

  	
  No Default

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Conditions Precedent

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
   

  	
  All Credit Events

  	
   

  	
   

  
	
  Section
  7.2.

  	
   

  	
  Initial Credit Event

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Covenants

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
   

  	
  Maintenance of Business

  	
   

  	
   

  
	
  Section 8.2.

  	
   

  	
  Maintenance of Properties

  	
   

  	
   

  
	
  Section 8.3.

  	
   

  	
  Taxes and Assessments

  	
   

  	
   

  
	
  Section 8.4.

  	
   

  	
  Insurance

  	
   

  	
   

  
	
  Section 8.5.

  	
   

  	
  Financial Reports

  	
   

  	
   

  
	
  Section 8.6.

  	
   

  	
  Inspection

  	
   

  	
   

  
	
  Section 8.7.

  	
   

  	
  Borrowings and Guaranties

  	
   

  	
   

  
	
  Section 8.8.

  	
   

  	
  Liens

  	
   

  	
   

  
	
  Section 8.9.

  	
   

  	
  Investments, Acquisitions, Loans and
  Advances

  	
   

  	
   

  
	
  Section 8.10.

  	
   

  	
  Mergers, Consolidations and Sales

  	
   

  	
   

  
	
  Section 8.11.

  	
   

  	
  Maintenance of Subsidiaries

  	
   

  	
   

  
	
  Section 8.12.

  	
   

  	
  Dividends and Certain Other
  Restricted Payments

  	
   

  	
   

  
	
  Section 8.13.

  	
   

  	
  ERISA

  	
   

  	
   

  
	
  Section 8.14.

  	
   

  	
  Compliance with Laws

  	
   

  	
   

  
	
  Section 8.15.

  	
   

  	
  Burdensome Contracts With Affiliates

  	
   

  	
   

  
	
  Section 8.16.

  	
   

  	
  No Changes in Fiscal Year

  	
   

  	
   

  
	
  Section 8.17.

  	
   

  	
  Formation of Subsidiaries and
  Schools

  	
   

  	
   

  
	
  Section 8.18.

  	
   

  	
  Change in the Nature of Business

  	
   

  	
   

  
	
  Section 8.19.

  	
   

  	
  Use of Loan Proceeds

  	
   

  	
   

  
	
  Section 8.20.

  	
   

  	
  No Restrictions

  	
   

  	
   

  
	
  Section 8.21.

  	
   

  	
  Intentionally Omitted

  	
   

  	
   

  
	
  Section 8.22.

  	
   

  	
  Financial Covenants

  	
   

  	
   

  

 

ii

 

	
  Section 9.

  	
   

  	
  Events of Default and Remedies

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
   

  	
  Events of Default

  	
   

  	
   

  
	
  Section 9.2.

  	
   

  	
  Non-Bankruptcy Defaults

  	
   

  	
   

  
	
  Section 9.3.

  	
   

  	
  Bankruptcy Defaults

  	
   

  	
   

  
	
  Section 9.4.

  	
   

  	
  Collateral for Undrawn Letters of
  Credit

  	
   

  	
   

  
	
  Section 9.5.

  	
   

  	
  Notice of Default

  	
   

  	
   

  
	
  Section 9.6.

  	
   

  	
  Expenses

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Change in Circumstances

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
   

  	
  Change of Law

  	
   

  	
   

  
	
  Section 10.2.

  	
   

  	
  Unavailability of Deposits or
  Inability to Ascertain, or Inadequacy of, LIBOR

  	
   

  	
   

  
	
  Section 10.3.

  	
   

  	
  Increased Cost and Reduced Return

  	
   

  	
   

  
	
  Section 10.4.

  	
   

  	
  Lending Offices

  	
   

  	
   

  
	
  Section 10.5.

  	
   

  	
  Discretion of Lender as to Manner of
  Funding

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  The Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
   

  	
  Appointment and Authorization of
  Administrative Agent

  	
   

  	
   

  
	
  Section 11.2.

  	
   

  	
  Administrative Agent and its
  Affiliates

  	
   

  	
   

  
	
  Section 11.3.

  	
   

  	
  Action by Administrative Agent

  	
   

  	
   

  
	
  Section 11.4.

  	
   

  	
  Consultation with Experts

  	
   

  	
   

  
	
  Section 11.5.

  	
   

  	
  Liability of Administrative Agent;
  Credit Decision

  	
   

  	
   

  
	
  Section 11.6.

  	
   

  	
  Indemnity

  	
   

  	
   

  
	
  Section 11.7.

  	
   

  	
  Resignation of Administrative Agent and
  Successor Administrative Agent

  	
   

  	
   

  
	
  Section 11.8.

  	
   

  	
  L/C Issuer

  	
   

  	
   

  
	
  Section 11.9.

  	
   

  	
  Hedging Liability and Funds Transfer
  and Deposit Account Liability Arrangements

  	
   

  	
   

  
	
  Section 11.10.

  	
   

  	
  Designation of Additional Agents

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  rThe Guarantees

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
   

  	
  The Guarantees

  	
   

  	
   

  
	
  Section 12.2.

  	
   

  	
  Guarantee Unconditional

  	
   

  	
   

  
	
  Section 12.3.

  	
   

  	
  Discharge Only upon Payment in Full;
  Reinstatement in Certain Circumstances

  	
   

  	
   

  
	
  Section 12.4.

  	
   

  	
  Subrogation

  	
   

  	
   

  
	
  Section 12.5.

  	
   

  	
  Waivers

  	
   

  	
   

  
	
  Secrtion 12.6.

  	
   

  	
  Limit on Recovery

  	
   

  	
   

  
	
  Section 12.7.

  	
   

  	
  Stay of Acceleration

  	
   

  	
   

  
	
  Section 12.8.

  	
   

  	
  Benefit to Guarantors

  	
   

  	
   

  
	
  Section
  12.9.

  	
   

  	
  Guarantor Covenants

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  Miscellaneous

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
   

  	
  Withholding Taxes

  	
   

  	
   

  

 

iii

r

	
  Section 13.2.

  	
   

  	
  No Waiver, Cumulative Remedies

  	
   

  	
   

  
	
  Section 13.3.

  	
   

  	
  Non-Business Days

  	
   

  	
   

  
	
  Section 13.4.

  	
   

  	
  Documentary Taxes

  	
   

  	
   

  
	
  Section 13.5.

  	
   

  	
  Survival of Representations

  	
   

  	
   

  
	
  Section 13.6.

  	
   

  	
  Survival of Indemnities

  	
   

  	
   

  
	
  Section 13.7.

  	
   

  	
  Sharing of Set-Off

  	
   

  	
   

  
	
  Section 13.8.

  	
   

  	
  Notices

  	
   

  	
   

  
	
  Section 13.9.

  	
   

  	
  Counterparts

  	
   

  	
   

  
	
  Section 13.10.

  	
   

  	
  Successors and Assigns

  	
   

  	
   

  
	
  Section 13.11.

  	
   

  	
  Participants

  	
   

  	
   

  
	
  Section 13.12.

  	
   

  	
  Assignments

  	
   

  	
   

  
	
  Section 13.13.

  	
   

  	
  Amendments

  	
   

  	
   

  
	
  Section 13.14.

  	
   

  	
  Headings

  	
   

  	
   

  
	
  Section 13.15.

  	
   

  	
  Costs and Expenses; Indemnification

  	
   

  	
   

  
	
  Section 13.16.

  	
   

  	
  Set-off

  	
   

  	
   

  
	
  Section 13.17.

  	
   

  	
  Entire Agreement

  	
   

  	
   

  
	
  Section 13.18.

  	
   

  	
  Governing Law

  	
   

  	
   

  
	
  Section 13.19.

  	
   

  	
  Severability of Provisions

  	
   

  	
   

  
	
  Section 13.20.

  	
   

  	
  Excess Interest

  	
   

  	
   

  
	
  Section 13.21.

  	
   

  	
  Construction

  	
   

  	
   

  
	
  Section 13.22.

  	
   

  	
  Lender’s Obligations Several

  	
   

  	
   

  
	
  Section
  13.23.

  	
   

  	
  Confidentiality

  	
   

  	
   

  
	
  Section 13.24.

  	
   

  	
  Submission to Jurisdiction; Waiver
  of Jury Trial

  	
   

  	
   

  
	
  Section 13.25.

  	
   

  	
  USA Patriot Act

  	
   

  	
   

  

 

	
  Exhibit A

  	
  —

  	
  Notice of Payment Request

  	
   

  	
   

  
	
  Exhibit B

  	
  —

  	
  Notice of Borrowing

  	
   

  	
   

  
	
  Exhibit C

  	
  —

  	
  Notice of
  Continuation/Conversion

  	
   

  	
   

  
	
  Exhibit D

  	
  —

  	
  Revolving Note

  	
   

  	
   

  
	
  Exhibit E

  	
  —

  	
  Compliance Certificate

  	
   

  	
   

  
	
  Exhibit F

  	
  —

  	
  Additional Guarantor
  Supplement

  	
   

  	
   

  
	
  Exhibit G

  	
  —

  	
  Assignment and Acceptance

  	
   

  	
   

  
	
  Schedule 1

  	
  —

  	
  Commitments

  	
   

  	
   

  
	
  Schedule 1.2

  	
  —

  	
  Existing Letters of Credit

  	
   

  	
   

  
	
  Schedule 6.2

  	
  —

  	
  Subsidiaries

  	
   

  	
   

  
	
  Schedule 8.8

  	
  —

  	
  Existing Liens

  	
   

  	
   

  

 

iv

 

CREDIT
AGREEMENT

 

This Credit Agreement is
entered into as of February 15, 2005, by and among Lincoln Educational Services Corporation, a New Jersey
corporation (the “Borrower”), the
direct and indirect Subsidiaries of the Borrower from time to time party to
this Agreement, as Guarantors, the several financial institutions from time to
time party to this Agreement, as Lenders, and Harris
Trust and Savings Bank (“HTSB”),
as Administrative Agent as provided herein. 
All capitalized terms used herein without definition shall have the same
meanings herein as such terms are defined in Section 5.1 hereof.

 

Preliminary Statement

 

The Borrower has requested,
and the Lenders have agreed to extend, certain credit facilities on the terms
and conditions of this Agreement.

 

Now,
Therefore, in
consideration of the mutual agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

Section 1.                                                 The Credit
Facilities.

 

Section 1.1.                                Revolving Credit
Commitments .  Subject to the terms and conditions hereof,
each Lender, by its acceptance hereof, severally agrees to make a loan or loans
(individually a “Revolving Loan”
and collectively the “Revolving Loans”)
in U.S. Dollars to the Borrower from time to time on a revolving basis up to
the amount of such Lender’s Revolving Credit Commitment before the Revolving
Credit Termination Date.  The sum of the
aggregate principal amount of Revolving Loans and L/C Obligations at any time
outstanding shall not exceed the Revolving Credit Commitments in effect at such
time.  Each Borrowing of Revolving Loans
shall be made ratably by the Lenders in proportion to their respective Revolver
Percentages.  As provided in
Section 1.5(a) hereof, the Borrower may elect that each Borrowing of
Revolving Loans be either Base Rate Loans or Eurodollar Loans.  Revolving Loans may be repaid and prepaid and
the principal amount thereof reborrowed before the Revolving Credit Termination
Date, subject to the terms and conditions hereof.

 

Section 1.2.                                Letters of Credit . 
(a) General Terms.  Subject to the terms and conditions hereof,
as part of the Revolving Credit, the L/C Issuer shall issue standby letters of
credit (each a “Letter of Credit”)
for the Borrower’s account in an aggregate undrawn face amount at any time
outstanding not to exceed the L/C Sublimit, provided
that the sum of the aggregate principal amount of Revolving Loans and L/C
Obligations at any time outstanding shall not exceed the Revolving Credit
Commitments in effect at such time.  Each
Letter of Credit shall be issued by the L/C Issuer, but each Lender shall be
obligated to reimburse the L/C Issuer for such Lender’s Revolver Percentage of
the amount of each drawing thereunder and, accordingly, each Letter of Credit
outstanding at any time shall constitute usage of the Revolving Credit
Commitment of each Lender in an amount equal to its Revolver Percentage of the
L/C Obligations with respect to such Letter of Credit then
outstanding.  Notwithstanding anything
herein to the contrary, the

 

 

Existing Letters of Credit shall constitute “Letters of Credit” herein for all purposes of this
Agreement to the same extent, and with the same force and effect, as if such
Letters of Credit had been issued under this Agreement at the request of the
Borrower (even though, among other things, the Existing Letters of Credit were
originally issued at the request of one or more Subsidiaries of the Borrower,
it being understood that, by its execution and delivery of this Agreement, the
Borrower hereby agrees to become jointly and severally liable as a co-applicant
on each of the Existing Letters of Credit to the same extent as if it had
manually executed the application for each of the Existing Letters of Credit as
a joint and several co-applicant therefor).

 

(b)                                 Applications.  At
any time before the Revolving Credit Termination Date, the L/C Issuer shall, at
the request of the Borrower, issue one or more Letters of Credit in U.S.
Dollars, in a form reasonably satisfactory to the L/C Issuer, with expiration
dates no later than the earlier of 12 months from the date of issuance (or
which are cancelable not later than 12 months from the date of issuance and
each renewal) or 30 days prior to the Revolving Credit Termination Date,
upon the receipt of an application duly executed by the Borrower for the
relevant Letter of Credit in the form then customarily prescribed by the L/C
Issuer for the Letter of Credit requested (each an “Application”). 
Notwithstanding anything contained in any Application to the
contrary:  (i) the Borrower shall
pay fees in connection with each Letter of Credit as set forth in
Section 2.1 hereof or as may be modified pursuant to the terms of Section
1.9 hereof, and (ii) if the L/C Issuer is not timely reimbursed for the
amount of any drawing under a Letter of Credit on the date such drawing is
paid, either with the proceeds of a Borrowing of Base Rate Loans pursuant to
the last sentence of Section 1.5(c) hereof or otherwise, the amount of
such drawing shall bear interest (which the Borrower hereby promises to pay)
from and after the date such drawing is paid at a rate per annum equal to the
sum of 2.0% plus the Applicable Margin plus the Base Rate from time to time in
effect (computed on the basis of a year of 360 days and the actual number of
days elapsed).  If the L/C Issuer issues
any Letter of Credit with an expiration date that is automatically extended
unless the L/C Issuer gives notice within a period specified in such Letter of
Credit that the expiration date will not so extend beyond its then scheduled
expiration date, unless the Required Lenders instruct the L/C Issuer otherwise,
the L/C Issuer will give such notice of non-renewal on any date during
such specified period if on or before the last day of such specified
period:  (i) the expiration date of
such Letter of Credit if so extended would be after the date 30 days prior to
the Revolving Credit Termination Date, (ii) the Revolving Credit
Commitments have been terminated, or (iii) a Default or an Event of
Default exists and the Administrative Agent, at the request or with the consent
of the Required Lenders, has given the L/C Issuer instructions not to so permit
the extension of the expiration date of such Letter of Credit.  The L/C Issuer agrees to issue amendments to
the Letter(s) of Credit increasing the amount, or extending the expiration
date, thereof at the request of the Borrower subject to the conditions of
Section 7 hereof and the other terms of this Section 1.2.

 

(c)                                  The Reimbursement
Obligations.  Subject to Section 1.2(b) hereof, the
Borrower shall reimburse the L/C Issuer for all drawings under a Letter of
Credit (a “Reimbursement Obligation”)
by no later than 1:00 p.m. (Chicago time) on the date when each drawing is
paid if the Borrower has been informed of such payment by the L/C Issuer on or
before 11:30 a.m. (Chicago time) on the date when such drawing is paid or,
if notice of such payment is given to the Borrower after 11:30 a.m.
(Chicago time) on the date when such drawing is paid, by 10:00 a.m.
(Chicago time) on the next Business Day, in immediately available funds at the 

 

2

 

Administrative Agent’s principal office in Chicago, Illinois or such
other office as the Administrative Agent may designate in writing to the
Borrower (who shall thereafter cause to be distributed to the L/C Issuer such
amount(s) in like funds).  If the
Borrower does not make any such reimbursement payment on the date due and the
Participating Lenders fund their participations therein in the manner set forth
in Section 1.2(d) below, then all payments thereafter received by the
Administrative Agent in discharge of any of the relevant Reimbursement
Obligations shall be distributed in accordance with Section 1.2(d) below.

 

The Borrower’s Reimbursement
Obligations as provided in this Section 1.2(c) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement and the relevant Application under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of
any Letter of Credit or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the L/C Issuer under a
Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder.  Neither the Administrative
Agent, the Lenders nor the L/C Issuer, nor any of their or their Affiliates’
directors, officers, employees, agents or advisors, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to
any Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the L/C Issuer; provided that the
foregoing shall not be construed to excuse the L/C Issuer from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the L/C Issuer’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the
part of the L/C Issuer (as finally determined by a court of competent
jurisdiction), the L/C Issuer shall be deemed to have exercised care in each
such determination.  In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the L/C Issuer
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.  In the event of any
conflict between the terms of this Agreement and the terms of any Application,
the terms of this Agreement shall govern.

 

(d)                                 The Participating
Interests.  Each Lender (other than the Lender acting as
L/C Issuer in issuing the relevant Letter of Credit), by its acceptance hereof,
severally agrees to

 

3

 

purchase from the L/C Issuer, and the L/C Issuer hereby agrees to sell
to each such Lender (a “Participating
Lender”), an undivided percentage participating interest (a “Participating Interest”), to the extent
of its Revolver Percentage, in each Letter of Credit issued by, and each
Reimbursement Obligation owed to, the L/C Issuer.  Upon any failure by the Borrower to pay any
Reimbursement Obligation at the time required on the date such Reimbursement
Obligation is to be paid, as set forth in Section 1.2(c) above, or if the
L/C Issuer is required at any time to return to the Borrower or to a trustee,
receiver, liquidator, custodian or other Person any portion of any payment of
any Reimbursement Obligation, each Participating Lender shall, not later than
the Business Day it receives a certificate in the form of Exhibit A hereto
from the L/C Issuer (with a copy to the Administrative Agent) to such effect,
if such certificate is received before 1:00 p.m. (Chicago time), or not
later than 1:00 p.m. (Chicago time) the following Business Day, if such
certificate is received after such time, pay to the Administrative Agent for
the account of the L/C Issuer an amount equal to such Participating Lender’s
Revolver Percentage of such unpaid or recaptured Reimbursement Obligation
together with interest on such amount accrued from the date the related payment
was made by the L/C Issuer to the date of such payment by such Participating
Lender at a rate per annum equal to: 
(i) from the date the related payment was made by the L/C Issuer to
the date 2 Business Days after payment by such Participating Lender is due
hereunder, the Federal Funds Rate for each such day and (ii) from the date
2 Business Days after the date such payment is due from such Participating
Lender to the date such payment is made by such Participating Lender, the Base
Rate in effect for each such day.  Each
such Participating Lender shall thereafter be entitled to receive its Revolver
Percentage of each payment received in respect of the relevant Reimbursement
Obligation and of interest paid thereon, with the L/C Issuer retaining its
Revolver Percentage thereof as a Lender hereunder.

 

The several obligations of
the Participating Lenders to the L/C Issuer under this Section 1.2 shall
be absolute, irrevocable and unconditional under any and all circumstances
whatsoever and shall not be subject to any set-off, counterclaim or
defense to payment which any Participating Lender may have or have had against
the Borrower, the L/C Issuer, the Administrative Agent, any Lender or any other
Person whatsoever.  Without limiting the
generality of the foregoing, such obligations shall not be affected by any
Default or Event of Default (other than an Event of Default of which the
Administrative Agent is aware pursuant to the standard set forth in the seventh
sentence of Section 11.3 hereof which exists at the time of the issuance of the
Letter of Credit in question and which is not at such time or thereafter waived
in accordance with Section 13.13 hereof or remedied to the satisfaction of the
Required Lenders or such other group of Lenders as would be required to waive
such Event of Default pursuant to Section 13.13 hereof) or by any reduction or
termination of any Commitment of any Lender (other than, with respect to a
Lender, a reduction or termination of such Lender’s Commitment prior to the
issuance of the Letter of Credit in question to the extent that such reduction
or termination would cause such Lender’s Percentage of the outstanding
principal amount of Revolving Loans and L/C Obligations, after giving effect to
the issuance of the Letter of Credit in question, to exceed its Commitment at
such time, unless such Lender’s Commitment is subsequently increased with such
Lender’s consent to eliminate such excess), and each payment by a Participating
Lender under this Section 1.2 shall be made without any offset, abatement,
withholding or reduction whatsoever.

 

4

 

(e)                                  Indemnification.  The
Participating Lenders shall, to the extent of their respective Revolver
Percentages, indemnify the L/C Issuer (to the extent not reimbursed by the
Borrower and without limiting the obligations of the Borrower to do so) against
any cost, expense (including reasonable counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from the L/C Issuer’s
gross negligence or willful misconduct) that the L/C Issuer may suffer or incur
in connection with any Letter of Credit issued by it.  The obligations of the Participating Lenders
under this Section 1.2(e) and all other parts of this Section 1.2
shall survive termination of this Agreement and of all Applications, Letters of
Credit, and all drafts and other documents presented in connection with
drawings thereunder.

 

(f)                                    Manner of Requesting a
Letter of Credit.  The Borrower shall provide at least five
(5) Business Days’ advance written notice to the Administrative Agent of
each request for the issuance of a Letter of Credit, such notice in each case
to be accompanied by an Application for such Letter of Credit properly
completed and executed by the Borrower and, in the case of an extension or an
increase in the amount of a Letter of Credit, a written request therefor, in a
form reasonably acceptable to the Administrative Agent and the L/C Issuer,
in each case, together with the fees called for by this Agreement.  The Administrative Agent shall promptly
notify the L/C Issuer of the Administrative Agent’s receipt of each such notice
and the L/C Issuer shall promptly notify the Administrative Agent and the
Lenders of the issuance of the Letter of Credit so requested.

 

Section 1.3.                                Applicable Interest Rates . 
(a) Base Rate Loans.  Each Base Rate Loan made or maintained by a
Lender shall bear interest during each Interest Period it is outstanding
(computed on the basis of a year of 360 days and the actual days elapsed) on
the unpaid principal amount thereof from the date such Loan is advanced,
continued or created by conversion from a Eurodollar Loan until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the sum of
the Applicable Margin plus the Base Rate from time to time in effect, payable
on the last day of its Interest Period and at maturity (whether by acceleration
or otherwise).

 

“Base
Rate” means for any
day the greater of:  (i) the rate of
interest announced or otherwise established by HTSB from time to time as its
prime commercial rate as in effect on such day, with any change in the Base
Rate resulting from a change in said prime commercial rate to be effective as
of the date of the relevant change in said prime commercial rate (it being
acknowledged and agreed that such rate may not be the Administrative Agent’s
best or lowest rate) and (ii) the sum of (x) the rate determined by
the Administrative Agent to be the average (rounded upward, if necessary, to
the next higher 1/100 of 1%) of the rates per annum quoted to the
Administrative Agent at approximately 10:00 a.m. (Chicago time) (or as soon
thereafter as is practicable) on such day (or, if such day is not a Business
Day, on the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Administrative Agent for sale to HTSB at face value of
Federal funds in the secondary market in an amount equal or comparable to the
principal amount of the Base Rate Loan owed to HTSB for such day for which such
rate is being determined, plus
(y) 1/2 of 1%.

 

(b)                                 Eurodollar Loans.  Each
Eurodollar Loan made or maintained by a Lender shall bear interest during each
Interest Period it is outstanding (computed on the basis of a year of 360 days
and actual days elapsed) on the unpaid principal amount thereof from the date
such Loan is

 

5

 

advanced, continued or created by conversion from a Base Rate Loan
until maturity (whether by acceleration or otherwise) at a rate per annum equal
to the sum of the Applicable Margin plus the Adjusted LIBOR applicable for such
Interest Period, payable on the last day of the Interest Period and at maturity
(whether by acceleration or otherwise), and, if the applicable Interest Period
is longer than three months, on each day occurring every three months after the
commencement of such Interest Period.

 

“Adjusted
LIBOR” means, for any
Borrowing of Eurodollar Loans, a rate per annum determined in accordance with
the following formula:

 

	
  Adjusted LIBOR

  	
  =

  	
  LIBOR

  	
   

  
	
   

  	
   

  	
  1 - Eurodollar Reserve Percentage

  

 

“Eurodollar
Reserve Percentage”
means, for any Borrowing of Eurodollar Loans, the daily average for the
applicable Interest Period of the maximum rate, expressed as a decimal, at
which reserves (including, without limitation, any supplemental, marginal, and
emergency reserves) are imposed during such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) on “eurocurrency liabilities”, as defined in
such Board’s Regulation D (or in respect of any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurodollar Loans is determined or any category of extensions of credit or other
assets that include loans by non-United States offices of any Lender to
United States residents), subject to any amendments of such reserve requirement
by such Board or its successor, taking into account any transitional
adjustments thereto.

 

“LIBOR” means, for an Interest Period for a
Borrowing of Eurodollar Loans, (a) the LIBOR Index Rate for such Interest
Period, if such rate is available, and (b) if the LIBOR Index Rate cannot
be determined, the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits
in U.S. Dollars are offered to HTSB at 11:00 a.m. (London, England time)
2 Business Days before the beginning of such Interest Period by 3 or more
major banks in the interbank eurodollar market selected by the Administrative
Agent for delivery on the first day of and for a period equal to such Interest
Period and in an amount equal or comparable to the principal amount of the
Eurodollar Loan scheduled to be made by HTSB as part of such Borrowing.

 

“LIBOR
Index Rate” means,
for any Interest Period, the rate per annum for deposits in U.S. Dollars for a
period equal to such Interest Period which appears on the Telerate
Page 3750 as of 11:00 a.m. (London, England time) on the day
2 Business Days before the commencement of such Interest Period.

 

“Telerate
Page 3750” means the
display designated as “Page 3750”
on the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers’
Association as the information vendor for the purpose of displaying British
Bankers’ Association Interest Settlement Rates for U.S. Dollar deposits).

 

6

 

(c)                                  Rate Determinations.  The
Administrative Agent shall determine each interest rate applicable to the Loans
and the Reimbursement Obligations hereunder, and its determination thereof
shall be conclusive and binding except in the case of manifest error.

 

Section 1.4.                                Minimum Borrowing Amounts;
Maximum Eurodollar Loans .  Each Borrowing of Base Rate Loans shall be in
an amount not less than $500,000 or such greater amount which is an integral
multiple of $100,000.  Each Borrowing of
Eurodollar Loans advanced, continued or converted shall be in an amount equal
to $1,000,000 or such greater amount which is an integral multiple of
$500,000.  Without the Administrative
Agent’s consent, there shall not be more than five Borrowings of
Eurodollar Loans outstanding at any one time.

 

Section 1.5.                                Manner of Borrowing Loans
and Designating Applicable Interest Rates .  (a) Notice to the Administrative Agent.  The Borrower shall give notice to the
Administrative Agent by no later
than 10:00 a.m. (Chicago time): 
(i) at least 3 Business Days before the date on which the
Borrower requests the Lenders to advance a Borrowing of Eurodollar Loans and
(ii) on the date the Borrower requests the Lenders to advance a Borrowing
of Base Rate Loans.  The Loans included
in each Borrowing shall bear interest initially at the type of rate specified
in such notice of a new Borrowing.  Thereafter, the Borrower may from time to time
elect to change or continue the type of interest rate borne by each Borrowing
or, subject to Section 1.4’s minimum amount requirement for each
outstanding Borrowing, a portion thereof, as follows:  (i) if such Borrowing is of Eurodollar
Loans, on the last day of the Interest Period applicable thereto, the Borrower
may continue part or all of such Borrowing as Eurodollar Loans or convert part
or all of such Borrowing into Base Rate Loans or (ii) if such Borrowing is
of Base Rate Loans, on any Business Day, the Borrower may convert all or part
of such Borrowing into Eurodollar Loans for an Interest Period or Interest
Periods specified by the Borrower.  The
Borrower shall give all such notices requesting the advance, continuation or
conversion of a Borrowing to the Administrative Agent by telephone or telecopy (which notice shall be irrevocable
once given and, if by telephone, shall be promptly confirmed in writing),
substantially in the form attached hereto as Exhibit B (Notice of
Borrowing) or Exhibit C (Notice of Continuation/Conversion), as
applicable, or in such other form reasonably acceptable to the Administrative Agent. 
Notice of the continuation of a Borrowing of Eurodollar Loans for an
additional Interest Period or of the conversion of part or all of a Borrowing
of Base Rate Loans into Eurodollar Loans must be given by no later than
10:00 a.m. (Chicago time) at least 3 Business Days before the date of
the requested continuation or conversion. 
All such notices concerning the advance, continuation or conversion of a
Borrowing shall specify the date of the requested advance, continuation or
conversion of a Borrowing (which shall be a Business Day), the amount of the
requested Borrowing to be advanced, continued or converted, the type of Loans
to comprise such new, continued or converted Borrowing and, if such Borrowing
is to be comprised of Eurodollar Loans, the Interest Period applicable
thereto.  The Borrower agrees that the
Administrative Agent may rely on any such telephonic or telecopy notice given
by any person the Administrative Agent in good faith believes is an Authorized
Representative without the necessity of independent investigation and, in the
event any such notice by telephone conflicts with any written confirmation,
such telephonic notice shall govern if the Administrative Agent has acted in
reliance thereon.

