EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into
as of November 14, 2000 by and among S-E Educational Holdings, a Delaware
corporation (the "Company"), and certain stockholders of the Company identified
from time to time on Schedule A hereto.
RECITALS:
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A. Concurrent with the execution and delivery of this Agreement, the
parties have entered into a Contribution Agreement and Plan of Reorganization
and Merger, dated as of the date hereof (the "Merger Agreement"), by and among
the Company, Earlychildhood.com LLC, a California limited liability company
("Earlychildhood"), SmarterKids.com, Inc., a Delaware corporation
("SmarterKids"), and S-E Educational Merger Corp., a newly-formed Delaware
corporation and a wholly-owned subsidiary of the Company ("Merger Sub").
B. Pursuant to the Merger Agreement, and upon the terms and subject to
the conditions set forth therein, the combination of Earlychildhood and
SmarterKids shall be effected through (i) the contribution to the Company by the
holders of LLC Interests (as defined in the Merger Agreement) of all of the
right, title and interest in and to their entire ownership interest in
Earlychildhood (the "Contribution") and (ii) the merger of Merger Sub with and
into SmarterKids such that SmarterKids becomes a wholly-owned subsidiary of the
Company (the "Merger" and, collectively with the Contribution, the
"Transactions").
C. Concurrent with the execution and delivery of this Agreement, and
as a condition and inducement to the parties' willingness to enter into the
Merger Agreement, certain holders of LLC Interests in Earlychildhood and certain
stockholders of SmarterKids have entered into a Lockup Agreement, dated as of
the date hereof (the "Lockup Agreement"), pursuant to which such persons have
agreed, among other things, not to sell the shares of Common Stock such persons
receive in the Transactions until the earlier to occur of (i) 180 days from the
Effective Time (as defined in the Merger Agreement) and (ii) the date upon which
a secondary offering of the Company's Common Stock for the purposes of effecting
the orderly sale of such shares has been consummated.
D. The Holders (as defined herein) desire to enter into this
Agreement for the purpose of providing a single, comprehensive, agreement
governing the resale registration by the Company for the benefit of the Holders
of the Common stock of the Company received by the Holders in the Transactions.
AGREEMENT:
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NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties contained herein, the parties agree as
follows:
1. Definitions. As used herein, the terms below shall have the
following meanings. Any such term, unless the context otherwise requires, may be
used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning provided in the Exchange Act and
the rules and regulations of the SEC promulgated thereunder.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Demand Holder" means any Holder or group of Holders controlling at
least 20% of the Registrable Securities then outstanding.
"Form S-3" shall mean such form under the Securities Act as in effect
on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
comparable information by reference to other documents filed by the Company with
the SEC.
"Holder" shall mean any Person who is the record owner of (i)
Registrable Securities or (ii) other securities of the Company convertible into,
or exercisable for, Registrable Securities, or any assignee thereof in
accordance with Sections 13 and 26 hereof. The identity of the Holders shall be
set forth on Schedule A which shall be revised from time to time as appropriate.
"Initiating Holders" shall have the meaning provided in Section 2(b).
"Other Stockholders" shall mean (i) any officers or directors of the
Company with respect to securities of the Company which are not Registrable
Securities, (ii) any Holders with respect to securities of the Company which are
not Registrable Securities and (iii) all other stockholders of the Company who
are entitled, by contract with the Company, to have securities included in a
registration; it being understood, in each case, that the only securities of the
Company to be registered hereunder shall be shares of Common Stock.
"Person" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity.
"Register," "registered," and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the SEC.
