Document:

Exhibit 10.2

 

EMPLOYMENT
AGREEMENT (this “Agreement”), dated as of January 3, 2005, between
LINCOLN EDUCATIONAL SERVICES CORPORATION, a New Jersey corporation (the “Company”),
and David F. Carney (the “Executive”).

 

WHEREAS,
the Executive is currently employed by the Company;

 

WHEREAS,
the Executive and the Company (formerly Lincoln Technical Institute, Inc.)
entered into an Employment Agreement, dated January 1, 2003 (the “Original
Agreement”), which set forth the terms and conditions of the Executive’s employment
with the Company;

 

WHEREAS,
the Executive has received a written notice from the Company dated June 29,
2004 indicating that the Original Agreement was terminated on January 1,
2005;

 

WHEREAS,
the parties desire that this Agreement supersede the Original Agreement;

 

NOW,
THEREFORE, in consideration of the covenants and agreements hereinafter set
forth, the parties hereto agree as follows:

 

1.                                       EFFECTIVENESS
OF AGREEMENT

 

This
Agreement shall become effective, and shall supersede the Original Agreement as
of the date hereof (the “Effective Date”).

 

2.                                       EMPLOYMENT
AND DUTIES

 

2.1                                 Position
and Duties.  The Company hereby
continues to employ the Executive, and the Executive agrees to serve, as
Chairman and Chief Executive Officer of the Company, upon the terms and
conditions contained in this Agreement. 
The Executive shall report to the Board of Directors of the Company (the
“Board”) and perform duties and services for the Company commensurate
with the Executive’s position.  Except as
may otherwise be approved in advance by the Board or the Compensation Committee
of the Board (the “Committee”), the Executive shall render his services
exclusively to the Company during his employment under this Agreement and shall
devote substantially all of his working time and efforts to the business and
affairs of the Company.

 

2.2                                 Term
of Employment.  The Executive’s
employment under this Agreement shall commence as of the Effective Date and
shall terminate on the second anniversary thereof, unless terminated earlier
pursuant to Section 5 or extended pursuant to Section 6.1 (the “Employment
Period”).

 

2.3                                 Location
of Work.  The Executive shall be
based in the United States in West Orange, New Jersey.  However, the Executive agrees to undertake
whatever domestic and worldwide travel is required by the Company.  The Executive shall not be required or
permitted to relocate without the mutual, written consent of the Executive and
the Company.

 

 

3.                                       COMPENSATION

 

3.1                                 Base
Salary.  Subject to the provisions of
Sections 5 and 6, the Executive shall be entitled to receive a base salary (the
“Base Salary”) at a rate of $375,000 per annum during the Employment
Period.  Such rate shall be adjusted
upwards, but not downwards, from time to time by the Board or the Committee, in
its sole discretion.  The Base Salary
shall be paid in equal installments on a biweekly basis or in accordance with
the Company’s current payroll practices, less all required deductions.  The Base Salary shall be pro-rated for any
period of service less than a full year.

 

3.2                                 Annual
Bonus.  Subject to the provisions of
Sections 5 and 6, the Executive shall be eligible to earn an annual bonus for
2005 and each full calendar year thereafter during the Employment Period (the “Annual
Bonus”), the amount of which shall be based upon performance targets or
such other criteria that are determined by the Board or the Committee pursuant
to the provisions of the Company’s Key Management Team Incentive Compensation
Plan ( the “Incentive Plan”) in effect for the applicable calendar
year.  The Company shall pay the Annual
Bonus to the Executive no later than three weeks following receipt by the Board
or the Committee of the Company’s audited financial statements for the
applicable fiscal year.  The Annual Bonus
shall be prorated for any year in which the Executive’s employment is
terminated due to death or Disability (as defined in Appendix A).  If
during the Employment Period the Executive’s employment is terminated by the
Company (or any successor thereto) for Cause (as defined in Exhibit A) or the
Executive resigns from his employment other than for Good Reason (as defined in
Exhibit A) prior to the payout of any Annual Bonus due for a completed
calendar, the Executive shall not receive such Annual Bonus.

 

3.3                                 Reimbursement
of Expenses.  The Company shall
reimburse the Executive for reasonable travel and other business expenses
incurred by him in the fulfillment of his duties hereunder upon presentation by
the Executive of an itemized account of such expenditures, in accordance with
Company practices.

 

4.                                       EMPLOYEE
BENEFITS

 

4.1                                 General.  The Executive shall, during the Employment
Period, be included, to the extent eligible thereunder, in all employee benefit
plans, programs and arrangements (including, without limitation, any plans,
programs or arrangements providing for retirement benefits, profit sharing,
disability benefits, health and life insurance or vacation and paid holidays)
that shall be established by the Company for, or made available to, its senior
executives.  In addition, the Company
shall furnish the Executive with coverage by the Company’s customary director
and officer indemnification arrangements, subject to applicable law.

 

4.2                                 Automobile.  During the Employment Period, the Company
shall provide the Executive with an automobile for business and personal use
and pay for associated costs, including automobile insurance, parking and fuel,
in accordance with the Company’s practices as consistently applied to other key
employees.

 

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5.                                       TERMINATION
OF EMPLOYMENT

 

5.1                                 Effect
of an Involuntary Termination. 
Subject to the provisions of Sections 6, 9.5 and 11.2, if during the
Employment Period there is an “Involuntary Termination” (as defined below) of
the Executive’s employment, the Company shall pay to the Executive:

 

(i)                                     an
amount equal to two times the sum of (x) the Executive’s annual Base Salary, at
a rate in effect at the date of such termination and (y) the average of the
Annual Bonuses paid to the Executive for the two years immediately prior to the
year in which the Involuntary Termination occurs;

 

(ii)                                  all
outstanding reasonable travel and other business expenses that he incurred as
of the date of his termination; and

 

(iii)                               the
employer portion of the premiums necessary to continue the Executive’s health
care coverage until the earlier of (1) the first anniversary of the date of
such Involuntary Termination and (2) the date on which the Executive is covered
under another group health plan (which coverage, once obtained, must be
promptly disclosed by the Executive to the Company).