 

7

 

(b)                                 Notice to the Lenders.  The
Administrative Agent shall give prompt telephonic or telecopy notice to each
Lender of any notice from the Borrower received pursuant to Section 1.5(a)
above and, if such notice requests the Lenders to make Eurodollar Loans, the
Administrative Agent shall give notice to the Borrower and each Lender by like
means of the interest rate applicable thereto promptly after the Administrative
Agent has made such determination.

 

(c)                                  Borrower’s Failure to
Notify; Automatic Continuations and Conversions.  Any
outstanding Borrowing of Base Rate Loans shall automatically be continued for
an additional Interest Period on the last day of its then current Interest
Period unless the Borrower has notified the Administrative Agent within the
period required by Section 1.5(a) that the Borrower intends to convert
such Borrowing, subject to Section 7.1 hereof, into a Borrowing of
Eurodollar Loans or such Borrowing is prepaid in accordance with Section
1.8(a).  If the Borrower fails to give
notice pursuant to Section 1.5(a) above of the continuation or conversion
of any outstanding principal amount of a Borrowing of Eurodollar Loans before
the last day of its then current Interest Period within the period required by
Section 1.5(a) or, whether or not such notice has been given, one or more
of the conditions set forth in Section 7.1 for the continuation or conversion
of a Borrowing of Eurodollar Loans would not be satisfied, and such Borrowing
is not prepaid in accordance with Section 1.8(a), such Borrowing shall
automatically be converted into a Borrowing of Base Rate Loans.  In the event the Borrower fails to give
notice pursuant to Section 1.5(a) above of a Borrowing equal to the amount
of a Reimbursement Obligation and has not notified the Administrative Agent by
1:00 p.m. (Chicago time) on the day such Reimbursement Obligation becomes
due that it intends to repay such Reimbursement Obligation, the Borrower shall
be deemed to have requested a Borrowing of Base Rate Loans under the Revolving
Credit on such day in the amount of the Reimbursement Obligation then due,
which Borrowing shall be applied to pay the Reimbursement Obligation then due.

 

(d)                                 Disbursement of Loans.  Not
later than 1:00 p.m. (Chicago time) on the date of any requested advance
of a new Borrowing, subject to Section 7 hereof, each Lender shall make
available its Loan comprising part of such Borrowing in funds immediately
available at the principal office of the Administrative Agent in Chicago,
Illinois.  The Administrative Agent shall
make the proceeds of each new Borrowing available to the Borrower at the
Administrative Agent’s principal office in Chicago, Illinois.

 

(e)                                  Administrative Agent
Reliance on Lender Funding.  Unless the Administrative Agent shall have
been notified by a Lender prior to (or, in the case of a Borrowing of Base Rate
Loans, by 1:00 p.m. (Chicago time) on) the date on which such Lender is
scheduled to make payment to the Administrative Agent of the proceeds of a Loan
(which notice shall be effective upon receipt) that such Lender does not intend
to make such payment, the Administrative Agent may assume that such Lender has
made such payment when due and the Administrative Agent may in reliance upon
such assumption (but shall not be required to) make available to the Borrower
the proceeds of the Loan to be made by such Lender and, if any Lender has not
in fact made such payment to the Administrative Agent, such Lender shall, on
demand, pay to the Administrative Agent the amount made available to the
Borrower attributable to such Lender together with interest thereon in respect
of each day during the period commencing on the date such amount was made
available to the Borrower and ending on (but excluding) the date such

 

8

 

Lender pays such amount to the Administrative Agent at a rate per annum
equal to:  (i) from the date the
related advance was made by the Administrative Agent to the date 2 Business
Days after payment by such Lender is due hereunder, the Federal Funds Rate for
each such day and (ii) from the date 2 Business Days after the date such
payment is due from such Lender to the date such payment is made by such
Lender, the Base Rate in effect for each such day.  If such amount is not received from such
Lender by the Administrative Agent immediately upon demand, the Borrower will,
on demand, repay to the Administrative Agent the proceeds of the Loan
attributable to such Lender with interest thereon from the date such amount was
made available to the Borrower until (but excluding) the date the Borrower pays
such amount to the Administrative Agent at a rate per annum equal to the
interest rate applicable to the relevant Loan, but without such payment being
considered a payment or prepayment of a Loan under Section 1.11 hereof so
that the Borrower will have no liability under such Section with respect to such
payment.

 

Section 1.6.                                Interest Periods .  As
provided in Section 1.5(a) hereof, at the time of each request to advance,
continue or create by conversion a Borrowing of Eurodollar Loans, the Borrower
shall select an Interest Period applicable to such Loans from among the
available options.  The term “Interest Period” means the period
commencing on the date a Borrowing of Loans is advanced, continued or created
by conversion and ending:  (a) in
the case of Base Rate Loans, on the earlier of (i) the last day of the
calendar quarter (i.e.,  the last day of March, June, September or
December, as applicable) in which such Borrowing is advanced, continued or
created by conversion (or on the last day of the following calendar quarter if
such Loan is advanced, continued or created by conversion on the last day of a
calendar quarter) and (ii) the date such Base Rate Loans are repaid or
prepaid or are converted to Eurodollar Loans, and (b) in the case of a
Eurodollar Loan, 1, 2, 3 or 6 months thereafter; provided, however, that:

 

(a)                                  any Interest Period for a Borrowing of
Revolving Loans consisting of Base Rate Loans that otherwise would end after
the Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date;

 

(b)                                 no Interest Period with respect to any
portion of the Revolving Loans shall extend beyond the Revolving Credit
Termination Date;

 

(c)                                  whenever the last day of any Interest Period
would otherwise be a day that is not a Business Day, the last day of such
Interest Period shall be extended to the next succeeding Business Day, provided
that, if such extension would cause the last day of an Interest Period for a
Borrowing of Eurodollar Loans to occur in the following calendar month, the
last day of such Interest Period shall be the immediately preceding Business
Day; and

 

(d)                                 for purposes of determining an Interest
Period for a Borrowing of Eurodollar Loans, a month means a period starting on
one day in a calendar month and ending on the numerically corresponding day in
the next calendar month; provided, however,
that if there is no numerically corresponding day in the month in which such an
Interest Period is to end or if such an Interest Period begins on the last
Business Day of a calendar month, then such Interest Period shall end on the
last Business Day of the calendar month in which such Interest Period is to
end.

 

9

 

Section 1.7.                                Maturity of Loans .  Each Loan, both for principal and interest, shall mature and become due
and payable by the Borrower on the Revolving Credit Termination Date.

 

Section 1.8.                                Prepayments.   (a) Optional.  The Borrower shall have the privilege of
prepaying without premium or penalty (except as set forth in Section 1.11
below) and in whole or in part (but, if in part, then:  (i) if such Borrowing is of Base Rate
Loans, in an amount equal to $500,000 or such greater amount which is an
integral multiple of $100,000, (ii) if such Borrowing is of Eurodollar
Loans, in an amount not less than $500,000, and (iii) in each case, in an
amount such that the minimum amount required for a Borrowing pursuant to
Section 1.4 hereof remains outstanding) any Borrowing of Loans at any time
upon, in the case of a Borrowing of Eurodollar Loans, 3 Business Days
prior notice by the Borrower to the Administrative Agent or, in the case of a
Borrowing of Base Rate Loans, notice delivered by the Borrower to the
Administrative Agent no later than 10:00 a.m. (Chicago time) on the date
of prepayment, such prepayment to be made by the payment of the principal
amount to be prepaid and, in the case of any Eurodollar Loans, accrued interest
thereon to the date fixed for prepayment plus any amounts due the Lenders under
Section 1.11 hereof.

 

(b)                                 Mandatory. 
(i) If the Borrower or any Subsidiary shall at any time or from
time to time after the Closing Date make a Disposition or suffer an Event of
Loss resulting in Net Cash Proceeds in excess of $1,500,000 individually or on
a cumulative basis for all such Dispositions and Events of Loss in any fiscal year
of the Borrower (such excess amount the “Excess
Net Cash Proceeds”), then (x) the Borrower shall promptly
notify the Administrative Agent of such proposed Disposition or of such Event
of Loss (including the amount of the estimated Net Cash Proceeds to be received
by the Borrower or such Subsidiary in respect thereof) and (y) promptly
upon receipt by the Borrower or the Subsidiary of the Net Cash Proceeds of such
Disposition or Event of Loss, the Borrower shall prepay the Loans, and shall
pay accrued interest to the date of such prepayment on the aggregate principal
amount being prepaid (or prepay the Loans, and pay accrued interest to the date
of such prepayment on the aggregate principal amount being prepaid, and prefund
the L/C Obligations if required under Section 9.4 hereof), in an
aggregate amount equal to 100% of such Excess Net Cash Proceeds; provided that in the case of each
Disposition and Event of Loss, if the Borrower states in its notice of such
event that the Borrower or the applicable Subsidiary intends to reinvest,
within 90 days of the receipt by it of Net Cash Proceeds from such
Disposition or Event of Loss, the Net Cash Proceeds thereof in assets similar
to the assets which were subject to such Disposition or Event of Loss, then so
long as no Default or Event of Default then exists, the Borrower shall not be
required to make a mandatory prepayment under this Section in respect of such
Excess Net Cash Proceeds to the extent such Excess Net Cash Proceeds are
actually reinvested in such similar assets with such 90-day period.  Promptly after the end of such 90-day
period, the Borrower shall notify the Administrative Agent whether the Borrower
or such Subsidiary has reinvested such Excess Net Cash Proceeds in such similar
assets, and to the extent such Excess Net Cash Proceeds have not been so
reinvested, the Borrower shall promptly prepay the Loans, and shall pay accrued
interest to the date of such prepayment on the aggregate principal amount being
prepaid (or prepay the Loans, and pay accrued interest to the date of such
prepayment on the aggregate principal amount being prepaid, and prefund the
L/C Obligations if required under Section 9.4 hereof), in the amount
of such Excess Net Cash Proceeds not so reinvested.  The amount of each such prepayment shall be
applied on a ratable basis among the relevant outstanding Obligations of the
several Lenders

 

10

 

based on the principal amounts thereof. 
The Borrower may elect to defer any prepayment required under this
Section 1.8(b)(i) until the end of the applicable Interest Period of one
or more Borrowings of Eurodollar Loans so as to avoid incurring funding
indemnity costs under Section 1.11 hereof, provided that cash in the
amount of any prepayment so deferred shall be deposited by the Borrower in a
non-interest bearing blocked cash collateral account with the Administrative
Agent during the period of such deferral.

 

(ii)                                  If after the Closing Date the Borrower or any
Subsidiary shall issue new equity securities (whether common or preferred stock
or otherwise), other than (x) shares of common stock of the Borrower
issued in its initial public offering (including any shares issued pursuant to
an over-allotment offering), (y) equity securities issued in connection
with the exercise of employee stock options and (z) capital stock issued
to the seller of an Acquired Business in connection with a Permitted
Acquisition, the Borrower shall promptly notify the Administrative Agent of the
estimated Net Cash Proceeds of such issuance to be received by or for the
account of the Borrower or such Subsidiary in respect thereof.  Promptly upon receipt by the Borrower or such
Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the
Loans, and shall pay accrued interest to the date of such prepayment on the
aggregate principal amount being prepaid (or prepay the Loans, and pay accrued
interest to the date of such prepayment on the aggregate principal amount being
prepaid, and prefund the L/C Obligations if required under
Section 9.4 hereof), in an aggregate amount equal to 100% of such Net Cash
Proceeds.  The amount of each such
prepayment shall be applied on a ratable basis among the relevant outstanding
Obligations of the several Lenders based on the principal amounts thereof.  The Borrower acknowledges that its
performance hereunder shall not limit the rights and remedies of the Lenders
for any breach of Section 8.11 hereof or any other terms of this Agreement.
The Borrower may elect to defer any prepayment required under this
Section 1.8(b)(ii) until the end of the applicable Interest Period of one
or more Borrowings of Eurodollar Loans so as to avoid incurring funding
indemnity costs under Section 1.11 hereof, provided that cash in the amount
of any prepayment so deferred shall be deposited by the Borrower in a
non-interest bearing blocked cash collateral account with the Administrative
Agent during the period of such deferral.

 

(iii)                               If after the Closing Date the Borrower or any
Subsidiary shall issue any Indebtedness for Borrowed Money, other than
Indebtedness for Borrowed Money permitted by Section 8.7(a)-(h)
hereof, the Borrower shall promptly notify the Administrative Agent of the
estimated Net Cash Proceeds of such issuance to be received by or for the
account of the Borrower or such Subsidiary in respect thereof.  Promptly upon receipt by the Borrower or such
Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the
Loans, and shall pay accrued interest to the date of such prepayment on the
aggregate principal amount being prepaid (or prepay the Loans, and pay accrued
interest to the date of such prepayment on the aggregate principal amount being
prepaid, and prefund the L/C Obligations if required under Section 9.4
hereof), in an aggregate amount equal to 100% of such Net Cash Proceeds.  The amount of each such prepayment shall be
applied on a ratable basis among the relevant outstanding Obligations of the
several Lenders based on the principal amounts thereof.  The Borrower acknowledges that its
performance hereunder shall not limit the rights and remedies of the Lenders
for any breach of Section 8.7 hereof or any other terms of this Agreement.
The Borrower may elect to defer any prepayment required under this Section 1.8(b)(iii)
until the end of the applicable Interest Period of one or more Borrowings of
Eurodollar Loans so as to avoid

 

11

 

incurring funding indemnity costs under Section 1.11 hereof,
provided that cash in the amount of any prepayment so deferred shall be
deposited by the Borrower in a non-interest bearing blocked cash collateral
account with the Administrative Agent during the period of such deferral.

 

(iv)                              The Borrower shall, on each date the
Revolving Credit Commitments are reduced pursuant to Section 1.12 hereof,
prepay the Revolving Loans and, if necessary, prefund the L/C Obligations by
the amount, if any, necessary to reduce the sum of the aggregate principal
amount of Revolving Loans and L/C Obligations then outstanding to the amount to
which the Revolving Credit Commitments (such term being understood to refer to
the aggregate amount of such Commitments in effect at such time, whether used
or unused) have been so reduced.

 

(v)                                 Unless the Borrower otherwise directs,
prepayments of Loans under this Section 1.8(b) shall be applied first to
Borrowings of Base Rate Loans until payment in full thereof with any balance
applied to Borrowings of Eurodollar Loans in the order in which their Interest
Periods expire.  Each prepayment of Loans
under this Section 1.8(b) shall be made by the payment of the principal amount
to be prepaid and, in the case of any Eurodollar Loans, accrued interest
thereon to the date of prepayment together with any amounts due the Lenders under
Section 1.11 hereof.  Each
prefunding of L/C Obligations shall be made in accordance with Section 9.4
hereof.

 

(c)                                  The Administrative Agent will promptly advise
each Lender of any notice of prepayment it receives from the Borrower.  Any amount of Revolving Loans paid or prepaid
before the Revolving Credit Termination Date may, subject to the terms and
conditions of this Agreement, be borrowed, repaid, prepaid and borrowed again.

 

Section 1.9.                                Default Rate. 
Notwithstanding anything to the contrary contained in Section 1.3
hereof, while any Event of Default exists or after acceleration of the Loans
pursuant to Section 9.2 or 9.3, the Borrower shall pay interest (after as
well as before entry of judgment to the extent permitted by law) on the principal
amount of all Loans owing by it and shall pay letter of credit fees at a rate
per annum equal to:

 

(a)                                  for any Base Rate Loan, the sum of 2.0% plus
the Applicable Margin plus the Base Rate from time to time in effect;

 

(b)                                 for any Eurodollar Loan, the sum of 2.0% plus
the rate of interest in effect thereon at the time such Event of Default shall
occur until the end of the Interest Period applicable thereto and, thereafter,
at a rate per annum equal to the sum of 2.0% plus the Applicable Margin for
Base Rate Loans plus the Base Rate from time to time in effect; and

 

(c)                                  for any letter of credit fees payable
pursuant to the second sentence of Section 2.1(b) hereof, the sum of 2.0% plus the Applicable Margin from time to
time in effect;

 

provided, however, that in the absence of acceleration, any
adjustments pursuant to this Section shall be made at the election of the
Administrative Agent, acting at the request or with the

 

12

 

consent of the Required Lenders, with written notice to the
Borrower.  While any Event of Default
exists or after acceleration, interest and letter of credit fees shall be paid
on demand of the Administrative Agent at the request or with the consent of the
Required Lenders.

 

Section 1.10.                         The Notes . 
(a) The Revolving Loans made to the Borrower by a Lender shall be
evidenced by a single promissory note of the Borrower issued to such Lender in
the form of Exhibit D hereto.  Each
such promissory note is hereinafter referred to as a “Revolving Note” and collectively such promissory notes are
referred to as the “Revolving Notes.”

 

(b)                                 Each Lender shall record on its books and
records or on a schedule to its appropriate Note the amount of each Loan
advanced, continued or converted by it, all payments of principal and interest
and the principal balance from time to time outstanding thereon, the type of
such Loan, and, for any Eurodollar Loan, the Interest Period and the interest
rate applicable thereto.  The record
thereof made in good faith by a Lender, whether shown on such books and records
of a Lender or on a schedule to the relevant Note, shall be prima  facie
evidence as to all such matters; provided,
however, that the failure of any Lender to record any of the
foregoing or any error in any such record shall not limit or otherwise affect
the obligation of the Borrower to repay all Loans made to it hereunder together
with accrued interest thereon as required under this Agreement.  At the request of any Lender and upon such
Lender tendering to the Borrower the appropriate Note to be replaced, the
Borrower shall furnish a new Note to such Lender to replace any outstanding
Note, and at such time the first notation appearing on a schedule on the
reverse side of, or attached to, such Note shall set forth the aggregate unpaid
principal amount of all Loans, if any, then outstanding thereon.

 

Section 1.11.                         Funding Indemnity .  If
any Lender shall incur any loss, cost or expense (excluding any loss of
anticipated profit, but otherwise including without limitation any other loss,
cost or expense reasonably incurred by reason of the liquidation or re-employment
of deposits or other funds acquired by such Lender to fund or maintain any
Eurodollar Loan or the relending or reinvesting of such deposits or amounts
paid or prepaid to such Lender) as a result of:

 

(a)                                  any payment, prepayment or conversion of a
Eurodollar Loan on a date other than the last day of its Interest Period,

 

(b)                                 any failure (because of a failure to meet the
conditions of Section 7 or otherwise) by the Borrower to borrow or
continue a Eurodollar Loan, or to convert a Base Rate Loan into a Eurodollar
Loan on the date specified in a notice given pursuant to Section 1.5(a)
hereof,

 

(c)                                  any failure by the Borrower to make any
payment of principal on any Eurodollar Loan when due (whether by acceleration
or otherwise), or

 

(d)                                 any acceleration of the maturity of a
Eurodollar Loan as a result of the occurrence of any Event of Default
hereunder,

 

13

 

then, upon the demand of such Lender and the receipt by the Borrower of
the certificate of such Lender referred to in the next succeeding sentence, the
Borrower shall pay to such Lender such amount as will reimburse such Lender for
such loss, cost or expense.  If any
Lender makes such a claim for compensation, it shall provide to the Borrower,
with a copy to the Administrative Agent, a certificate setting forth the amount
of such loss, cost or expense in reasonable detail (including an explanation of
the basis for and the computation of such loss, cost or expense) and the
amounts shown on such certificate shall be conclusive absent manifest error.

 

Section 1.12.                         Commitment
Terminations.     (a) Optional
Revolving Credit Terminations.  The
Borrower shall have the right at any time and from time to time, upon
5 Business Days prior written notice to the Administrative Agent, to
terminate the Revolving Credit Commitments without premium or penalty and in
whole or in part, any partial termination to be (i) in an amount not less
than $1,000,000 and (ii) allocated ratably among the Lenders in proportion
to their respective Revolver Percentages, provided that the Revolving Credit
Commitments (such term being understood to refer to the aggregate amount of
such Commitments in effect at such time, whether used or unused) may not be
reduced to an amount less than the sum of the aggregate principal amount of
Revolving Loans and of L/C Obligations then outstanding.  Any termination of the Revolving Credit
Commitments below the L/C Sublimit then in effect shall reduce the
L/C Sublimit by a like amount.  The
Administrative Agent shall give prompt notice to each Lender of any such
termination of the Revolving Credit Commitments.

 

(b)                                 Any termination of the Commitments pursuant
to this Section 1.12 may not be reinstated.

 

Section 1.13.                         Substitution of Lenders.  Upon
the receipt by the Borrower of (a) a claim from any Lender for
compensation under Section 10.3 or 13.1 hereof, (b) notice by any
Lender to the Borrower of any illegality pursuant to Section 10.1 hereof
or (c) in the event any Lender is in default in any material respect with
respect to its obligations under the Loan Documents (any such Lender referred
to in clause (a), (b) or (c) above being hereinafter referred to as an “Affected Lender”), the Borrower may, in
addition to any other rights the Borrower may have hereunder or under
applicable law, require, at its expense, any such Affected Lender to assign, at
par plus accrued interest and fees, without recourse, all of its interest,
rights, and obligations hereunder (including all of its Commitments and the
Loans and participation interests in Letters of Credit and other amounts at any
time owing to it hereunder and the other Loan Documents) to a bank or other
institutional lender specified by the Borrower, provided that (i) such
assignment shall not conflict with or violate any law, rule or regulation or
order of any court or other governmental authority, (ii) except in the
case of an assignment to a Person that, immediately prior to such assignment,
was a Lender, the Borrower shall have received the written consent of the
Administrative Agent, which consent shall not be unreasonably withheld, to the
identity of the assignee of such assignment, (iii) the Affected Lender
shall receive one or more payments from either the Borrower or one or more
assignees of all monies (together with amounts due such Affected Lender under
Section 1.11 hereof as if the Loans owing to it were prepaid rather than
assigned) owing to it hereunder for a purchase of its Obligations at par, and
(iv) the assignment is entered into in accordance with the other
requirements of Section 13.12 hereof.

 

14

 

Section 2.                                                 Fees. 

 

Section 2.1.                                Fees. 
(a) Revolving Credit Commitment
Fee.  The Borrower shall pay
to the Administrative Agent for the ratable account of the Lenders in
accordance with their Revolver Percentages a commitment fee at the rate per
annum equal to the Applicable Margin (computed on the basis of a year of 360 days
and the actual number of days elapsed) on the average daily Unused Revolving
Credit Commitments.  Such commitment fee
shall be payable quarter-annually in arrears on the last day of each
March, June, September, and December in each year (commencing on the first such
date occurring after the date hereof) and on the Revolving Credit Termination
Date, unless the Revolving Credit Commitments are terminated in whole on an
earlier date, in which event the commitment fee for the period to the date of
such termination in whole shall be paid on the date of such termination.

 

(b)                                 Letter of Credit Fees.  On
the date of issuance or extension, or increase in the amount, of any Letter of
Credit pursuant to Section 1.2 hereof, the Borrower shall pay to the L/C
Issuer for its own account an issuance fee equal to 0.125% of the face amount
of (or of the increase in the face amount of) such Letter of Credit.  Quarterly in arrears, on the last day of each
March, June, September, and December, commencing on the first such date
occurring after the date hereof, the Borrower shall pay to the Administrative
Agent, for the ratable benefit of the Lenders in accordance with their Revolver
Percentages, a letter of credit fee at a rate per annum equal to the Applicable
Margin (computed on the basis of a year of 360 days and the actual number
of days elapsed) applied to the daily average maximum amount available to be
drawn under all Letters of Credit outstanding during such quarter (assuming
compliance with all conditions to drawing thereunder).  In addition, the Borrower shall pay to the
L/C Issuer for its own account the L/C Issuer’s standard drawing,
negotiation, amendment, and other administrative fees for each Letter of
Credit.  Such standard fees referred to
in the preceding sentence may be established by the L/C Issuer from time to
time.

 

(c)                                  Administrative Agent Fees.  The
Borrower shall pay to the Administrative Agent, for its own use and benefit,
the other fees agreed to between the Administrative Agent and the Borrower in a
letter dated October 22, 2004 or as otherwise agreed to in writing between
them.

 

(d)                                 Audit Fees.  The
Borrower shall pay to the Administrative Agent for its own use and benefit
reasonable charges for audits of the Collateral performed by the Administrative
Agent or its agents or representatives in such amounts as the Administrative
Agent may from time to time request (the Administrative Agent acknowledging and
agreeing that such charges shall be computed in the same manner as it at the
time customarily uses for the assessment of charges for similar collateral
audits); provided, however, that
in the absence of any Default or Event of Default, the Borrower shall not be
required to pay the Administrative Agent for more than one such audit per
calendar year.

 

Section 3.                                                 Place and
Application of Payments.

 

Section 3.1.                                Place and Application of
Payments.  All payments of principal of and interest on
the Loans and the Reimbursement Obligations, and of all other Obligations
payable by the Borrower under this Agreement and the other Loan Documents,
shall be made by the

 

15

 

Borrower to the Administrative Agent by no later than 12:00 Noon
(Chicago time) on the due date thereof at the office of the Administrative
Agent in Chicago, Illinois (or such other location as the Administrative Agent
may designate in writing to the Borrower) for the benefit of the Lender or
Lenders entitled thereto.  Any payments
received after such time shall be deemed to have been received by the Administrative
Agent on the next Business Day.  All such
payments shall be made in U.S. Dollars, in immediately available funds at the
place of payment, in each case without set-off or counterclaim.  The Administrative Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest on Loans and on Reimbursement Obligations in which the
Lenders have purchased Participating Interests ratably to the Lenders and like
funds relating to the payment of any other amount payable to any Lender to such
Lender, in each case to be applied in accordance with the terms of this
Agreement.

 

Anything contained herein to
the contrary notwithstanding, all payments and collections received in respect
of the Obligations and all proceeds of the Collateral received, in each
instance, by the Administrative Agent or any of the Lenders after the
Obligations have been declared, or have become, due and payable, shall be
remitted to the Administrative Agent and distributed as follows:

 

(a)                                  first, to the payment of any outstanding
costs and expenses incurred by the Administrative Agent, and any security
trustee therefor, in monitoring, verifying, protecting, preserving or enforcing
the Liens on the Collateral, in protecting, preserving or enforcing rights
under the Loan Documents, and in any event all costs and expenses of a
character which the Borrower has agreed to pay the Administrative Agent under
Section 13.15 hereof (such funds to be retained by the Administrative
Agent for its own account unless it has previously been reimbursed for such
costs and expenses by the Lenders, in which event such amounts shall be
remitted to the Lenders to reimburse them for payments theretofore made to the
Administrative Agent);

 

(b)                                 second, to the payment of any outstanding
interest and fees due under the Loan Documents to be allocated pro rata in
accordance with the aggregate unpaid amounts owing to each holder thereof;

 

(c)                                  third, to the payment of principal on the
Notes, unpaid Reimbursement Obligations, together with amounts to be held by
the Administrative Agent as collateral security for any outstanding
L/C Obligations pursuant to Section 9.4 hereof (until the
Administrative Agent is holding an amount of cash equal to the then outstanding
amount of all such L/C Obligations), and Hedging Liability, the aggregate
amount paid to, or held as collateral security for, the Lenders and, in the
case of Hedging Liability, their Affiliates to be allocated pro rata in
accordance with the aggregate unpaid amounts owing to each holder thereof;

 

(d)                                 fourth, to the payment of all other unpaid
Obligations and all other indebtedness, obligations, and liabilities of the
Borrower and the Subsidiaries secured by the Collateral Documents (including,
without limitation, Funds Transfer and Deposit Account Liability) to be
allocated pro rata in accordance with the aggregate unpaid amounts owing to
each holder thereof; and

 

16

 

(e)                                  fifth, to the Borrower or whoever else may be
lawfully entitled thereto.

 

Section 4.                                                 The Collateral and
Guaranties.

