Document:

Employment Agreement with Walter T. Chesley

 
Exhibit 10.21

 
EMPLOYMENT AGREEMENT 
 
EMPLOYMENT AGREEMENT (this “Employment
Agreement”) dated as of February 25, 2003 (“Effective Date”), between UNIVERSAL HOSPITAL SERVICES, INC., a Delaware corporation (the “Company”), and Walter T. Chesley (the
“Executive”). 
 
The Company wishes to employ the
Executive, and the Executive wishes to accept employment with the Company, on the terms and conditions set forth in this Agreement. 
 
Accordingly, the Company and the Executive agree as follows: 
 
1. Position; Duties. The Company agrees to employ the Executive, and the Executive agrees to serve and accept employment, for the Term (as defined
below) as Senior Vice President, Human Resources of the Company, subject to the direction and control of the Chief Executive Officer and the Board of Directors of the Company (the “Board”), and, in connection therewith, to reside in
the Minneapolis, Minnesota area, to oversee and direct the development and execution of the human resources strategy of the Company and to perform such other duties as the Chief Executive Officer and Board may from time to time reasonably direct.
The Executive’s place of employment will be in the Minneapolis, Minnesota area. During the Term, the Executive agrees to devote substantially all of his time, energy, experience and talents during regular business hours, and as otherwise
reasonably necessary, to such employment, to devote his best efforts to advance the interests of the Company and not to engage in any other business activities of a material nature, as an employee, director, consultant or in any other capacity,
whether or not the Executive receives any compensation therefore, without the prior written consent of the Board; provided, however, that Executive shall be permitted to serve as a member of the Board of Directors of the entities
listed on Annex 1; 
 

provided, further, that the Executive shall be entitled to engage in such other business
activities as do not unreasonably conflict with the Executive’s duties and responsibilities to the Company pursuant to this Employment Agreement upon notice to and consent by the Company, which consent will not be unreasonably withheld. The
Executive will not be given duties inconsistent with his executive position. 
 
2. Term of Employment Agreement. The term of the Executive’s employment hereunder will begin as of the 15th day of March, 2003, and end as of the close of business on the Date of Termination (as defined in Section 4(h)) (the “Term”). 
 
3. Compensation and Benefits. 
 
(a) Base Salary. The Executive’s base salary will be an annual rate of $170,000, payable in equal bi-weekly
installments. The Board will review the Executive’s base salary annually and make adjustments as it deems appropriate. Necessary withholding taxes, FICA contributions and the like will be deducted from the Executive’s base salary.

 
(b) Bonus. In addition to the Executive’s base
salary, the Executive will be entitled to receive a bonus under the Company’s Executive Bonus Plan based on the Company’s achievement of the annual EBITDA target established by the Board for each fiscal year (each an “EBITDA
Target”), on the same basis as other executives of the Company, as such plan has been described to the Executive and may be amended from time to time by the Board. Any bonus respecting fiscal year 2003 shall be prorated as of the date of
the beginning of the Executive’s term of employment, March 15, 2003. The EBITDA Target for any fiscal year will be subject to adjustment by the Board, in good faith, to reflect any acquisitions, dispositions and material changes to capital
spending. 
 
(c) Options. As of the Effective Date, the
Company will grant to the Executive options to purchase a total of 100,000 shares of the Company’s common stock, $.01 par value (the “Common Stock”), at an exercise price of $13.64 per share, which options shall be granted
under the Company’s 1998 Stock Option Plan (the “Plan”). A copy of the Plan has been provided to the Executive. Such options will vest in accordance with, and will have such other terms as provided in, the Stock Option
Agreement attached hereto as Exhibit A. 
 
(d) Other. The
Executive will be entitled to such health, life, disability, pension, sick leave and other benefits as are generally made available by the Company to its executive employees. The Executive will also accrue five weeks paid vacation during each year
during the Term, in accordance with and subject to the Company’s vacation policy. 
 