 

The Executive shall also be entitled to (i) the
continued use of an automobile and payment of associated costs by the Company
pursuant to Section 4.2 until the later of (x) the first anniversary of
the date of such Involuntary Termination and (y) the second anniversary of the
Effective Date and (ii) receive any other accrued compensation and benefits
otherwise payable to him as of the date of his termination, including, without
limitation, any Annual Bonus due for a completed calendar year.  All payments made under Sections 5.1(a)(i)
and (ii) above shall be made by the Company (or its successor) in a lump-sum
amount no later than thirty days after the date of the Executive’s termination
of employment.

 

For purposes of this
Agreement, “Involuntary Termination” means the termination of the
Executive’s employment (i) by the Company (or any successor thereto) without
Cause or (ii) by the Executive for Good Reason.

 

5.2                                 Effect
of a Termination for Cause or Resignation without Good Reason.  Subject to the provisions of Sections 3.2 and
6, if during the Employment Period, the Executive’s employment is terminated by
the Company (or any successor thereto) for Cause or the Executive resigns from
his employment other than for Good Reason, the Company shall pay to the
Executive, any (i) accrued but unpaid Base Salary earned through the date of
his termination, (ii) unreimbursed expenses, plus (iii) accrued but unpaid
employee benefits set forth in Section 4.1 above as determined in
accordance with the provisions of the applicable employee benefit plans or
programs of the Company.

 

5.3                                 Effect
of a Termination due to Death or Disability.  Subject to the provisions of Sections 3.2 and
6, if during the Employment Period, the Executive’s employment is terminated by
the Company (or any successor thereto) due to death or Disability, the Company
shall pay to the Executive, or if applicable his estate any (i) accrued but
unpaid Base Salary earned through the date of his termination, (ii)
unreimbursed expenses, plus (iii) accrued but unpaid employee benefits set
forth in Section 4.1 above as determined in accordance with the

 

3

 

provisions
of the applicable employee benefit plans or programs of the Company including,
without limitation, any Annual Bonus due but not yet paid for a completed
calendar year.

 

6.                                       EFFECT
OF A CHANGE IN CONTROL

 

6.1                                 New
Term of Employment.  Notwithstanding
anything to the contrary in this Agreement, upon the occurrence of a Change in
Control (as defined in Appendix A) during the Employment Period, the Company
(or its successor) shall continue the employment of the Executive, and the
Executive shall continue performing services for the Company, for a period of
two years commencing on the date of the Change in Control and ending on the
second anniversary of the date of the Change in Control.

 

6.2                                 Acceleration
of Options.  Notwithstanding anything
to the contrary in any of the Option Documents (as defined in Appendix A), upon
a Change in Control, all outstanding stock options granted by the Company or
any of its affiliates to the Executive shall become fully vested and
immediately exercisable on the date of the Change in Control.

 

6.3                                 Right
of Termination.  Notwithstanding
anything to the contrary in this Agreement, during a thirty-day period
commencing on the first anniversary of the date of the Change in Control, the
Executive shall have the right to resign from his employment with the Company
(or its successor) for any reason and receive an amount equal to (i) one times
the amount of his Base Salary, as is then in effect, and (ii) one times the
average of the Annual Bonuses paid to the Executive for the two years
immediately prior to the year in which such resignation occurs; provided,
however, that, if such resignation constitutes an Involuntary
Termination, Section 5.1 shall apply (in lieu of this Section 6.3).  All payments made under this Section 6.3
shall be made by the Company (or its successor) in a lump-sum amount no later
than thirty days after the date of the Executive’s termination of employment.

 

7.                                       REDUCTION
OF PAYMENTS

 

If any amounts due to the Executive under this
Agreement and any other agreement, plan or arrangement of or with the Company
or any of its affiliates constitute a “parachute payment” as such term is
defined in Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the
“Code”), and the amount of the parachute payment, reduced by all
federal, state and local taxes applicable thereto, including the excise tax
imposed pursuant to Section 4999 of the Code, is less than the amount the
Executive would receive if he was paid three times his “base amount”, as
defined in Section 280G(b)(3) of the Code, less $1.00, reduced by all
federal, state and local taxes applicable thereto, then the aggregate of the
amounts constituting the parachute payment will be reduced (or returned by the
Executive if it has already been paid to him) to an amount that will equal
three times the Executive’s base amount less $1.00.  Any determination to be made with respect to
this Section 7 shall be made by an accounting firm jointly selected by the
Company and the Executive and paid for by the Company,  and which may be the Company’s independent auditors.

 

8.                                       NO
ADDITIONAL RIGHTS

 

The
Executive shall have no right to receive any compensation or benefits upon his
termination or resignation of employment, except (i) as expressly set forth in
Sections 5 and 6

 

4

 

above,
where applicable, or (ii) as determined in accordance with the provisions of
the employee benefit plans or programs of the Company.

 

9.                                       RESTRICTIVE COVENANTS

 

9.1                                 Noncompetition.  During
the term of the Executive’s employment with the Company (or any successor
thereto) and continuing for one year thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, own,
manage, operate, join, control, or participate in the ownership, management, operation
or control of, or be employed by or connected in any manner with, any Competing
Business, whether for compensation or otherwise;  provided, however, that the
Executive shall be permitted to hold, directly or indirectly, less than 1% of
any class of securities of any entity that is listed on a national securities
exchange or on the NASDAQ National Market System.  Notwithstanding the foregoing, this Section 9.1
shall cease to apply upon the termination of the Executive’s employment with
the Company (or any successor thereto) resulting from (i) an Involuntary
Termination or (ii) the Executive’s resignation pursuant to Section 6.3.  For purposes of this Agreement, “Competing
Business” means any business within the United States that involves
for-profit, post secondary education.

 

9.2                                 Nonsolicitation.  During the term of the Executive’s employment
with the Company (or any successor thereto) and continuing for one year
thereafter, the Executive shall not, without the prior written consent of the
Company, directly or indirectly, as a sole proprietor, member of a partnership,
stockholder, investor, officer or director of a corporation, or as an employee,
associate, consultant or agent of any person, partnership, corporation or other
business organization or entity other than a member of the Company or any of
its subsidiaries or affiliates (the “Company Group”) (i) solicit or
endeavor to entice away from any member of the Company Group, any person or
entity who is, or was on the date of this Agreement, employed by, or serving as
a key consultant of, any member of the Company Group or (ii) solicit or
endeavor to entice away from any member of the Company Group, any person or
entity who is, or was on the date of this Agreement, a customer or client (or
reasonably anticipated to become a customer or client) of any member of the
Company Group.