 

Section 4.1.                                Collateral.  The
Obligations, Hedging Liability, and Funds Transfer and Deposit Account
Liability shall be secured by (a) valid, perfected and enforceable Liens
on all right, title, and interest of the Borrower and each Subsidiary in all
capital stock and other equity interests held by such Person in each of its
Subsidiaries, whether now owned or hereafter formed or acquired, and all
proceeds thereof, and (b) valid, perfected, and enforceable Liens on all
right, title, and interest of the Borrower and each Subsidiary in all personal
property, fixtures, and real estate, whether now owned or hereafter acquired or
arising, and all proceeds thereof; provided,
however, that: 
(i) unless and until an Event of Default has occurred and is
continuing and thereafter unless and until otherwise required by the
Administrative Agent or the Required Lenders, Liens on deposit accounts
maintained by the Borrower and the Subsidiaries need not be perfected provided
that the total amount on deposit at any one time not so perfected shall not
exceed $250,000 in the aggregate, (ii) unless and until an Event of
Default has occurred and is continuing and thereafter unless and until
otherwise required by the Administrative Agent or the required Lenders, Liens
on payroll accounts maintained by the Borrower and the Subsidiaries need not be
perfected provided the total amount on deposit at any time not so perfected
does not exceed the current amount of their payroll obligations,
(iii) unless and until an Event of Default has occurred and is continuing
and thereafter, unless and until otherwise required by the Administrative Agent
or the Required Lenders, Liens on vehicles which are subject to a certificate of
title law need not be perfected provided that the total value of such property
at any one time not so perfected shall not exceed $250,000 in the aggregate,
(iv) unless and until otherwise required by the Administrative Agent or
the Required Lenders during the existence of any Event of Default, Liens on the
capital stock or other equity interests of a Foreign Subsidiary shall be
limited to 66% of the total outstanding Voting Stock of any such Foreign
Subsidiary owned by a Domestic Subsidiary and shall not be granted in respect
of the stock of any Foreign Subsidiary owned by another Foreign Subsidiary, and
(v) unless and until otherwise required by the Administrative Agent or the
Required Lenders during the existence of any Event of Default, Liens shall not
be granted on the assets of a Foreign Subsidiary.  The Borrower acknowledges and agrees that the
Liens on the Collateral shall be granted to the Administrative Agent for the
benefit of the holder of the Obligations, the Hedging Liability, and the Funds
Transfer and Deposit Account Liability and shall be valid and perfected first
priority Liens subject only to Liens permitted by Section 8.8 hereof, in
each case pursuant to one or more Collateral Documents from such Persons, each
in form and substance satisfactory to the Administrative Agent.

 

Section 4.2.                                Liens on Real Property.  In
the event the Borrower or any Subsidiary owns or hereafter acquires any real
property, the Borrower shall, or shall cause such Subsidiary to, execute and
deliver to the Administrative Agent (or a security trustee therefor) a mortgage
or deed of trust reasonably acceptable in form and substance to the
Administrative Agent for the purpose of granting to the Administrative Agent a
Lien on such real property to secure the Obligations, Hedging Liability, and
Funds Transfer and Deposit Account Liability, shall pay all taxes, costs, and
expenses reasonably incurred by the Administrative Agent in recording such
mortgage or deed of trust, and shall (except to the extent waived by the
Administrative Agent)

 

17

 

supply to the Administrative Agent at the Borrower’s cost and expense a
survey, environmental report, hazard insurance policy, appraisal report, and a
mortgagee’s policy of title insurance from a title insurer acceptable to the
Administrative Agent insuring the validity of such mortgage or deed of trust
and its status as a first Lien (subject to Liens permitted by this Agreement)
on the real property encumbered thereby and such other instrument, documents,
certificates, and opinions reasonably required by the Administrative Agent in
connection therewith.

 

Section 4.3.                                Guaranties.  The
payment and performance of the Obligations, Hedging Liability, and Funds
Transfer and Deposit Account Liability shall at all times be guaranteed each
direct and indirect Subsidiary of Borrower pursuant to Section 12 hereof
or pursuant to one or more guaranty agreements in form and substance acceptable
to the Administrative Agent, as the same may be amended, modified or
supplemented from time to time (individually a “Guaranty”
and collectively the “Guaranties”);
provided, however, that unless
otherwise required by the Administrative Agent or the Required Lenders during
the existence of any Event of Default, a Foreign Subsidiary shall not be
required to be a guarantor hereunder.

 

Section 4.4.                                Further Assurances.  The
Borrower agrees that it shall, and shall cause each Subsidiary to, from time to
time at the request of the Administrative Agent or the Required Lenders, execute
and deliver such documents and do such acts and things as the Administrative
Agent or the Required Lenders may reasonably request in order to provide for or
perfect or protect such Liens on the Collateral, including without limitation
using commercially reasonable efforts to cause landlords of its leased property
to deliver landlord waivers and, if applicable, consents to leasehold
mortgages, in favor of the Administrative Agent.  In the event the Borrower or any Subsidiary
forms or acquires any other Subsidiary after the date hereof, the Borrower or
such Subsidiary (as the case may be) shall promptly upon such formation or
acquisition cause such newly formed or acquired Subsidiary to execute a
Guaranty and such Collateral Documents as the Administrative Agent may then
require, and the Borrower or such Subsidiary (as the case may be) shall also
deliver to the Administrative Agent, or cause such Subsidiary to deliver to the
Administrative Agent, at the Borrower’s cost and expense, such other
instruments, documents, certificates, and opinions reasonably required by the
Administrative Agent in connection therewith.

 

Section 4.5.                                Collections.   The
Borrower shall promptly, but in any event within 30 days after the Closing
Date, make arrangements (including the opening of a central collections account
with HTSB) whereby all cash proceeds of the Collateral of the Borrower and each
Subsidiary are required to be deposited into one or more accounts maintained by
the Borrower or any of its Subsidiaries with HTSB or with other financial
institutions selected by the Borrower and acceptable to the Administrative
Agent (which financial institutions have entered into reasonably acceptable
account control agreements with the Administrative Agent relating to such
accounts), pursuant to arrangements under which the balance of collected funds
standing on deposit in such accounts maintained with such other financial
institutions are transmitted to one or more collections accounts at HTSB,
except to the extent agreed by the Borrower and the Administrative Agent with
respect to certain payroll and demand deposit accounts of the Borrower and its
Subsidiaries.

 

18

 

Section 5.                                                 Definitions;
Interpretation. 

 

Section 5.1.                                Definitions.  The
following terms when used herein shall have the following meanings:

 

“Acceptable
Accounting Firm” is
defined within the definition of “Permitted
Acquisition” in this Section 5.1.

 

“Accrediting
Body” means any
entity or organization which engages in granting or withholding Accreditation
or similar approval for private post-secondary schools and educational
programs, in accordance with standards relating to the performance, operation,
financial condition and/or educational quality of such schools and programs,
including, without limitation, the Accrediting Commission for Career Schools
and Colleges of Technology.

 

 “Accreditation” means the status of public recognition
granted by any Accrediting Body to an educational institution that meets the
Accrediting Body’s standards and requirements.

 

“Acquired
Business” means the
entity or assets acquired by the Borrower or a Subsidiary in an Acquisition,
whether before or after the date hereof.

 

“Acquired
EBITDA” means, with
reference to any Acquired Business for any period, Acquired Net Income for such
period plus (i) the sum of
all amounts deducted in arriving at such Acquired Net Income amount in respect
of (a) Acquired Interest Expense for such period, (b) federal, state,
and local income taxes of the Acquired Business for such period, and
(c) depreciation of fixed assets and amortization of intangible assets of
the Acquired Business for such period, subject to adjustments approved by the
Administrative Agent.

 

“Acquired
EBITDAR” means, with
reference to any Acquired Business for any period, Acquired EBITDA for such
period plus Rental Expenses of
the Acquired Business for such period, subject to adjustments approved by the
Administrative Agent.

 

“Acquired
Interest Expense”
means, with reference to any Acquired Business for any period, the sum of all
interest charges (including imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and
expense) of the Acquired Business for such period determined on a consolidated basis
in accordance with GAAP.

 

“Acquired
Net Income” means,
with reference to any Acquired Business for any period, the net income (or net
loss) of the Acquired Business for such period computed on a consolidated basis
in accordance with GAAP; provided
that there shall be excluded from Acquired Net Income the net income (or net
loss) of any Person (other than a subsidiary of such Acquired Business) in
which the Acquired Business has a equity interest, except to the extent of the
amount of dividends or other distributions actually paid to the Acquired
Business during such period.

 

“Acquisition” means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a

 

19

 

Person, or of any business or division of a Person, (b) the
acquisition of an amount in excess of 50% of the capital stock,
partnership interests, membership interests or equity of any Person (other than
a Person that is, immediately prior to such transaction or series of related
transactions, a Subsidiary), or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other combination with
another Person (other than a Person that is a Subsidiary) provided that the
Borrower or the Subsidiary is the surviving entity.

 

“Adjusted
EBITDA” means, with
reference to any period, EBITDA for such period plus the Acquired EBITDA of the
Persons or assets which are the subject of any Permitted Acquisition during
such period, adjusted for the reasonably expected savings in operating expenses
resulting from such Permitted Acquisition as if such Permitted Acquisition was
consummated on the first day of such period, all such calculations and
adjustments to be approved by the Required Lenders in their reasonable
discretion.

 

“Adjusted
EBITDAR” means, with
reference to any period, EBITDAR for such period plus the Acquired EBITDAR of
the Persons or assets which are the subject of any Permitted Acquisition during
such period, adjusted for the reasonably expected savings in operating expenses
resulting from such Permitted Acquisition as if such Permitted Acquisition was
consummated on the first day of such period, all such calculations and
adjustments to be approved by the Required Lenders in their reasonable
discretion.

 

“Adjusted
LIBOR” is defined in
Section 1.3(b) hereof.

 

“Administrative
Agent” means Harris
Trust and Savings Bank, in its capacity as administrative agent hereunder, and
any successor pursuant to Section 11.7 hereof.

 

“Affiliate” means any Person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
another Person.  A Person shall be deemed
to control another Person for the purposes of this definition if such Person
possesses, directly or indirectly, the power to direct, or cause the direction
of, the management and policies of the other Person, whether through the
ownership of voting securities, common directors, trustees or officers, by
contract or otherwise; provided that,
in any event for purposes of this definition, any Person that owns, directly or
indirectly, 10% or more of the securities having the ordinary voting power for
the election of directors or governing body of a corporation or 10% or more of
the partnership or other ownership interest of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.

 

“Agreement” means this Credit Agreement, as the same may
be amended, modified, restated or supplemented from time to time pursuant to
the terms hereof.

 

“Applicable
Margin” means, with
respect to Loans, Reimbursement Obligations, and the commitment fees and letter
of credit fees payable under Section 2.1 hereof, until the first Pricing Date,
the rates per annum shown opposite Level II below, and thereafter from one
Pricing Date to the next, the Applicable Margin means the rates per annum
determined in accordance with the following schedule: 

 

20

 

	
  LEVEL

  	
   

  	
  TOTAL FUNDED DEBT/ADJUSTED

  EBITDA RATIO FOR SUCH

  PRICING DATE

  	
   

  	
  APPLICABLE MARGIN FOR

  BASE RATE LOANS UNDER

  REVOLVING CREDIT AND

  REIMBURSEMENT

  OBLIGATIONS SHALL BE:

  	
   

  	
  APPLICABLE MARGIN FOR

  EURODOLLAR LOANS

  UNDER REVOLVING

  CREDIT AND LETTER OF

  CREDIT FEE SHALL BE:

  	
   

  	
  APPLICABLE MARGIN

  FOR COMMITMENT FEE

  SHALL BE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IV

  	
   

  	
  Greater than or equal to 2.0 to 1.0

  	
   

  	
  0.25

  	
  %

  	
  1.75

  	
  %

  	
  0.40

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  Less than 2.0 to 1.0, but greater than or equal to 1.50 to 1.0

  	
   

  	
  0.0

  	
  %

  	
  1.50

  	
  %

  	
  0.35

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  Less than 1.50 to 1.0, but greater than or equal to 1.0 to 1.0

  	
   

  	
  0.0

  	
  %

  	
  1.25

  	
  %

  	
  0.30

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Less than 1.0 to 1.0

  	
   

  	
  0.0

  	
  %

  	
  1.00

  	
  %

  	
  0.25

  	
  %

  

 

For purposes hereof, the term “Pricing
Date” means, for any fiscal quarter of the Borrower ending on or
after December 31, 2004, the date on which the Borrower has delivered to the
Administrative Agent the Borrower’s most recent financial statements and
compliance certificate (and, in the case of the year-end financial
statements, audit report) for the fiscal quarter then ended, pursuant to
Section 8.5 hereof.  The
Applicable Margin shall be established based on the Total Funded Debt/Adjusted
EBITDA Ratio for the most recently completed fiscal quarter and the Applicable
Margin established on a Pricing Date shall remain in effect until the next
Pricing Date.  If the Borrower has not
delivered its financial statements and compliance certificate by the date such
financial statements and compliance certificate (and, in the case of the year-end
financial statements, audit report) are required to be delivered under
Section 8.5 hereof, from such date until such financial statements,
compliance certificate and audit report are delivered, the Applicable Margin
shall be the highest Applicable Margin (i.e.,
Level IV shall apply).  If the
Borrower subsequently delivers such financial statements and compliance
certificate before the next Pricing Date, the Applicable Margin established by
such late delivered financial statements and compliance certificate shall take
effect from the date of such delivery until the next Pricing Date.  In all other circumstances, the Applicable
Margin established with respect to such financial statements and compliance
certificate shall be in effect from the Pricing Date that occurs immediately
after the end of the fiscal quarter covered by such financial statements and
Compliance Certificate until the next Pricing Date.  Each determination of the Applicable Margin
made by the Administrative Agent in accordance with the foregoing shall be
conclusive and binding on the Borrower and the Lenders if reasonably
determined.

 

“Application” is defined in Section 1.2(b) hereof.

 

“Approved
Fund” means any Fund
that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender
or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.

 

21

 

“Authorized
Representative” means
those persons shown on the list of officers provided by the Borrower pursuant
to Section 7.2 hereof or on any update of any such list provided by the
Borrower to the Administrative Agent, or any further or different officers of
the Borrower so named by any Authorized Representative of the Borrower in a
written notice to the Administrative Agent.

 

“Base
Rate” is defined in
Section 1.3(a) hereof.

 

“Base Rate
Loan” means a Loan
bearing interest at a rate specified in Section 1.3(a) hereof.

 

“Borrower” is defined in the introductory paragraph of
this Agreement.

 

“Borrowing” means the total of Loans of a single type
advanced, continued for an additional Interest Period, or converted from a
different type into such type on a single date and, in the case of Eurodollar
Loans, for a single Interest Period. 
Borrowings of Loans are made and maintained ratably from each of the
Lenders under a Credit according to their Percentages of such Credit.  A Borrowing is “advanced” on the day Lenders advance funds comprising such
Borrowing to the Borrower, is “continued”
on the date a new Interest Period for the same type of Loans commences for such
Borrowing, and is “converted”
when such Borrowing is changed from one type of Loans to the other, all as
requested by the Borrower pursuant to Section 1.5(a) hereof.

 

“Business
Day” means any day
(other than a Saturday or Sunday) on which banks are not authorized or required
to close in Chicago, Illinois and, if the applicable Business Day relates to
the advance or continuation of, or conversion into, or payment of a Eurodollar
Loan, on which banks are dealing in U.S. Dollar deposits in the interbank
eurodollar market in London, England and Nassau, Bahamas.

 

“Capital
Expenditures” means,
with respect to any Person for any period, the aggregate amount of all
expenditures (whether paid in cash or accrued as a liability) by such Person
during that period for the acquisition or leasing (pursuant to a Capital Lease)
of fixed or capital assets or additions to property, plant, or equipment
(including replacements, capitalized repairs, and improvements) which should be
capitalized on the balance sheet of such Person in accordance with GAAP.

 

“Capital
Lease” means any
lease of Property which in accordance with GAAP is required to be capitalized
on the balance sheet of the lessee.

 

“Capitalized
Lease Obligation”
means, for any Person, the amount of the liability shown on the balance sheet
of such Person in respect of a Capital Lease determined in accordance with
GAAP.

 

“CERCLA” means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. §§9601 et
seq., and any future amendments.

 

22

 

“Change of
Control” means any of
(a) at any time prior to the Borrower’s initial public offering of common
stock, Stonington shall cease to own, directly or indirectly, at least 51% of
the outstanding Voting Stock of the Borrower on a fully-diluted basis,
(b) at any time after the Borrower’s initial public offering of common stock,
any Person or two or more Persons acting in concert, other than Stonington and
Five Mile River, shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934), directly or indirectly, of the Voting Stock
(or other securities convertible into such Voting Stock) representing 20% or
more of the combined voting power of all Voting Stock of the Borrower,
(c) the failure of individuals who are members of the board of directors
(or similar governing body) of the Borrower on the Closing Date (together with
any new or replacement directors whose initial nomination for election was
approved by a majority of the directors who were either directors on the
Closing Date or previously so approved) to constitute a majority of the board
of directors (or similar governing body) of the Borrower, or (d) any
“Change of Control” or “Control Event” (or words of like import), as defined in
any agreement or indenture relating to any issue of Indebtedness for Borrowed
Money of the Borrower or any of the Subsidiaries outstanding at such time in a
principal amount aggregating in excess of $1,000,000 shall occur, which “Change
of Control” or “Control Event” (or words of like import) would permit the
acceleration of the maturity of such Indebtedness for Borrowed Money or require
the issuer or borrower of such Indebtedness for Borrowed Money to offer to one
or more of the holders thereof to prepay in full such Indebtedness for Borrowed
Money.

 

“Closing
Date” means the date
of this Agreement or such later Business Day upon which each condition
described in Section 7.2 shall be satisfied or waived in a manner
acceptable to the Administrative Agent in its discretion.

 

“Code” means the Internal Revenue Code of 1986, as
amended, and any successor statute thereto.

 

“Cohort
Default Rate” shall
have the meaning as provided in 34 C.F.R. Section 668 Subpart M.

 

“Collateral” means all properties, rights, interests, and
privileges from time to time subject to the Liens granted to the Administrative
Agent, or any security trustee therefor, by the Collateral Documents.

 

“Collateral
Account” is defined
in Section 9.4 hereof.

 

“Collateral
Documents” means the
Mortgages, the Pledge Agreement, the Security Agreement, and all other
mortgages, deeds of trust, security agreements, pledge agreements, assignments,
financing statements and other documents as shall from time to time secure the
Obligations, the Hedging Liability, and the Funds Transfer and Deposit Account
Liability or any part thereof.

 

“Commitments” means the Revolving Credit Commitments.

 

23

 

“Consolidated
Total Assets” means,
as of any time, the total assets of the Borrower and the Subsidiaries on a
consolidated basis in accordance with GAAP.

 

“Controlled
Group” means all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414 of the Code.

 

“Credit” means the Revolving Credit.

 

“Credit
Event” means the
advancing of any Loan, or the issuance of, or extension of the expiration date
or increase in the amount of, any Letter of Credit.

 

“Damages” means all damages including, without
limitation, punitive damages, liabilities, costs, expenses, losses, diminutions
in value, fines, penalties, demands, claims, cost recovery actions, lawsuits,
administrative proceedings, orders, response action, removal and remedial
costs, compliance costs, investigation expenses, consultant fees, attorneys’
and paralegals’ fees and litigation expenses.

 

“Default” means any event or condition the occurrence
of which would, with the passage of time or the giving of notice, or both, constitute
an Event of Default.

 

“Disposition” means, with respect to any Person, the sale,
lease, conveyance or other disposition of Property of such Person, other than
sales or other dispositions expressly permitted under Section 8.10(a), (b), (d)
or (e) hereof.

 

“DOE” shall mean the United States Department of
Education and any successor agency administering Title IV Programs.

 

“Domestic
Subsidiary” means
each Subsidiary other than a Foreign Subsidiary.

 

“EBITDA” means, with reference to any period, Net Income
for such period plus  the sum of all amounts deducted in arriving
at such Net Income amount in respect of (a) Interest Expense for such
period, (b) federal, state, and local income taxes for such period, and
(c) depreciation of fixed assets and amortization of intangible assets for
such period, minus, to the extent
otherwise included in Net Income for such period, any gain on the Disposition
of the real property in Indianapolis, Indiana owned by Lincoln Technical
Institute, Inc.

 

“EBITDAR” means, with reference to any period, EBITDA
for such period plus Rental
Expense for such period.

 

“Eligible
Line of Business”
means the business of operating educational facilities and/or programs
providing postsecondary educational programs, vocational training and/or
corporate training and each line of business related thereto.

 

“Environmental
Claim” means any
investigation, notice, demand, allegation, action, suit, injunction, judgment,
order, consent decree, penalty, fine, lien, proceeding or claim (whether

 

24

 

administrative, judicial or private in nature) arising
(a) pursuant to, or in connection with an actual or alleged violation of,
any Environmental Law, (b) in connection with any Hazardous Material,
(c) from any abatement, removal, remedial, corrective or response action
in connection with a Hazardous Material, Environmental Law or order of a
governmental authority relating thereto or (d) from any actual or alleged
damage, injury, threat or harm to health and safety (as such relates to
Hazardous Materials), natural resources or the environment.

 

“Environmental
Law” means any
current or future Legal Requirement pertaining to (a) the protection of
health and safety (as such relates to Hazardous Materials) and the indoor or
outdoor environment, (b) the conservation or management of natural
resources and wildlife, (c) the protection of surface water or
groundwater, (d) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, 
Release, threatened Release, abatement, removal, remediation or handling
of, or exposure to, any Hazardous Material or (e) pollution (including any
Release of Hazardous Material to air, land, surface water or groundwater), and
any amendment, rule, regulation, order or directive issued thereunder.

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended, or any successor statute thereto, and the
regulations promulgated and rulings issued thereunder.

 

“Eurodollar
Loan” means a Loan bearing
interest at the rate specified in Section 1.3(b) hereof.

 

“Eurodollar
Reserve Percentage”
is defined in Section 1.3(b) hereof.

 

“Event of
Default” means any
event or condition identified as such in Section 9.1 hereof.

 

“Event of
Loss” means, with respect
to any Property, any of the following: 
(a) any loss, destruction or damage of such Property or
(b) any condemnation, seizure, or taking, by exercise of the power of
eminent domain or otherwise, of such Property, or confiscation of such Property
or the requisition of the use of such Property.

 

“Excess
Net Cash Proceeds” is
defined in Section 1.8(b) hereof.

 

“Existing
Credit Agreement”
means that certain Credit Agreement dated as of February 11, 2003 among
Lincoln Technical Institute, Inc., the Guarantors party thereto and HTSB, as
administrative agent and sole Lender, as amended as of the date hereof.

 

“Existing
Letters of Credit”
means the letters of credit set forth on Schedule 1.2 hereto.

 

“Federal
Funds Rate” means the
fluctuating interest rate per annum described in part (x) of clause (ii) of the
definition of Base Rate appearing in Section 1.3(a) hereof.

 

“Financial
Responsibility Composite Score” means the composite score of the Borrower’s and its Subsidiaries’, on
a consolidated basis, equity, primary reserve and net income ratios described
in 34 C.F.R. Sections 668.171(b)(1) and Section 668.172 and appendices A and B
to Subpart L of 34 C.F.R. of Section 668, provided
that if at any time the Borrower or its

 

25

 

Subsidiaries are required by the DOE to report such composite score on
a School-by-School or other basis, their “Financial
Responsibility Composite Score” shall also refer to the composite
score for each School or other Person required to be reported to the DOE.

 

“Financing
Obligation” means
that certain sale-leaseback transaction with respect to real property between
Lincoln Technical Institute, Inc. and W.P. Carey & Co. LLC that is treated
as a financing obligation in accordance with GAAP.

 

“Five Mile
River” means Five
Mile River Capital Partners LLC, a Connecticut limited liability company.

 

“Fixed
Charges” means, with
reference to any period, the sum of (a) all scheduled cash payments of
principal made or to be made with respect to Indebtedness for Borrowed Money of
the Borrower and its Subsidiaries for such period on a consolidated basis, plus (b) cash Interest Expense for such
period on a consolidated basis, plus
(c) Rental Expense of the Borrower and its Subsidiaries on a consolidated basis
for such period.

 

“Foreign
Subsidiary” means
each Subsidiary which is organized under the laws of a jurisdiction other than
the United States of America or any state thereof.

 

“Fund” means any Person (other than a natural
person) that is (or will be) engaged in making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its business.

 

“Funds
Transfer and Deposit Account Liability” means the liability of the Borrower or any
of the Subsidiaries owing to any of the Lenders, or any Affiliates of such
Lenders, arising out of (a) the execution or processing of electronic
transfers of funds by automatic clearing house transfer, wire transfer or
otherwise to or from the deposit accounts of the Borrower and/or any Subsidiary
now or hereafter maintained with any of the Lenders or their Affiliates,
(b) the acceptance for deposit or the honoring for payment of any check,
draft or other item with respect to any such deposit accounts, and (c) any
other deposit, disbursement, and cash management services afforded to the
Borrower or any such Subsidiary by any of such Lenders or their Affiliates.

 

“GAAP” means generally accepted accounting
principles set forth from time to time in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are applicable to the
circumstances as of the date of determination.

 

“Guarantor” and “Guarantors”
each is defined in Section 12.1 hereof.

 

“Guaranty” and “Guaranties”
each is defined in Section 4.3 hereof.

 

26

 

“Hazardous
Material” means any
substance, chemical, compound, product, solid, gas, liquid, waste or byproduct
defined or regulated as a pollutant or contaminant under Environmental Law, and
includes, without limitation, (a) asbestos, polychlorinated biphenyls and
petroleum (including crude oil or any fraction thereof) and (b) any material
classified or regulated as “hazardous” or “toxic” pursuant to an Environmental
Law.

 

“Hedging
Liability” means the
liability of the Borrower or any Subsidiary to any of the Lenders, or any
Affiliates of such Lenders, in respect of any interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
floor agreements, interest rate exchange agreements, foreign currency
contracts, currency swap contracts, or other similar interest rate or currency
hedging arrangements as the Borrower or such Subsidiary, as the case may be,
may from time to time enter into with any one or more of the Lenders party to
this Agreement or their Affiliates.

 

“Hostile
Acquisition” means
the acquisition of the capital stock or other equity interests of a Person
through a tender offer or similar solicitation of the owners of such capital
stock or other equity interests which has not been approved (prior to such
acquisition) by resolutions of the Board of Directors of such Person or by
similar action if such Person is not a corporation, and as to which such
approval has not been withdrawn.

 

“HTSB” is defined in the introductory paragraph of
this Agreement.

 

“Indebtedness
for Borrowed Money”
means for any Person (without duplication) (a) all indebtedness of such
Person for borrowed money, whether current or funded, or secured or unsecured,
(b) all indebtedness for the deferred purchase price of Property or
services, (c) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to Property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of a default are limited to repossession or sale of
such Property), (d) all indebtedness secured by a purchase money mortgage
or other Lien to secure all or part of the purchase price of Property subject
to such mortgage or Lien, (e) all obligations under leases which shall
have been or must be, in accordance with GAAP, recorded as Capital Leases in
respect of which such Person is liable as lessee, (f) any reimbursement
obligation or other liability in respect of banker’s acceptances or letters of
credit, calculated at the full face amount thereof, whether or not drawn upon
or matured, as the case may be, and (g) any indebtedness referred to in
clauses (a) through (f), above, whether or not assumed by such Person,
secured by Liens on Property acquired by such Person at the time of acquisition
thereof, it being understood that the term “Indebtedness for Borrowed Money”
shall not include (x) trade payables arising in the ordinary course of
business or (y) liabilities of any Person relating to the Financing Obligation.

 

“Interest
Expense” means, with
reference to any period, the sum of all interest charges (including imputed
interest charges with respect to Capitalized Lease Obligations and all
amortization of debt discount and expense) of the Borrower and the Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP.

 

“Interest
Period” is defined in
Section 1.6 hereof.

 

27

 

“L/C
Issuer” means Harris
Trust and Savings Bank.

 

“L/C
Obligations” means
the aggregate undrawn face amounts of all outstanding Letters of Credit and all
unpaid Reimbursement Obligations.

 

“L/C
Sublimit” means
$20,000,000, as reduced pursuant to the terms hereof.

 

“Legal
Requirement” means
any ratified treaty or convention, or any statute, law, regulation, ordinance,
license, permit, governmental approval, injunction, judgment, order, consent
decree or other requirement of any governmental authority, whether federal,
state, or local.

 

“Lenders” means and includes Harris Trust and Savings
Bank and the other financial institutions from time to time party to this
Agreement, including each assignee Lender pursuant to Section 13.12
hereof.

 

“Lending
Office” is defined in
Section 10.4 hereof.

 

“Letter of
Credit” is defined in
Section 1.2(a) hereof.

 

“LIBOR” is defined in Section 1.3(b) hereof.

 

“Lien” means any mortgage, lien, security interest,
pledge, charge or encumbrance of any kind in respect of any Property, including
the interests of a vendor or lessor under any conditional sale, Capital Lease
or other title retention arrangement.