"Registrable Securities" shall mean (a) shares of Common Stock
beneficially owned by any Holder which were received in the Transactions, (b)
shares of Common Stock issuable upon conversion or exercise of any convertible
securities, warrants, options or rights beneficially owned by any Holder which
were received in the Transactions or (c) any Common Stock of the Company issued
to a Holder as (or issuable upon the conversion or exercise of any warrant,
option, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, any of
the securities described in (a) or (b) above; provided, however, that shares of
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as (i) they have not, after the Closing Date (as defined in the
Merger Agreement), been sold to or through a broker or dealer or underwriter in
a public distribution or otherwise pursuant to an effective Registration
Statement under the Securities Act or (ii) they have not, after the Closing Date
(as defined in
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the Merger Agreement), been sold to or through a broker or dealer or underwriter
in a public distribution or otherwise pursuant to an effective Registration
Statement under the Securities Act or (ii) they have not, after the Closing Date
(as defined in the Merger Agreement), been sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof (including any sale pursuant to Rules 144 or 145 of the
Securities Act or any similar provision) so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale. In no event shall any securities of the Company other than Common
Stock (or any successor security) constitute Registrable Securities.
The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities. The
number of shares of Registrable Securities owned by any Holder shall be deemed
to include the number of shares of Common Stock issuable pursuant to equity
securities convertible into, or exercisable for, convertible securities
(regardless of whether such securities are then convertible or exercisable,
except for compensatory stock options, which shall not be deemed outstanding
unless they have vested).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
2. Request for Registration.
(a) Demand Rights; General. If the Company shall receive at any time
after the date 180 days after the Closing Date (as defined in the Merger
Agreement), a written request from a Demand Holder that the Company file a
registration statement under the Securities Act covering the registration of
such Registrable Securities as shall be identified in the notice, then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of Sections
2(c) and 2(d), use its best efforts to effect within ninety (90) days of the
receipt of such request, and in any event as soon as practicable, the
registration on a Form S-1 registration statement under the Securities Act for
resale of all Registrable Securities which the Holders request to be registered
within fifteen (15) business days of receipt by each Holder from the Company of
notice of the pending registration. Such notice shall be provided by the
Company to all non-requesting Holders in accordance with Section 23 promptly
after receipt of notice by it from the Demand Holder initiating the registration
request.
(b) Underwriter; Cut-back. If the Demand Holder initiating the
registration request under Section 2(a) or Section 12 (the "Initiating Holder")
intends to distribute the Registrable Securities covered by its request by means
of an underwriting, it shall so advise the Company as a part of the request made
pursuant to this Agreement and the Company shall include such information in the
written notice to be delivered by the Company referred to in such Section. The
selection of the managing underwriter by the Initiating Holder in any
registration under this Section 2 shall require the consent of a majority of the
Company's Board of Directors, such consent not to be unreasonably withheld. In
the case of an underwritten offering, the right of any
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Holder to include Registrable Securities in such registration and the right of
any Other Stockholder to include shares of Common Stock in such registration
shall be conditioned upon such Holder's or Other Stockholder's, as applicable,
participation in such underwriting on customary terms. All Holders and Other
Stockholders proposing to distribute their securities through such underwriting
shall (together with the Company as provided in Section 4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Agreement, if the underwriter advises the Initiating Holder in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holder shall so advise the Company which shall
so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto and all Other Stockholders having securities which
would otherwise be underwritten pursuant hereto, and (i) first, the number of
shares of the Company held by Other Stockholders (other than Registrable
Securities) shall be excluded from such underwriting on a pro rata basis
according to the total number of securities (other than Registrable Securities)
requested for registration by such Other Stockholder to the extent deemed
advisable by the managing underwriter, including down to zero and (ii)
thereafter, if a further limitation of the number of shares is required, the
number of shares of Registrable Securities that may be included in the
underwriting shall be allocated on pro rata basis among all Holders according to
the total amount of Registrable Securities requested for registration by each
selling Holder. If any Holder of Registrable Securities or Other Stockholder who
has requested inclusion in such registration as provided above disapproves of
the terms of the underwriting, such Person may elect to withdraw therefrom by
written notice to the Company, and the securities so withdrawn shall also be
withdrawn from the registration. If the managing underwriter has not limited the
number of Registrable Securities and other securities to be underwritten, the
Company may include securities for its own account in such registration, if the
managing underwriter so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such registration
and underwriting will not thereby be limited.