 

9.3                                 Confidentiality.  (a) 
The Executive shall not at any time, except in performance of his
obligations to the Company Group under the provisions of this Agreement and as
an employee of the Company, directly or indirectly, disclose or use any secret
or protected information that he may learn or has learned by reason of his
association with any member of the Company Group.  The term “protected information” includes
trade secrets and confidential and proprietary business information of the
Company Group, 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, but shall exclude any information which (i) is or
becomes available to the public or is generally known in the industry or
industries in which the Company Group operates other than as a result of
disclosure by the Executive in violation of this Section 9.3 or (ii) the
Executive is required to disclose under any applicable laws, regulations or
directives of any government agency, tribunal or authority having jurisdiction
in the matter or under subpoena or other process of law.

 

5

 

(b)                                 The Executive hereby agrees that
he shall keep the provisions of this Agreement confidential, and shall not,
except as required by law, disclose such provisions to any person other than
his immediate family or professional advisors (who also must keep the
provisions of this Agreement confidential).

 

9.4                                 Exclusive
Property.  The Executive confirms
that all protected information is and shall remain the exclusive property of
the Company Group.  All business records,
papers and documents kept or made by the Executive relating to the business of
the Company shall be and remain the property of the Company Group.

 

9.5                                 Compliance
with Restrictive Covenants.  Without
intending to limit any other remedies available to the Company Group and except
as required by law, in the event that the Executive breaches or threatens to
breach any of the covenants set forth in this Section 9, (i) the Company
Group shall be entitled to seek a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 9 or such other relief as may be
required to enforce any of such covenants and (ii) all obligations of the
Company to make payments and provide benefits under this Agreement shall
immediately cease.

 

10.                                 ARBITRATION

 

10.1                           General.  Subject to Section 9.5 above, any
dispute or controversy arising under or in connection with this Agreement that
cannot be mutually resolved by the Executive and the Company shall be settled
exclusively by arbitration in West Orange, New Jersey before three arbitrators
of exemplary qualifications and stature. 
The Executive and the Company shall each select one arbitrator.  The arbitrators selected by the Executive and
the Company shall jointly select the third arbitrator.  Judgment may be entered on the arbitrators’
award in any court having jurisdiction. 
The Executive and the Company hereby agree that the arbitrators shall be
empowered to enter an equitable decree mandating specific enforcement of the
provisions of this Agreement.

 

10.2                           Associated
Costs.  The cost of the arbitration
shall be borne by the parties in the manner determined by the arbitrators.  If, however, the dispute concerns contractual
rights that arise in the event of or subsequent to a Change in Control, the
costs of arbitration (and any reasonable attorney’s fees incurred by the
Executive) shall be borne by the Company, unless the arbitrators determine that
the Executive commenced such arbitration on unfounded or unreasonable grounds.

 

11.                                 MISCELLANEOUS

 

11.1                           Communications.  All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, or on the fifth business day after
mailed if delivered personally or mailed by registered or certified mail
(postage prepaid, return receipt requested), to the relevant party at the
following address (or at such other address for a party as shall be specified
by like notice, except that notices of change of address shall be effective
upon receipt):

 

6

 

if to the Company:

 

200 Executive Drive, Suite 340

West Orange, New Jersey  07052

Attention: 
Alexandra Luster

 

if to the Executive:

 

14
Stuyvesant Road

Montvale,
New Jersey 07645

 

11.2                           Waiver
and Release.  As a condition to
receiving the payments set forth in Section 5.1 or Section 6.3, the
Executive shall be required to execute and not revoke a Waiver and Release
(relating to the Executive’s release of claims against the Company Group)
substantially in the form attached hereto as Appendix B.

 

11.3                           Waiver
of Breach; Severability.  (a)  The waiver by the Executive or the Company of
a breach of any provision of this Agreement by the other party hereto shall not
operate or be construed as a waiver of any subsequent breach by either party.

 

(b) 
The parties hereto recognize that the laws and public policies of
various jurisdictions may differ as to the validity and enforceability of
covenants similar to those set forth herein. 
It is the intention of the parties that the provisions of this Agreement
be enforced to the fullest extent permissible under the laws and policies of
each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws or policies) of
any provisions hereof shall not render unenforceable, or impair, the remainder
of the provisions hereof.  Accordingly,
if at the time of enforcement of any provision hereof, a court of competent
jurisdiction holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope, or geographic area reasonable under such circumstances shall be
substituted for the stated period, scope or geographical area and that such
court shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and geographical area permitted by law.

 

11.4                           Assignment;
Successors.  No right, benefit or
interest hereunder shall be assigned, encumbered, charged, pledged, hypothecated
or be subject to any setoff or recoupment by the Executive.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company.

 

11.5                           Entire
Agreement.  This Agreement and the
Option Documents represent the entire agreement of the parties and shall
supersede any and all previous contracts, arrangements or understandings
between the Company and the Executive relating to the subject matter hereof,
including, without limitation, the Original Agreement.  This Agreement may be amended at any time by
mutual written agreement of the parties hereto.

 

11.6                           Withholding.  The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and
such other deductions as may be required under the Company’s employee benefit
plans, if any.

 

7

 

11.7                           Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
Jersey.

 

11.8                           Headings.  The headings in this Agreement are for
convenience only and shall not be used to interpret or construe any of its
provisions.

 

11.9                           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

IN
WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and
the Executive has hereunto set his hand as of the day and year first written
above.

 

 

	
   

  	
  LINCOLN
  EDUCATIONAL SERVICES

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James J.
  Burke, Jr.

  	
   

  
	
   

  	
   

  	
  Name: James J.
  Burke, Jr.