 

“Loan” means any Revolving Loan, whether
outstanding as a Base Rate Loan or Eurodollar Loan or otherwise, each of which
is a “type” of Loan hereunder.

 

“Loan
Documents” means this
Agreement, the Notes, the Applications and the Collateral Documents.

 

“Material
Adverse Effect” means
(a) a material adverse change in, or material adverse effect upon, the
operations, business, Property, condition (financial or otherwise) or prospects
of the Borrower and the Subsidiaries taken as a whole, (b) a material
impairment of the ability of the Borrower or any Subsidiary to perform its
material obligations under any Loan Document, (c) a material adverse
effect upon (i) the legality, validity, binding effect or enforceability
against the Borrower or any Subsidiary of any of its material obligations under
any Loan Document or the material rights and remedies of the Administrative
Agent and the Lenders thereunder or (ii) the perfection or priority of any
Lien granted under any Collateral Document on any material portion of the
Collateral, or (d) the imposition by the DOE of a requirement that the
Borrower, any Subsidiary or any School post or procure or obtain the issuance
of a Title IV Letter of Credit in an amount in excess of the then-unused
L/C Sublimit in order to establish the continued eligibility of the
Borrower, any Subsidiary or any School to participate in Title IV Programs.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

28

 

“Mortgages” means, collectively, each Mortgage and
Security Agreement with Assignment of Rents and each Deed of Trust and Security
Agreement with Assignment of Rents between the Borrower or the relevant
Subsidiary and the Administrative Agent relating to such Person’s real property
owned as of the Closing Date and located in the states of Ohio, Indiana and
Tennessee and any other mortgages or deeds of trust delivered to the
Administrative Agent pursuant to Section 4.2 hereof, as the same may be
amended, modified, supplemented or restated from time to time.

 

“Multiemployer
Plan” means any
employee pension benefit plan covered by Title IV of ERISA that is maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which a member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions.

 

“Nashville” means Nashville Auto Diesel College, Inc., a
Tennessee corporation.

 

“Net Cash
Proceeds” means, as
applicable, (a) with respect to any Disposition by a Person, cash and cash
equivalent proceeds received by or for the account of such Person, net of
(i) reasonable costs relating to such Disposition, (ii) sale, use or other
transactional taxes paid or payable by such Person in connection with or as a
result of such Disposition, and (iii) the aggregate principal amount of
Indebtedness for Borrowed Money (other than the Obligations) secured by a Lien
on any assets which are the subject of such Disposition and which indebtedness
is required by its terms to be repaid in connection with such Disposition and
release of Lien, (b) with respect to any Event of Loss suffered by a
Person, cash and cash equivalent proceeds received by or for the account of
such Person (whether as a result of payments made under any applicable
insurance policy therefor or in connection with condemnation proceedings or
otherwise), net of reasonable costs incurred in connection with the collection
of such proceeds, awards or other payments, and (c) with respect to any
offering by a Person of equity securities of such Person or the issuance by
such Person of any Indebtedness for Borrowed Money of such Person, cash and cash
equivalent proceeds received by or for the account of such Person, net of
reasonable legal, underwriting, and other fees, discounts and expenses relating
to such offering or issuance.

 

“Net
Income” means, with
reference to any period, the net income (or net loss) of the Borrower and the
Subsidiaries for such period computed on a consolidated basis in accordance
with GAAP; provided that there
shall be excluded from Net Income (a) the net income (or net loss) of any
Person accrued prior to the date it becomes a Subsidiary of, or has merged into
or consolidated with, the Borrower or another Subsidiary, and (b) the net
income (or net loss) of any Person (other than a Subsidiary) in which the
Borrower or any of the Subsidiaries has a equity interest, except to the extent
of the amount of dividends or other distributions actually paid to the Borrower
or any of the Subsidiaries during such period.

 

“Net
Worth” means, for any
Person and at any time the same is to be determined, total shareholder’s equity
(including capital stock, additional paid-in capital, and retained
earnings after deducting treasury stock) which would appear on the balance
sheet of such Person in accordance with GAAP.

 

29

 

“Notes” means and includes the Revolving Notes.

 

“Obligations” means all obligations of the Borrower to pay
principal and interest on the Loans, all Reimbursement Obligations owing under
the Applications, all fees and charges payable hereunder, and all other payment
obligations of the Borrower or any of their Subsidiaries arising under or in
relation to any Loan Document, in each case whether now existing or hereafter
arising, due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired.

 

“Operating
Lease” means any
lease of Property other than a Capital Lease.

 

“Participating
Interest” is defined
in Section 1.2(d) hereof.

 

“Participating
Lender” is defined in
Section 1.2(d) hereof.

 

“PBGC” means the Pension Benefit Guaranty Corporation
or any Person succeeding to any or all of its functions under ERISA.

 

“Percentage” means for any Lender its Revolver
Percentage.

 

“Permitted Acquisition” means (1) with respect to any
Acquisition, an Acquisition with respect to which all of the following
conditions shall have been satisfied:

 

(a)                                  the Acquired Business is in an Eligible Line
of Business and has its primary operations within the United States of America;

 

(b)                                 the Acquisition shall not be a Hostile
Acquisition;

 

(c)                                  if a new Subsidiary is formed or acquired as
a result of or in connection with the Acquisition, the Borrower and any
Subsidiary (as applicable) shall have complied with the requirements of
Section 4 hereof in connection therewith;

 

(d)                                 after giving effect to the Acquisition, no Default
or Event of Default shall exist, including with respect to the covenants
contained in Section 8.22 on a pro forma basis;

 

(e)                                  the Administrative Agent shall have received
pro forma calculations reasonably satisfactory to it showing, on a pro forma basis
for the Borrower and the Subsidiaries and the Acquired Business, compliance at
a level satisfactory to the Administrative Agent with all financial ratios
required by the DOE with respect to the Borrower and each School, including
without limitation the financial responsibility and 90/10 ratios;

 

30

 

(f)                                    the Acquired Business shall have had Acquired
EBITDA of not less than —$5,000,000 in aggregate for its four most
recently completed fiscal quarters; and

 

(g)                                 after giving effect to the Acquisition and
any Credit Events in connection therewith, the Borrower shall have a minimum of
$5,000,000 in Unused Revolving Credit Commitments;

 

(2)                                  with respect to any Acquisition for which the
aggregate Total Consideration paid by the Borrower or any of the Subsidiaries
for the Acquired Business is equal to or greater than $20,000,000 but less than
$35,000,000, an Acquisition with respect to which all of the following
conditions shall have been satisfied:

 

(a)                                  the financial statements of the Acquired
Business shall have been audited by an independent accounting firm of national
or regional repute or otherwise reasonably satisfactory to the Administrative
Agent (“Acceptable Accounting Firm”),
or if such financial statements have not been audited by such an accounting
firm, such financial statements shall have been approved by the Administrative
Agent;

 

(b)                                 the Administrative Agent has received due
diligence material in form and substance reasonably satisfactory to it with respect
to the Acquired Business, including without limitation a review of all
regulatory compliance at the Acquired Business and, the Acquired Business shall
have undergone a successful so-called businessman’s review by an
Acceptable Accounting Firm as part of the Borrower’s due diligence on the
Acquisition (whether or not financial statements audited by an Acceptable
Accounting Firm have been provided with respect to such Acquired Business);

 

(c)                                  the Acquired Business shall have had Acquired
EBITDA of not less than $0 for its most recently completed fiscal quarter
and, in aggregate, for its four most recently completed fiscal quarters; and

 

(d)                                 the Borrower shall have notified the
Administrative Agent and Lenders not less than 45 days prior to any such Acquisition
and furnished to the Administrative Agent and Lenders at such time reasonable
details as to such Acquisition (including sources and uses of funds therefor),
and 3-year historical financial information and 3-year pro forma
financial forecasts of the Acquired Business on a stand alone basis as well as
of the Borrower on a consolidated basis after giving effect to the Acquisition,
together with covenant compliance calculations satisfactory to the
Administrative Agent showing pro forma compliance with Section 8.22
hereof, both before and after the proposed Acquisition (and giving effect to
any Borrowing or equity issuance in connection therewith), for the four fiscal
quarter period ending at the end of the last fiscal quarter ending prior to the
date of such Acquisition, and assuming for the purpose of such pro forma
calculations that such Acquisition had taken place on the first

 

31

 

day of such four fiscal
quarter period, and with any adjustments to EBITDA as a result of or in
connection with such Acquisition to be subject to the approval of the
Administrative Agent and substantiated by third party due diligence reasonably
acceptable to the Administrative Agent; and

 

(3)                                  with respect to any Acquisition with the
aggregate Total Consideration paid by the Borrower or any of the Subsidiaries
for the Acquired Business greater than $35,000,000, the Required Lenders
consent to such Acquisition.

 

“Permitted
Liens” means Liens of
the types permitted pursuant to Section 8.8(a)-(i) hereof,
inclusive.

 

“Permitted
Management Fees” means
management fees, consulting fees, finders’ fees or similar fees in an aggregate
amount not to exceed the sum of $1,050,000 per fiscal year of the Borrower,
plus an additional $500,000 with respect to each Permitted Acquisition, provided that (i) an amount not less than
the lesser of (1) $750,000 and (2) the amount of Permitted Management Fees
actually incurred by the Borrower and the Subsidiaries during any fiscal year
of the Borrower (and payable to any Person other than the Borrower or any
Subsidiary) is charged against revenues in the determination of Net Income for
such fiscal year, and (ii) the amount of any Permitted Management Fees incurred
by the Borrower and the Subsidiaries during any fiscal year of the Borrower
(and payable to any Person other than the Borrower or any Subsidiary) and not
charged against revenues in the determination of Net Income for such fiscal
year shall be included within Total Consideration in calculating the Borrower’s
compliance with the provisions of Section 8.9 hereof.

 

“Person” means an individual, partnership,
corporation, limited liability company, association, trust, unincorporated
organization or any other entity or organization, including a government or
agency or political subdivision thereof or a School.

 

“Plan” means any employee pension benefit plan
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code that is maintained by a member of the Controlled Group
for employees of a member of the Controlled Group.

 

“Pledge
Agreement” means that
certain Pledge Agreement dated the date of this Agreement among the Borrower
and the Subsidiaries and the Administrative Agent, as the same may be amended,
modified, supplemented or restated from time to time.

 

“Premises” means the real property owned or leased by
the Borrower or any Subsidiary, including without limitation the real property
and improvements thereon owned by the Borrower or any Subsidiary subject to the
Lien of the Mortgages or any other Collateral Documents.

 

“Property” means, as to any Person, all types of real,
personal, tangible, intangible or mixed property owned by such Person whether
or not included in the most recent balance sheet of such Person and its
subsidiaries under GAAP.

 

32

 

“Purchase
Money Indebtedness”
means indebtedness incurred to finance the purchase price of, or cost of
construction or improvement of, Property at the time of or within 90 days
before or after the date of such purchase, construction or improvement and in a
principal amount not exceeding the purchase price or cost of such construction
or improvement, as the case may be, of such Property.

 

“RCRA” means the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. §§6901 et seq.,
and any future amendments.

 

“Reimbursement
Obligation” is
defined in Section 1.2(c) hereof.

 

“Release” means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
migration, dumping, or disposing into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of barrels, drums,
containers, tanks or other receptacles containing any Hazardous Material.

 

“Rental
Expense” means
obligations for fixed rentals or other consideration payable to any Person
(other than to the Borrower or a Wholly-owned Subsidiary) under Operating
Leases payable during such period on a consolidated basis.

 

“Required
Lenders” means, as of
the date of determination thereof, Lenders whose Revolving Credit Commitments
constitute more than 50% of the Revolving Credit Commitments of all the Lenders
or, if the Revolving Credit Commitments have been terminated, Lenders whose
outstanding Loans and interests in Letters of Credit constitute more than 50%
of the sum of the total outstanding Loans and interests in Letters of Credit of
the Lenders.

 

“Revolver
Percentage” means,
for each Lender, the percentage of the aggregate Revolving Credit Commitments
of all Lenders represented by such Lender’s Revolving Credit Commitment or, if
the Revolving Credit Commitments have been terminated, the percentage held by
such Lender (including through participation interests in Reimbursement
Obligations) of the aggregate principal amount of all Revolving Loans and
L/C Obligations then outstanding.

 

“Revolving
Credit” means the
credit facility for making Revolving Loans and issuing Letters of Credit
described in Sections 1.1 and 1.2 hereof.

 

“Revolving
Credit Commitment”
means, as to any Lender, the obligation of such Lender to make Revolving Loans
and to participate in Letters of Credit issued for the account of the Borrower
hereunder in an aggregate principal or face amount at any one time outstanding
not to exceed the amount set forth opposite such Lender’s name on
Schedule 1 attached hereto and made a part hereof, as the same may be
reduced or modified at any time or from time to time pursuant to the terms
hereof.  The Borrower and the Lenders
acknowledge and agree that the Revolving Credit Commitments of the Lenders
aggregate $100,000,000 on the date hereof.

 

33

 

“Revolving
Credit Termination Date”
means February 15, 2010, or such earlier date on which the Revolving Credit
Commitments are terminated in whole pursuant to Section 1.13, 9.2 or 9.3
hereof.

 

“Revolving
Loan” is defined in
Section 1.2 hereof and, as so defined, includes a Base Rate Loan or a
Eurodollar Loan, each of which is a “type”
of Revolving Loan hereunder.

 

“Revolving
Note” is defined in
Section 1.10 hereof.

 

“S&P” means Standard & Poor’s Ratings Services
Group, a division of The McGraw-Hill Companies, Inc.

 

“School” means a postsecondary institution of higher
education and its additional locations, taken together, operated by the
Borrower or any Subsidiary.

 

“Secretary of the
DOE” shall mean the Secretary of the DOE or an official employee of
the DOE acting for the Secretary of the DOE under a delegation of authority.

 

“Security
Agreement” means that
certain Security Agreement dated the date of this Agreement among the Borrower
and the Subsidiaries and the Administrative Agent, as the same may be amended,
modified, supplemented or restated from time to time.

 

“Significant
Regulatory Event”
means, as the context may require, either (a) a failure of a Person to
maintain its status as an “eligible institution”, as defined in 34 C.F.R.
Sections 600.2 and 600.5, (b) a failure of a Person to maintain its
eligibility to participate in Title IV Programs (including without
limitation any suspension or termination of Title IV funding), (c) a
failure of a Person to maintain in effect any of its Accreditations, or (d) a
failure of a Person to maintain in full force and effect its licenses to
provide post-secondary education in any jurisdiction, which failure of any of
the types described in clauses (a), (b), (c) and (d) when taken together with
all other such failures of any of the types described in clauses (a), (b), (c)
and (d) occurring during the current fiscal quarter and the three previous
fiscal quarters of the Borrower, affects (x) Schools which contributed more
than 10% of the EBITDA of the Borrower and the Subsidiaries for the most recent
four complete fiscal quarters of the Borrower, or (y) Schools the assets of
which comprise more than 10% of the Borrower’s Consolidated Total Assets as of
the end of its most recent fiscal quarter.

 

“Stonington” means Stonington Partners, Inc., a Delaware
corporation.

 

“Subsidiary” means, as to any particular parent
corporation or organization, any other corporation or organization more than
50% of the outstanding Voting Stock of which is at the time directly or
indirectly owned by such parent corporation or organization or by any one or
more other entities which are themselves subsidiaries of such parent
corporation or organization.  Unless
otherwise expressly noted herein, the term “Subsidiary”
means a Subsidiary of the Borrower or of any of its direct or indirect
Subsidiaries.

 

“Taxes” is defined in Section 13.1 hereof.

 

34

 

“Title IV
Letter of Credit”
means a letter of credit required by the DOE to enable the Borrower, any
Subsidiary or a School to satisfy the DOE’s requirements of financial
responsibility necessary for its continued eligibility to participate in the
Title IV Programs.

 

“Title IV
Programs” means the
Title IV Programs as listed in 34 C.F.R. Section 668.1(c).

 

“Total
Consideration” means,
with respect to an Acquisition by any Person, the total amount (but without
duplication) of (a) cash paid by such Person in connection with any
Acquisition, plus
(b) Indebtedness for Borrowed Money payable by such Person to the seller
in connection with such Acquisition, plus
(c) the fair market value of any equity securities, including any warrants
or options therefor, delivered in connection with any Acquisition, plus (d) the present value of
covenants not to compete entered into in connection with such Acquisition or
other future payments which are required to be made over a period of time and
are not contingent upon the Borrower or any Subsidiary meeting financial
performance objectives (exclusive of salaries paid in the ordinary course of
business) (discounted at the rate of 10% per annum), but only to the extent not
included in clause (a), (b) or (c) above, plus
(e) the amount of Indebtedness for Borrowed Money assumed by such Person
in connection with such Acquisition.

 

“Total
Funded Debt” means, at
any time the same is to be determined, the aggregate of all Indebtedness for
Borrowed Money of the Borrower and the Subsidiaries at such time, including all
Indebtedness for Borrowed Money of any other Person which is directly or
indirectly guaranteed by the Borrower or any of the Subsidiaries or which the
Borrower or any of the Subsidiaries has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which the Borrower or any of the
Subsidiaries has otherwise assured a creditor against loss.

 

“Total
Funded Debt/Adjusted EBITDA Ratio” means, as of the last day of any fiscal quarter of the Borrower, the
ratio of Total Funded Debt of the Borrower and the Subsidiaries as of the last
day of such fiscal quarter to Adjusted EBITDA of the Borrower and the
Subsidiaries for the period of four fiscal quarters then ended.

 

“Unfunded
Vested Liabilities”
means, for any Plan at any time, the amount (if any) by which the present value
of all vested nonforfeitable accrued benefits under such Plan exceeds the fair
market value of all Plan assets allocable to such benefits, all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.

 

“Unused
Revolving Credit Commitments” means, at any time, the amount, if any, by which the Revolving Credit
Commitments then in effect exceed the aggregate then outstanding principal
amount of Revolving Loans and L/C Obligations.

 

“U.S.
Dollars” and “$” each means the lawful currency of the
United States of America.

 

“Voting
Stock” of any Person
means capital stock or other equity interests of any class or classes (however
designated) having ordinary power for the election of directors or other
similar

 

35

 

governing body of such Person, other than stock or other equity
interests having such power only by reason of the happening of a contingency.

 

“Welfare Plan” means a “welfare plan” as defined in
Section 3(1) of ERISA that is maintained for employees of the Borrower or
any other member of the Controlled Group or in respect of which the Borrower or
any member of the Controlled Group could have liability.

 

“Wholly-owned
Subsidiary” means a
Subsidiary of which all of the issued and outstanding shares of capital stock
(other than directors’ qualifying shares as required by law) or other equity
interests are owned by the Borrower and/or one or more Wholly-owned Subsidiaries
within the meaning of this definition.

 

Section 5.2.                                Interpretation.  The
foregoing definitions are equally applicable to both the singular and plural
forms of the terms defined.  The words “hereof”, “herein”,
and “hereunder” and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.  All references to time of day herein are
references to Chicago, Illinois, time unless otherwise specifically
provided.  Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, it shall be done in accordance with
GAAP except where such principles are inconsistent with the specific provisions
of this Agreement.

 

Section 5.3.                                Change in Accounting
Principles.  If, after the date of this Agreement, there
shall occur any change in GAAP from those used in the preparation of the
financial statements referred to in Section 6.5 hereof and such change
shall result in a change in the method of calculation of any financial
covenant, standard or term found in this Agreement, either the Borrower or the
Required Lenders may by notice to the Lenders and the Borrower, respectively,
require that the Lenders and the Borrower negotiate in good faith to amend such
covenants, standards, and term so as equitably to reflect such change in
accounting principles, with the desired result being that the criteria for
evaluating the financial condition of the Borrower and the Subsidiaries shall
be the same as if such change had not been made.  No delay by the Borrower or the Required
Lenders in requiring such negotiation shall limit their right to so require
such a negotiation at any time after such a change in accounting
principles.  Until any such covenant,
standard, or term is amended in accordance with this Section 5.3,
financial covenants shall be computed and determined in accordance with GAAP in
effect prior to such change in accounting principles.  Without limiting the generality of the
foregoing, the Borrower shall neither be deemed to be in compliance with any
financial covenant hereunder nor out of compliance with any financial covenant
hereunder if such state of compliance or noncompliance, as the case may be,
would not exist but for the occurrence of a change in accounting principles
after the date hereof.

 

36

 

Section 6.                                                 Representations and
Warranties .

 

The Borrower represents and
warrants to the Administrative Agent and the Lenders as follows:

 

Section 6.1.                                Organization and
Qualification.  The Borrower is duly organized, validly
existing and in good standing as a corporation under the laws of the state of
its incorporation, has full and adequate power to own its Property and conduct
its business as now conducted, and is duly licensed or qualified and in good
standing in each jurisdiction in which the nature of the business conducted by it
or the nature of the Property owned or leased by it requires such licensing or
qualifying, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect.

 

Section 6.2.                                Subsidiaries.  Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated or organized, as the case
may be, has full and adequate power to own its Property and conduct its
business as now conducted, and is duly licensed or qualified and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the nature of the Property owned or leased by it requires such licensing
or qualifying, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect. 
Schedule 6.2 hereto identifies each Subsidiary, the jurisdiction of
its incorporation or organization, as the case may be, the percentage of issued
and outstanding shares of each class of its capital stock or other equity
interests owned by the Borrower and the other Subsidiaries and, if such
percentage is not 100% (excluding directors’ qualifying shares as required by
law), a description of each class of its authorized capital stock and other
equity interests and the number of shares of each class issued and
outstanding.  All of the outstanding
shares of capital stock and other equity interests of each Subsidiary are
validly issued and outstanding and fully paid and nonassessable and all such
shares and other equity interests indicated on Schedule 6.2 as owned by
the Borrower or another Subsidiary are owned, beneficially and of record, by
the Borrower or such Subsidiary free and clear of all Liens other than the
Liens granted in favor of the Administrative Agent pursuant to the Collateral
Documents and any Liens permitted under Section 8.8(a) or (c) hereof.  There are no outstanding commitments or other
obligations of any Subsidiary to issue, and no options, warrants or other
rights of any Person to acquire, any shares of any class of capital stock or
other equity interests of any Subsidiary. 
Schedule 6.2 also identifies each School and its identification
number.

 

Section 6.3.                                Authority and Validity of
Obligations.  The Borrower has full right and authority to
enter into this Agreement and the other Loan Documents executed by it, to make
the borrowings herein provided for, to issue its Notes in evidence thereof, to
grant to the Administrative Agent the Liens described in the Collateral
Documents executed by the Borrower, and to perform all of its obligations
hereunder and under the other Loan Documents executed by it.  Each Subsidiary has full right and authority
to enter into the Loan Documents executed by it, to guarantee (in the case of
the Subsidiaries only) the Obligations, Hedging Liability, and Funds Transfer
and Deposit Account Liability, to grant to the Administrative Agent the Liens
described in the Collateral Documents executed by such Person, and to perform
all of its obligations under the Loan Documents executed by it.  The Loan Documents delivered by the Borrower
and by each Subsidiary have been duly authorized, executed, and delivered by
such Person and 

 

37

 

constitute valid and binding obligations of such Person enforceable
against it in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors’ rights generally and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law); and this Agreement and the other Loan
Documents do not, nor does the performance or observance by the Borrower or any
Subsidiary of any of the matters and things herein or therein provided for,
(a) contravene or constitute a default under any provision of law (which,
in the case of any such performance or observance after the Closing Date, could
reasonably be expected to have a Material Adverse Effect) or contravene or constitute
a default under any judgment, injunction, order or decree binding upon the
Borrower or any Subsidiary or any provision of the organizational documents
(e.g., charter, articles of incorporation or by-laws, articles of
association or operating agreement, partnership agreement or other similar
document) of the Borrower or any Subsidiary, (b) contravene or constitute
a default under any covenant, indenture or agreement of or affecting the
Borrower or any Subsidiary or any of its Property, in each case where such
contravention or default, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or (c) result in the creation
or imposition of any Lien on any Property of the Borrower or any Subsidiary
other than the Liens granted in favor of the Administrative Agent pursuant to
the Collateral Documents.

 

Section 6.4.                                Use of Proceeds; Margin
Stock.  The Borrower shall, and shall permit the
Subsidiaries to, use the proceeds of the Revolving Credit to refinance existing
indebtedness, to finance Capital Expenditures, to finance Permitted
Acquisitions, to pay transaction expenses relating to any of the foregoing, for
its general working capital purposes, to issue Title IV Letters of Credit and
for such other legal and proper purposes as are consistent with all applicable
laws.  Neither the Borrower nor any
Subsidiary is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Loan or any other extension of credit made hereunder will be
used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock.

 

Section 6.5.                                Financial Reports.  The
restated consolidated balance sheet of the Borrower and its Subsidiaries as at
December 31, 2003, and the related restated consolidated statements of income,
retained earnings and cash flows of the Borrower and its Subsidiaries for the
fiscal year then ended, and accompanying notes thereto, which financial
statements are accompanied by the audit report of Deloitte & Touche LLP,
independent public accountants, and the unaudited interim consolidated balance
sheet of the Borrower and its Subsidiaries as at September 30, 2004, and the
related consolidated statements of income, retained earnings and cash flows of
the Borrower and its Subsidiaries for the 9 months then ended, heretofore
furnished to the Administrative Agent and the Lenders, fairly present in all
material respects the consolidated financial condition of the Borrower and its
Subsidiaries as at said dates and the consolidated results of their operations
and cash flows for the periods then ended in conformity with GAAP applied on a
consistent basis.  Neither the Borrower
nor any Subsidiary has contingent liabilities which are material to the
Borrower and the Subsidiaries, taken as a whole, other than as indicated in
such restated financial statements (including the footnotes thereto) or, with
respect to future

 

38

 

periods, in the financial statements (including the footnotes thereto)
furnished pursuant to Section 8.5 hereof.

 

Section 6.6.                                No Material Adverse Effect.  Since December 31, 2003, there has been no Material Adverse
Effect.

 

Section 6.7.                                Full Disclosure.  The
written information furnished by the Borrower to the Administrative Agent in
connection with the negotiation of this Agreement and the other Loan Documents
(excluding the financial reports covered by the representation and warranty in
Section 6.5 hereof and the written information covered by the representation
and warranty in the next succeeding sentence) does not contain, as of the Closing
Date, any materially untrue statements of a material fact or, as of the Closing
Date, omit a material fact necessary to make the material statements contained
herein or therein not materially misleading. 
The projections, estimates, forecasts, budgets, statements of opinion or
intent and discussions of strategy contained in such written information have
been prepared in good faith based upon reasonable assumptions (it being
understood that such projections, estimates, forecasts, budgets, statements of
opinion or intent and discussions of strategy are subject to significant
uncertainties and contingencies, and that no assurance can be given that any
particular projections, estimates, forecasts or budgets will be realized).

 

Section 6.8.                                Trademarks, Franchises, and
Licenses.  The Borrower and the Subsidiaries own,
possess, or have the right to use all necessary patents, licenses, franchises,
trademarks, trade names, trade styles, copyrights, trade secrets, know how, and
confidential commercial and proprietary information to conduct their businesses
as now conducted, without known conflict with any patent, license, franchise,
trademark, trade name, trade style, copyright or other proprietary right of any
other Person.

 

Section 6.9.                                Governmental Authority and Licensing.  The
Borrower and the Subsidiaries have received all licenses, permits, and
approvals of all federal, state, and local governmental authorities, including
without limitation the DOE and all state education departments, necessary to
conduct their businesses, in each case where the failure to obtain or maintain
the same could reasonably be expected to have a Material Adverse Effect.  Without limiting the foregoing, the Borrower
and the Subsidiaries have qualified under all necessary laws and regulations to
participate in Title IV Programs.  No
investigation or proceeding which, if adversely determined, could reasonably be
expected to result in revocation or denial of any material license, permit or
approval is pending or, to the knowledge of the Borrower, threatened.  The educational programs of the Borrower and
the Subsidiaries have been accredited by Accrediting Commission for Career
Schools and Colleges of Technology, and no such accreditation has been denied,
suspended or revoked, except for any such denial, suspension or revocation
which could not reasonably be expected to have a Material Adverse Effect.

 

Section 6.10.                         Good Title.  The
Borrower and the Subsidiaries have good title to (or valid leasehold interests
in) their assets as reflected on the most recent consolidated balance
sheet  of the Borrower and the
Subsidiaries furnished to the Administrative Agent and the Lenders (except for
sales or other dispositions of assets since the date of such consolidated
balance sheet which

 

39

 

are permitted hereunder), subject to no Liens other than such thereof
as are permitted by Section 8.8 hereof.

