Exhibit 10.42
REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement, dated as of May 27, 2003, by and
between Nobel Learning Communities, Inc., a Delaware corporation (the "Company")
and Children's Out-of-School Time, Inc., a Massachusetts corporation ("COST").
BACKGROUND:
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Whereas, contemporaneously herewith, the parties hereto are entering into a
certain settlement agreement of even date herewith (the "Settlement Agreement"),
pursuant to which the Company is issuing to COST certain shares of the Company's
common stock, $.001 par value (the "Common Stock"); and
Whereas, in that connection, the Company wishes to afford COST certain
rights with respect to such shares of Common Stock.
Now, Therefore, in consideration of the mutual promises made herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Agreement" means this Registration Rights Agreement, as the same from time
to time may be amended, supplemented or waived.
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Piggyback Registration" means any registration of Common Stock, (other
than a registration on Forms S-4 or S-8 or any successor or similar form then in
existence, a registration relating to the sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar benefit plan or a
registration relating to a business combination, or another form not available
for registering the Restricted Stock for sale to the public).
"Registration Expenses" means the expenses so described in Section 6.
"Restricted Stock" means the shares of Common Stock issued to COST pursuant
to the Settlement Agreement; provided, however, that, as to any such shares of
Common Stock, such shares will cease to be Restricted Stock when such shares:
(a) have been sold to the public pursuant to a registration or pursuant to Rule
144; (b) are eligible for resale to the public (i) within any three-month period
under Rule 144(e) under the Securities Act, or (ii) under Rule
144(k) under the Securities Act; (c) have been sold or otherwise transferred by
COST to any person or entity; or (d) have already been registered.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means the expenses so described in Section 6.
2. Restrictive Legend. Each certificate representing Restricted Stock
shall, except as otherwise provided in this Section 2 or in Section 3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the written opinion of counsel
satisfactory to the Company (it being agreed that ▇▇▇▇▇ ▇▇▇▇ LLP shall be
satisfactory) the securities being sold thereby may be publicly sold without
registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Restricted Stock, the holder thereof shall give written notice to the Company of
its intention to effect such transfer. Each such notice shall describe the
manner of the proposed transfer and, if requested by the Company, shall be
accompanied by an opinion of counsel satisfactory to the Company (it being
agreed that ▇▇▇▇▇ ▇▇▇▇ LLP shall be satisfactory) to the effect that the
proposed transfer may be effected without registration under the Securities Act,
whereupon the holder thereof shall be entitled to transfer such stock in
accordance with the terms of its notice. Each certificate for Restricted Stock
transferred as above provided shall bear the legend set forth in Section 2,
except that such certificate shall not bear such legend if the opinion of
counsel referred to above is to the effect that the transferee and any
subsequent transferee would be entitled to transfer such securities in a public
sale without registration under the Securities Act. The restrictions provided
for in this Section 3 shall not apply to securities which are not required to
bear the legend prescribed by Section 2 in accordance with the provisions of
that Section.
4. Piggyback Registration.
(a) If the Company at any time proposes to effect a Piggyback
Registration, whether for its own account or for the account of other security
holders or both, each such time it will give written notice to all holders of
outstanding Restricted Stock of its intention so to do. Upon the written request
of any such holder, received by the Company within 30 days after the giving of
any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use its best efforts to cause the Restricted Stock as to which registration
shall have been so requested to be included in
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the securities to be covered by the registration statement proposed to be filed
by the Company, all to the extent requisite to permit the sale or other
disposition by the holder (in accordance with its written request) of such
Restricted Stock so registered. In the event that any registration pursuant to
this Section 4 shall be, in whole or in part, an underwritten public offering of
Common Stock, the number of shares of Restricted Stock to be included in such an
underwriting may be reduced (pro rata among the requesting holders based upon
the number of shares of Restricted Stock owned by such holders and the shares of
Common Stock held by the persons referred to in clauses (ii) and (iii) of the
proviso to this sentence) if and to the extent that the managing underwriter
advises the Company that marketing factors require a limitation of the number of
shares of Common Stock to be underwritten in such registration; provided,
however, that such number of shares of Restricted Stock shall not be reduced if
any shares are to be included in such underwriting for the account of any person
other than (i) the Company, (ii) requesting holders of Restricted Stock, or
(iii) any other holders of Common Stock who as of May 27, 2003 are entitled to
contractual rights to be included in the registration statement.
(b) Notwithstanding anything herein to the contrary, the Company
shall not be required to file any registration statement registering the
Restricted Stock upon the request of the holders of the Restricted Stock during
the period beginning on the date of the Company's receipt of a notice from
requesting holders pursuant to that certain Registration Rights Agreement dated
August 30, 1995 by and among the Company, Allied Capital Corporation, Allied
Capital Corporation II, Allied Investment Corporation and Allied Investment
Corporation II, as amended by that certain First Amendment of Registration
Rights Agreement dated February 23, 1996 and further amended by that certain
First Amended and Restated Registration Rights Agreement dated June 30, 1998,
and ending on the date on which the distribution of the securities included in
such registration has been completed.