  	
   

  
	
   

  	
   

  	
  Title: Chairman—Compensation
  Committee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David F.
  Carney

  	
   

  
	
   

  	
  David F. Carney

  

 

8

 

APPENDIX A

 

“Cause” shall mean, with respect to the
Executive, the following:

 

(a)                                  prior to a Change in Control,
(i) the Executive’s willful failure to perform the duties of his employment in
any material respect, (ii) malfeasance or gross negligence in the performance
of the Executive’s duties of employment, (iii) the Executive’s conviction of a
felony under the laws of the United States or any state thereof (whether or not
in connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment, (v) the Executive’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 Executive (other than an
act or omission resulting from the exercise by the Executive of good faith
business judgment), which is materially injurious to the financial condition or
business reputation of any member of the Company Group; provided, however,
that in the case of (i) and (ii) above, the Executive 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
30 days after he has received such notice, except that no such “cure
opportunity” shall be required in the case of two separate episodes occurring
within any 12-month period that give the Company the right to terminate for
cause for such reason; or

 

(b)                                 on or after a Change in Control,
(i) the Executive’s willful failure to perform the duties of his employment in
any material respect, (ii) malfeasance or gross negligence in the performance
of the Executive’s duties of employment, (iii) the Executive’s conviction of a
felony under the laws of the United States or any state thereof (whether or not
in connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided, however,
that in the case of (i) and (ii) above, the Executive 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
30 days after he has received such notice, except that no such “cure
opportunity” shall be required in the case of two separate episodes occurring
within any 12-month period that give the Company the right to terminate for
cause for such reason.

 

“Change in Control” shall mean:

 

(a)                                  on or prior to the date of the
consummation of the Company’s initial public offering (the “IPO”),

 

A-1

 

(i)                                     the merger of the Company with
or into another corporation as a result of which Stonington Partners, Inc. (“Stonington”),
together with Five Mile River Capital, LLC (“Five Mile”), own less than
50% of the outstanding common stock of the Company, no par value per share (the
“Common Stock”) (on a fully diluted basis, assuming exercise of all
options and warrants, whether or not then exercisable) of the surviving company
(or parent thereof);

 

(ii)                                  the sale of all or substantially
all of the assets of the Company to an entity not controlled by Stonington; or

 

(iii)                               the sale (in a single
transaction or series of related transactions) to an entity not controlled by
Stonington of shares of the Common Stock and as a result of which Stonington,
together with Five Mile, owns less than 50% of the outstanding Common Stock (on
a fully diluted basis, assuming exercise of all options and warrants, whether
or not then exercisable); provided, however, that an IPO shall
not constitute a Change in Control; and

 

(b)                                 following an IPO,

 

(i)                                     when a “person” (as defined in Section 3(a)(9)
of the Exchange Act), including a “group” (as defined in Section 13(d) and
14(d) of the Exchange Act), either directly or indirectly becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of 25% or more of
either (1) the then outstanding Common Stock, or (2) the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided, however, that the following acquisitions shall not constitute a
Change in Control:  (1) any acquisition
directly from the Company; (2) any acquisition by the Company; or (3) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company;

 

(ii)                                  when, during any period of 24
consecutive months during the Employment Period, the individuals who, at the
beginning of such period, constitute the Board (the “Company Incumbent
Directors”) cease for any reason other than death to constitute at least a
majority thereof;  provided, however,
that a director who was not a director at the beginning of such 24-month period
shall be deemed to be a Company Incumbent Director if such director was elected
by, or on the recommendation of or with the approval of at least two-thirds of
the directors of the Company, who then qualified as Company Incumbent
Directors;

 

A-2

 

(iii)                               when the stockholders of the
Company approve a reorganization, merger or consolidation of the Company
without the consent or approval of a majority of the Company Incumbent
Directors;

 

(iv)                              consummation of a merger,
amalgamation or consolidation of the Company with any other corporation, the
issuance of voting securities of the Company in connection with a merger,
amalgamation or consolidation of the Company or sale or other disposition of
all or substantially all of the assets of the Company or the acquisition of
assets of another corporation (each, a “Business
Combination”),
unless, in each case of a Business Combination, immediately following such
Business Combination, all or substantially all of the individuals and entities
who were the beneficial owners of the Common Stock outstanding immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of the then outstanding shares of common stock and 50% of the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Common Stock; or

 

(v)                                 a complete liquidation or
dissolution of the Company or the sale or other disposition of all or
substantially all of the assets of the Company;

 

provided, however, that in no
event shall a Change in Control be deemed to have occurred so long as Stonington,
together with Five Mile and any of their respective affiliates, remain the
person or group with the largest single beneficial ownership stake in the
outstanding Common Stock and combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
the Company’s directors; provided, further, that under no
circumstances shall the IPO or an initial public offering of the Company’s
affiliates constitute a Change in Control.

 

“Disability” shall mean the inability of the
Executive to perform substantially his duties and responsibilities to the
Company or any of its subsidiaries by reason of a physical or mental disability
or infirmity (a) for a continuous period of six months or (b) at such earlier
time as the Executive submits medical evidence of such disability satisfactory
to the Committee acting reasonably that the Executive has a physical or mental
disability or infirmity that shall likely prevent him from substantially
performing his 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 Committee determines
that the Executive has a physical or mental disability or infirmity as provided
in clause (b) herein.

 

A-3

 

“Good Reason” shall mean, with respect to the
Executive, any of the following (without his written consent):  (a) a reduction in the Executive’s Base
Salary or minimum guaranteed Annual Bonus; (b) an adverse change in the
Executive’s title, authority, duties, responsibilities or reporting lines as
specified in Section 2.1; (c) the relocation of the Executive’s principal
place of employment to a location more than 10 miles from West Orange, New Jersey;
(d) a failure by the Company to pay material compensation when due in
connection with the Executive’s employment; or (e) a material breach of this
Agreement by the Company; provided, however,
that, if any such Good Reason is susceptible to cure, then the Executive shall
not terminate his employment hereunder unless the Executive first provides the
Company with written notice of his intention to terminate and of the grounds
for such termination, and the Company has not, within 10 business days following
receipt of such written notice, cured such Good Reason.

 

“Option Documents” shall mean, with respect to
the Executive, each of the following documents to the extent applicable:  (a) the Management Stockholders Agreement,
dated January 1, 2002, among the Company, Back to School Acquisition LLC
and certain Management Investors; (b) the Lincoln Technical Institute
Management Stock Option Plan, effective January 1, 2002, and any stock
option agreement thereunder; (c) the Management Stock Subscription Agreement,
dated January 1, 2002, among the Company and certain Management Investors;
and (d) any stock pledge agreement or promissory note relating to the Executive’s
stock options or shares of Company common stock underlying such options.