4. Termination. 
 
(a)
Death. This Employment Agreement will automatically terminate upon the Executive’s death. In the event of such termination, the Company will pay to the Executive’s legal representatives the Executive’s base salary in monthly
installments and 
 

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continue to provide the benefits provided hereunder, in each case for twelve months following such
termination. 
 
(b) Disability. If during the Term the
Executive becomes physically or mentally disabled whether totally or partially, either permanently or so that the Executive is unable substantially and competently to perform his duties hereunder for a period of 90 consecutive days or for 90 days
during any six-month period during the Term (a “Disability”), the Company may terminate the Executive’s employment hereunder by written notice to the Executive. In the event of such termination, the Company will pay to the
Executive his base salary in monthly installments and continue to provide the benefits provided hereunder, in each case for twelve months following such termination. 
 
(c) Cause. The Executive’s employment hereunder may be terminated at any time by the Company for Cause (as
defined herein) by written notice to the Executive. In the event of such termination, all of the Executive’s rights to payments (other than payment for services already rendered) and any other benefits otherwise due hereunder will cease
immediately. The Company will have “Cause” for termination of the Executive’s employment hereunder if any of the following has occurred: 
 
(i) the commission by the Executive of a felony for which he is convicted; or 
 
(ii) the material breach by the Executive of his agreements or obligations under this Agreement, if such breach is described
in a written notice to the Executive referring to this Section 4(c)(ii), and such breach is not capable of being cured or has not been cured within thirty (30) days after receipt of such notice. 
 
(d) Without Cause. The Executive’s employment hereunder may be
terminated at any time by the Company without Cause by written notice to the Executive. In the event of such termination, the Company shall 
 
(i) continue to pay the Executive the Executive’s base salary and provide the Executive continued group health plan benefits at the active employee
rate and in accordance with the Executive’s group health plan elections on the date of termination through the date that is twelve months following the Date of Termination and 
 
(ii) pay to Executive within 10 days following the Date of Termination, a lump sum payment equal to the amount of
Executive’s bonus that would have been payable to the Executive for the fiscal year in which the Date of Termination occurs had the Company achieved 100% of the then applicable EBITDA Target for such fiscal year. 
 
(e) Resignation Without Good Reason. The Executive may terminate the
Executive’s employment hereunder upon sixty days’ prior written notice to the Company, without Good Reason (as defined herein). In the event of such termination, all of the Executive’s rights to payment (other than payment for
services already rendered) and any other benefits otherwise due hereunder will cease upon the date of such termination. 
 
 

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(f) Resignation For Good Reason. The Executive may terminate the Executive’s employment
hereunder at any time upon thirty days’ written notice to the Company, for Good Reason. In the event of such termination, the Company shall (i) continue to pay the Executive the Executive’s base salary and provide the Executive the
benefits provided in Section 3(d) hereunder through the date that is twelve months following the Date of Termination and (ii) pay to Executive within 10 days following the Date of Termination, a lump sum payment equal to the amount of
Executive’s bonus that would have been payable to the Executive for the fiscal year in which the Date of Termination occurs had the Company achieved 100% of the then applicable EBITDA Target for such fiscal year. 
 
The Executive will have “Good Reason” for termination of the
Executive’s employment hereunder if, other than for Cause, any of the following has occurred: 
 
(i) the Executive’s base salary or the bonus (as a percentage of base salary) to which the Executive may be entitled as the result of the Company reaching the then applicable EBITDA Target under
the Executive Bonus Plan has been reduced other than in connection with an across-the-board reduction (of approximately the same percentage) in executive compensation to executive employees imposed by the Board in response to negative financial
results or other adverse circumstances affecting the Company; 
 
(ii) the Board establishes an unachievable and commercially unreasonable EBITDA Target that the Company must achieve in order for the Executive to receive a bonus under Section 3(b) of this Employment Agreement; 
 