(c) Limit on Demand Registrations. The Company is obligated to effect
only two (2) Demand Registrations pursuant to Section 2(a) and is obligated to
effect such Demand Registration only so long as the Registrable Securities
subject to such Demand Registration have a fair market value (based on the
closing market price on the trading day immediately prior to the date of the
written request referred to in Section 2(a) (as reported in the Wall Street
Journal), of not less than $10,000,000). For purposes of this Section 2(c),
no such Demand Registration shall be deemed to have taken place unless (i) the
registration statement filed pursuant to such Demand Registration has been
declared effective by the SEC and sales of the securities have been permitted
consistent with the plan of distribution described in the registration statement
or (ii) a Demand Registration shall be forfeited by operation of Section 6.
(d) Right to Defer; General. Notwithstanding the foregoing, if the
Company shall furnish to the Holders requesting a registration statement
pursuant to this Agreement a certificate signed by the Secretary of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company as set forth in a duly adopted written resolution, it would be
materially detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore necessary to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after
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receipt of the request of the Initiating Holder, provided, however, that the
Company may not utilize this right more than once in any twelve month period.
3. Company Registration. If (but without any obligation to do so) the
Company proposes to register (other than a registration effected by the Company
pursuant to Section 2 or Section 12 of this Agreement) any of its Common Stock
under the Securities Act in connection with the public offering of such
securities solely for cash (other than (i) a registration relating to the sale
of securities to participants in a Company stock plan, (ii) a registration on
any form which does not include or incorporate by reference substantially the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or (iii) a SEC Rule 145
transaction), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within fifteen (15) business days after delivery of such notice by the Company
in accordance with Section 23 hereof, the Company shall cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered subject to the underwriter cutback and other
provisions of Section 8 hereof.
4. Obligations of the Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) SEC Filing. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days or until all of the shares of Common Stock registered thereunder are sold,
whichever occurs sooner.
(b) Amendments. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement, and furnish such copies
thereof to the Holders and any underwriters as they may reasonably request.
(c) Prospectus. Furnish to the Holders and any underwriters such
numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them, and cause all related filings to be made
with the SEC as required by Rule 424.
(d) Blue Sky Qualification. Use all reasonable commercial efforts to
register and qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders and any underwriters, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
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(e) Underwriting Agreement. In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering, provided that such managing underwriter has been selected, to the
extent applicable, consistent with the provisions of Section 2(b). Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Prospectus Delivery. Promptly notify each Holder of Registrable
Securities covered by the registration statement at any time when the Company
becomes aware of the happening of any event as a result of which the
registration statement or the prospectus included in such registration statement
or any supplement to the prospectus (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading or, if for any other
reason it shall be necessary during such time period to amend or supplement the
registration statement or the prospectus in order to comply with the Securities
Act, whereupon, in either case, each Holder shall immediately cease to use such
registration statement or prospectus for any purpose and, as promptly as
practicable thereafter, the Company shall prepare and file with the SEC, and
furnish without charge to the appropriate Holders and managing underwriters, if
any, a supplement or amendment to such registration statement or prospectus
which will correct such statement or omission or effect such compliance and such
copies thereof as the Holders and any underwriters may reasonably request.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. Such information shall be used specifically for inclusion in the
registration statement and the prospectus and any supplement thereto with
respect to the Registrable Securities. The selling Holders shall promptly notify
the Company at any time when any such Holder becomes aware that any information
furnished pursuant to this Section 5 becomes materially incorrect.
6. Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions and stock transfer taxes incurred in
connection with the registration and sale of Registrable Securities pursuant to
Section 2, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, reasonable fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company, which counsel the Company may request be the Company's counsel if such
counsel is reasonably acceptable to the Initiating Holders and, if not, shall be
selected by the Initiating Holders; provided, however, that in the event the
Holders retain separate counsel, the reasonable fees and expenses to be
reimbursed shall not exceed $50,000 in a subsequent registration without the
prior consent of the Company. Notwithstanding the foregoing, however, in the
event a registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (other than
as a result of information concerning the business or financial condition of the
Company which is made known to the Holders after the date on which such
registration was requested), then either (i) such expenses shall be borne solely
by the Initiating Holders and not
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by the Company (in which case all Holders participating in such registration
shall bear such expenses pro rata based on the Registrable Securities to be
registered), or (ii) one of the demand registration rights provided for in
Section 2(a) shall be deemed forfeited. The election permitted by the previous
sentence shall be made by the Initiating Holders in proportion to the
Registrable Securities to be registered by each.
7. Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities pursuant to Section 3, including
(without limitation) all registration, filing, and qualification fees, printers
and accounting fees relating or apportionable thereto and fees and disbursements
of one counsel for the selling Holders selected by them (which the Company may
request be the Company's counsel if such counsel is reasonably acceptable to
such selling Holders), but excluding underwriting discounts and commissions and
stock transfer taxes relating to Registrable Securities; provided, however, that
in the event the Holders retain separate counsel, the reasonable fees and
expenses to be reimbursed shall not exceed $20,000 in a subsequent registration
without the prior consent of the Company.
8. Underwriting Requirements. In connection with any offering
contemplated by this Agreement which constitutes an underwriting, the Company
shall not be required to include any of the Holders' Registrable Securities or
any securities of any Other Stockholders in such underwriting unless such
Holders or Other Stockholders, as applicable, accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the person(s) entitled to select the underwriters, and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company, such determination to be
confirmed in writing upon the request of any Holder. If the total amount of
Registrable Securities or other securities requested by Holders and Other
Stockholders, as applicable, to be included in such offering exceeds the amount
of securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only (i) that number of
Registrable Securities (up to 100% of the Registrable Securities requested to be
included in such registration) which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among all selling Holders according to the
total amount of Registrable Securities requested for registration by each
selling Holder or in such other proportions as shall mutually be agreed to by
such selling Holders) and (ii) if all Registrable Securities requested for
registration by the selling Holders are included in such offering, that number
of securities of the Company which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among all Other Stockholders according to
the total amount of securities (other than Registrable Securities) requested for
registration by such Other Stockholders). If any Holder of Registrable
Securities or Other Stockholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such Person may
elect to withdraw therefrom by written notice to the Company, and the securities
so withdrawn shall also be withdrawn from the registration.
9. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
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10. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) Indemnification by the Company. To the fullest extent permitted
by law, the Company will indemnify and hold harmless each Holder and its
officers, directors, stockholders, partners, owners and agents, any underwriter
(as defined in the Securities Act) for such Holder, and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act, or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, or any state securities
law or any rule or regulation promulgated under the Securities Act, the Exchange
Act, or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by one law firm retained by them, plus appropriate local
counsel in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 10(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to which any Holder, underwriter
or controlling person may become subject to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
(b) Indemnification by Selling Holder. To the fullest extent
permitted by law, each selling Holder severally, but not jointly, will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
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settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that, in no event shall any
indemnity under this Section 10(b) exceed the net after-tax proceeds from the
offering actually received by such Holder.
(c) Procedures. Promptly after receipt by an indemnified party under
this Section 10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel
(plus appropriate local counsel), with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Section 10 to the extent (and only the extent) that
it is actually prejudiced thereby, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 10.
(d) Contribution. If the indemnification provided for in this Section
10 from the indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified parties on the other in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or related to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action; provided, however, that in no event shall the liability of
any selling Holder hereunder be greater in amount than the difference between
the dollar amount of the net after-tax proceeds received by such Holder upon the
sale of the Registrable Securities giving rise to such contribution obligation
and all amounts previously contributed by such Holder with respect to such
losses, claims, damages, liabilities and expenses. The amount paid or payable
to a party as a result of the losses, claims damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and Holders under this
Section 10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement, and otherwise.