 

A-4

 

APPENDIX B

 

B-1Exhibit
10.4

 

EMPLOYMENT AGREEMENT (this “Agreement”), dated
as of  January 3, 2005, between
LINCOLN EDUCATIONAL SERVICES CORPORATION, a New Jersey corporation (the “Company”),
and Lawrence E. Brown (the “Executive”).

 

WHEREAS, the Executive is currently employed by the
Company;

 

WHEREAS, the Executive and the Company (formerly
Lincoln Technical Institute, Inc.) entered into an Employment Agreement, dated January 1,
2003 (the “Original Agreement”), which set forth the terms and
conditions of the Executive’s employment with the Company;

 

WHEREAS, the Executive has received a written notice
from the Company dated June 29, 2004 indicating that the Original
Agreement was terminated on January 1, 2005;

 

WHEREAS, the parties desire that this Agreement
supersede the Original Agreement;

 

NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:

 

1.                                       EFFECTIVENESS
OF AGREEMENT

 

This Agreement shall become effective, and shall
supersede the Original Agreement as of the date hereof (the “Effective Date”).

 

2.                                       EMPLOYMENT
AND DUTIES

 

2.1                                 Position
and Duties.  The Company hereby
continues to employ the Executive, and the Executive agrees to serve, as
President and Chief Operating Officer of the Company, upon the terms and
conditions contained in this Agreement. 
The Executive shall report to the Chairman of the Board of Directors of
the Company (the “Board”) and the Chief Executive Officer of the Company
and perform duties and services for the Company commensurate with the Executive’s
position.  Except as may otherwise be
approved in advance by the Board or the Compensation Committee of the Board
(the “Committee”), the Executive shall render his services exclusively
to the Company during his employment under this Agreement and shall devote
substantially all of his working time and efforts to the business and affairs
of the Company.

 

2.2                                 Term
of Employment.  The Executive’s
employment under this Agreement shall commence as of the Effective Date and
shall terminate on the second anniversary thereof, unless terminated earlier
pursuant to Section 5 or extended pursuant to Section 6.1 (the “Employment
Period”).

 

2.3                                 Location
of Work.  The Executive shall be
based in the United States in West Orange, New Jersey.  However, the Executive agrees to undertake
whatever domestic and worldwide travel is required by the Company.  The Executive shall not be required or
permitted to relocate without the mutual, written consent of the Executive and
the Company.

 

 

3.                                       COMPENSATION

 

3.1                                 Base
Salary.  Subject to the provisions of
Sections 5 and 6, the Executive shall be entitled to receive a base salary (the
“Base Salary”) at a rate of $330,000 per annum during the Employment
Period.  Such rate shall be adjusted
upwards, but not downwards, from time to time by the Board or the Committee, in
its sole discretion.  The Base Salary
shall be paid in equal installments on a biweekly basis or in accordance with
the Company’s current payroll practices, less all required deductions.  The Base Salary shall be pro-rated for any
period of service less than a full year.

 

3.2                                 Annual
Bonus.  Subject to the provisions of
Sections 5 and 6, the Executive shall be eligible to earn an annual bonus for
2005 and each full calendar year thereafter during the Employment Period (the “Annual
Bonus”), the amount of which shall be based upon performance targets or
such other criteria that are determined by the Board or the Committee pursuant
to the provisions of the Company’s Key Management Team Incentive Compensation
Plan ( the “Incentive Plan”) in effect for the applicable calendar
year.  The Company shall pay the Annual
Bonus to the Executive no later than three weeks following receipt by the Board
or the Committee of the Company’s audited financial statements for the
applicable fiscal year.  The Annual Bonus
shall be prorated for any year in which the Executive’s employment is
terminated due to death or Disability (as defined in Appendix A).  If
during the Employment Period the Executive’s employment is terminated by the
Company (or any successor thereto) for Cause (as defined in Exhibit A) or the
Executive resigns from his employment other than for Good Reason (as defined in
Exhibit A) prior to the payout of any Annual Bonus due for a completed
calendar, the Executive shall not receive such Annual Bonus.

 

3.3                                 Reimbursement
of Expenses.  The Company shall
reimburse the Executive for reasonable travel and other business expenses
incurred by him in the fulfillment of his duties hereunder upon presentation by
the Executive of an itemized account of such expenditures, in accordance with
Company practices.

 

4.                                       EMPLOYEE
BENEFITS

 

4.1                                 General.  The Executive shall, during the Employment
Period, be included, to the extent eligible thereunder, in all employee benefit
plans, programs and arrangements (including, without limitation, any plans,
programs or arrangements providing for retirement benefits, profit sharing,
disability benefits, health and life insurance or vacation and paid holidays)
that shall be established by the Company for, or made available to, its senior
executives.  In addition, the Company
shall furnish the Executive with coverage by the Company’s customary director
and officer indemnification arrangements, subject to applicable law.

 

4.2                                 Automobile.  During the Employment Period, the Company
shall provide the Executive with an automobile for business and personal use
and pay for associated costs, including automobile insurance, parking and fuel,
in accordance with the Company’s practices as consistently applied to other key
employees.

 

2

 

5.                                       TERMINATION
OF EMPLOYMENT

 

5.1                                 Effect
of an Involuntary Termination. 
Subject to the provisions of Sections 6, 9.5 and 11.2, if during the
Employment Period there is an “Involuntary Termination” (as defined below) of
the Executive’s employment, the Company shall pay to the Executive:

 

(i)                                     an amount equal to
one and a half times the sum of (x) the Executive’s annual Base Salary, at a
rate in effect at the date of such termination and (y) the average of the
Annual Bonuses paid to the Executive for the two years immediately prior to the
year in which the Involuntary Termination occurs;

 

(ii)                                  all outstanding
reasonable travel and other business expenses that he incurred as of the date
of his termination; and

 

(iii)                               the employer portion of
the premiums necessary to continue the Executive’s health care coverage until
the earlier of (1) the first anniversary of the date of such Involuntary
Termination and (2) the date on which the Executive is covered under another
group health plan (which coverage, once obtained, must be promptly disclosed by
the Executive to the Company).