(iii) the Company has reduced or reassigned a material portion of the
Executive’s duties hereunder, has required the Executive to relocate outside the greater Minneapolis, Minnesota area or has relocated the corporate headquarters of the Company outside the greater Minneapolis, Minnesota area or has removed or
relocated outside the greater Minneapolis area, a material number of employees or senior management of the Company; or 
 
(iv) the Company has breached this Employment Agreement in any material respect 
 
(g) Change of Control. If the Executive is terminated without Cause or resigns for Good Reason at any time within six
months prior to, or twenty- four months following, a Change of Control, or the Executive terminates employment for any reason during the thirty (30) day period following the six month anniversary of the Change of Control, and notwithstanding
Sections 4(d) and 4(f), and in lieu of amounts provided under Sections 4(d) and 4(f), the Company shall 
 
(i) continue to pay the Executive the Executive’s base salary and provide the Executive the benefits provided in Section 3(d) hereunder through the date that is twelve months following the Date of
Termination and 
 
 

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(ii) pay to Executive within 10 days following the Date of Termination, a lump sum payment equal to the
amount of Executive’s bonus that would have been payable to the Executive for the fiscal year in which the Date of Termination occurs had the Company achieved 100% of the then applicable EBITDA Target for such fiscal year. 
 
Notwithstanding any provision of this Employment Agreement to the contrary, in
the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control of the Company or termination of Executive’s employment constitutes a “parachute payment,” within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) which would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall pay
the Executive in cash an additional amount (the “Gross-Up Payment”) such that, after payment by Executive of all taxes, including but not limited to income taxes (and any interest and penalties imposed with respect thereto) and the
Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the parachute payments. 
 
For purposes of this Section 4(g), “Change of Control” shall mean when any “person” (as
defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934), other than the Company, J.W. Childs Equity Partners, L.P. or any of its affiliates, any trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any Subsidiary, or any corporation owned, directly or indirectly, by the stockholders of the Company, in substantially the same proportions as their ownership of stock of the Company, acquires, in a single transaction or a series of
transactions (i) “beneficial ownership” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of securities representing more than 50% of the combined voting power of the Company (or, prior to a public offering, more
than 50% of the Company’s outstanding shares of Common Stock), or (ii) substantially all of the assets of the Company. For purposes of this Section 4(g), “Subsidiary” shall mean any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of a Change of Control, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain. 
 
(h) Date
and Effect of Termination. The date of termination of the Executive’s employment hereunder, pursuant to this Section 4, will be, (i) in the case of Section 4(a), the date of the Executive’s death, (ii) in the case of Sections 4(b), (c)
or (d), the date specified as the last day of employment in the Company’s notice to the Executive of such termination, (iii) in the case of Section 4(e), or 4(f), the date specified in the Executive’s notice to the Company of such
termination (in each case, the “Date of Termination”), or (iv) in the case of Section 4(g), the date specified in the Executive’s notice to the Company for resignation for Good Reason or the Company’s notice to the
Executive for termination without Cause. Upon any termination of the Executive’s employment hereunder pursuant to this Section 4, the Executive will not be entitled to any further payments or benefits of any nature pursuant to this Employment
Agreement, or as a result of such termination, except as specifically provided for in this 
 

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Employment Agreement or the Stockholders’ Agreement between the Company and the equity security
holders of the Company (the “Stockholders’ Agreement “), in any stock option plans adopted by the Company in accordance with Section 3(b) hereof, or as may be required by law. 
 
(i) Terminations Not a Breach. The termination of the Executive’s
employment pursuant to this Section 4 shall not constitute a breach of this Employment Agreement by the party responsible for the termination, and the rights and responsibilities of the parties under this Employment Agreement as a result of such
termination shall be as described in this Section 4. 
 