 

Section 6.11.                         Litigation and Other Controversies.  There
is no litigation or governmental proceeding or labor controversy pending, nor
to the knowledge of the Borrower threatened, against the Borrower or any
Subsidiary which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

Section 6.12.                         Taxes.  All
tax returns required to be filed by the Borrower or any Subsidiary in any
jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and
other governmental charges upon the Borrower or any Subsidiary or upon any of
its Property, income or franchises, which are shown to be due and payable in
such returns, have been paid, except such taxes, assessments, fees and
governmental charges, if any, as are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under contest
and as to which adequate reserves established in accordance with GAAP have been
provided.  The Borrower does not know of
any proposed additional tax assessment against it or the Subsidiaries for which
adequate provisions in accordance with GAAP have not been made on their
accounts.  Adequate provisions in
accordance with GAAP for taxes on the books of the Borrower and each Subsidiary
have been made for all open years, and for its current fiscal period.

 

Section 6.13.                         Approvals.  No
authorization, consent, license or exemption from, or filing or registration
with, any court or governmental department, agency or instrumentality, nor any
approval or consent of any other Person, is or will be necessary to the valid
execution, delivery or performance by the Borrower or any Subsidiary of any
Loan Document to which it is a party, except for such approvals which have been
obtained prior to the date of this Agreement and remain in full force and
effect.

 

Section 6.14.                         Affiliate Transactions. 
Neither the Borrower nor any Subsidiary is a party to any contracts or
agreements with any of its Affiliates (other than with Wholly-owned
Subsidiaries) on terms and conditions which are less favorable to the Borrower
or such Subsidiary than would be usual and customary in similar contracts or
agreements between Persons not affiliated with each other, except for any
management, consulting or similar agreements resulting in the payment of
Permitted Management Fees.

 

Section 6.15.                         Investment Company; Public
Utility Holding Company.  Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940, as amended, or a
“holding company” within the meaning of the Public Utility Holding Company Act
of 1935, as amended.

 

Section 6.16.                         ERISA. 
Except to the extent not reasonably expected to result in a liability of
the Borrower or any Subsidiary in an amount in excess of $1,000,000
collectively for all such Persons, the Borrower and each other member of its
Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with ERISA and the
Code to the extent applicable to it and has not incurred any material liability
which has not been satisfied to the PBGC or a Plan or a Multiemployer Plan
under Title IV of

 

40

 

ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.  Neither the
Borrower nor any Subsidiary has any contingent liabilities with respect to any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Article 6 of Title I of ERISA.

 

Section 6.17.                         Compliance with Laws. The Borrower and the Subsidiaries are in
compliance with the requirements of all federal, state and local laws, rules
and regulations applicable to or pertaining to their Property or business
operations (including, without limitation, Title IV, the Occupational Safety
and Health Act of 1970, the Americans with Disabilities Act of 1990, and
Environmental Laws), where any such non-compliance, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect.  Without limiting generality of
the foregoing and notwithstanding any limitations contained therein, all of the
Borrower’s and each Subsidiary’s operations are in compliance with (i) all
laws, regulations and standards, the violation of which would terminate or
materially impair the Borrower’s, any Subsidiary’s or any School’s eligibility
for participation in student financial assistance programs under Title IV,
(ii) the federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., and all other consumer credit
laws applicable to the Borrower, any Subsidiary or any School in connection
with the advancing of student loans, except for such laws and regulations the
violation of which, in the aggregate, will not result in the assessment of
penalties and damages claims against the Borrower or any Subsidiary which are
in excess of 5% of Borrower’s Consolidated Total Assets or which (even if in a
lesser amount) could reasonably be expected to have a Material Adverse Effect,
(iii) all statutory and regulatory requirements for authorization to provide
post-secondary education in the jurisdictions in which its educational
facilities are located except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect and (iv) all
requirements to continuing its Accreditations, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary has
received any written Environmental Claim, where any non-compliance or
remedial action relating to the subject matter of such Environmental Claim,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

Section 6.18.                         Other Agreements. 
Neither the Borrower
nor any Subsidiary is in default under the terms of any covenant, indenture or
agreement of or affecting such Person or any of its Property, which default
could reasonably be expected to have a Material Adverse Effect.

 

Section 6.19.                         Solvency.  The Borrower and the Subsidiaries are solvent, able to pay their debts
as they become due, and have sufficient capital to carry on their business and
all businesses in which they are about to engage.

 

Section 6.20.                         No Default.  No Default or Event of Default has occurred and is continuing.

 

Section 6.21                            Anti-Terrorism Law.  (a) Neither the Borrower nor any of its Subsidiaries, nor to the
knowledge of the Borrower, any of their respective Affiliates, is in violation
of any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”), including
Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001 (the “Executive
Order”), and the Uniting and Strengthening America by Providing
Appropriate Tools Required to

 

41

 

Intercept and Obstruct
Terrorism Act of 2001, Public Law 107-56, signed into law October 26,
2001 (the “USA Patriot Act”).

 

(b)                                 Neither
the Borrower nor any of its Subsidiaries, nor to the knowledge of the Borrower,
any of their respective Affiliates, or brokers or other agents of such Person acting
or benefiting in any capacity in connection with the Loans hereunder, is any of
the following:

(i)                                     a
Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order;

 

(ii)                                  a
Person owned or controlled by, or acting for or on behalf of, any Person that
is listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order;

 

(iii)                               a
Person with which any Lender is prohibited from dealing or otherwise engaging
in any transaction by any Anti-Terrorism Law;

 

(iv)                              a
Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

 

(v)                                 a
Person that is named as a “specially designed
national and blocked person” on the most current list published by
the USA Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website
or other replacement official publication of such list.

 

(c)                                  Neither
the Borrower nor any of its Subsidiaries, nor to the knowledge of the Borrower,
any of their respective Affiliates, or brokers or other agents of such Person
acting or benefiting in any capacity in connection with the Loans hereunder
(i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Person
described in clause (b) above, (ii) deals in, or otherwise engages in
any transaction relating to, any property or interests in property blocked
pursuant to the Executive Order, or (iii) engages in or conspires to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

 

SECTION 7.                                CONDITIONS PRECEDENT.

 

The obligation of each Lender to advance any Loan or
of the L/C Issuer to issue, extend the expiration date (including by not giving
notice of non-renewal) of or increase the amount of any Letter of Credit under
this Agreement, shall be subject to the following conditions precedent:

 

Section 7.1.                                All
Credit Events.  At the time of each
Credit Event hereunder:

 

(a)                                  each
of the representations and warranties set forth herein and in the other Loan
Documents shall be and remain true and correct in all material respects as of
said time, except to the extent the same expressly relate to an earlier date;

 

42

 

(b)                                 no
Default or Event of Default shall have occurred and be continuing or would
occur as a result of such Credit Event;

 

(c)                                  in
the case of a Borrowing, the Administrative Agent shall have received the
notice required by Section 1.5 hereof, in the case of the issuance of any
Letter of Credit, the L/C Issuer shall have received a duly completed
Application for such Letter of Credit together with any fees called for by
Section 2.1 hereof, and, in the case of an extension (other than an
automatic extension) or increase in the amount of a Letter of Credit, a written
request therefor in a form acceptable to the L/C Issuer together with fees
called for by Section 2.1 hereof; and

 

(d)                                 such
Credit Event shall not violate any order, judgment or decree of any court or
other authority or any provision of law or regulation applicable to the
Administrative Agent or any Lender (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System) as
then in effect.

 

Each request for a Borrowing hereunder and each
request for the issuance of, increase in the amount of, or extension of the
expiration date of, a Letter of Credit shall be deemed to be a representation
and warranty by the Borrower on the date on such Credit Event as to the facts
specified in subsections (a) through (c), both inclusive, of this Section.

 

Section 7.2.                                Initial
Credit Event.  Before or concurrently
with the initial Credit Event:

 

(a)                                  the
Administrative Agent shall have received for each Lender this Agreement duly
executed by the Borrower, any Guarantors and the Lenders;

 

(b)                                 the
Administrative Agent shall have received for each Lender such Lender’s duly
executed Notes of the Borrower dated the date hereof and otherwise in
compliance with the provisions of Section 1.10 hereof;

 

(c)                                  the
Administrative Agent shall have received the Mortgages, Security Agreement and
Pledge Agreement duly executed, as appropriate, by the Borrower and each
Subsidiary, together with (i) original stock certificates or other similar
instruments or securities representing all of the issued and outstanding shares
of capital stock or other equity interests in each Subsidiary (66% of such
capital stock in the case of any Foreign Subsidiary as provided in
Section 4.1 hereof) as of the Closing Date, (ii) stock powers for the
Collateral consisting of the stock or other equity interest in each Subsidiary
executed in blank and undated, (iii) UCC financing statements to be
filed against the Borrower and each Subsidiary, as debtor, in favor of the
Administrative Agent, as secured party, (iv) patent, trademark, and
copyright collateral assignments to the extent reasonably requested by the Administrative
Agent, and (v) deposit account and securities account control agreements
to the extent reasonably requested by the Administrative Agent;

 

(d)                                 the
Administrative Agent shall have received evidence of insurance required to be
maintained under the Loan Documents, naming the Administrative Agent as
mortgagee and loss payee;

 

43

 

(e)                                  the
Administrative Agent shall have received for each Lender copies of the
Borrower’s and each Subsidiary’s articles of incorporation and bylaws (or
comparable organizational documents) and any amendments thereto, certified in
each instance by its Secretary or Assistant Secretary;

 

(f)                                    the
Administrative Agent shall have received for each Lender copies of resolutions
of the Borrower’s and each Subsidiary’s Board of Directors (or similar
governing body) authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, together with
specimen signatures of the persons authorized to execute such documents on the
Borrower’s or such Subsidiary’s behalf, all certified in each instance by its
Secretary or Assistant Secretary;

 

(g)                                 the
Administrative Agent shall have received for each Lender copies of the
certificates of good standing for the Borrower and each Subsidiary (dated no
earlier than 30 days prior to the date hereof) from the office of the secretary
of the state of its incorporation or organization and of each state in which it
is qualified to do business as a foreign corporation or organization, provided
that, to the extent that (i) the Borrower has not delivered a Colorado
good standing certificate for Lincoln Technical Institute, Inc. prior to the
initial Credit Event or (ii) any other good standing certificates
delivered are dated more than 30 days prior to the Closing Date, the Borrower
undertakes and agrees to deliver to the Administrative Agent within 15 days of
the Closing Date the applicable good standing certificates dated no earlier
than February 1, 2005 with respect to each of such Persons;

 

(h)                                 the
Administrative Agent shall have received for each Lender a list of the
Borrower’s Authorized Representatives;

 

(i)                                     the
Administrative Agent shall have received for itself and for the Lenders the
fees called for by Section 2.1 hereof which are to be paid on or prior to the
Closing Date;

 

(j)                                     the
Administrative Agent shall have received a mortgagee’s title insurance policy
(or a prepaid binding commitment therefor) in form and substance reasonably
acceptable to the Administrative Agent from a title insurance company
reasonably acceptable to the Administrative Agent in the aggregate amount of
$32,698,000 insuring the Lien of the Mortgage on the Borrower’s real property
located in Cincinnati, Ohio, Indianapolis, Indiana and Nashville, Tennessee to
be a valid first priority Lien subject to no defects or objections which are
unacceptable to the Administrative Agent, together with such endorsements as the
Administrative Agent may reasonably require;

 

(k)                                  the
Administrative Agent shall have been provided (x) copies of all
environmental assessments (other than those delivered to the Administrative
Agent in connection with the Existing Credit Agreement) that are in the
possession of the Borrower or any of its Subsidiaries relating to the parcels
of real property subject to the Lien of the Mortgages and (y) a
Phase I environmental assessment reasonably satisfactory

 

44

 

in form and substance to
the Administrative Agent of the real property located in Cincinnati, Ohio
subject to the Lien of the Mortgages;

 

(l)                                     the
Administrative Agent shall have received surveys in form and substance
reasonably acceptable to the Administrative Agent prepared by licensed
surveyors on each parcel of real property located in Nashville, Tennessee and
Cincinnati, Ohio subject to the Liens of the Mortgages, which surveys shall
also state whether or not any portion of the real property is in a federally
designated flood hazard area;

 

(m)                               each
Lender shall have received such evaluations and certifications as it may
reasonably require (including a compliance certificate in the form attached
hereto as Exhibit E containing compliance calculations of the financial
covenants as of September 30, 2004, and satisfactory results of regulatory
and collateral audits) in order to satisfy itself as to the financial condition
of the Borrower and the Subsidiaries, and the lack of material contingent liabilities
of the Borrower and the Subsidiaries;

 

(n)                                 the
Administrative Agent shall have received financing statement, tax, and judgment
lien search results against the Borrower and each Subsidiary evidencing the
absence of Liens on its Property except as permitted by Section 8.8
hereof;

 

(o)                                 the
Administrative Agent shall have received pay-off and lien release letters from
secured creditors of the Borrower and each Subsidiary setting forth, among
other things, the total amount of indebtedness outstanding and owing to them
(or outstanding letters of credit issued for the account of the Borrower or any
Subsidiary) and containing an authorization for the Administrative Agent to
file UCC termination statements and an undertaking to cause to be delivered to
the Administrative Agent any other lien release instruments necessary to
release their Liens on the assets of the Borrower and each Subsidiary, which
pay-off and lien release letters shall be in form and substance reasonably
acceptable to the Administrative Agent;

 

(p)                                 the
Administrative Agent shall have received for each Lender the favorable written
opinion of counsel to the Borrower and the Subsidiaries, in form and substance
reasonably satisfactory to the Administrative Agent;

 

(q)                                 the
Administrative Agent shall have received evidence satisfactory to it that the
Adjusted EBITDA of the Borrower, with any adjustments thereto being acceptable
to the Administrative Agent, for the twelve months ending on
September 30, 2004 was not less than $35,000,000;

 

(r)                                    the
Lenders shall be satisfied with the Borrower’s capital structure and with the
terms and conditions of any agreements relating thereto;

 

(s)                                  the
Borrower shall have opened one or more operating accounts at Harris Trust and
Savings Bank;

 

45

 

(t)                                    each
Lender shall have received all documentation and other information reasonably
requested by it and required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and
regulations, including without limitation the USA Patriot Act; and

 

(u)                                 the
Administrative Agent shall have received for the account of the Lenders such
other agreements, instruments, documents, certificates, and opinions as the
Administrative Agent or any Lender may reasonably request.

 

SECTION 8.                                COVENANTS.

 

The Borrower agrees that, so long as any credit is
available to or in use by the Borrower hereunder, except to the extent
compliance in any case or cases is waived in writing pursuant to the terms of
Section 13.13 hereof:

 

Section 8.1.                                Maintenance
of Business.  The Borrower shall, and
shall cause each Subsidiary to, preserve and maintain its existence, except as
otherwise provided in Section 8.10(c) hereof.  The Borrower shall, and shall cause each
Subsidiary to, preserve and keep in force and effect all licenses, permits,
franchises, approvals, patents, trademarks, trade names, trade styles,
copyrights, and other proprietary rights necessary to the proper conduct of its
business where the failure to do so could reasonably be expected to have a
Material Adverse Effect.  Without
limiting the generality of the foregoing and notwithstanding any limitation
contained therein, the Borrower will, and will cause each School to, maintain
in full force and effect, except to the extent that the failure to do so would
not constitute a Significant Regulatory Event, 
(i) its status as an “eligible institution,” as defined in 34
C.F.R. Sections 600.2 and 600.5, (ii) its eligibility to participate in all
Title IV Programs in which and to the extent that it currently
participates, (iii) its Accreditations, and (iv) its licenses to provide
postsecondary education in all jurisdictions where it is so licensed.  Without limiting the generality of the
foregoing and notwithstanding any limitations contained therein, the Borrower
will, and will cause each School to, comply with all of the factors of
financial responsibility set forth in 34 C.F.R. Section 668, 171-175, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.  Neither the
Borrower nor any Subsidiary shall conduct any business other than an Eligible
Line of Business.

 

Section 8.2.                                Maintenance
of Properties.  The Borrower shall,
and shall cause each Subsidiary to, maintain, preserve, and keep its property,
plant, and equipment in good repair, working order and condition (ordinary wear
and tear excepted), except to the extent that, in the reasonable business
judgment of such Person, any such Property is no longer necessary for the proper
conduct of the business of such Person.

 

Section 8.3.                                Taxes
and Assessments.  The Borrower shall
duly pay and discharge, and shall cause each Subsidiary to duly pay and
discharge, all taxes, governmental assessments, and other governmental charges
upon or against it or its Property, in each case before the same become
delinquent and before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith and by appropriate proceedings which
prevent enforcement of the matter under contest and adequate reserves are
provided therefor.

 

46

 

Section 8.4.                                Insurance.  The Borrower shall insure and keep insured,
and shall cause each Subsidiary to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Borrower shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including, without limitation, employers’
and public liability risks) with good and responsible insurance companies, as
and to the extent usually insured by Persons similarly situated and conducting
similar businesses.  The Borrower shall
in any event maintain, and cause each Subsidiary to maintain, insurance on the
Collateral to the extent required by the Collateral Documents.  The Borrower shall, upon the request of the
Administrative Agent, furnish to the Administrative Agent and the Lenders a
certificate setting forth in summary form the nature and extent of the
insurance maintained pursuant to this Section.

 

Section 8.5.                                Financial
Reports. The Borrower shall, and shall cause each Subsidiary to, maintain a
standard system of accounting in accordance with GAAP and shall furnish to the
Administrative Agent (for distribution to the Lenders) such information
respecting the business and financial condition of the Borrower and each
Subsidiary as the Administrative Agent or any Lender may reasonably request;
and without any request, shall furnish to the Administrative Agent for
distribution by the Administrative Agent to the Lenders:

 

(a)                                  as
soon as available, and in any event within 45 days after the close of each
fiscal quarter of each fiscal year of the Borrower, a copy of the consolidated
and consolidating balance sheet of the Borrower and the Subsidiaries as of the
last day of such fiscal quarter and the consolidated and consolidating
statements of income, retained earnings, and cash flows of the Borrower and the
Subsidiaries for the fiscal quarter and for the fiscal year-to-date period then
ended, each in reasonable detail showing in comparative form the figures for
the corresponding date and period in the previous fiscal year, prepared by the
Borrower in accordance with GAAP (subject to (i) the absence of footnote
disclosures and (ii) year-end audit adjustments) and certified to by its
chief financial officer or another officer of the Borrower acceptable to the
Administrative Agent;

 

(b)                                 as
soon as available, and in any event within 90 days after the close of each
fiscal year of the Borrower, a copy of the consolidated and consolidating
balance sheet of the Borrower and the Subsidiaries as of the last day of the
fiscal year then ended and the consolidated and consolidating statements of
income, retained earnings, and cash flows of the Borrower and the Subsidiaries
for the fiscal year then ended, and accompanying notes thereto, each in
reasonable detail showing in comparative form the figures for the previous
fiscal year, accompanied in the case of the consolidated financial statements
by an unqualified opinion of Deloitte & Touche LLP or another firm of
independent public accountants of recognized standing, selected by the Borrower
and reasonably satisfactory to the Administrative Agent and the Required
Lenders, to the effect that the consolidated financial statements have been
prepared in accordance with GAAP and present fairly in accordance with GAAP the
consolidated financial condition of the Borrower and the Subsidiaries as of the
close of such fiscal year and the results of

 

47

 

their operations and cash
flows for the fiscal year then ended and that an examination of such accounts
in connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, such examination
included such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances;

 

(c)                                  within
the period provided in subsection (b) above, the written statement of the
accountants who certified the audit report thereby required that in the course
of their audit they have obtained no knowledge of any Default or Event of
Default, or, if such accountants have obtained knowledge of any such Default or
Event of Default, they shall disclose in such statement the nature and period
of the existence thereof;

 

(d)                                 promptly
after receipt thereof, any additional written reports, management letters or
other detailed information contained in writing concerning significant aspects
of the Borrower’s or any Subsidiary’s operations and financial affairs given to
it by its independent public accountants;

 

(e)                                  promptly
after the sending or filing thereof, copies of each financial statement,
report, notice or proxy statement sent by the Borrower or any Subsidiary to its
stockholders or other equity holders, and copies of each regular, periodic or
special report, registration statement or prospectus (including all Form 10-K,
Form 10-Q and Form 8-K reports) filed by the Borrower or any Subsidiary with
any securities exchange or the Securities and Exchange Commission or any
successor agency;

 

(f)                                    within
five (5) Business Days of submission to the DOE, a copy of all compliance
audits and audited financial statements submitted to the DOE pursuant to 34 C.F.R.
Section 668.23;

 

(g)                                 within
five (5) Business Days of submission to any Accrediting Body, a copy of each
annual report submitted to such Accrediting Body;

 

(h)                                 promptly
after receipt thereof, a copy of each audit made by any regulatory agency of
the books and records of the Borrower or any Subsidiary or of notice of any
material noncompliance with any applicable law, regulation or guideline
relating to the Borrower or any Subsidiary, or its business;

 

(i)                                     as
soon as available, and in any event within 30 days after the end of each
fiscal year of the Borrower, a copy of the Borrower’s consolidated and
consolidating business plan for the following fiscal year, such business plan
to show the Borrower’s projected consolidated and consolidating revenues, expenses
and balance sheet on a month-by-month basis, such business plan to be in
reasonable detail prepared by the Borrower and in form satisfactory to the
Administrative Agent (which shall include a summary of all assumptions made in
preparing such business plan);

 

(j)                                     promptly,
but in any event within 5 Business Days of the occurrence thereof, notice
of any Change in Control;

 

48

 

(k)                                  promptly,
but in any event within 5 Business Days after knowledge thereof shall have
come to the attention of the Chief Executive Officer, President, Chief
Financial Officer, Corporate Counsel or Vice President of Compliance and Review
of the Borrower or any Subsidiary, written notice of (i) any threatened or
pending litigation, governmental proceeding, inquiry or investigation or labor
controversy against the Borrower or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect, (ii) the occurrence of any
Default or Event of Default hereunder, (iii) any pending or threatened
loss of any Accreditation or state license other than those which could not
reasonably be expected to have a Material Adverse Effect, (iv) any change
in any of the information provided in the eligibility application, to the extent
required under 34 C.F.R. Section 600.30, of the Borrower or any Subsidiary
or any School, (v) any change to occur in state or federal laws, rules or
governmental regulations or budgetary allocations or educational loan policies
which could reasonably be expected to have a Material Adverse Effect,
(vi) any pending or threatened investigation, inquiry or proceeding
against any School by the DOE, any state governmental agency or Accrediting
Body which is reasonably likely to have a Material Adverse Effect, or (vii) the
imposition by the DOE of a requirement that the Borrower, any Subsidiary or any
School post or procure or obtain the issuance of a Title IV Letter of
Credit in order to establish the continued eligibility of the Borrower, any
Subsidiary or any School to participate in Title IV Programs; and

 

(l)                                     with
each of the financial statements furnished to the Lenders pursuant to
subsections (a) and (b) above, a written compliance certificate in the
form attached hereto as Exhibit E signed by the Chief Financial Officer of
the Borrower or another officer of the Borrower acceptable to the
Administrative Agent to the effect that to the best of such officer’s knowledge
and belief no Default or Event of Default has occurred during the period
covered by such statements or, if any such Default or Event of Default has
occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by the Borrower or
any Subsidiary to remedy the same.  Each
compliance certificate furnished pursuant to subsections (a) and (b) above
shall also set forth the calculations supporting such statements in respect of
Section 8.22 hereof and (but only at such intervals as such information is
required to be furnished to the DOE) those financial ratios required by the DOE
with respect to the Borrower and its Subsidiaries on a consolidated basis (or
on any other basis then required to be reported to the DOE), including primary
reserve, equity, net income and, with respect to each School, 90/10 ratios.

 

Section 8.6.                                Inspection.  Subject to the terms of Section 13.23
hereof, the Borrower shall, and shall cause each Subsidiary to, permit the
Administrative Agent, each Lender, and each of their duly authorized
representatives and agents to visit and inspect any of its Property, corporate
books, and financial records, to examine and make copies of its books of
accounts and other financial records, and to discuss its affairs, finances, and
accounts with, and to be advised as to the same by, its officers, employees and
independent public accountants (and by this provision the Borrower hereby
authorizes such accountants to discuss with the Administrative Agent and such
Lenders the finances and affairs of the Borrower and the Subsidiaries) at such
reasonable times and intervals as the Administrative Agent or any such Lender
may designate

 

49

 

and, so long as no
Default or Event of Default exists, with reasonable prior notice to the
Borrower.

 

Section 8.7.                                Borrowings
and Guaranties.  The Borrower
shall not, nor shall it permit any Subsidiary to, issue, incur, assume, create
or have outstanding any Indebtedness for Borrowed Money, or be or become liable
as endorser, guarantor, surety or otherwise for any Indebtedness for Borrowed
Money or any performance undertaking of any other Person (other than the
Borrower or any Subsidiary or any School), or otherwise agree to provide funds
for payment of the Indebtedness for Borrowed Money of any other Person, or otherwise
assure a creditor of any other Person (other than the Borrower or any
Subsidiary or any School) against loss; provided, however,
that the foregoing shall not restrict nor operate to prevent:

 

(a)                                  the
Obligations, Hedging Liability and Funds Transfer and Deposit Account Liability
of the Borrower and the Subsidiaries owing to the Administrative Agent and the
Lenders (and their Affiliates), and obligations of the type included within the
definition of “Funds Transfer and Deposit Account Liability” owed to other
Persons;

 

(b)                                 Purchase
Money Indebtedness and Capitalized Lease Obligations of the Borrower and the
Subsidiaries in an amount not to exceed $10,000,000 in the aggregate at any one
time outstanding;

 

(c)                                  obligations
of the Borrower arising out of interest rate and foreign currency hedging
agreements entered into with financial institutions in the ordinary course of
business;

 

(d)                                 endorsement
of items for deposit or collection received in the ordinary course of business;

 

(e)                                  indebtedness
from time to time owing by the Borrower to any Subsidiary or by any Subsidiary
to the Borrower or by any Subsidiary to any other Subsidiary;

 

(f)                                    liabilities
not to exceed $10,000,000 relating to the Financing Obligation;

 

(g)                                 indebtedness
in a principal amount not to exceed $815,000, as reduced by payments of
principal thereon, owing to Bank Midwest, NA, as assignee of Lyons Savings and
Loan Association, and secured by a Lien on the property in Nashville, Tennessee
subject to the Mortgage; and

 

(h)                                 unsecured
indebtedness of the Borrower and the Subsidiaries not otherwise permitted by
this Section in an amount not to exceed $5,000,000 in the aggregate at any one
time outstanding.

 

50

 

Section 8.8.                                Liens.  The Borrower shall not, nor shall it permit
any Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by any such Person; provided, however,
that the foregoing shall not apply to nor operate to prevent:

 

(a)                                  Liens
arising by statute in connection with worker’s compensation, unemployment
insurance, old age benefits, social security obligations, taxes, assessments,
statutory obligations or other similar charges (other than Liens arising under
ERISA), deposits in connection with tenders, contracts or leases to which the
Borrower or any Subsidiary is a party or other deposits required to be made in
the ordinary course of business, provided in each case that the obligation is
not Indebtedness for Borrowed Money and that the obligation secured is not
overdue for a period of more than 30 days or, if overdue for a period of
more than 30 days, is being contested in good faith by appropriate
proceedings which prevent enforcement of such Lien and adequate reserves have
been established therefor;

 

(b)                                 mechanics’,
workmen’s, materialmen’s, landlords’, carriers’ or other similar Liens arising
in the ordinary course of business with respect to obligations which are not
overdue for a period of more than 30 days or which are being contested in good
faith by appropriate proceedings which prevent enforcement of such Lien;

 

(c)                                  judgment
liens and judicial attachment liens not constituting an Event of Default under
Section 9.1(g) hereof and the pledge of assets for the purpose of securing
an appeal, stay or discharge in the course of any legal proceeding, provided
that the aggregate amount of such judgment liens and attachments and
liabilities of the Borrower and the Subsidiaries secured by a pledge of assets
permitted under this subsection, including interest and penalties thereon, if
any, shall not be in excess of $1,000,000 at any one time outstanding;

 

(d)                                 Liens
on property of the Borrower or any Subsidiary created solely for the purpose of
securing Purchase Money Indebtedness permitted by Section 8.7(b) hereof,
provided that no such Lien shall extend to or cover other Property of the
Borrower or such Subsidiary other than the respective Property so acquired,
constructed or improved, and the principal amount of indebtedness secured by
any such Lien shall at no time exceed the purchase price or the cost of such
construction or improvement, as the case may be, of such Property, as reduced
by repayments of principal thereon;

 

(e)                                  Liens
on Property of the Borrower or any Subsidiary arising in connection with Capital
Leases permitted under Section 8.7(b);

 

(f)                                    any
interest or title of a lessor under any operating lease;

 

(g)                                 easements,
rights-of-way, restrictions, and other similar encumbrances against real
property of the Borrower and the Subsidiaries incurred in the ordinary course
of business which do not materially detract from the value of the Property
subject thereto or materially interfere with the ordinary conduct of the
business of the Borrower or any Subsidiary;

 

51

 

(h)                                 the
Liens granted in favor of the Administrative Agent pursuant to the Collateral
Documents; and

 

(i)                                     Liens
existing on the Closing Date and listed on Schedule 8.8 hereto.