 

The Executive shall also be entitled to (i) the
continued use of an automobile and payment of associated costs by the Company
pursuant to Section 4.2 until the later of (x) the first anniversary of
the date of such Involuntary Termination and (y) the second anniversary of the
Effective Date and (ii) receive any other accrued compensation and benefits
otherwise payable to him as of the date of his termination, including, without
limitation, any Annual Bonus due for a completed calendar year.  All payments made under Sections 5.1(a)(i)
and (ii) above shall be made by the Company (or its successor) in a lump-sum
amount no later than thirty days after the date of the Executive’s termination
of employment.

 

For purposes of this Agreement, “Involuntary Termination” means
the termination of the Executive’s employment (i) by the Company (or any
successor thereto) without Cause or (ii) by the Executive for Good Reason.

 

5.2                                 Effect
of a Termination for Cause or Resignation without Good Reason.  Subject to the provisions of Sections 3.2 and
6, if during the Employment Period, the Executive’s employment is terminated by
the Company (or any successor thereto) for Cause or the Executive resigns from
his employment other than for Good Reason, the Company shall pay to the
Executive, any (i) accrued but unpaid Base Salary earned through the date of
his termination, (ii) unreimbursed expenses, plus (iii) accrued but unpaid
employee benefits set forth in Section 4.1 above as determined in
accordance with the provisions of the applicable employee benefit plans or
programs of the Company.

 

5.3                                 Effect
of a Termination due to Death or Disability.  Subject to the provisions of Sections 3.2 and
6, if during the Employment Period, the Executive’s employment is terminated by
the Company (or any successor thereto) due to death or Disability, the Company
shall pay to the Executive, or if applicable his estate any (i) accrued but
unpaid Base Salary earned through the date of his termination, (ii)
unreimbursed expenses, plus (iii) accrued but unpaid employee benefits set
forth in Section 4.1 above as determined in accordance with the

 

3

 

provisions of the applicable employee benefit plans or
programs of the Company including, without limitation, any Annual Bonus due but
not yet paid for a completed calendar year.

 

6.                                       EFFECT
OF A CHANGE IN CONTROL

 

6.1                                 New
Term of Employment.  Notwithstanding
anything to the contrary in this Agreement, upon the occurrence of a Change in
Control (as defined in Appendix A) during the Employment Period, the Company
(or its successor) shall continue the employment of the Executive, and the
Executive shall continue performing services for the Company, for a period of
two years commencing on the date of the Change in Control and ending on the
second anniversary of the date of the Change in Control.

 

6.2                                 Acceleration
of Options.  Notwithstanding anything
to the contrary in any of the Option Documents (as defined in Appendix A), upon
a Change in Control, all outstanding stock options granted by the Company or
any of its affiliates to the Executive shall become fully vested and immediately
exercisable on the date of the Change in Control.

 

6.3                                 Right
of Termination.  Notwithstanding
anything to the contrary in this Agreement, during a thirty-day period
commencing on the first anniversary of the date of the Change in Control, the
Executive shall have the right to resign from his employment with the Company
(or its successor) for any reason and receive an amount equal to (i) one and a
half times the amount of his Base Salary, as is then in effect, and (ii) one
and a half times the average of the Annual Bonuses paid to the Executive for
the two years immediately prior to the year in which such resignation occurs; provided,
however, that, if such resignation constitutes an Involuntary
Termination, Section 5.1 shall apply (in lieu of this Section 6.3).  All payments made under this Section 6.3
shall be made by the Company (or its successor) in a lump-sum amount no later
than thirty days after the date of the Executive’s termination of employment.

 

7.                                       REDUCTION
OF PAYMENTS

 

If any amounts due to the
Executive under this Agreement and any other agreement, plan or arrangement of
or with the Company or any of its affiliates constitute a “parachute payment”
as such term is defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”), and the amount of the
parachute payment, reduced by all federal, state and local taxes applicable
thereto, including the excise tax imposed pursuant to Section 4999 of the
Code, is less than the amount the Executive would receive if he was paid three
times his “base amount”, as defined in Section 280G(b)(3) of the Code,
less $1.00, reduced by all federal, state and local taxes applicable thereto,
then the aggregate of the amounts constituting the parachute payment will be
reduced (or returned by the Executive if it has already been paid to him) to an
amount that will equal three times the Executive’s base amount less $1.00.  Any determination to be made with respect to
this Section 7 shall be made by an accounting firm jointly selected by the
Company and the Executive and paid for by the Company,  and which may be the Company’s independent
auditors.

 

8.                                       NO
ADDITIONAL RIGHTS

 

The Executive shall have no right to receive any
compensation or benefits upon his termination or resignation of employment,
except (i) as expressly set forth in Sections 5 and 6

 

4

 

above, where applicable, or (ii) as determined in
accordance with the provisions of the employee benefit plans or programs of the
Company.

 

9.                                       RESTRICTIVE COVENANTS

 

9.1                                 Noncompetition.  During
the term of the Executive’s employment with the Company (or any successor
thereto) and continuing for one year thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, own,
manage, operate, join, control, or participate in the ownership, management,
operation or control of, or be employed by or connected in any manner with, any
Competing Business, whether for compensation or otherwise;  provided, however, that the
Executive shall be permitted to hold, directly or indirectly, less than 1% of
any class of securities of any entity that is listed on a national securities
exchange or on the NASDAQ National Market System.  Notwithstanding the foregoing, this Section 9.1
shall cease to apply upon the termination of the Executive’s employment with
the Company (or any successor thereto) resulting from (i) an Involuntary
Termination or (ii) the Executive’s resignation pursuant to Section 6.3.  For purposes of this Agreement, “Competing
Business” means any business within the United States that involves
for-profit, post secondary education.

 

9.2                                 Nonsolicitation.  During the term of the Executive’s employment
with the Company (or any successor thereto) and continuing for one year
thereafter, the Executive shall not, without the prior written consent of the
Company, directly or indirectly, as a sole proprietor, member of a partnership,
stockholder, investor, officer or director of a corporation, or as an employee,
associate, consultant or agent of any person, partnership, corporation or other
business organization or entity other than a member of the Company or any of
its subsidiaries or affiliates (the “Company Group”) (i) solicit or
endeavor to entice away from any member of the Company Group, any person or
entity who is, or was on the date of this Agreement, employed by, or serving as
a key consultant of, any member of the Company Group or (ii) solicit or
endeavor to entice away from any member of the Company Group, any person or
entity who is, or was on the date of this Agreement, a customer or client (or
reasonably anticipated to become a customer or client) of any member of the
Company Group.