5.
Acknowledgment. The Executive agrees and acknowledges that in the course of rendering services to the Company and its clients and customers, the Executive will have access to and become acquainted with confidential information about the
professional, business and financial affairs of the Company and its affiliates. The Executive acknowledges that the Company is engaged and will be engaged in a highly competitive business, and the success of the Company in the marketplace depends
upon its good will and reputation for quality and dependability. The Executive recognizes that in order to guard the legitimate interests of the Company and its affiliates, it is necessary for the Company to protect all confidential information. The
existence of any claim or cause of action by the Executive against the Company shall not constitute and shall not be asserted as a defense to the enforcement by the Company of Section 6. The Executive further agrees that the Executive’s
obligations under Section 6 shall be absolute and unconditional. 
 
6. Confidentiality. The Executive agrees that during and at all times after the Term, the Executive will keep secret all confidential matters and materials of the Company (including its subsidiaries and affiliates), including,
without limitation, know- how, trade secrets, real estate plans and practices, individual office results, customer lists, pricing policies, operational methods, any information relating to the Company (including any of its subsidiaries and
affiliates) products, processes, customers and services and other business and financial affairs of the Company (collectively, the “Confidential Information”), to which the Executive had or may have access and will not disclose such
Confidential Information to any person other than the Company, their respective authorized employees and such other people to whom the Executive has been instructed to make disclosure by the Board, in each case only to the extent required in
connection with court process. “Confidential Information” will not include any information which is in the public domain during or after the Term, provided such information is not in the public domain as a consequence of disclosure by the
Executive in violation of this Employment Agreement. 
 
7.
Modification. The Executive agrees and acknowledges that the perpetual duration and scope of the covenants described in Section 6 are fair, reasonable and necessary in order to protect the good will and other legitimate interests of the
Company and its subsidiaries, that adequate consideration has been received by the Executive for such obligations, and that these obligations do not prevent the Executive from earning a livelihood. If, 
 

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however, for any reason any court of competent jurisdiction determines that any restriction contained in
Section 6 is not reasonable, that consideration is inadequate or that the Executive has been prevented unlawfully from earning a livelihood, such restriction will be interpreted, modified or rewritten to include as much of the duration, scope and
geographic area identified in Section 6 as will render such restrictions valid and enforceable. 
 
8. Equitable Relief. The Executive acknowledges that the Company will suffer irreparable harm as a result of a breach of this Employment Agreement by the Executive for which an adequate monetary
remedy does not exist and a remedy at law may prove to be be inadequate. Accordingly, in the event of any actual or threatened breach by the Executive of any provision of this Employment Agreement, the Company will, in addition to any other remedies
permitted by law, be entitled to obtain remedies in equity, including without limitation specific performance, injunctive relief, a temporary restraining order and/or a permanent injunction in any court of competent jurisdiction, to prevent or
otherwise restrain any such breach without the necessity of proving damages, posting a bond or other security, and to recover any and all costs and expenses, including reasonable counsel fees, incurred in enforcing this Employment Agreement against
the Executive, and the Executive hereby consents to the entry of such relief against the Executive and agrees not to contest such entry. Such relief will be in addition to and not in substitution of any other remedies available to the Company. The
existence of any claim or cause of action by the Executive against the Company or any of its subsidiaries, whether predicated on this Employment Agreement or otherwise, will not constitute a defense to the enforcement by the Company of this
Employment Agreement. The Executive agrees not to defend on the basis that there is an adequate remedy at law. 
 