 

Section 8.9.                                Investments,
Acquisitions, Loans and Advances. 
The Borrower shall not, nor shall it permit any Subsidiary to, directly
or indirectly, make, retain or have outstanding any investments (whether
through purchase of stock or obligations or otherwise) in, or loans or advances
to, any other Person (other than accounts receivable owed from students or
former students of the Schools for tuition or fee payments), or acquire all or
any substantial part of the assets or business of any other Person or division
thereof; provided, however, that the foregoing
shall not apply to nor operate to prevent:

 

(a)                                  investments
in direct obligations of the United States of America or of any agency or
instrumentality thereof or obligations unconditionally guaranteed by the United
States of America or any agency or instrumentality thereof which, in each case,
constitute full faith and credit obligations of the United States of America,
provided that any such obligations shall mature within one year of the date of
issuance thereof;

 

(b)                                 investments
in commercial paper rated at least P-1 (or the then-equivalent grade) by
Moody’s and at least A-1 (or the then-equivalent grade) by S&P maturing
within one year of the date of issuance thereof;

 

(c)                                  investments
in certificates of deposit issued by any Lender or by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia having capital and surplus of not less than
$100,000,000 which have a maturity of one year or less;

 

(d)                                 investments
in repurchase obligations with a term of not more than 7 days for
underlying securities of the types described in subsection (a) above
entered into with any bank meeting the qualifications specified in
subsection (c) above, provided all such agreements require physical
delivery of the securities securing such repurchase agreement, except those
delivered through the Federal Reserve Book Entry System;

 

(e)                                  investments
in money market funds that invest solely, and which are restricted by their
respective charters to invest solely, in investments of the type described in
the immediately preceding subsections (a), (b), (c), and (d) above;

 

(f)                                    the
Borrower’s investments from time to time in the Subsidiaries, and investments
made from time to time by a Subsidiary in one or more of the Subsidiaries or in
the Borrower; provided that any subsequent
investment by the Borrower or any Subsidiary in a Person which was the Acquired
Business in a Permitted Acquisition in which the Borrower and the Subsidiaries
collectively owned less than 100% of the Voting Stock of such Acquired Business
after giving effect to such Permitted Acquisition and which investment results
in the Borrower or such Subsidiary increasing its ownership percentage of the
Voting Stock of such entity shall be deemed to use a part of the

 

52

 

permitted Total
Consideration for all Permitted Acquisitions as set forth in clause (e) of
the definition of “Permitted Acquisition”;

 

(g)                                 intercompany
advances made from time to time between the Borrower or any Subsidiary and any
one or more Subsidiaries in the ordinary course of business to finance working
capital needs;

 

(h)                                 Permitted
Acquisitions;

 

(i)                                     short-term
loans and advances to employees for travel and other purposes in the ordinary
course of business in an aggregate amount not to exceed $50,000 at any one time
outstanding; and

 

(j)                                     other
investments, loans, and advances in addition to those otherwise permitted by
this Section in an amount not to exceed $1,500,000 in the aggregate at any one
time outstanding.

 

In determining the amount of investments,
acquisitions, loans, and advances permitted under this Section, investments and
acquisitions (other than loans and advances) shall always be taken at the
original cost thereof (regardless of any subsequent appreciation or
depreciation therein), and loans and advances shall be taken at the principal
amount thereof then remaining unpaid.

 

Section 8.10.                         Mergers,
Consolidations and Sales.  The
Borrower shall not, nor shall it permit any Subsidiary to, be a party to any
merger or consolidation, or sell, transfer, lease or otherwise dispose of all
or any part of its Property, including any disposition of Property as part of a
sale and leaseback transaction, or in any event sell or discount (with or
without recourse) any of its notes or accounts receivable; provided,
however, that this Section shall not apply to nor operate to
prevent:

 

(a)                                  the
sale or lease of inventory in the ordinary course of business;

 

(b)                                 the
sale, transfer, lease or other disposition of Property of the Borrower and the
Subsidiaries to one another; provided that
no sale, lease or other disposition of property to ComTech Services Group, Inc.
shall be permitted hereunder;

 

(c)                                  the
merger of any Subsidiary with and into the Borrower or any other Subsidiary, or
the consolidation of any Subsidiary with any other Subsidiary, or any merger or
consolidation pursuant to or as part of a Permitted Acquisition provided that,
in the case of any merger involving the Borrower, the Borrower is the
corporation surviving the merger, and in the case of any merger or
consolidation involving both a Wholly-owned Subsidiary and a Subsidiary other
than a Wholly-owned Subsidiary, the surviving entity is a Wholly-owned
Subsidiary;

 

(d)                                 so
long as no Default or Event of Default has occurred and is continuing or would
arise as a result thereof, the sale of delinquent notes or accounts receivable
in the

 

53

 

ordinary course of
business for purposes of collection only (and not for the purpose of any bulk
sale or securitization transaction);

 

(e)                                  so
long as no Default or Event of Default has occurred and is continuing or would
arise as a result thereof, the sale, transfer or other disposition of any
tangible personal property that, in the reasonable business judgment of the
Borrower or the relevant Subsidiary, has become obsolete or worn out, and which
is disposed of in the ordinary course of business;

 

(f)                                    so
long as no Default or Event of Default has occurred and is continuing or would
arise as a result thereof, the sale to a third party unaffiliated with the
Borrower and its Subsidiaries of any or all Property comprising the
Indianapolis campus; and

 

(g)                                 so
long as no Default or Event of Default has occurred and is continuing or would arise
as a result thereof, the sale, transfer, lease or other disposition of Property
of the Borrower or any Subsidiary (including any disposition of Property as
part of a sale and leaseback transaction) aggregating Net Cash Proceeds for the
Borrower and its Subsidiaries not more than $1,500,000 during any fiscal year
of the Borrower.

 

Upon the written request
of the Borrower, the Administrative Agent shall release its Lien on any
Property sold pursuant to the foregoing provisions.

 

Section 8.11.                         Maintenance
of Subsidiaries.  The Borrower shall
not assign, sell or transfer, nor shall it permit any Subsidiary to issue,
assign, sell or transfer, any shares of capital stock or other equity interests
of a Subsidiary other than to the Borrower or a Wholly-owned Subsidiary, provided that following any such issuance, assignment, sale
or transfer, such shares of stock or other equity interests shall be or remain,
as the case may be, subject to the Lien of the Administrative Agent; provided, however, that the foregoing shall not operate to
prevent (a) Liens on the capital stock or other equity interests of the
Subsidiaries granted to the Administrative Agent pursuant to the Collateral
Documents, (b) the issuance, sale, and transfer to any person of any shares
of capital stock of a Subsidiary solely for the purpose of qualifying, and to
the extent legally necessary to qualify, such person as a director of such
Subsidiary, and (c) any transaction permitted by Section 8.10(c)
above.  The Borrower has no Subsidiaries
on the Closing Date other than those listed on Schedule 6.2 hereto.

 

Section 8.12.                         Dividends
and Certain Other Restricted Payments. 
The Borrower shall not, nor shall it permit any Subsidiary to,
(a) declare or pay any dividends on or make any other distributions in
respect of any class or series of its capital stock or other equity interests,
(b) directly or indirectly purchase, redeem, or otherwise acquire or
retire any of its capital stock or other equity interests or any warrants,
options, or similar instruments to acquire the same, or (c) directly or
indirectly pay any management, consulting or similar fees to any of its
Affiliates (all of the foregoing, collectively, the “Restricted
Payments”); provided, however,
that the foregoing shall not operate to prevent (v) the declaration,
payment or making of dividends or distributions payable solely in common stock
or other common equity interests which do not by their terms, entitle the
holder to receive guaranteed cash dividends or distributions, (w) the
payment of any management, consulting or similar fees to the Borrower or any
Wholly-owned

 

54

 

Subsidiary of the
Borrower, (x) the declaration, payment or making of dividends or
distributions by any Subsidiary of the Borrower to the Borrower or a
Wholly-owned Subsidiary of the Borrower, (y) the payment by the Borrower,
at any time when no Default or Event of Default exists or would be caused
thereby, of Permitted Management Fees, or (z) the payment by any Subsidiary
to the Borrower of dividends or distributions in an amount sufficient to enable
the Borrower to timely pay when due United States federal, state and local
income tax liabilities in respect of income earned by the Borrower and the
Subsidiaries; provided, that the proceeds of
such dividends or distributions are in fact used to pay such tax liabilities.

 

Section 8.13.                         ERISA.  The Borrower shall, and shall cause each
Subsidiary to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed could
reasonably be expected to result in the imposition of a Lien or Liens securing
liabilities in an amount in excess of $1,000,000 (in the aggregate for all such
Liens) against any of its Property, other than Liens permitted under
Section 8.8 hereof.  The Borrower
shall, and shall cause each Subsidiary to, promptly notify the Administrative
Agent of:  (a) the occurrence of any
reportable event (as defined in ERISA) with respect to a Plan, other than any
reportable event with respect to which the 30-day notice requirement has been
waived by the PBGC, (b) receipt of any notice from the PBGC of its
intention to seek termination of any Plan or appointment of a trustee therefor,
(c) its intention to terminate or withdraw from any Plan, and (d) the
occurrence of any event with respect to any Plan or Multiemployer Plan which
would result in the incurrence by the Borrower or any Subsidiary of any
material liability, fine or penalty, or any material increase in the contingent
liability of the Borrower or any Subsidiary with respect to any post-retirement
Welfare Plan benefit; provided that
the Borrower shall only be required to notify the Administrative Agent of any
of the matters described in any of the foregoing clauses to the extent that any
of such matters could reasonably be expected to result in the Borrower or any
of the Subsidiaries incurring liabilities, fines, penalties or expenses in
excess of $1,000,000 for all of such Persons collectively.

 

Section 8.14.                         Compliance
with Laws.  (a) The Borrower
shall, and shall cause each Subsidiary to, comply in all respects with the
requirements of all federal, state, and local laws, rules, regulations,
ordinances and orders applicable to its Property or business operations, where
any such non-compliance, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or result in a Lien upon any of its
Property other than a Lien permitted under Section 8.8 hereof.  Without limiting the generality of the
foregoing and notwithstanding any limitations contained therein, the Borrower
and each Subsidiary shall and shall cause each School (to the extent that it is
subject thereto) to comply with the Truth-in-Lending Act, 15 U.S.C. § 1601 et
seq., all regulations promulgated thereunder, and all other consumer credit
laws applicable to the Borrower, each Subsidiary and each School in connection
with the advancing of student loans, except for such laws and regulations the
violation of which, in the aggregate (i) could not reasonably be expected
to result in the assessment of penalties and damages and claims against the
Borrower, any Subsidiary or any School which are in excess of 5% of the
Borrower’s Consolidated Total Assets, and (ii) (even if in a lesser amount)
could not reasonably be expected to have a Material Adverse Effect.  The Borrower shall (a) ensure and cause
each Subsidiary to ensure that no Person that owns a controlling interest in or
otherwise controls the Borrower or any of its Subsidiaries is or shall be
listed in any of the listings described in Section 6.21(b), and
(b) not use or permit the use of the proceeds of the Loans to violate any
of 

 

55

 

the foreign asset control
regulations of OFAC or any enabling statute or order relating thereto or the
Executive Order.

 

(b)                                 Without
limiting the agreements set forth in Section 8.14(a) above, the Borrower
shall, and shall cause each Subsidiary to, at all times, do the following to
the extent the failure to do so, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect:  (i) comply in all material respects
with, and maintain or cause to be maintained each of the Premises in compliance
in all material respects with, all applicable Environmental Laws;
(ii) require that each tenant and subtenant, if any, of any of the
Premises or any part thereof comply in all material respects with all
Environmental Laws applicable to such Premises; (iii) obtain and maintain
in full force and effect all material governmental approvals required by any
applicable Environmental Law for operations at each of the Premises;
(iv) cure any material violation by it or at any of the Premises of
applicable Environmental Laws; (v) not allow the presence or operation at
any of the Premises of any (1) landfill or dump or (2) ”hazardous
waste management facility” or “solid waste disposal facility” as defined
pursuant to RCRA or any analogous state law; (vi) not manufacture, use,
generate, transport, treat, store, release, dispose or handle any Hazardous
Material at any of the Premises except in the ordinary course of its business
and in compliance with applicable Environmental Laws; (vii) within 15
Business Days notify the Administrative Agent in writing of and provide any
reasonably requested documents upon learning of any of the following in
connection with the Borrower or any Subsidiary or any of the Premises:  (1) that it has any material liability
for response or corrective action, natural resource damage or other harm
pursuant to CERCLA, RCRA or any analogous state law; (2) any material
Environmental Claim; (3) any material violation of an Environmental Law or
material Release or material threatened Release of a Hazardous Material; (4) any
restriction on the ownership, occupancy, use or transferability arising
pursuant to any (x) Release or material threatened Release of a Hazardous
Material or (y) Environmental Law; or (5) any environmental, natural
resource, health or safety condition, which could reasonably be expected to
have a Material Adverse Effect; (viii) conduct at its expense any
investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up
or abate any material Release or material threatened Release of a Hazardous
Material as required by any applicable Environmental Law; (ix) abide by
and observe any restrictions on the use of the Premises imposed by any
governmental authority as set forth in a deed or other instrument affecting the
Borrower’s or any Subsidiary’s interest therein; (x) promptly provide or
otherwise make available to the Administrative Agent any reasonably requested
environmental record concerning the Premises which the Borrower or any Subsidiary
possesses or can reasonably obtain; and (xi) perform, satisfy, and
implement any operation or maintenance actions required of it by any
governmental authority under any Environmental Law, or included in any no
further action letter or covenant not to sue, in each case to which the
Borrower or a Subsidiary is a party or addressee, issued by any governmental
authority under any Environmental Law.

 

Section 8.15.                         Burdensome
Contracts With Affiliates.  The
Borrower shall not, nor shall it permit any Subsidiary to, enter into any
contract, agreement or business arrangement with any of its Affiliates (other
than with Wholly-owned Subsidiaries) on terms and conditions which are less
favorable to the Borrower or such Subsidiary than would be usual and customary
in similar

 

56

 

contracts, agreements or
business arrangements with a Person not an Affiliate, except as described in
Section 6.14 hereof.

 

Section 8.16.                         No
Changes in Fiscal Year.  The fiscal
year of the Borrower and the Subsidiaries ends on December 31 of each
year; and the Borrower shall not, nor shall it permit any Subsidiary to, change
its fiscal year from its present basis.

 

Section 8.17.                         Formation
of Subsidiaries and Schools. 
Promptly upon the formation or acquisition of any Subsidiary, the
Borrower shall provide the Administrative Agent notice thereof and timely
comply with the requirements of Section 4 hereof (at which time
Schedule 6.2 shall be deemed amended to include reference to such
Subsidiary).  Promptly upon the formation
of any School, the Borrower shall supply to the Administrative Agent an updated
Schedule 6.2 including the information with respect to such School required on
such Schedule.  The Borrower shall not
permit the total assets of its direct and indirect Foreign Subsidiaries (if
any) to exceed 15% of Consolidated Total Assets at any time.

 

Section 8.18.                         Change
in the Nature of Business.  The
Borrower shall not, nor shall it permit any Subsidiary to, engage in any
business or activity if as a result the Borrower or such Subsidiary,
respectively, would not be engaged in an Eligible Line of Business.

 

Section 8.19.                         Use
of Loan Proceeds.  The Borrower
shall, and shall require the Subsidiaries to, use the credit extended under
this Agreement solely for the purposes set forth in, or otherwise permitted by,
Section 6.4 hereof.

 

Section 8.20.                         No
Restrictions.  Except as permitted or
provided herein, the Borrower shall not, nor shall it permit any Subsidiary to,
directly or indirectly create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of the Borrower or any Subsidiary to: 
(a) pay dividends or make any other distribution on the Borrower’s
or any Subsidiary’s capital stock or other equity interests owned by the
Borrower or any Subsidiary, (b) pay any indebtedness owed to the Borrower
or any Subsidiary, (c) make loans or advances to the Borrower or any
Subsidiary, (d) transfer any of its Property to the Borrower or any
Subsidiary or (e) guarantee the Obligations and/or grant Liens on its
assets to the Administrative Agent as required by the Loan Documents.

 

Section 8.21.                         [Intentionally
Omitted].

 

Section 8.22.                         Financial
Covenants.  (a)  Total Funded Debt/Adjusted
EBITDA Ratio.  As of the last
day of each fiscal quarter of the Borrower ending during the periods specified
below, the Borrower shall not permit the Total Funded Debt/Adjusted EBITDA
Ratio to be greater than:

 

	
  FROM AND 

  INCLUDING

  	
   

  	
  TO AND 

  INCLUDING

  	
   

  	
  RATIO SHALL

  NOT BE 

  GREATER THAN

  	
   

  
	
  the Closing
  Date

  	
   

  	
  December 31, 2005

  	
   

  	
  2.50 to 1.0

  	
   

  
	
  January 1,
  2006

  	
   

  	
  December 31, 2006

  	
   

  	
  2.25 to 1.0

  	
   

  
	
  January 1,
  2007

  	
   

  	
  At all times thereafter

  	
   

  	
  2.00 to 1.0

  	
   

  

 

57

 

 

(b)                                 Minimum Net Worth. 
The Borrower shall at all times maintain Net Worth in an amount not less
than the sum of $43,500,000 plus 50% of the Borrower’s Net Income (but without
deducting for losses) for each fiscal quarter commencing with the fiscal
quarter ending December 31, 2004.

 

(c)                                  Fixed Charge Coverage Ratio. 
As of the last day of each fiscal quarter of the Borrower ending during
the periods specified below, the Borrower shall maintain a ratio of
(i) Adjusted EBITDAR for the four fiscal quarters of the Borrower then
ended, less Capital Expenditures of the
Borrower and the Subsidiaries on a consolidated basis for the same four fiscal
quarters then ended (provided that,
solely for the purposes of calculating such ratio, Capital Expenditures of the
Borrower and the Subsidiaries on a consolidated basis for each of the four fiscal
quarter periods ended March 31, 2005, June 30, 2005, September 30, 2005 and
December 31, 2005 shall be deemed to be $12,000,000, notwithstanding the actual
level of such Capital Expenditures during each of such four fiscal quarter
periods), less federal, state, and local income
taxes paid or payable in cash by the Borrower and its Subsidiaries on a
consolidated basis for the same four fiscal quarters then ended to
(ii) Fixed Charges of the Borrower and the Subsidiaries for the same four
fiscal quarters then ended of not less than:

 

	
  FROM AND

  INCLUDING

  	
   

  	
  TO AND

  INCLUDING

  	
   

  	
  RATIO
  SHALL

  NOT BE LESS

  THAN

  	
   

  
	
  the Closing
  Date

  	
   

  	
  December 31, 2005

  	
   

  	
  1.20 to 1.0

  	
   

  
	
  January 1,
  2006

  	
   

  	
  June 30, 2006

  	
   

  	
  1.0 to 1.0

  	
   

  
	
  July 1,
  2006

  	
   

  	
  September 30, 2006

  	
   

  	
  1.10 to 1.0

  	
   

  
	
  October 1,
  2006

  	
   

  	
  June 30, 2007

  	
   

  	
  1.25 to 1.0

  	
   

  
	
  July 1, 2007

  	
   

  	
  September 30, 2007

  	
   

  	
  1.35 to 1.0

  	
   

  
	
  October 1,
  2007

  	
   

  	
  At all times thereafter

  	
   

  	
  1.50 to 1.0

  	
   

  

 

(d)                                 Minimum
Financial Responsibility Composite Score. 
As of the last day of each fiscal year of the Borrower, the Borrower
shall not permit the Financial Responsibility Composite Score to be less than
1.0.

 

(e)                                  Cohort
Default Rate.  The Borrower shall
not, nor shall it permit any Subsidiary or any School to, maintain or permit to
exist a Cohort Default Rate exceeding 20% at any time.

 

(f)                                    Capital
Expenditures.  The Borrower shall not
permit actual Capital Expenditures of the Borrower and its Subsidiaries on a
consolidated basis to exceed $35,000,000 for any of the four fiscal quarter
periods ending March 31, 2005, June 30, 2005, September 30, 2005 or December
31, 2005.

 

58

 

SECTION 9.                                EVENTS OF DEFAULT AND REMEDIES.

 

Section 9.1.                                Events of
Default.  Any one or more of
the following shall constitute an “Event of Default”
hereunder:

 

(a)                                  (x) default
in the payment when due of all or any part of the principal of any Note,
(y) default for a period of five Business Days or more in the payment when
due of any interest on any Note or (z) default for a period of five Business
Days or more in the payment when due of any Reimbursement Obligation or of any
fee or other Obligation payable hereunder or under any other Loan Document
(whether, in the case of any such default, such due date is the scheduled
maturity of such obligation or another time at which such obligation shall
become due pursuant to the terms of the Agreement);

 

(b)                                 default
in the observance or performance of any covenant set forth in Sections 8.1
(other than the second sentence thereof), 8.5 (a, b, c, f, g, j, k or l), 8.7,
8.8, 8.9, 8.10, 8.11, 8.12, 8.14(a), 8.16, 8.19, 8.20 or 8.22 hereof or of any
provision in any Loan Document dealing with the use, disposition or remittance
of the proceeds of Collateral or requiring the maintenance of insurance
thereon;

 

(c)                                  default
in the observance or performance of any provision hereof or of any other Loan
Document (in each case other than as set forth in clause (a) or (b), above)
which is not remedied within 30 days after the earlier of (i) the
date on which such default shall first become known to the Chief Executive
Officer, President, Chief Financial Officer, Corporate Counsel or Vice
President of Compliance and Review of the Borrower or (ii) written notice
thereof is given to the Borrower by the Administrative Agent;

 

(d)                                 any
representation or warranty made by the Borrower or any Subsidiary herein or in
any other Loan Document or in any certificate furnished to the Administrative
Agent or the Lenders pursuant hereto or thereto or in connection with any
transaction contemplated hereby or thereby proves untrue in any material
respect as of the date of the making or deemed making thereof;

 

(e)                                  any
material provision in any of the Loan Documents shall for any reason not be or
shall cease to be in full force and effect or is declared to be null and void,
or any of the Collateral Documents shall for any reason fail to create a valid
and perfected first priority Lien in favor of the Administrative Agent in any
Collateral purported to be covered thereby except as expressly permitted by the
terms thereof or hereof (including, without limitation, Section 8.8
hereof), or except to the extent any such failure is caused by an action or
omission of the Administrative Agent, a Lender, or one of their
representatives, the Borrower or any Subsidiary takes any action for the
purpose of terminating, repudiating or rescinding any Loan Document executed by
it or any of its obligations thereunder;

 

(f)                                    default
shall occur under any Indebtedness for Borrowed Money issued, assumed or
guaranteed by the Borrower or any Subsidiary that is outstanding at the time of
such default in a principal amount aggregating in excess of $1,000,000, or
under any

 

59

 

indenture, agreement or other instrument under which
the same may be issued, and such default shall continue for a period of time
sufficient to permit the acceleration of the maturity of any such Indebtedness
for Borrowed Money (whether or not such maturity is in fact accelerated, and
including any such acceleration in the form of a mandatory offer to the holders
thereof to prepay such Indebtedness for Borrowed Money in full prior to its
stated maturity), or any such Indebtedness for Borrowed Money shall not be paid
when due (whether by demand, lapse of time, acceleration or otherwise) and any
grace period with respect to such payment shall have lapsed;

 

(g)                                 any
judgment or judgments, writ or writs or warrant or warrants of attachment, or
any similar process or processes, shall be entered or filed against the
Borrower or any Subsidiary, or against any of its Property, for the payment of
money in an aggregate amount in excess of $1,000,000 (except to the extent
covered by insurance pursuant to which the insurer has not denied liability
therefor in writing), and which remains undischarged, unvacated, unbonded or
unstayed for a period of 30 consecutive days;

 

(h)                                 the
Borrower or any Subsidiary, or any member of its Controlled Group, shall fail
to pay when due an amount or amounts aggregating in excess of $1,000,000 (for
all of such Persons) which it shall have become liable to pay to the PBGC or to
a Plan or Multiemployer Plan under Title IV of ERISA; or notice of intent
to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in
excess of $1,000,000 (collectively, a “Material Plan”)
shall be filed under Title IV of ERISA by the Borrower or any Subsidiary,
or any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Section 4041(c) of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a fiduciary
of any Material Plan against the Borrower or any Subsidiary, or any member of
its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA that
is reasonably expected to result in a liability of the Borrower or any of the
Subsidiaries in an amount in excess of $1,000,000 for all of such Persons
collectively, and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated;

 

(i)                                     any
Change of Control shall occur;

 

(j)                                     the
Borrower or any Subsidiary shall (i) have entered involuntarily against it
an order for relief under the United States Bankruptcy Code, as amended,
(ii) not pay, or admit in writing its inability to pay, its debts
generally as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) apply for, seek, consent to or acquiesce in,
the appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property,
(v) institute any proceeding seeking to have entered against it an order
for relief under the United States Bankruptcy Code, as amended, to adjudicate
it insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors or

 

60

 

fail to file an answer or
other pleading denying the material allegations of any such proceeding filed against
it, (vi) take any corporate action in furtherance of any matter described
in parts (i) through (v) above, or (vii) fail to contest in good
faith any appointment or proceeding described in Section 9.1(k) hereof;

 

(k)                                  a
custodian, receiver, trustee, examiner, liquidator or similar official shall be
appointed for the Borrower or any Subsidiary, or any substantial part of any of
its Property, or a proceeding described in Section 9.1(j)(v) shall be
instituted against the Borrower or any Subsidiary, and such appointment
continues undischarged or such proceeding continues undismissed or unstayed for
a period of 60 days;

 

(l)                                     the
DOE shall have, pursuant to Subpart G of 34 C.F.R., Part 668, regarding the
eligibility of the Borrower, any Subsidiary or any School to participate in the
Title IV Programs, notified the Borrower, any Subsidiary or such School,
as the case may be, of any suspension or termination of Title IV Program
funding, but only to the extent that such suspension or termination would constitute
a Significant Regulatory Event; or

 

(m)                               the
Borrower shall (x) own any property or assets other than its capital stock or
other equity interests in the Subsidiaries or (y) conduct or operate any
business other than its ownership of the Subsidiaries.

 

Section 9.2.                                Non-Bankruptcy
Defaults.  When any Event of
Default other than those described in subsection (j) or (k) of
Section 9.1 hereof has occurred and is continuing, the Administrative
Agent shall, by written notice to the Borrower: (a) if so directed by the
Required Lenders, terminate the remaining Commitments and all other obligations
of the Lenders hereunder on the date stated in such notice (which may be the
date thereof); (b) if so directed by the Required Lenders, declare the
principal of and the accrued interest on all outstanding Notes to be forthwith
due and payable and thereupon all outstanding Notes, including both principal
and interest thereon, shall be and become immediately due and payable together
with all other amounts payable under the Loan Documents without further demand,
presentment, protest or notice of any kind; and (c) if so directed by the
Required Lenders, demand that the Borrower immediately pay to the
Administrative Agent to be held as Collateral for the payment of Reimbursement
Obligations then existing or thereafter arising the full amount then available
for drawing under each or any Letter of Credit, and the Borrower agrees to
immediately make such payment and acknowledges and agrees that the Lenders
would not have an adequate remedy at law for failure by the Borrower to honor
any such demand and that the Administrative Agent, for the benefit of the
Lenders, shall have the right to require the Borrower to specifically perform
such undertaking whether or not any drawings or other demands for payment have
been made under any Letter of Credit. 
The Administrative Agent, after giving notice to the Borrower pursuant
to Section 9.1(c) or this Section 9.2, shall also promptly send a
copy of such notice to the other Lenders, but the failure to do so shall not
impair or annul the effect of such notice.

 

Section 9.3.                                Bankruptcy
Defaults.  When any Event of Default
described in subsections (j) or (k) of Section 9.1 hereof has
occurred and is continuing, then all outstanding Notes shall immediately become
due and payable together with all other amounts payable under

 

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the Loan Documents without presentment, demand,
protest or notice of any kind, the obligation of the Lenders to extend further
credit pursuant to any of the terms hereof shall immediately terminate (except
that the L/C Issuer’s obligation to honor presentments, drawings and other
demands for payment under outstanding Letters of Credit shall not be affected)
and the Borrower shall immediately pay to the Administrative Agent to be held
as Collateral for the payment of Reimbursement Obligations then existing or
thereafter arising the full amount then available for drawing under all
outstanding Letters of Credit, the Borrower acknowledging and agreeing that the
Lenders would not have an adequate remedy at law for failure by the Borrower to
honor any such demand and that the Lenders, and the Administrative Agent on
their behalf, shall have the right to require the Borrower to specifically perform
such undertaking whether or not any draws or other demands for payment have
been made under any of the Letters of Credit.