 

9.3                                 Confidentiality.  (a) 
The Executive shall not at any time, except in performance of his
obligations to the Company Group under the provisions of this Agreement and as
an employee of the Company, directly or indirectly, disclose or use any secret
or protected information that he may learn or has learned by reason of his
association with any member of the Company Group.  The term “protected information” includes
trade secrets and confidential and proprietary business information of the
Company Group, 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, but shall exclude any information which (i) is or
becomes available to the public or is generally known in the industry or
industries in which the Company Group operates other than as a result of
disclosure by the Executive in violation of this Section 9.3 or (ii) the
Executive is required to disclose under any applicable laws, regulations or
directives of any government agency, tribunal or authority having jurisdiction
in the matter or under subpoena or other process of law.

 

5

 

(b)                                 The Executive hereby agrees that
he shall keep the provisions of this Agreement confidential, and shall not,
except as required by law, disclose such provisions to any person other than
his immediate family or professional advisors (who also must keep the
provisions of this Agreement confidential).

 

9.4                                 Exclusive
Property.  The Executive confirms
that all protected information is and shall remain the exclusive property of
the Company Group.  All business records,
papers and documents kept or made by the Executive relating to the business of
the Company shall be and remain the property of the Company Group.

 

9.5                                 Compliance
with Restrictive Covenants.  Without
intending to limit any other remedies available to the Company Group and except
as required by law, in the event that the Executive breaches or threatens to
breach any of the covenants set forth in this Section 9, (i) the Company
Group shall be entitled to seek a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 9 or such other relief as may be
required to enforce any of such covenants and (ii) all obligations of the
Company to make payments and provide benefits under this Agreement shall
immediately cease.

 

10.                                 ARBITRATION

 

10.1                           General.  Subject to Section 9.5 above, any
dispute or controversy arising under or in connection with this Agreement that
cannot be mutually resolved by the Executive and the Company shall be settled
exclusively by arbitration in West Orange, New Jersey before three arbitrators
of exemplary qualifications and stature. 
The Executive and the Company shall each select one arbitrator.  The arbitrators selected by the Executive and
the Company shall jointly select the third arbitrator.  Judgment may be entered on the arbitrators’
award in any court having jurisdiction. 
The Executive and the Company hereby agree that the arbitrators shall be
empowered to enter an equitable decree mandating specific enforcement of the
provisions of this Agreement.

 

10.2                           Associated
Costs.  The cost of the arbitration
shall be borne by the parties in the manner determined by the arbitrators.  If, however, the dispute concerns contractual
rights that arise in the event of or subsequent to a Change in Control, the
costs of arbitration (and any reasonable attorney’s fees incurred by the
Executive) shall be borne by the Company, unless the arbitrators determine that
the Executive commenced such arbitration on unfounded or unreasonable grounds.

 

11.                                 MISCELLANEOUS

 

11.1                           Communications.  All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, or on the fifth business day after
mailed if delivered personally or mailed by registered or certified mail
(postage prepaid, return receipt requested), to the relevant party at the
following address (or at such other address for a party as shall be specified
by like notice, except that notices of change of address shall be effective
upon receipt):

 

6

 

if to the Company:

 

200 Executive Drive,
Suite 340

West Orange, New
Jersey  07052

Attention:  Alexandra Luster

 

if to the Executive:

 

56
Redner Road

Morristown,
New Jersey 07960

 

11.2                           Waiver
and Release.  As a condition to
receiving the payments set forth in Section 5.1 or Section 6.3, the
Executive shall be required to execute and not revoke a Waiver and Release
(relating to the Executive’s release of claims against the Company Group)
substantially in the form attached hereto as Appendix B.

 

11.3                           Waiver
of Breach; Severability.  (a)  The waiver by the Executive or the Company of
a breach of any provision of this Agreement by the other party hereto shall not
operate or be construed as a waiver of any subsequent breach by either party.

 

(b) 
The parties hereto recognize that the laws and public policies of
various jurisdictions may differ as to the validity and enforceability of
covenants similar to those set forth herein. 
It is the intention of the parties that the provisions of this Agreement
be enforced to the fullest extent permissible under the laws and policies of
each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws or policies) of
any provisions hereof shall not render unenforceable, or impair, the remainder
of the provisions hereof.  Accordingly,
if at the time of enforcement of any provision hereof, a court of competent
jurisdiction holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope, or geographic area reasonable under such circumstances shall be
substituted for the stated period, scope or geographical area and that such
court shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and geographical area permitted by law.

 

11.4                           Assignment;
Successors.  No right, benefit or
interest hereunder shall be assigned, encumbered, charged, pledged,
hypothecated or be subject to any setoff or recoupment by the Executive.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company.

 

11.5                           Entire
Agreement.  This Agreement and the
Option Documents represent the entire agreement of the parties and shall
supersede any and all previous contracts, arrangements or understandings
between the Company and the Executive relating to the subject matter hereof,
including, without limitation, the Original Agreement.  This Agreement may be amended at any time by
mutual written agreement of the parties hereto.

 

11.6                           Withholding.  The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and
such other deductions as may be required under the Company’s employee benefit
plans, if any.

 

7

 

11.7                           Governing
Law.  This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New Jersey.

 

11.8                           Headings.  The headings in this Agreement are for
convenience only and shall not be used to interpret or construe any of its
provisions.

 

11.9                           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this
Agreement to be duly executed and the Executive has hereunto set his hand as of
the day and year first written above.