9. Life Insurance. The Company may, at its discretion and at any time after the execution of this Employment Agreement, apply for and procure, as owner and for its own benefit, and at its own
expense, insurance on the Executive’s life, in such amount and in such form or forms as the Company may determine. The Executive will have no right or interest whatsoever in such policy or policies, but the Executive agrees that the Executive
will, at the request of the Company, submit himself to such medical examinations, supply such information and execute and deliver such documents as may be required by the insurance company or companies to which the Company or any such subsidiary has
applied for such insurance 
 
10. Successors; Assigns;
Amendment; Notice. This Employment Agreement will be binding upon and will inure to the benefit of the Company and will not be assigned by the Company without the Executive’s prior written consent. This Employment Agreement will be binding
upon the Executive and will inure to the benefit of the Executive’s heirs, executors, administrators and legal representatives, but will not be assignable by the Executive. This Employment Agreement may be amended or altered only by the written
agreement of the Company and the Executive. All notices or other communications permitted or required under this Employment Agreement will be in writing and will be deemed to have been duly given if delivered by hand, by facsimile transmission to
the 
 

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Company (if confirmed) or mailed (certified or registered mail, postage prepaid, return receipt requested)
to the Executive or the Company at the last known address of the party, or such other address as will be furnished in writing by like notice by the Executive or the Company to the other. 
 
11. Entire Agreement. This Employment Agreement, together with the agreements specifically referred to herein,
embodies the entire agreement and understanding between the Executive and the Company with respect to the subject matter hereof and supersedes all such prior agreements and understandings. 
 
12. Severability. If any term, provision, covenant or restriction of this Employment Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Employment Agreement will remain in full force and effect and will in no way be affected, impaired or
invalidated. 
 
13. Governing Law. This Employment Agreement
will be governed by and construed and enforced in accordance with the laws of the state of Minnesota applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws thereof. 
 
14. Counterparts. This Employment Agreement may be executed in two or
more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument, and all signatures need not appear on any one counterpart. 
 
15. Headings. All headings in this Employment Agreement are for
purposes of reference only and will not be construed to limit or affect the substance of this Employment Agreement. 
 
 

	 UNIVERSAL HOSPITAL SERVICES, INC.

	
	 By:
	 	 
	 	 	

	
	 Name:
	 	 
	 	 	

	
	 Title:
	 	 
	 	 	

	
	 	 	 
	
	 /s/     Walter T. Chesley

 Walter T. Chesley

 

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                                                                     EXHIBIT 4.1

                             AMENDMENT NO. 3 TO THE
                                RIGHTS AGREEMENT
                       OF NOBEL LEARNING COMMUNITIES, INC.

          This Amendment No. 3, dated as of March 12, 2003, amends the Rights
Agreement dated as of May 16, 2000, as amended by Amendment No. 1 dated as of
August 4, 2002 and as further amended by Amendment No. 2 dated as of August 5,
2002 (as amended and in effect from time to time, the "Rights Agreement"),
between Nobel Learning Communities, Inc., a Delaware corporation (the
"Company"), and Stocktrans, Inc., as Rights Agent (the "Rights Agent"). Terms
defined in the Rights Agreement and not otherwise defined herein are used herein
as so defined.

                              W I T N E S S E T H:

          WHEREAS, on May 16, 2000, the Board of Directors of the Company
authorized the issuance of Rights to purchase, on the terms and subject to the
provisions of the Rights Agreement, shares of the Company's Preferred Stock;

          WHEREAS, on May 16, 2000, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right for every share of
Common Stock of the Company outstanding on the Record Date and authorized the
issuance of one Right (subject to certain adjustments) for each share of Common
Stock of the Company issued between the Record Date and the Distribution Date;

          WHEREAS, on August 4, the Board of Directors of the Company approved
Amendment No. 1 to the Rights Agreement;

          WHEREAS, on August 5, the Board of Directors of the Company approved
Amendment No. 2 to the Rights Agreement;

          WHEREAS, the Merger Agreement referenced in Amendment No. 2 has been
terminated by the Company;

          WHEREAS, the Distribution Date has not occurred; and

          WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of
Directors of the Company has approved an amendment of certain provisions of the
Rights Agreement as set forth below;

          NOW, THEREFORE, the Rights Agreement is hereby amended as follows:

<PAGE>

I. Exceptions to the Definition of "Acquiring Person." Section 1(a)(ii) of the
Rights Agreement is hereby amended by restating it in its entirety as follows:

     "An Acquiring Person shall not include (A) the Company, (B) any Subsidiary
     of the Company, (C) any employee benefit plan of the Company, or of any
     Subsidiary of the Company, or any Person or entity organized, appointed or
     established by the Company for or pursuant to the terms of any such plan,
     (D) any Person who falls within the definition of an Acquiring Person
     pursuant to Section 1(a)(i), but falls within such definition solely as a
     result of a reduction in the number of shares of Common Stock outstanding
     due to the repurchase of shares of Common Stock by the Company unless and
     until such Person, after becoming aware that such Person has become an
     Acquiring Person as a result of such redemption or repurchase of Common
     Stock by the Company, acquires beneficial ownership of any additional
     shares of Common Stock, and (E) any Person who qualifies as an Acquiring
     Person pursuant to Section 1(a)(i) inadvertently, and who divests as
     promptly as practicable a sufficient number of shares of Common Stock so
     that such Person would no longer be an Acquiring Person pursuant to Section
     1(a)(i). None of KU Learning, L.L.C., Knowledge Universe Learning Group,
     L.L.C., Knowledge Universe II LLC nor their respective subsidiaries,
     Associates, Affiliates or designees (collectively, the "Exempted Persons")
     either individually, collectively or in any combination shall be or be
     deemed to be an Acquiring Person by virtue of or as a result of (i) actions
     taken in furtherance of the formation of a group consisting solely of
     Exempted Persons in connection with the Board Agreement and the
     transactions contemplated thereby, (ii) the execution of the Board
     Agreement, (iii) on or after the KU Loan Date (as that term is defined in
     the Board Agreement), the acquisition of the Warrants (as that term is
     defined in the Board Agreement) and/or the acquisition of any securities
     issuable pursuant to the Warrants, (iv) on or after the KU Loan Date, after
     giving effect to the issuance of the Warrants (and all securities issuable
     pursuant to the Warrants), the acquisition of up to an additional ten
     percent (10%) of the fully-diluted capital stock of the Company (calculated
     in accordance with SFAS 128) outstanding from time to time after the KU
     Loan Date; provided, that any such acquisition of capital stock pursuant to
     the foregoing clause (iv) is made in one or more transactions through
     purchases in the open market, or (v) the consummation of the other
     transactions contemplated by the Board Agreement. Notwithstanding anything
     in this Section 1(a)(ii) to the contrary, in the event that the Board
     Agreement is terminated in accordance with the terms of Section 5.4
     thereof, the foregoing clauses (iv) and (v) shall be deemed to be null and
     void, and of no further force or effect."

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<PAGE>

II. Amendment to Definition of "Beneficial Owner." Section 1(d) of the Rights
Agreement is hereby amended by replacing the last paragraph of such Section 1(d)
with the following:

          "Notwithstanding anything in this Section 1(d) to the contrary, none
          of the Exempted Persons, either individually, collectively or in any
          combination, shall be deemed to be a beneficial owner of or to
          beneficially own any securities beneficially owned, directly or
          indirectly, by any other Exempted Person regardless of any agreements,
          arrangements or understandings among any Exempted Persons, by virtue
          of or as a result of (i) actions taken in furtherance of the formation
          of a group consisting solely of Exempted Persons in connection with
          the Board Agreement and the transactions contemplated thereby, (ii)
          the execution of the Board Agreement, (iii) on or after the KU Loan
          Date, the acquisition of the Warrants and/or the acquisition of any
          securities issuable pursuant to the Warrants, (iv) on or after the KU
          Loan Date, after giving effect to the issuance of the Warrants (and
          all securities issuable pursuant to the Warrants), the acquisition of
          up to an additional ten percent (10%) of the fully-diluted capital
          stock of the Company (calculated in accordance with SFAS 128)
          outstanding from time to time after the KU Loan Date; provided, that
          any such acquisition of capital stock pursuant to the foregoing clause
          (iv) is made in one or more transactions through purchases in the open
          market, or (v) the consummation of the other transactions contemplated
          by the Board Agreement. Notwithstanding anything in this Section 1(d)
          to the contrary, in the event that the Board Agreement is terminated
          in accordance with the terms of Section 5.4 thereof, the foregoing
          clauses (iii) and (iv) shall be deemed to be null and void, and of no
          further force or effect."