11. Reports Under Exchange Act. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration generally or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the
effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) use all reasonable commercial efforts, including voluntarily
registering its Common Stock under Section 12 of the Exchange Act, to
qualify for registration on Form S-3 for the sale of their Registrable
Securities as soon as it becomes eligible to file such resale
registration statement;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, promptly upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC
Rule 144, the Securities Act and the Exchange Act, (at any time after
it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most
recent annual and/or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.
12. Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of at least the lesser of (x) 5,000,000 shares of Common
Stock (adjusted for all stock splits or similar transactions) or (y) Registrable
Securities with a fair market value, based on the closing market price on the
trading day immediately prior to the date of notice (as reported in the Wall
Street Journal), of not less than $2,500,000, a written request or requests
10
that the Company effect a registration on Form S-3 and any related reasonable
qualification or compliance with respect to such Registrable Securities, the
Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliance as may be so requested and as would
permit or facilitate the sale and distribution of all or a portion of
each such Holder's Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities or other securities, as the case may be, of any other
Holder or Other Stockholder, as applicable, joining in such request as
are specified in a written request given within ten (10) business days
after delivery of such notice by the Company in accordance with
Section 23 hereof; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or
compliance, pursuant to this Section 12: (i) if Form S-3 is not
available for such offering by the Holders; (ii) if the Company shall
furnish to the Holders a certificate signed by the Secretary of the
Company stating that in the good faith judgment of the Board of
Directors of the Company as set forth in a duly adopted written
resolution, it would be detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such
time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more
than sixty (60) days after receipt of the request of the Holders under
this Section 12; provided, however, that the Company shall not utilize
this right more than once in any twelve month period; (iii) if the
Company has, within the twelve (12) month period preceding the date of
such request, already effected two registrations for the Holders
pursuant to Section 2 and/or this Section 12; or (iv) in any
particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as reasonably practicable after
receipt of the request or requests of the Holders. All expenses
incurred in connection with such registrations requested by the
Holders, including (without limitation) all registration, filing,
qualification, printer's and accounting fees, the reasonable fees and
disbursements of counsel for the Company and the reasonable fees and
expenses of one counsel for the selling Holders, which counsel the
Company may request be the Company's counsel if such counsel is
reasonably acceptable to such selling Holders and, if not, shall be
selected by the Initiating Holders; provided, however, that (i) the
underwriters' discounts or commissions and stock transfer taxes
associated with Registrable Securities shall not be borne by the
Company, but shall be borne by the applicable Holders of such
Registrable Securities and (ii) in the event the Selling Holders
retain separate counsel, the reasonable fees and expenses reimbursed
shall not exceed $25,000 ($12,500 if the registration is not
underwritten) without the prior consent of the Company. Registrations
effected
11
pursuant to this Section 12 shall not be counted as demands for
registration effected pursuant to Section 2.
(d) For purposes of this Section 12, the provisions of Section 4
applicable to Form S-3 offerings shall apply and, if any such
registration is to be an underwritten offering, such registration
shall be subject to underwriter, cut-back and other provisions as
provided in Section 2(b).
13. Assignment of Registration Rights. Except as otherwise provided
herein, the rights to cause the Company to register Registrable Securities
pursuant to this Agreement may be assigned only to a purchaser, assignee or
transferee (each a "transferee") of in excess of 1,000,000 of the underlying
Registrable Securities; provided, however, that such transferee must be (i) a
member, partner or stockholder of such Holder and be receiving such Registrable
Securities upon distribution by such Holder of all Registrable Securities held
by such Holder to its members, partners or stockholders in accordance with their
proportionate ownership of the Holder, or (ii) an Affiliate of the Holder; and,
provided, further, that such transferee must have executed a joinder agreement
substantially in the form of Exhibit 1 and become bound to this Agreement. The
Company may, at is election, require that this covenant be enforced by requiring
all Holders to legend their share certificates in a manner consistent with the
provisions of this Agreement.
14. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the then outstanding shares Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to include such securities in any registration filed under Sections 2, 3
or 12 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of its securities will not reduce the amount of
the Registrable Securities of the Holders which are included; provided, however,
that this Section 14 shall not apply to issuances to employees, directors or
consultants approved by the Board of Directors.