 

 

	
   

  	
  LINCOLN
  EDUCATIONAL SERVICES

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David F. Carney

  	
   

  
	
   

  	
   

  	
  Name: David F. Carney

  	
   

  
	
   

  	
   

  	
  Title: Chairman
  & CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Lawrence E.
  Brown

  	
   

  
	
   

  	
  Lawrence E.
  Brown

  

 

8

 

APPENDIX A

 

“Cause” shall mean, with respect to the
Executive, the following:

 

(a)                                  prior to a Change in Control,
(i) the Executive’s willful failure to perform the duties of his employment in
any material respect, (ii) malfeasance or gross negligence in the performance
of the Executive’s duties of employment, (iii) the Executive’s conviction of a
felony under the laws of the United States or any state thereof (whether or not
in connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment, (v) the Executive’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 Executive (other than an
act or omission resulting from the exercise by the Executive of good faith
business judgment), which is materially injurious to the financial condition or
business reputation of any member of the Company Group; provided, however,
that in the case of (i) and (ii) above, the Executive 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
30 days after he has received such notice, except that no such “cure
opportunity” shall be required in the case of two separate episodes occurring
within any 12-month period that give the Company the right to terminate for
cause for such reason; or

 

(b)                                 on or after a Change in Control,
(i) the Executive’s willful failure to perform the duties of his employment in
any material respect, (ii) malfeasance or gross negligence in the performance
of the Executive’s duties of employment, (iii) the Executive’s conviction of a
felony under the laws of the United States or any state thereof (whether or not
in connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided, however,
that in the case of (i) and (ii) above, the Executive 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
30 days after he has received such notice, except that no such “cure
opportunity” shall be required in the case of two separate episodes occurring
within any 12-month period that give the Company the right to terminate for
cause for such reason.

 

“Change in Control” shall mean:

 

(a)                                  on or prior to the date of the
consummation of the Company’s initial public offering (the “IPO”),

 

A-1

 

(i)                                     the merger of the Company with
or into another corporation as a result of which Stonington Partners, Inc. (“Stonington”),
together with Five Mile River Capital, LLC (“Five Mile”), own less than
50% of the outstanding common stock of the Company, no par value per share (the
“Common Stock”) (on a fully diluted basis, assuming exercise of all
options and warrants, whether or not then exercisable) of the surviving company
(or parent thereof);

 

(ii)                                  the sale of all or substantially
all of the assets of the Company to an entity not controlled by Stonington; or

 

(iii)                               the sale (in a single
transaction or series of related transactions) to an entity not controlled by
Stonington of shares of the Common Stock and as a result of which Stonington,
together with Five Mile, owns less than 50% of the outstanding Common Stock (on
a fully diluted basis, assuming exercise of all options and warrants, whether
or not then exercisable); provided, however, that an IPO shall
not constitute a Change in Control; and

 

(b)                                 following an IPO,

 

(i)                                     when a “person” (as defined in Section 3(a)(9)
of the Exchange Act), including a “group” (as defined in Section 13(d) and
14(d) of the Exchange Act), either directly or indirectly becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of 25% or more of
either (1) the then outstanding Common Stock, or (2) the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided, however, that the following acquisitions shall not constitute a
Change in Control:  (1) any acquisition
directly from the Company; (2) any acquisition by the Company; or (3) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company;

 

(ii)                                  when, during any period of 24
consecutive months during the Employment Period, the individuals who, at the
beginning of such period, constitute the Board (the “Company Incumbent
Directors”) cease for any reason other than death to constitute at least a
majority thereof;  provided, however,
that a director who was not a director at the beginning of such 24-month period
shall be deemed to be a Company Incumbent Director if such director was elected
by, or on the recommendation of or with the approval of at least two-thirds of
the directors of the Company, who then qualified as Company Incumbent
Directors;

 

A-2

 

(iii)                               when the stockholders of the
Company approve a reorganization, merger or consolidation of the Company
without the consent or approval of a majority of the Company Incumbent
Directors;

 

(iv)                              consummation of a merger,
amalgamation or consolidation of the Company with any other corporation, the
issuance of voting securities of the Company in connection with a merger,
amalgamation or consolidation of the Company or sale or other disposition of
all or substantially all of the assets of the Company or the acquisition of
assets of another corporation (each, a “Business
Combination”),
unless, in each case of a Business Combination, immediately following such
Business Combination, all or substantially all of the individuals and entities
who were the beneficial owners of the Common Stock outstanding immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of the then outstanding shares of common stock and 50% of the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Common Stock; or

 

(v)                                 a complete liquidation or
dissolution of the Company or the sale or other disposition of all or
substantially all of the assets of the Company;

 

provided, however, that in no
event shall a Change in Control be deemed to have occurred so long as
Stonington, together with Five Mile and any of their respective affiliates,
remain the person or group with the largest single beneficial ownership stake
in the outstanding Common Stock and combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of the Company’s directors; provided, further, that
under no circumstances shall the IPO or an initial public offering of the Company’s
affiliates constitute a Change in Control.

 

“Disability” shall mean the inability of the
Executive to perform substantially his duties and responsibilities to the
Company or any of its subsidiaries by reason of a physical or mental disability
or infirmity (a) for a continuous period of six months or (b) at such earlier
time as the Executive submits medical evidence of such disability satisfactory
to the Committee acting reasonably that the Executive has a physical or mental
disability or infirmity that shall likely prevent him from substantially
performing his 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 Committee determines
that the Executive has a physical or mental disability or infirmity as provided
in clause (b) herein.

 

A-3

 

“Good Reason” shall mean, with respect to the
Executive, any of the following (without his written consent):  (a) a reduction in the Executive’s Base
Salary or minimum guaranteed Annual Bonus; (b) an adverse change in the
Executive’s title, authority, duties, responsibilities or reporting lines as
specified in Section 2.1; (c) the relocation of the Executive’s principal
place of employment to a location more than 10 miles from West Orange, New
Jersey; (d) a failure by the Company to pay material compensation when due in
connection with the Executive’s employment; or (e) a material breach of this
Agreement by the Company; provided, however,
that, if any such Good Reason is susceptible to cure, then the Executive shall
not terminate his employment hereunder unless the Executive first provides the
Company with written notice of his intention to terminate and of the grounds for
such termination, and the Company has not, within 10 business days following
receipt of such written notice, cured such Good Reason.

 

“Option Documents” shall mean, with respect to
the Executive, each of the following documents to the extent applicable:  (a) the Management Stockholders Agreement,
dated January 1, 2002, among the Company, Back to School Acquisition LLC
and certain Management Investors; (b) the Lincoln Technical Institute
Management Stock Option Plan, effective January 1, 2002, and any stock
option agreement thereunder; (c) the Management Stock Subscription Agreement,
dated January 1, 2002, among the Company and certain Management Investors;
and (d) any stock pledge agreement or promissory note relating to the Executive’s
stock options or shares of Company common stock underlying such options.

 

A-4

 

APPENDIX
B

 

B-1

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