III. Deletion of Certain Definitions. Section 1 of the Rights Agreement is
hereby amended by deleting in their entirety subsections (kk), (ll) and (mm).

IV. Additional Definition. Section 1 of the Rights Agreement is hereby amended
by inserting the following subsections at the end of such Section 1:

          "(kk) "Board Agreement" shall mean the Agreement Regarding Board of
          Directors and Amendment of Rights Agreement dated as of March 12, 2003
          by and among the Company, A.J. Clegg, KU Learning, L.L.C., Knowledge
          Universe Learning Group, L.L.C., Knowledge Universe II L.L.C., Steven
          B. Fink and Joseph Harch, as amended from time to time."

V. Amendment to Section 3(a). Section 3(a) of the Rights Agreement is hereby
amended by replacing the last sentence of such Section 3(a) with the following:

          "Notwithstanding anything in this Rights Agreement to the contrary, a
          Distribution Date shall not be deemed to have occurred solely by
          virtue of (a) actions taken in furtherance of the formation of a group
          consisting solely of Exempted Persons in connection with the Board
          Agreement and the transactions

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<PAGE>

          contemplated thereby, (b) the execution of the Board Agreement, (c) on
          or after the KU Loan Date, the acquisition of the Warrants and/or the
          acquisition of any securities issuable pursuant to the Warrants, (d)
          on or after the KU Loan Date, after giving effect to the issuance of
          the Warrants (and all securities issuable pursuant to the Warrants),
          the acquisition of up to an additional ten percent (10%) of the
          fully-diluted capital stock of the Company (calculated in accordance
          with SFAS 128) outstanding from time to time after the KU Loan Date;
          provided, that any such acquisition of capital stock pursuant to the
          foregoing clause (d) is made in one or more transactions through
          purchases in the open market, or (e) the consummation of the other
          transactions contemplated by the Board Agreement. Notwithstanding
          anything in this Section 3(a) to the contrary, in the event that the
          Board Agreement is terminated in accordance with the terms of Section
          5.4 thereof, the foregoing clauses (c) and (d) shall be deemed to be
          null and void, and of no further force or effect."

VI. Amendment to Section 7. Section 7(a) of the Rights Agreement is hereby
amended to read in its entirety as follows:

          "(a) Subject to Section 7(e) hereof, at any time after, but not
          before, the Distribution Date the registered holder of any Rights
          Certificate may exercise the Rights evidenced thereby (except as
          otherwise provided herein including, without limitation, the
          restrictions on exercisability set forth in Section 9(c), Section
          11(a)(iii) and Section 23(a) hereof) in whole or in part upon
          surrender of the Rights Certificate, with the form of election to
          purchase and the certificate on the reverse side thereof duly
          executed, to the Rights Agent at the principal office or offices of
          the Rights Agent designated for such purpose, together with payment of
          the aggregate Purchase Price with respect to the total number of one
          one-hundredths of a share (or other securities, cash or other assets,
          as the case may be) as to which such surrendered Rights are then
          exercisable, at or prior to the earlier of (i) 5:00 P.M., New York
          City time, on May 31, 2010, or such later date as may be established
          by the Board of Directors prior to the expiration of the Rights (such
          date, as it may be extended by the Board, the ("Final Expiration
          Date"), or (ii) the time at which the Rights are redeemed or exchanged
          as provided in Section 23 and Section 24 hereof (the earlier of (i)
          and (ii) being herein referred to as the "Expiration Date")."