15. "Market Stand-Off" Agreement. Each Holder hereby agrees that for a
period of ninety (90) days after any registration effected subsequent hereto
pursuant to Sections 2, 3 or 12 (provided the Holders are given written notice
of the offering and the right to participate therein as provided for in this
Agreement), such Holder shall not, unless otherwise agreed to by the managing
underwriters, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration; provided, however, that all
executive officers and directors of the Company and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements. In addition, each Holder agrees to acknowledge the
undertaking provided for in this Section 15 by entering into customary written
"lock-up" agreements with the managing underwriters of the relevant
underwriting. This requirement shall not apply to a Holder that, at the time of
receipt of the referenced notice from the Company, (a) beneficially owned less
than 1% of the outstanding shares of each class of the capital stock of the
Company,
12
(b) is not an Affiliate or an employee of the Company and (c) waives any further
benefits of this Agreement for it or any subsequent assignee or transferee of
its Registrable Securities.
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
16. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the then
outstanding shares of Registrable Securities; provided, however, that if any
amendment proposed hereunder would reasonably be expected to adversely affect
any right granted to a specific Holder herein (including the rights granted in
Section 2(a)(i)), such amendment shall require the consent of such Holder. Any
amendment or waiver effected in accordance with this Section 16 shall be binding
upon each Holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities and the Company.
17. Termination. The rights provided in this Agreement shall terminate
on the earlier of (i) five years from the Closing Date (as defined in the Merger
Agreement), or (ii) once the Company has registered the resale of all of the
shares of Registrable Securities under the Exchange Act.
18. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware (without giving effect to
its conflicts of law principles), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those matters the law of
the jurisdiction under which the respective entity derives its powers shall
govern.
19. 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.
20. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
21. Negotiation of Agreement. Each party hereto represents and agrees
with each other that it has been represented by or had the opportunity to be
represented by, independent counsel of its own choosing, and that it has had the
full right and opportunity to consult with its respective attorney(s), that to
the extent, if any, that it desired, it availed itself of this right and
opportunity, that it or its authorized officers (as the case may be) have
carefully read and fully understand this Agreement in its entirety and have had
it fully explained to them by such party's respective counsel, that each is
fully aware of the contents thereof and its meaning, intent and legal effect,
and that it or its authorized officer (as the case may be) is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence. This Agreement is the product of negotiations between
the parties
13
hereto represented by counsel and any rules of construction relating to
interpretation against the drafter of an agreement, shall not apply to this
Agreement and are expressly waived.
22. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another party hereto shall be in writing,
shall be deemed to have been duly given or delivered when delivered personally
or telecopied (receipt confirmed, with a copy sent by reputable overnight
courier), or one business day after delivery to a reputable overnight courier,
postage prepaid, to the address of the party set forth below such person's
signature on this Agreement or to such address as the party to whom notice is to
be given may provide in a written notice to each of the other parties to this
Agreement, a copy of which written notice shall be on file with the Secretary of
the Company.
23. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its terms
to the fullest extent permitted by law.
24. Further Assurances. Each of the parties shall, without further
consideration, use reasonable efforts to execute and deliver such additional
documents and take such other action as the other parties, or any of them may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
25. Successors and Assigns. This Agreement shall be binding upon and
all rights hereto shall inure to the benefit of the Company, its successors and
permitted assigns, and shall be binding upon and all rights hereto shall inure
to the benefit of the other parties hereto and their respective heirs,
successors and permitted assigns.
26. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the actions and transactions
contemplated by this Agreement. There are no restrictions, promises,
inducements, representations, warranties, covenants or undertakings with regard
to the registration of the Company's capital stock pursuant to the Securities
Act, other than those expressly set forth or referred to in this Agreement.
(Signature Pages Follow)
14
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
S-E EDUCATIONAL HOLDINGS CORP.