5. Registration Procedures. If and whenever the Company is required by
the provisions of Section 4 to use its best efforts to effect the registration
of any shares of Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use reasonable efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided), and comply with the provisions of the Securities Act with respect to
the disposition of all Restricted Stock covered by such registration statement
for such period;
(c) furnish to each seller of Restricted Stock such number of copies
of the registration statement and the prospectus included therein (including
preliminary prospectuses) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such registration statement;
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(d) use reasonable efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Restricted Stock or, in the case of
an underwritten public offering, the managing underwriter reasonably shall
request; provided, however, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) use reasonable efforts to list the Restricted Stock covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed; and
(f) notify each seller of Restricted Stock and each underwriter under
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of (i) the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; (ii) any request by the Commission for
amendments or supplements to the registration statement or the prospectus or for
additional information; (iii) the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; or (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Restricted Stock for sale in any jurisdiction or the initiation of any
proceeding for such purpose, whereupon each such seller shall forthwith refrain
from making any sales of Restricted Stock until such seller has either received
from the Company a prospectus supplement describing such event or has been
advised in writing by the Company that the use of the prospectus may be resumed.
For purposes of Sections 5(a) and 5(b), the period of distribution of
Restricted Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Restricted Stock
in any other registration shall be deemed to extend until the earlier of (1) the
sale of all Restricted Stock covered thereby, or (2) 120 days after the
effective date thereof.
It shall be a condition precedent to the obligations of the Company
pursuant to this Section 5 with respect to the Restricted Stock of any seller
that such seller shall furnish to the Company in writing such information
regarding itself and the proposed distribution by it as the Company may
reasonably request or as shall be necessary in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to this Agreement covering an
underwritten public offering, the Company and each seller agree to enter into a
written agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the
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Company's size and investment stature including, without limitation, customary
provisions with respect to indemnification of the underwriters of such offering.
6. Restrictions. If a seller's Restricted Stock is included in a
registration statement filed by the Company pursuant to this Agreement, then
such seller shall not offer, sell, transfer or otherwise dispose of any Common
Stock (and shall not effect any short sale of, any loan of, or any grant of any
option for the purchase of, any Common Stock), directly or indirectly, during
the 14 days prior to or within 120 days following the effective date of, such
registration statement, unless the managing underwriter otherwise agrees;
provided, however, that all persons entitled to registration rights with respect
to shares of Common Stock who are not parties to this Agreement, all other
persons selling shares of Common Stock in such offering, all persons holding in
excess of 1% of the capital stock of the Company on a fully diluted basis and
all executive officers and directors of the Company shall also have agreed not
to sell publicly their Common Stock under the circumstances and pursuant to the
terms set forth in this Section 6. The Company may impose stop-transfer
instructions with respect to the Common Stock subject to the foregoing
restriction during such restricted period.
7. Withdrawal of, and Delay in, Registration. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement for
any reason without incurring any liability to any seller. In addition,
notwithstanding anything contained in this Agreement to the contrary, the
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed 120 days, if the Company determines in good faith that: (a)
such registration might interfere with or affect the negotiation or completion
of any material transaction that is being contemplated by the Company, or (b)
there exists at the time material non- public information relating to the
Company which, in the reasonable opinion of the Company, should not be
disclosed; whereupon no sales of Restricted Stock shall be made by the sellers
during such period.
8. Expenses. All expenses incurred by the Company in complying with
Section 4 including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, and fees
of transfer agents and registrars, but excluding any Selling Expenses, are
called "Registration Expenses". All underwriting discounts, selling commissions
and fees of counsel to participating sellers applicable to the sale of
Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under this Agreement. All Selling Expenses in connection
with each registration statement under this Agreement shall be borne by the
participating sellers in proportion to the number of shares sold by each, or by
such participating sellers other than the Company (except to the extent the
Company shall be a seller) as they may agree.
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9. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, the Company will indemnify and
hold harmless each seller of such Restricted Stock thereunder, each underwriter
of such Restricted Stock thereunder and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant to Section 4, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, 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,
and will reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that: (i) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by or on behalf of any such seller, any such underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus; or (ii) the untrue statement or alleged untrue
statement or omission or alleged omission is corrected in a supplement or
amendment to the registration statement or prospectus provided by or on behalf
of the Company to such seller in a timely fashion which is not used by such
seller.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, each seller of such Restricted
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 4, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, 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, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that such seller will be liable hereunder in any such case if and only to
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the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus; and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9; then, and in each such case, the Company and such holder will contribute to
the
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aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Common Stock. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
11. Rule 144 Reporting. 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 Restricted Stock to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use 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
(c) furnish to each holder of Restricted Stock 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 holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
12. Representations and Warranties of the Company. The Company represents
and warrants to COST as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
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(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
13. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, transferees of any Restricted Stock), whether so expressed or not;
provided, however, that registration rights conferred herein on the holders of
Restricted Stock shall only inure to the benefit of a transferee of Restricted
Stock if (i) there is transferred to such transferee at least 10% of the total
shares of Restricted Stock originally issued pursuant to the Settlement
Agreement to the direct or indirect transferor of such transferee, or (ii) such
transferee is a partner, stockholder or affiliate of a party hereto.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by facsimile,
addressed as follows:
if to the Company or any other party hereto, at the address of such party
set forth in the Settlement Agreement;
if to any subsequent holder of Restricted Stock, to it at such address as
may have been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Restricted
Stock) or to the holders of Restricted Stock (in the case of the Company) in
accordance with the provisions of this Section 13(b).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of at least two-thirds of the outstanding shares of Restricted Stock.
(e) 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.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NOBEL LEARNING COMMUNITIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice Chairman
CHILDREN'S OUT-OF-SCHOOL TIME, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
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