VII. Amendment to Section 26. Section 26 of the Rights Agreement is hereby
amended by replacing the address of the Company following the first paragraph of
such Section 26 with the following:

          "Nobel Learning Communities, Inc.
          1615 West Chester Pike
          West Chester, PA  19382
          Attention: General Counsel"

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<PAGE>

VIII. Amendment to Section 27. Section 27 of the Rights Agreement is hereby
amended to read in its entirety as follows:

          "27. Supplements and Amendments. Prior to the Distribution Date, and
          subject to the penultimate sentence of this Section 27, the Company
          and the Rights Agent shall, if the Company so directs, supplement or
          amend any provision of this Agreement without the approval of any
          holders of certificates representing shares of Common Stock. From and
          after the Distribution Date, and subject to the penultimate sentence
          of this Section 27, the Company and the Rights Agent shall, if the
          Company so directs, supplement or amend this Agreement without the
          approval of any holders of Rights Certificates in order (i) to cure
          any ambiguity, (ii) to correct or supplement any provision contained
          herein which may be defective or inconsistent with any other
          provisions herein, (iii) to shorten or lengthen any time period
          hereunder (which lengthening or shortening, following the first
          occurrence of an event set forth in clauses (i) or (ii) of the first
          provision to Section 23(a) hereof, shall be effective only if there
          are Continuing Directors and shall require the concurrence of a
          majority of such Continuing Directors), or (iv) to change or
          supplement the provisions hereunder in any manner which the Company
          may deem necessary or desirable and which shall not adversely affect
          the interests of the holders of Rights Certificates (other than an
          Acquiring Person or an Affiliate or Associate of an Acquiring Person);
          provided, this Agreement may not be supplemented or amended to
          lengthen, pursuant to clause (iii) of this sentence, (A) a time period
          relating to when the Rights may be redeemed at such time as the Rights
          are not then redeemable, or (B) any other time period unless such
          lengthening is for the purpose of protecting, enhancing or clarifying
          the rights of, and/or the benefits to, the holders of Rights. Upon the
          delivery of a certificate from an appropriate officer of the Company
          which states that the proposed supplement or amendment is in
          compliance with the terms of this Section 27, the Rights Agent shall
          execute such supplement or amendment. Notwithstanding anything
          contained in this Agreement to the contrary, no supplement or
          amendment shall be made which changes the Redemption Price, the Final
          Expiration Date, the Purchase Price or the number of one
          one-hundredths of a share of Preferred Stock for which a Right is
          exercisable, and no supplement or amendment that changes the rights or
          duties of the Rights Agent under this Agreement shall be effective
          without the execution of such supplement or amendment by the Rights
          Agent. Prior to the Distribution Date, the interests of the holders of
          Rights shall be deemed coincident with the interests of the holders of
          Common Stock."

IX. Effectiveness. This Amendment shall be deemed effective as of the date first
written above, as if executed on such date. Except as amended hereby, the Rights
Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.

X. Miscellaneous. This Amendment shall be deemed to be a contract made under the
laws of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of

                                       5

<PAGE>

such state applicable to contracts to be made and performed entirely within such
state without giving effect to the principles of conflict of laws thereof. This
Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. If any
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, illegal or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

          [The Remainder of the Page has been Intentionally Left Blank]

                                       6

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
3 to the Rights Agreement to be duly executed as of the day and year first above
written.

                                                NOBEL LEARNING COMMUNITIES, INC.

                                                By: /s/ A. J. Clegg
                                                    ---------------------------
                                                Title: Chairman and CEO

Attest:

By:  /s/ John R. Frock
    --------------------------
Title: Vice Chairman

                                                STOCKTRANS, INC.

                                                By: /s/ Jonathan Miller
                                                    ----------------------------
                                                Title:  President

Attest:

By: /s/ Lisa Ann Klevence
    -----------------------------------------
Title: Assistant Vice President Operations

                                       7

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