 

Section 9.4.                                Collateral
for Undrawn Letters of Credit. 
(a) If the prepayment of the amount available for drawing under any
or all outstanding Letters of Credit is required under Section 9.2 or 9.3
above, the Borrower shall forthwith pay the amount required to be so prepaid,
to be held by the Administrative Agent as provided in subsection (b)
below.

 

(b)                                 All
amounts prepaid pursuant to subsection (a) above shall be held by the
Administrative Agent in one or more separate collateral accounts (each such
account, and the credit balances, properties, and any investments from time to
time held therein, and any substitutions for such account, any certificate of
deposit or other instrument evidencing any of the foregoing and all proceeds of
and earnings on any of the foregoing being collectively called the “Collateral Account”) as security for, and for application
by the Administrative Agent (to the extent available) to, the reimbursement of
any payment under any Letter of Credit then or thereafter made by the
Administrative Agent, and to the payment of the unpaid balance of any other
Obligations.  The Collateral Account
shall be held in the name of and subject to the exclusive dominion and control
of the Administrative Agent for the benefit of the Administrative Agent, the
Lenders, and the L/C Issuer.  If and when
requested by the Borrower, the Administrative Agent shall invest funds held in
the Collateral Account from time to time in direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America with a remaining maturity of one
year or less, provided that the Administrative Agent is irrevocably authorized
to sell investments held in the Collateral Account when and as required to make
payments out of the Collateral Account for application to amounts due and owing
from the Borrower to the L/C Issuer, the Administrative Agent or the Lenders; provided, however, that if (i) all relevant preference
or other disgorgement periods relating to the receipt of such payments have
passed, and (ii) no Letters of Credit, Commitments, Loans or other
Obligations remain outstanding hereunder, then the Administrative Agent shall
release to the Borrower any remaining amounts, credit balances, properties and
investments held in the Collateral Account.

 

Section 9.5.                                Notice
of Default.  The Administrative Agent
shall give notice to the Borrower under Section 9.1(c) hereof promptly
upon being requested to do so by the Required Lenders and shall thereupon
notify all the Lenders thereof.

 

Section 9.6.                                Expenses.  The Borrower agrees to pay to the
Administrative Agent and each Lender all costs and expenses reasonably incurred
or paid by the Administrative Agent and

 

62

 

such Lender, including reasonable attorneys’ fees and
court costs, in connection with any Default or Event of Default by the Borrower
hereunder or in connection with the enforcement of any of the Loan Documents
(including all such costs and expenses incurred in connection with any
proceeding under the United States Bankruptcy Code involving the Borrower or
any Subsidiary as a debtor thereunder).

 

SECTION 10.                          CHANGE IN CIRCUMSTANCES.

 

Section 10.1.                         Change
of Law.  Notwithstanding any other
provisions of this Agreement or any Note, if at any time after the date hereof
any change in applicable law or regulation or in the interpretation thereof
makes it unlawful for any Lender to make or continue to maintain any Eurodollar
Loans or to perform its obligations as contemplated hereby, such Lender shall
promptly give notice thereof to the Borrower and such Lender’s obligations to
make or maintain Eurodollar Loans under this Agreement shall be suspended until
it is no longer unlawful for such Lender to make or maintain Eurodollar
Loans.  The Borrower shall prepay on
demand the outstanding principal amount of any such affected Eurodollar Loans,
together with all interest accrued thereon and all other amounts then due and
payable to such Lender under this Agreement; provided,
however, that as long as no Event of Default exists at such time,
even if one or more conditions precedent to a Credit Event other than absence
of an Event of Default have not been satisfied at such time, the Borrower may
then elect to borrow the principal amount of the affected Eurodollar Loans from
such Lender by means of Base Rate Loans from such Lender, which Base Rate Loans
shall not be made ratably by the Lenders but only from such affected Lender.

 

Section 10.2.                         Unavailability
of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR.  If on or prior to the first day of any
Interest Period for any Borrowing of Eurodollar Loans:

 

(a)                                  the
Administrative Agent determines that deposits in U.S. Dollars (in the
applicable amounts) are not being offered to it in the interbank eurodollar
market or other capital market in which it conventionally funds Eurodollar
Loans for such Interest Period, or that by reason of circumstances affecting
the interbank eurodollar market (i) the LIBOR Index Rate for such Interest
Period cannot be determined and (ii) adequate and reasonable means do not
exist for ascertaining the applicable LIBOR, or

 

(b)                                 the
Required Lenders advise the Administrative Agent that (i) either the LIBOR
Index Rate for such Interest Period or LIBOR as determined by the
Administrative Agent pursuant to clause (b) of the definition of “LIBOR”
herein, as applicable, will not adequately and fairly reflect the cost to such
Lenders of funding their Eurodollar Loans for such Interest Period or
(ii) the making or funding of Eurodollar Loans has become impracticable,

 

then the Administrative Agent shall forthwith give
notice thereof to the Borrower and the Lenders, whereupon until the
Administrative Agent notifies the Borrower that the circumstances giving rise
to such suspension no longer exist, the obligations of the Lenders to make
Eurodollar Loans shall be suspended.

 

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Section 10.3.                         Increased
Cost and Reduced Return. 
(a) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Lending Office) with any request
or directive (whether or not having the force of law) of any such authority,
central bank or comparable agency promulgated on or after the date hereof shall
impose, modify or deem applicable any reserve, special deposit or similar
requirement (including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding with respect to
any Eurodollar Loans any such requirement included in an applicable Eurodollar
Reserve Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Lender (or its Lending Office) or shall impose on any
Lender (or its Lending Office) or on the interbank market any other condition
affecting its Eurodollar Loans, its Notes, its Letter(s) of Credit, or its
participation in any thereof, any Reimbursement Obligation owed to it, or its
obligation to make Eurodollar Loans, or to issue a Letter of Credit, or to
participate therein; and the result of any of the foregoing is to increase the
cost to such Lender (or its Lending Office) of making or maintaining any
Eurodollar Loan, issuing or maintaining a Letter of Credit, or participating
therein, or to reduce the amount of any sum received or receivable by such
Lender (or its Lending Office) under this Agreement or under any other Loan
Document with respect thereto (in each case, other than taxes, which shall be
governed exclusively by Section 13.1 and any specific provisions of any
other Loan Documents), by an amount deemed by such Lender to be material, then,
within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall be obligated to pay to such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduction.

 

(b)                                 If
any Lender or the Administrative Agent shall have determined that the adoption
after the date hereof of any applicable law, rule or regulation regarding
capital adequacy, or any change after the date hereof therein, or any change
after the date hereof in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Lending Office) or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency issued or promulgated
after the date hereof, has had the effect of reducing the rate of return on
such Lender’s or such corporation’s capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender’s or such corporation’s policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, within 15 days after demand by such Lender (with a copy to
the Administrative Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.

 

(c)                                  A
certificate of a Lender claiming compensation under this Section 10.3 and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive, absent manifest error.  In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.

 

64

 

Section 10.4.                         Lending
Offices.  Each Lender may, at its
option, elect to make its Loans hereunder at the branch, office or affiliate
specified on the appropriate signature page hereof (each a “Lending
Office”) for each type of Loan available hereunder or at such other
of its branches, offices or affiliates as it may from time to time elect and
designate in a written notice to the Borrower and the Administrative
Agent.  To the extent reasonably
possible, a Lender shall designate an alternative branch or funding office with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 10.3 or 13.1 hereof or to avoid the unavailability
of Eurodollar Loans under Section 10.2 hereof, so long as such designation
is not otherwise disadvantageous to the Lender.

 

Section 10.5.                         Discretion
of Lender as to Manner of Funding. 
Notwithstanding any other provision of this Agreement, each Lender shall
be entitled to fund and maintain its funding of all or any part of its Loans in
any manner it sees fit, it being understood, however, that for the purposes of
this Agreement all determinations hereunder with respect to Eurodollar Loans
shall be made as if each Lender had actually funded and maintained each
Eurodollar Loan through the purchase of deposits in the interbank eurodollar
market having a maturity corresponding to such Loan’s Interest Period, and
bearing an interest rate equal to LIBOR for such Interest Period.

 

SECTION 11.                          THE ADMINISTRATIVE AGENT.

 

Section 11.1.                         Appointment
and Authorization of Administrative Agent. 
Each Lender hereby appoints Harris Trust and Savings Bank as the Administrative
Agent under the Loan Documents and hereby authorizes the Administrative Agent
to take such action as Administrative Agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Administrative Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto.  The Lenders expressly agree
that the Administrative Agent is not acting as a fiduciary of the Lenders in
respect of the Loan Documents, the Borrower or otherwise, and nothing herein or
in any of the other Loan Documents shall result in any duties or obligations on
the Administrative Agent or any of the Lenders except as expressly set forth
herein.

 

Section 11.2.                         Administrative
Agent and its Affiliates.  The
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise or refrain
from exercising such rights and power as though it were not the Administrative
Agent, and the Administrative Agent and its affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Borrower or any Affiliate of the Borrower as if it were not the Administrative
Agent under the Loan Documents.  The term
“Lender” as used herein and in all other
Loan Documents, unless the context otherwise clearly requires, includes the
Administrative Agent in its individual capacity as a Lender.  References in Section 1 hereof to the
Administrative Agent’s Loans, or to the amount owing to the Administrative
Agent for which an interest rate is being determined, refer to the
Administrative Agent in its individual capacity as a Lender.

 

Section 11.3.                         Action
by Administrative Agent.  If the
Administrative Agent receives from the Borrower a written notice of an Event of
Default pursuant to Section 8.5 hereof, the Administrative Agent shall
promptly give each of the Lenders written notice thereof.  The obligations of the Administrative Agent
under the Loan Documents are only those expressly set

 

65

 

forth therein. 
Without limiting the generality of the foregoing, the Administrative
Agent shall not be required to take any action hereunder with respect to any
Default or Event of Default, except as expressly provided in Sections 9.2,
9.5 and this Section 11.3.  Upon the
occurrence of an Event of Default, the Administrative Agent shall take such
action to enforce its Lien on the Collateral and to preserve and protect the
Collateral as may be directed by the Required Lenders.  Unless and until the Required Lenders give
such direction, the Administrative Agent may (but shall not be obligated to)
take or refrain from taking such actions as it deems appropriate and in the
best interest of all the Lenders.  In no
event, however, shall the Administrative Agent be required to take any action
in violation of applicable law or of any provision of any Loan Document, and
the Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Loan Document unless it first
receives any further assurances of its indemnification from the Lenders that it
may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expense, and liability which
may be incurred by it by reason of taking or continuing to take any such
action.  The Administrative Agent shall
be entitled to assume that no Default or Event of Default exists (other than a
Default or Event of Default arising under Section 9.1(a) hereof) unless
notified in writing to the contrary by a Lender or the Borrower.  In all cases in which the Loan Documents do
not require the Administrative Agent to take specific action, the
Administrative Agent shall be fully justified in using its discretion in
failing to take or in taking any action thereunder.  Any instructions of the Required Lenders, or
of any other group of Lenders called for under the specific provisions of the
Loan Documents, shall be binding upon all the Lenders and the holders of the
Obligations.

 

Section 11.4.                         Consultation
with Experts.  The Administrative
Agent may consult with legal counsel, independent public accountants, and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.

 

Section 11.5.                         Liability
of Administrative Agent; Credit Decision. 
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or not taken by it in
connection with the Loan Documents: 
(i) with the consent or at the request of (x) the Required Lenders
or, (y) if such action or inaction requires, pursuant to the terms of the Loan
Documents, the consent of (1) all of the Lenders or (2) the Required Lenders
and certain specific Lenders, all of the Lenders or the Required Lenders and
such specific Lenders, as the case may be, or (ii) in the absence of its
own gross negligence or willful misconduct. 
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify:  (i) any
statement, warranty or representation made in connection with this Agreement,
any other Loan Document or any Credit Event; (ii) the performance or
observance of any of the covenants or agreements of the Borrower or any
Subsidiary contained herein or in any other Loan Document; (iii) the
satisfaction of any condition specified in Section 7 hereof, except
receipt of items required to be delivered to the Administrative Agent; or
(iv) the validity, effectiveness, genuineness, enforceability, perfection,
value, worth or collectibility hereof or of any other Loan Document or of any
other documents or writing furnished in connection with any Loan Document or of
any Collateral; and the Administrative Agent makes no representation of any
kind or character with respect to any such matter mentioned in this
sentence.  The Administrative

 

66

 

Agent may execute any of its duties under any of the
Loan Documents by or through employees, agents, and attorneys-in-fact and shall
not be answerable to the Lenders, the Borrower, or any other Person for the
default or misconduct of any such agents or attorneys-in-fact selected with
reasonable care.  The Administrative
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, other document or statement (whether written or oral) believed
by it to be genuine or to be sent by the proper party or parties.  In particular and without limiting any of the
foregoing, the Administrative Agent shall have no responsibility for confirming
the accuracy of any compliance certificate or other document or instrument
received by it under the Loan Documents. 
Each Lender acknowledges that it has independently and without reliance
on the Administrative Agent or any other Lender, and based upon such
information, investigations and inquiries as it deems appropriate, made its own
credit analysis and decision to extend credit to the Borrower in the manner set
forth in the Loan Documents.  It shall be
the responsibility of each Lender to keep itself informed as to the
creditworthiness of the Borrower and the Subsidiaries, and the Administrative
Agent shall have no liability to any Lender with respect thereto.

 

Section 11.6.                         Indemnity.  The Lenders shall ratably, in accordance with
their respective Revolver Percentages, indemnify and hold the Administrative Agent,
and its directors, officers, employees, agents, and representatives harmless
from and against any liabilities, losses, costs or expenses suffered or
incurred by it under any Loan Document or in connection with the transactions
contemplated thereby, regardless of when asserted or arising, except to the
extent they are promptly reimbursed for the same by the Borrower (without
limiting the obligations of the Borrower to do so) and except to the extent
that any event giving rise to a claim was caused by the gross negligence or
willful misconduct of the party seeking to be indemnified.  The obligations of the Lenders under this
Section shall survive termination of this Agreement.  The Administrative Agent shall be entitled to
offset amounts received for the account of a Lender under this Agreement
against unpaid amounts due from such Lender to the Administrative Agent
hereunder (whether as fundings of participations, indemnities or otherwise),
but shall not be entitled to offset against amounts owed to the Administrative
Agent by any Lender arising outside of this Agreement and the other Loan
Documents.

 

Section 11.7.                         Resignation
of Administrative Agent and Successor Administrative Agent.  The Administrative Agent may resign at any
time by giving 30 days’ prior written notice thereof to the Lenders and the
Borrower.  Upon any such resignation of
the Administrative Agent, the Required Lenders shall have the right to appoint
a successor Administrative Agent.  If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after
the retiring Administrative Agent’s giving of notice of resignation then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which may be any Lender hereunder or any commercial bank
organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $500,000,000.  Upon the acceptance of its appointment as the
Administrative Agent hereunder, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Administrative Agent under the Loan Documents, and the retiring
Administrative Agent shall be discharged from its duties and obligations
thereunder.  After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this 

 

67

 

Section 11 and all protective provisions of the
other Loan Documents shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent, but no successor
Administrative Agent shall in any event be liable or responsible for any
actions of its predecessor.  If the
Administrative Agent resigns and no successor is appointed, the rights and
obligations of such Administrative Agent shall be automatically assumed by the
Required Lenders until such time as a new Administrative Agent is appointed
pursuant to the terms hereof, and (i) the Borrower shall be directed to
make all payments due each Lender hereunder directly to such Lender and
(ii) the Administrative Agent’s rights in the Collateral Documents shall
be assigned without representation, recourse or warranty to the Lenders as
their interests may appear.

 

Section 11.8.                         L/C
Issuer.  The Lenders authorize and
direct the L/C Issuer to issue Letters of Credit in accordance with the terms
of this Agreement.  The L/C Issuer
shall have all of the benefits and immunities (i) provided to the
Administrative Agent in this Section 11 with respect to any acts taken or
omissions suffered by the L/C Issuer in connection with Letters of Credit
issued by it or proposed to be issued by it and the Applications pertaining to
such Letters of Credit as fully as if the term “Administrative Agent”, as used
in this Section 11, included the L/C Issuer with respect to such acts
or omissions and (ii) as additionally provided in this Agreement with
respect to such L/C Issuer.

 

Section 11.9.                         Hedging
Liability and Funds Transfer and Deposit Account Liability Arrangements.  By virtue of a Lender’s execution of this
Agreement or an assignment agreement pursuant to Section 13.12 hereof, as
the case may be, any Affiliate of such Lender with whom the Borrower or any
Subsidiary has entered into an agreement creating Hedging Liability or Funds
Transfer and Deposit Account Liability shall be deemed a Lender party hereto
for purposes of any reference in a Loan Document to the parties for whom the
Administrative Agent is acting, it being understood and agreed that the rights
and benefits of such Affiliate under the Loan Documents consist exclusively of
such Affiliate’s right to share in payments and collections out of the Collateral
and the Guaranties as more fully set forth in Section 3.1 hereof.  In connection with any such distribution of
payments and collections, the Administrative Agent shall be entitled to assume
no amounts are due to any Lender or its Affiliate with respect to Hedging
Liability or Funds Transfer and Deposit Account Liability unless such Lender
has notified the Agent in writing of the amount of any such liability owed to
it or its Affiliate prior to such distribution.

 

Section 11.10.                  Designation
of Additional Agents.  The
Administrative Agent shall have the continuing right, for purposes hereof, at
any time and from time to time to designate one or more of the Lenders (and/or
its or their Affiliates) as “syndication agents,” “documentation agents,” “arrangers,”
or other designations for purposes hereto, but such designation shall have no
substantive effect, shall not impose any additional fees or costs on the
Borrower, and such Lenders and their Affiliates shall have no additional
powers, duties or responsibilities as a result thereof.

 

68

 

SECTION 12.                          THE GUARANTEES.

 

Section 12.1.                         The
Guarantees.  To induce the Lenders to
provide the credits described herein and in consideration of benefits expected
to accrue to the Borrower by reason of the Commitments and for other good and
valuable consideration, receipt of which is hereby acknowledged, each
Subsidiary party hereto or executing an Additional Guarantor Supplement
(individually a “Guarantor” and collectively the “Guarantors,” including Subsidiaries formed or acquired
after the Closing Date executing an Additional Guarantor Supplement in the form
attached hereto as Exhibit F or such other form acceptable to the
Administrative Agent) hereby unconditionally and irrevocably guarantee jointly
and severally to the Administrative Agent, the Lenders, and their Affiliates,
the due and punctual payment of all present and future Obligations, Hedging
Liability, and Funds Transfer and Deposit Account Liability, including, but not
limited to, the due and punctual payment of principal of and interest
(including, without limitation, interest accruing after the commencement of a
bankruptcy proceeding, whether or not allowed in any such proceeding) on the
Notes, the Reimbursement Obligations, and the due and punctual payment of all
other Obligations now or hereafter owed by the Borrower under the Loan
Documents as and when the same shall become due and payable, whether at stated
maturity, by acceleration, or otherwise, according to the terms hereof and
thereof.  In case of failure by the
Borrower punctually to pay any Obligations, Hedging Liability, or Funds
Transfer and Deposit Account Liability guaranteed hereby, each Guarantor hereby
unconditionally agrees to make such payment or to cause such payment to be made
punctually as and when the same shall become due and payable, whether at stated
maturity, by acceleration, or otherwise, and as if such payment were made by
the Borrower.

 

Section 12.2.                         Guarantee
Unconditional.  The obligations of
each Guarantor under this Section 12 shall be unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged, or otherwise affected by:

 

(a)                                  any
extension, renewal, settlement, compromise, waiver, or release in respect of
any obligation of the Borrower or of any other guarantor under this Agreement
or any other Loan Document or by operation of law or otherwise;

 

(b)                                 any
modification or amendment of or supplement to this Agreement or any other Loan
Document;

 

(c)                                  any
change in the corporate existence, structure, or ownership of, or any
insolvency, bankruptcy, reorganization, or other similar proceeding affecting,
the Borrower, any other guarantor, or any of their respective assets, or any
resulting release or discharge of any obligation of the Borrower or of any
other guarantor contained in any Loan Document;

 

(d)                                 the
existence of any claim, set-off, or other rights which the Borrower or any
other guarantor may have at any time against the Administrative Agent, any
Lender, or any other Person, whether or not arising in connection herewith;

 

69

 

(e)                                  any
failure to assert, or any assertion of, any claim or demand or any exercise of,
or failure to exercise, any rights or remedies against the Borrower, any other
guarantor, or any other Person or Property;

 

(f)                                    any
application of any sums by whomsoever paid or howsoever realized to any
obligation of the Borrower, regardless of what obligations of the Borrower
remain unpaid;

 

(g)                                 any
invalidity or unenforceability relating to or against the Borrower or any other
guarantor for any reason of this Agreement or of any other Loan Document or any
provision of applicable law or regulation purporting to prohibit the payment by
the Borrower or any other guarantor of the principal of or interest on any Note
or any Reimbursement Obligation or any other amount payable under the Loan
Documents; or

 

(h)                                 any
other act or omission to act or delay of any kind by the Administrative Agent,
any Lender, or any other Person or any other circumstance whatsoever that
might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of the obligations of such Guarantor under this
Section 12.

 

Section 12.3.                         Discharge
Only upon Payment in Full; Reinstatement in Certain Circumstances.  Each Guarantor’s obligations under this
Section 12 shall remain in full force and effect until the Commitments are
terminated, all Letters of Credit have expired, and the principal of and
interest on the Notes and all other amounts payable by the Borrower and the
Guarantors under this Agreement and all other Loan Documents and, if then
outstanding and unpaid, all Hedging Liability and Funds Transfer and Deposit
Account Liability shall have been paid in full. 
If at any time any payment of the principal of or interest on any Note
or any Reimbursement Obligation or any other amount payable by the Borrower or
any Guarantor under the Loan Documents is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy, or reorganization of the Borrower
or of any other guarantor, or otherwise, each Guarantor’s obligations under
this Section 12 with respect to such payment shall be reinstated at such
time as though such payment had become due but had not been made at such time.

 

Section 12.4.                         Subrogation.  Each Guarantor agrees it will not exercise
any rights which it may acquire by way of subrogation by any payment made
hereunder, or otherwise, until all the Obligations, Hedging Liability, and
Funds Transfer and Deposit Account Liability shall have been paid in full
subsequent to the termination of all the Commitments and expiration of all
Letters of Credit.  If any amount shall
be paid to a Guarantor on account of such subrogation rights at any time prior
to the later of (x) the payment in full of the Obligations, Hedging
Liability, and Funds Transfer and Deposit Account Liability and all other
amounts payable by the Borrower hereunder and the other Loan Documents and (y) the
termination of the Commitments and expiration of all Letters of Credit, such
amount shall be held in trust for the benefit of the Administrative Agent and
the Lenders and shall forthwith be paid to the Administrative Agent to be held
as Collateral for the benefit of the Lenders or be credited and applied upon
the Obligations, Hedging Liability, and Funds Transfer and Deposit Account
Liability, whether matured or unmatured, in accordance with the terms of this
Agreement.

 

70

 

Section 12.5.                         Waivers.  Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest, and any notice not provided for herein,
as well as any requirement that at any time any action be taken by the
Administrative Agent, any Lender, or any other Person against the Borrower,
another guarantor, or any other Person.

 

Section 12.6.                         Limit
on Recovery.  Notwithstanding any
other provision hereof, the right of recovery against each Guarantor under this
Section 12 shall not exceed $1.00 less than the lowest amount which would
render such Guarantor’s obligations under this Section 12 void or voidable
under applicable law, including, without limitation, fraudulent conveyance law.

 

Section 12.7.                         Stay
of Acceleration.  If acceleration of
the time for payment of any amount payable by the Borrower under this Agreement
or any other Loan Document, or under any agreement establishing Hedging
Liability or Funds Transfer and Deposit Account Liability, is stayed upon the
insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise subject to acceleration under the terms of this Agreement or the
other Loan Documents, or under any agreement establishing Hedging Liability or
Funds Transfer and Deposit Account Liability, shall nonetheless be payable by
the Guarantors hereunder forthwith on demand by the Administrative Agent made
at the request of the Required Lenders.

 

Section 12.8.                         Benefit
to Guarantors.  All of the Guarantors
are engaged in related businesses and integrated to such an extent that the
financial strength and flexibility of each Guarantor has a direct impact on the
success of each other Guarantor.  Each
Guarantor will derive substantial direct and indirect benefit from the
extension of credit hereunder.

 

Section 12.9.                         Guarantor
Covenants.  Each Guarantor shall take
such action as the Borrower is required by this Agreement to cause such
Guarantor to take, and shall refrain from taking such action as the Borrower is
required by this Agreement to prohibit such Guarantor from taking.

 

SECTION 13.                          MISCELLANEOUS.

 

Section 13.1.                         Withholding
Taxes.  (a) Payments
Free of Withholding.  Except
as otherwise required by law and subject to Section 13.1(b) hereof, each
payment by the Borrower under this Agreement or the other Loan Documents shall
be made without withholding for or on account of any present or future taxes
(other than (i) taxes imposed on, or measured by, the recipient’s overall net
income or overall gross income imposed by the jurisdiction in which such
recipient’s principal executive office or Lending Office is located, (ii)
branch profit taxes, franchise taxes or similar taxes imposed on the recipient,
and (iii) any taxes that would not have been imposed but for the activities of
the recipient in the jurisdiction imposing such tax other than the execution,
delivery of, or otherwise or a result of the recipient’s participation in the
transactions contemplated by this Agreement or the other Loan Documents)
imposed by or within the jurisdiction in which the Borrower is domiciled, any
jurisdiction from which the Borrower makes any payment, or (in each case) any
political subdivision or taxing authority thereof or therein (all such
non-excluded taxes, “Taxes”).  If any withholding for Taxes is so required,
the Borrower shall make the withholding, pay the amount withheld to the
appropriate governmental authority before penalties attach thereto or interest
accrues thereon and forthwith pay such additional

 

71

 

amount as may be necessary to ensure that the net
amount actually received by each Lender and the Administrative Agent free and
clear of such Taxes (including such Taxes on such additional amount) is equal
to the amount which that Lender or the Administrative Agent (as the case may
be) would have received had such withholding not been made.  If the Administrative Agent or any Lender
pays any amount in respect of any such Taxes, including penalties or interest
thereon, the Borrower shall reimburse the Administrative Agent or such Lender
for that payment following written demand therefor (which demand shall set
forth the details relating to the Taxes for which reimbursement is sought with
reasonable specificity), in the currency in which such payment was made.  If the Borrower pays any Taxes, including
penalties or interest thereon, it shall deliver official tax receipts,
certified copies thereof or evidence of such payment reasonably satisfactory to
the Lender or Administrative Agent evidencing that payment, to the Lender or
Administrative Agent on whose account such withholding was made (with a copy to
the Administrative Agent if not the recipient of the original) on or before the
thirtieth day after payment.

 

(b)                                 U.S. Withholding Tax Exemptions.  Each Lender that is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Administrative Agent on or before the date the
initial Credit Event is made hereunder or, if later, the date such financial
institution becomes a Lender hereunder, two duly completed and signed copies of
(i) either Form W-8 BEN or Form W-8 ECI (certifying that such Lender
is exempt from or entitled to a reduced rate of United States withholding tax
on all amounts to be received by such Lender, including fees, pursuant to the
Loan Documents and the Obligations) of the United States Internal Revenue
Service or (ii) solely if such Lender is claiming exemption from United States
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest”, a Form W-8 BEN, or any successor form
prescribed by the Internal Revenue Service, and a certificate representing that
such Lender is not a bank for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B)
of the Code) of the Borrower and is not a controlled foreign corporation
related to the Borrower (within the meaning of Section 864(d)(4) of the
Code).  If the form provided by a Lender
at the time such Lender first becomes a party to this Agreement indicates a
United States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from Taxes unless and until such
Lender provides the appropriate form certifying that a lesser rate applies,
whereupon withholding tax at such lesser rate only shall be considered excluded
from Taxes for the period governed by such form.  Thereafter and from time to time, each Lender
shall submit to the Borrower and the Administrative Agent such additional duly
completed and signed copies of one or the other of such Forms (or such
successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) and such other certificates as may be
(i) requested by the Borrower in a written notice, directly or through the
Administrative Agent, to such Lender and (ii) required under then-current
United States law or regulations to avoid or reduce United States withholding
taxes on payments in respect of all amounts to be received by such Lender,
including fees, pursuant to the Loan Documents or the Obligations.  Upon the request of the Borrower or the
Administrative Agent, each Lender that is a United States person (as such term
is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrower and the Administrative Agent a duly completed IRS Form W-9 or
such other form or certificate as may establish a withholding tax
exemption.  For any period with respect
to which a Lender or the Administrative Agent has failed to provide the
Borrower with the

 

72

 

appropriate form described in this subsection (b)
(other than to the extent that such failure, in accordance with subsection (c)
below, is due to a change in law occurring after the date on which a form
originally was required to be provided), such Lender or the Administrative
Agent shall not be entitled to the additional amounts or indemnities with
respect to Taxes withheld under subsection (a) of this Section 13.1 by
reason of such failure.