By: /s/ Ronald C. Elliott
-----------------------------
Name: Ronald C. Elliott
Title:
Address: 2 Lower Ragsdale
Suite 200
Monterey, CA 93940
EDUCATIONAL SIMON, L.L.C., a Delaware
limited liability company
By: /s/ Michael B. Lenard
-----------------------------
Name: Michael B. Lenard
Title: Vice President
Address:
QTL CORPORATION, a California corporation
By: /s/ Ronald C. Elliott
-----------------------------
Name: Ronald C. Elliott
Title:
Address:
ACACIA CAPITAL PARTNERS, LLC, a
California limited liability company
By: /s/ C.D.N. Thomas
-----------------------------
Name: C.D.N. Thomas
Title: Partner
Address: 12301 Wilshire Blvd., Suite 414
Los Angeles, CA
90025
NORTH BRIDGE VENTURE PARTNERS III, L.P.
By: NORTH BRIDGE VENTURE MANAGEMENT
III, L.P., its General Partner
By: /s/ Richard A. D'Amore
-----------------------------
Name: Richard A. D'Amore
Title: General Partner
Address:
COMMONWEALTH CAPITAL VENTURES II, L.P.
By: COMMONWEALTH CAPITAL VENTURES II, L.P.,
its General Partner
By: /s/ Michael Fitzgerald
-----------------------------
Name: Michael Fitzgerald
Title: General Partner
Address:
RONALD PHELAN, an Individual
By: /s/ Ronald Phelan
-----------------------------
Ronald Phelan
Address:
RICHARD PHELAN, an Individual
By: /s/ Richard Phelan
-----------------------------
Richard Phelan
Address:
RANDY DEAN, an Individual
By: /s/ Randy Dean
-----------------------------
Randy Dean
Address:
DR. JUDITH HERR, an Individual
By: /s/ Dr. Judith Herr
-----------------------------
Dr. Judith Herr
Address:
STEPHEN KAPLAN, an Individual
By: /s/ Stephen Kaplan
-----------------------------
Stephen Kaplan
Address:
RICHARD SECOR, an Individual
By: /s/ Richard Secor
-----------------------------
Richard Secor
Address: 15 Crawford St.
Needham, MA 02067
RICHARD D'AMORE, an Individual
By: /s/ Richard D'Amore
-----------------------------
Richard D'Amore
Address:
MICHAEL FITZGERALD, an Individual
By: /s/ Michael Fitzgerald
-----------------------------
Michael Fitzgerald
Address:
MICHAEL KOLOWICH, an Individual
By: /s/ Michael Kolowich
-----------------------------
Michael Kolowich
Address:
DAVID BLOHM, an Individual
By: /s/ David Blohm
-----------------------------
David Blohm
Address: 12 Rambling Rd.
Sudbury, MA 01726
JEFF PUCCI, an Individual
By: /s/ Jeffrey A. Pucci
-----------------------------
Jeff Pucci
Address: 205 Rosemary St.
Needham, MA 02494
RICHARD VIARD, an Individual
By: /s/ Richard Viard
-----------------------------
Richard Viard
Address: 169 North St.
Walpole, MA 02081
ALBERT NOYES, an Individual
By: /s/ Albert Noyes
-----------------------------
Albert Noyes
Address: 237 Varich Rd.
Needham, MA 02468
BRIAN HICKEY, an Individual
By: /s/ Brian Hickey
-----------------------------
Brian Hickey
Address:
ROBERT CAHILL, an Individual
By: /s/ Robert Cahill
-----------------------------
Robert Cahill
Address:
15
SCHEDULE A
HOLDERS:
Educational Simon, L.L.C.
QTL Corporation
Acacia Capital Partners, LLC
North Bridge Venture Partners III, L.P.
Commonwealth Capital Partners II, L.P.
Ronald Phelan
Richard Phelan
Randy Dean
Dr. Judith Herr
Stephen Kaplan
David Blohm
Jeff Pucci
Richard Viard
Albert Noyes
Richard Secor
Richard D'Amore
Michael Fitzgerald
Michael Kolowich
Brian Hickey
Robert Cahill
16