 

(c)                                  Inability of Lender to Submit Forms.  If any Lender determines, as a result of any
change after the date hereof in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Borrower or the Administrative Agent any form or certificate that such
Lender is obligated to submit pursuant to subsection (b) of this
Section 13.1 or that such Lender is required to withdraw or cancel any
such form or certificate previously submitted or any such form or certificate
otherwise becomes ineffective or inaccurate, such Lender shall promptly notify
the Borrower and Administrative Agent of such fact and the Lender shall to that
extent not be obligated to provide any such form or certificate and will be
entitled to withdraw or cancel any affected form or certificate, as applicable;
provided, however, the Lender shall
provide any form of certification that it is lawfully able to so provide as a
basis for an exemption from or reduced rate of withholding.

 

(d)                                 Application of Credits. 
If the Borrower is required to pay any amounts pursuant to the
provisions of this Section 13.1, and if thereafter any Lender or the
Administrative Agent (as the case may be) shall receive or be granted a credit
against or remission or other relief for Taxes payable by the Lender or
Administrative Agent (as the case may be) in respect of the amounts so paid by
the Borrower, the Lender or Administrative Agent (as the case may be) shall to
the extent that it can do so without prejudice to the retention of the amount
of such credit, remission or other relief, pay to the Borrower 60 days after
the date on which the Lender or Administrative Agent effectively obtains the
benefit of such credit, remission or other relief an amount which it reasonably
determines to be equal to such credit, remission or other relief less any sum
which it is required by law to deduct therefrom.  Such Lender or the Administrative Agent (as
the case may be) may, in its reasonable discretion, determine the order of
utilization of all charges, deductions, credits and expenses which reduce Taxes
imposed on its net income.  Nothing in
this Section 13.1(d) shall be construed as requiring the Lender or
Administrative Agent (as the case may be) to conduct its business or to arrange
or alter in any respect its tax or financial affairs so that it is entitled to
receive such credit, remission or other relief, other than performing any
ministerial acts necessary to be entitled to receive such credit, remission or
other relief.

 

(e)                                  Assessments, Contests, Etc. 
In the event that any Lender or the Administrative Agent receives
written communication from any tax authority with respect to an assessment or
proposed assessment of any Taxes, such Lender or the Administrative Agent (as
the case may be) shall promptly notify Borrower in writing and provide a copy
of such communication to Borrower.  In
the event that an administrative or judicial proceeding is commenced involving
any Lender or the Administrative Agent which, if determined adversely to it,
would result in the payment of Taxes, such Lender or the Administrative Agent
(as the case may be) shall promptly notify Borrower and shall permit Borrower
to participate in such proceeding and in the preparation of submissions in
connection with such proceeding to the extent that such Lender or the
Administrative Agent reasonably determines that such participation by the
Borrower will not be detrimental to its overall position in such proceeding,
including with respect to any matters in 

 

73

 

such proceeding not affecting the Borrower.  In the event that such Lender or the
Administrative Agent (as the case may be) fails to comply with this provision,
with respect to any communication, or administrative or judicial proceeding,
Borrower shall have no liability to indemnify such Lender or the Administrative
Agent (as the case may be) hereunder with respect to Taxes that are the subject
of such communication or proceeding.

 

Section 13.2.                         No
Waiver, Cumulative Remedies.  No
delay or failure on the part of the Administrative Agent or any Lender or on
the part of the holder or holders of any of the Obligations in the exercise of
any power or right under any Loan Document shall operate as a waiver thereof or
as an acquiescence in any default, nor shall any single or partial exercise of
any power or right preclude any other or further exercise thereof or the
exercise of any other power or right. 
The rights and remedies hereunder of the Administrative Agent, the
Lenders and of the holder or holders of any of the Obligations are cumulative
to, and not exclusive of, any rights or remedies which any of them would
otherwise have.

 

Section 13.3.                         Non-Business
Days.  If any payment hereunder
becomes due and payable on a day which is not a Business Day, the due date of
such payment shall be extended to the next succeeding Business Day on which
date such payment shall be due and payable. 
In the case of any payment of principal falling due on a day which is
not a Business Day, interest on such principal amount shall continue to accrue
during such extension at the rate per annum then in effect, which accrued
amount shall be due and payable on the next scheduled date for the payment of
interest.

 

Section 13.4.                         Documentary
Taxes.  The Borrower agrees to pay on
demand any documentary, stamp or similar taxes payable in respect of this
Agreement or any other Loan Document, including interest and penalties, in the
event any such taxes are assessed, irrespective of when such assessment is made
and whether or not any credit is then in use or available hereunder.

 

Section 13.5.                         Survival
of Representations.  All
representations and warranties made herein or in any other Loan Document or in
certificates given pursuant hereto or thereto are effective as of the time made
or deemed made and may give rise to an Event of Default hereunder if they prove
untrue in any material respect as of the date of the making or deemed making
thereof, notwithstanding any lapse of time subsequent to such date.

 

Section 13.6.                         Survival of Indemnities. 
All indemnities and other provisions relative to reimbursement to the
Lenders of amounts sufficient to protect the yield of the Lenders with respect
to the Loans and Letters of Credit, including, but not limited to,
Sections 1.12, 10.3, and 13.15 hereof, shall survive the termination of
this Agreement and the other Loan Documents and the payment of the Obligations.

 

Section 13.7.                         Sharing
of Set-Off.  Each Lender agrees with
each other Lender a party hereto that if such Lender shall receive and retain
any payment, whether by set-off or application of deposit balances or
otherwise, on any of the Loans or Reimbursement Obligations in excess of its
ratable share of payments on all such Obligations then outstanding to the
Lenders, then such Lender shall purchase for cash at face value, but without
recourse, ratably from each of the other

 

74

 

Lenders such amount of the Loans or Reimbursement
Obligations, or participations therein, held by each such other Lenders (or
interest therein) as shall be necessary to cause such Lender to share such
excess payment ratably with all the other Lenders; provided,
however, that if any such purchase is made by any Lender, and if
such excess payment or part thereof is thereafter recovered from such
purchasing Lender, the related purchases from the other Lenders shall be
rescinded ratably and the purchase price restored as to the portion of such
excess payment so recovered, but without interest.  For purposes of this Section, amounts owed to
or recovered by the L/C Issuer in connection with Reimbursement Obligations in
which Lenders have been required to fund their participation shall be treated
as amounts owed to or recovered by the L/C Issuer as a Lender hereunder.

 

Section 13.8.                         Notices.  Except as otherwise specified herein, all
notices hereunder and under the other Loan Documents shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth below, or such
other address or telecopier number as such party may hereafter specify by
notice to the Administrative Agent and the Borrower given by courier, by United
States certified or registered mail, by telecopy or by other telecommunication
device capable of creating a written record of such notice and its
receipt.  Notices under the Loan
Documents to the Lenders and the Administrative Agent shall be addressed to
their respective addresses or telecopier numbers set forth on the signature
pages hereof, and to the Borrower to:

 

	
   

  	
  Lincoln
  Educational Services Corporation

  	
   

  
	
   

  	
  200 Executive
  Drive, Suite 340

  	
   

  
	
   

  	
  West Orange, New
  Jersey  07052

  	
   

  
	
   

  	
  Attention:

  	
  Cesar Ribeiro

  
	
   

  	
  Telephone:

  	
  (973) 736-9340

  
	
   

  	
  Telecopy:

  	
  (973) 243-0841

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to
  Scott M. Shaw (same address

  and telephone/telecopy numbers)

  	
   

  
				

 

Each such notice, request or other communication shall
be effective (i) if given by telecopier, when such telecopy is transmitted
to the telecopier number specified in this Section or on the signature pages
hereof and a confirmation of such telecopy has been received by the sender,
(ii) if given by mail, 5 Business Days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when
delivered at the addresses specified in this Section or on the signature pages
hereof; provided that any notice
given pursuant to Section 1 hereof shall be effective only upon receipt.

 

Section 13.9.                         Counterparts.  This Agreement may be executed in any number
of counterparts, and by the different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.

 

Section 13.10.                  Successors
and Assigns.  This Agreement shall be
binding upon the Borrower and the Guarantors and their successors and assigns,
and shall inure to the benefit of the Administrative Agent and each of the
Lenders and the benefit of their respective successors 

 

75

 

and assignee Lenders. 
The Borrower and the Guarantors may not assign any of their rights or
obligations under any Loan Document without the written consent of all of the
Lenders.

 

Section 13.11.                  Participants.  Each Lender shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made and Reimbursement Obligations
and/or Commitments held by such Lender at any time and from time to time to one
or more other Persons; provided that no such participation shall relieve any
Lender of any of its obligations under this Agreement, and, provided, further
that no such participant shall have any rights under this Agreement except as
provided in this Section, and none of the Borrower, the Subsidiaries or the
Administrative Agent shall have any obligation or responsibility to such
participant.  Any agreement pursuant to
which such participation is granted shall provide that the granting Lender
shall retain the sole right and responsibility to enforce the obligations of
the Borrower under this Agreement and the other Loan Documents including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of the Loan Documents, except that such agreement may provide
that such Lender will not agree, without such participant’s consent, to any
modification, amendment or waiver of the Loan Documents that would reduce the
amount of or postpone any fixed date for payment of any Obligation in which
such participant has an interest. 
Provided that each participant or prospective participant has entered
into an agreement to keep such information confidential on the terms set forth
in Section 13.23 hereof, the Borrower authorizes each Lender to disclose
to any participant or prospective participant under this Section any financial
or other information pertaining to the Borrower or any Subsidiary.

 

Section 13.12.                  Assignments.  (a) Each Lender shall have the right at
any time, with the prior consent of the Administrative Agent and, so long as no
Event of Default then exists, the Borrower (which consent of the Borrower shall
not be unreasonably withheld) to sell, assign, transfer or negotiate all or any
part of its rights and obligations under the Loan Documents (including, without
limitation, the indebtedness evidenced by the Notes then held by such assigning
Lender, together with an equivalent percentage of its obligation to make Loans
and participate in Letters of Credit) to one or more commercial banks or other
financial institutions or investors, provided that such assignment shall be of
a fixed percentage (and not a varying percentage) of the assigning Lender’s
rights and obligations under the Loan Documents; provided,
however, that in order to make any such assignment (i) unless
the assigning Lender is assigning all of its Commitments, outstanding Loans and
interests in Letters of Credit Obligations, the assigning Lender shall retain
at least $5,000,000 in unused Commitments, outstanding Loans and interests in
Letters of Credit, (ii) unless the assigning Lender is assigning all of
its Commitments, outstanding Loans and interests in Letters of Credit
Obligations, the assignee Lender shall have Commitments, outstanding Loans and
interests in Letters of Credit of at least $5,000,000, (iii) each such
assignment shall be evidenced by a written agreement (substantially in the form
attached hereto as Exhibit G or in such other form acceptable to the
Administrative Agent) executed by such assigning Lender, such assignee Lender
or Lenders, the Administrative Agent and, if required as provided above, the
Borrower, which agreement shall specify in each instance the portion of the
Obligations which are to be assigned to the assignee Lender and the portion of
the Commitments of the assigning Lender to be assumed by the assignee Lender,
and (iv) the assigning Lender shall pay to the Administrative Agent a
processing fee of $3,500 and any out-of-pocket attorneys’ fees and expenses
incurred by the 

 

76

 

Administrative Agent in connection with any such
assignment agreement; provided, further, however,
that the Borrower’s consent shall not be required with respect to assignments
by any Lender to an Affiliate thereof or to an Approved Fund with respect to
such Lender.  Any such assignee shall
become a Lender for all purposes hereunder to the extent of the rights and
obligations under the Loan Documents it assumes and the assigning Lender shall
be released from its obligations, and will have released its rights, under the
Loan Documents to the extent of such assignment.  The address for notices to such assignee Lender
shall be as specified in the assignment agreement executed by it.  Promptly upon the effectiveness of any such
assignment agreement, the Borrower shall execute and deliver replacement Notes
to the assignee Lender and the assigning Lender in the respective amounts of
their Commitments (or assigned principal amounts, as applicable) after giving
effect to the reduction occasioned by such assignment (all such Notes to
constitute “Notes” for all purposes of the Loan
Documents), and the assignee Lender shall surrender to the Borrower its old
Notes.  Provided that each such purchaser
or prospective purchaser has entered into an agreement to keep such information
confidential on the terms set forth in Section 13.23 hereof, the Borrower
authorizes each Lender to disclose to any purchaser or prospective purchaser of
an interest in the Loans and interest in Letters of Credit owed to it or its
Commitments under this Section any financial or other information pertaining to
the Borrower or any Subsidiary.

 

(b)                                 Any
Lender may at any time pledge or grant a security interest to a Federal Reserve
Bank in all or any portion of its rights under this Agreement to secure
obligations of such Lender to a Federal Reserve Bank, and this Section shall
not apply to any such pledge or grant of a security interest; provided that no such pledge or grant of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such pledgee or secured party for such Lender as a party hereto.

 

Section 13.13.                  Amendments.
 Any provision of this Agreement or
the other Loan Documents may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by (a) the Borrower, (b) the
Required Lenders, and (c) if the rights or duties of the Administrative Agent
are affected thereby, the Administrative Agent; provided that:

 

(i)                                     no
amendment or waiver pursuant to this Section 13.13 shall (A) increase
any Commitment of any Lender without the consent of such Lender or
(B) reduce the amount of or postpone the date for any scheduled payment of
any principal of or interest on any Loan or of any Reimbursement Obligation or
of any fee payable hereunder, or reduce any rate of interest payable hereunder,
without the consent of the Lender to which such payment is owing or which has
committed to make such Loan or Letter of Credit (or participate therein)
hereunder; and

 

(ii)                                  no
amendment or waiver pursuant to this Section 13.13 shall, unless signed by
each Lender, increase the aggregate Commitments of the Lenders, change the
definitions of Revolving Credit Termination Date or Required Lenders, change
the provisions of this Section 13.13, release any material Guarantor or any
substantial part of the Collateral (except as otherwise provided for in the
Loan Documents), or affect the number of Lenders required to take any action
hereunder or under any other Loan Document.

 

77

 

Section 13.14.                  Headings.
Section headings used in this Agreement are for reference only and shall not
affect the construction of this Agreement.

 

Section 13.15.                  Costs
and Expenses; Indemnification.  (a)
The Borrower agrees to pay all costs and expenses of the Administrative Agent
in connection with the preparation, negotiation, syndication, and administration
of the Loan Documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, in connection with the
preparation and execution of the Loan Documents, and any amendment, waiver or
consent related thereto, whether or not the transactions contemplated herein
are consummated, together with any fees and charges (but subject to any
limitations set forth in the Loan Documents) suffered or incurred by the
Administrative Agent in connection with periodic environmental audits,
regulatory reviews, fixed asset appraisals, title insurance policies,
collateral filing fees and lien searches. 
The Borrower further agrees to indemnify the Administrative Agent, each
Lender, and their respective directors, officers, employees, agents, financial
advisors, and consultants (collectively, the “Indemnified
Persons” ) against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all
reasonable expenses of litigation or preparation therefor, whether or not an
Indemnified Person is a party thereto, or any settlement arrangement arising
from or relating to any such litigation) which any of them may pay or incur
arising out of or relating to any Loan Document or any of the transactions
contemplated thereby or the direct or indirect application or proposed
application of the proceeds of any Loan or Letter of Credit (collectively, “Damages”), other than those which arise from the gross
negligence or willful misconduct of the Indemnified Person claiming
indemnification.  The Borrower, upon
demand by the Administrative Agent or a Lender at any time, shall reimburse the
Administrative Agent or such Lender for any legal or other expenses incurred in
connection with investigating or defending against any of the foregoing
(including any settlement costs relating to the foregoing) except to the extent
that the same arises from the gross negligence or willful misconduct of the
party to be indemnified.  The obligations
of the Borrower under this Section shall survive the termination of this
Agreement.

 

(b)                                 In
furtherance of paragraph (a) of this Section 13.15, the Borrower also agrees to
indemnify the Indemnified Persons for any Damages arising out of any of the
following:  (i) any presence, Release or
threatened Release of any Hazardous Material by the Borrower or any Subsidiary
or otherwise occurring on or with respect to its Property (whether owned or
leased), (ii) the operation or violation of any Environmental Law by the
Borrower or any Subsidiary or otherwise occurring on or with respect to its
Property (whether owned or leased), (iii) any Environmental Claim for personal
injury or property damage in connection with the Borrower or any Subsidiary or
otherwise occurring on or with respect to its Property (whether owned or
leased), and (iv) the inaccuracy or breach of any environmental representation,
warranty or covenant by the Borrower or any Subsidiary made herein or in any
other Loan Document evidencing or securing any Obligations or setting forth
terms and conditions applicable thereto or otherwise relating thereto, except
for Damages arising from the willful misconduct or gross negligence of the
party claiming indemnification.

 

Section 13.16.                  Set-off.  In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, each Lender is hereby authorized
by the Borrower and each Guarantor at any time or from time to 

 

78

 

time, without notice to the Borrower or such Guarantor
or to any other Person, any such notice being hereby expressly waived, to set-off
and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured, but not including trust accounts, and in
whatever currency denominated) and any other indebtedness at any time held or
owing by that Lender or that subsequent holder to or for the credit or the
account of the Borrower or such Guarantor, whether or not matured, against and
on account of the Obligations of the Borrower or such Guarantor to that Lender
under the Loan Documents, irrespective of whether or not (a) that Lender
shall have made any demand hereunder or (b) the principal of or the
interest on the Loans or Notes and other amounts due hereunder shall have
become due and payable pursuant to Section 9 and although said obligations
and liabilities, or any of them, may be contingent or unmatured.

 

Section 13.17.                  Entire
Agreement.  The Loan Documents
constitute the entire understanding of the parties thereto with respect to the
subject matter thereof and any prior agreements, whether written or oral, with
respect thereto are superseded hereby.

 

Section 13.18.                  Governing
Law.  This Agreement and the other
Loan Documents, and the rights and duties of the parties hereto, shall be
construed and determined in accordance with the laws of the State of New York
(except to the extent a contrary choice of law is specifically elected in any
Collateral Document).

 

Section 13.19.                  Severability
of Provisions.  Any provision of any
Loan Document which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.  All rights, remedies and powers provided in
this Agreement and the other Loan Documents may be exercised only to the extent
that the exercise thereof does not violate any applicable mandatory provisions
of law, and all the provisions of this Agreement and other Loan Documents are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Agreement or the other Loan Documents invalid or unenforceable.

 

Section 13.20.                  Excess
Interest.  Notwithstanding any
provision to the contrary contained herein or in any other Loan Document, no
such provision shall require the payment or permit the collection of any amount
of interest in excess of the maximum amount of interest permitted by applicable
law to be charged for the use or detention, or the forbearance in the
collection, of all or any portion of the Loans or other obligations outstanding
under this Agreement or any other Loan Document (“Excess
Interest”).  If any Excess
Interest is provided for, or is adjudicated to be provided for, herein or in
any other Loan Document, then in such event (a) the provisions of this
Section shall govern and control, (b) neither the Borrower nor any
guarantor or endorser shall be obligated to pay any Excess Interest,
(c) any Excess Interest that the Administrative Agent or any Lender may
have received hereunder shall, at the option of the Administrative Agent, be
(i) applied as a credit against the then outstanding principal amount of
Obligations hereunder and accrued and unpaid interest thereon (not to exceed
the maximum amount permitted by applicable law), (ii) refunded to the
Borrower, or (iii) any combination of the foregoing, (d) the interest
rate 

 

79

 

payable hereunder or under any other Loan Document
shall be automatically subject to reduction to the maximum lawful contract rate
allowed under applicable usury laws (the “Maximum Rate”),
and this Agreement and the other Loan Documents shall be deemed to have been,
and shall be, reformed and modified to reflect such reduction in the relevant
interest rate, and (e) neither the Borrower nor any guarantor or endorser
shall have any action against the Administrative Agent or any Lender for any
damages whatsoever arising out of the payment or collection of any Excess
Interest.  Notwithstanding the foregoing,
if for any period of time interest on any of Borrower’s Obligations is
calculated at the Maximum Rate rather than the applicable rate under this
Agreement, and thereafter such applicable rate becomes less than the Maximum
Rate, the rate of interest payable on the Borrower’s Obligations shall remain
at the Maximum Rate until the Lenders have received the amount of interest
which such Lenders would have received during such period on the Borrower’s Obligations
had the rate of interest not been limited to the Maximum Rate during such
period.

 

Section 13.21.                  Construction.  Nothing contained herein shall be deemed or
construed to permit any act or omission which is prohibited by the terms of any
Collateral Document, the covenants and agreements contained herein being in
addition to and not in substitution for the covenants and agreements contained
in the Collateral Documents.

 

Section 13.22.                  Lender’s
Obligations Several.  The obligations
of the Lenders hereunder are several and not joint.  Nothing contained in this Agreement and no
action taken by the Lenders pursuant hereto shall be deemed to constitute the
Lenders a partnership, association, joint venture or other entity.

 

Section 13.23.                  Confidentiality.  Each of the Administrative Agent, the Lenders
and the L/C Issuer agrees to maintain the confidentiality of the Information
(as defined below), except that the Borrower, individually and on behalf of the
Subsidiaries, agrees that Information may be disclosed by each of the
Administrative Agent, the Lenders and the L/C Issuer (a) to its and
its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors in connection with the Loan
Documents and the transactions contemplated hereby (it being understood that
the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential, the party hereto making such disclosure being responsible for any
breach of this Section 13.23 by the Person to whom such disclosure is made),
(b) to the extent requested by any regulatory authority (including any
self-regulatory authority, such as the National Association of Insurance Commissioners),
(c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (A) any assignee of or
participant in, or any prospective assignee of or participant in, any of its
rights or obligations under this Agreement or (B) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower, the Subsidiaries and their obligations,
(g) with the consent of the Borrower, (h) to the extent such
Information (A) becomes publicly available other than as a result of a
breach of this Section or (B) becomes available to the Administrative
Agent, any Lender or the L/C Issuer on a 

 

80

 

nonconfidential basis from a source other than the
Borrower or the Subsidiaries and not in breach of any confidentiality
requirement or undertaking applicable to such source, (i) to rating agencies if
requested or required by such agencies in connection with a rating relating to
the Loans or Commitments hereunder, or (j) to entities which compile and
publish information about the syndicated loan market, provided that only basic
information about the pricing and structure of the transaction evidenced hereby
may be disclosed pursuant to this clause (j).

 

For purposes of this Section, “Information”
means all information received from the Borrower or any of the Subsidiaries
relating to the Borrower or any of the Subsidiaries or any of their respective
businesses or properties, provided that,
in the case of information received from the Borrower or the Subsidiaries after
the date hereof, such information is clearly identified at the time of delivery
as confidential.

 

Section 13.24.                  Submission
to Jurisdiction; Waiver of Jury Trial. 
Each of the parties hereto hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Northern District of
Illinois and of any Illinois State court sitting in the City of Chicago for
purposes of all legal proceedings arising out of or relating to this Agreement,
the other Loan Documents or the transactions contemplated hereby or
thereby.  The Borrower and the Guarantors
irrevocably waive, to the fullest extent permitted by law, any objection which
they may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.  THE BORROWER, THE GUARANTORS, THE
ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

 

Section 13.25.                  USA Patriot Act.  Each
Lender 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, which information includes the name and address of the
Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the USA Patriot Act.

 

[SIGNATURE PAGES TO FOLLOW]

 

81

 

This Agreement is entered into between us for the uses
and purposes hereinabove set forth as of the date first above written.

 

	
   

  	
  “BORROWER”

  
	
   

  	
   

  
	
   

  	
  LINCOLN
  EDUCATIONAL SERVICES CORPORATION

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Cesar
  Ribeiro

  
	
   

  	
  Name

  	
  Cesar Ribeiro

  
	
   

  	
  Title

  	
  VP.CFO

  
	
   

  	
   

  
	
   

  	
  “GUARANTORS”

  
	
   

  	
   

  
	
   

  	
  LINCOLN TECHNICAL
  INSTITUTE, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Cesar
  Ribeiro

  
	
   

  	
  Name

  	
  Cesar Ribeiro

  
	
   

  	
  Title

  	
  VP. CFO

  
	
   

  	
   

  
	
   

  	
  COMTECH SERVICES
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ David
  F.Carney

  
	
   

  	
  Name

  	
  David F.Carney

  
	
   

  	
  Title

  	
  Chairman &
  CEO

  
	
   

  	
   

  
	
   

  	
  SOUTHWESTERN
  ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Cesar
  Ribeiro

  
	
   

  	
  Name

  	
  Cesar Ribeiro

  
	
   

  	
  Title

  	
  VP.Treasurer

  
	
   

  	
   

  
	
   

  	
  NASHVILLE
  ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Cesar
  Ribeiro

  
	
   

  	
  Name

  	
  Cesar Ribeiro

  
	
   

  	
  Title

  	
  VP.Treasurer

  
				

 

S-1

 

	
   

  	
  NEW ENGLAND
  ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Cesar Ribeiro

  
	
   

  	
  Name

  	
  Cesar Ribeiro

  
	
   

  	
  Title

  	
  VP.Treasurer

  
				

 

S-2

 

	
   

  	
  “LENDERS”

  
	
   

  	
   

  
	
   

  	
  HARRIS TRUST AND SAVINGS BANK, in its 

  individual capacity as a Lender, as 

  L/C Issuer, and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Ronald Redd

  
	
   

  	
  Name:

  	
  Ronald Redd

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  111 West Monroe
  Street

  
	
   

  	
  Chicago,
  Illinois 60603

  
	
   

  	
  Attention:

  	
  Ronald Redd

  
	
   

  	
  Telecopy:

  	
  (312) 461-3128

  
	
   

  	
  Telephone:

  	
  (312) 293-8445

  
				

 

S-3

 

	
   

  	
  FLEET NATIONAL
  BANK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James
  C.Silva

  
	
   

  	
   

  	
  Name

  	
  James C.Silva

  
	
   

  	
   

  	
  Title

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  100 Federal
  Street

  	
   

  
	
   

  	
  Mailcode:
  MA5-100-09-04

  	
   

  
	
   

  	
  Boston,
  Massachusetts 02110

  	
   

  
	
   

  	
  Attention:

  	
  James C. Silva

  
	
   

  	
  Telecopy:

  	
  (617) 434-1692

  
	
   

  	
  Telephone:

  	
  (617) 434-8632

  
					

 

S-4

 

	
   

  	
  LASALLE BANK
  NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Paul
  Korrison

  
	
   

  	
   

  	
  Name

  	
  Paul Korrison

  
	
   

  	
   

  	
  Title

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  135 South
  LaSalle Street, Suite 1743

  
	
   

  	
  Chicago,
  Illinois 60603

  
	
   

  	
  Attention:

  	
  Paul Korrison

  
	
   

  	
  Telecopy:

  	
  (312) 904-4779

  
	
   

  	
  Telephone:

  	
  (312) 904-9292

  
					

 

S-5

 

	
   

  	
  U.S. BANK
  NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Matthew J.
  Schulz

  
	
   

  	
   

  	
  Name

  	
  Matthew J.
  Schulz

  
	
   

  	
   

  	
  Title

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  777 East
  Wisconsin Avenue

  
	
   

  	
  (MK-WI-TGCB)

  
	
   

  	
  Milwaukee,
  Wisconsin 53202

  
	
   

  	
  Attention:

  	
  Matthew J.
  Schulz

  
	
   

  	
  Telecopy:

  	
  (414) 765-4632

  
	
   

  	
  Telephone:

  	
  (414) 765-5724

  
					

 

S-6

 

	
   

  	
  JPMORGAN CHASE
  BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Harold V.
  Garrity III

  
	
   

  	
   

  	
  Name

  	
  Harold V.
  Garrity III

  
	
   

  	
   

  	
  Title

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  695 Route 46
  West

  
	
   

  	
  Fairfield, New
  Jersey 07004

  
	
   

  	
  Attention:

  	
  Hal Garrity

  
	
   

  	
  Telecopy:

  	
  (973) 439-5017

  
	
   

  	
  Telephone:

  	
  (973) 439-5052

  
					

 

S-7

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