Exhibit 3.7
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES F
CONVERTIBLE PREFERRED STOCK
OF
NOBEL LEARNING COMMUNITIES, INC.
Nobel Learning Communities, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
A. That, pursuant to Section 141(c)(2) of Title 8 of the Delaware Code of
1953, as amended, the Board of Directors of the Corporation (the "Board")
conferred upon a Special Committee (the "Committee") the power and authority to
adopt a resolution providing for the designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions of the Series F Convertible Preferred Stock; and
B. That, pursuant to authority conferred upon the Committee by the Board
and the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), and pursuant to the provisions of Section 151 of Title 8 of the
Delaware Code of 1953, as amended, the Committee, at a duly convened meeting of
the Committee held on September 2, 2003, adopted a resolution providing for the
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions of the
Series F Convertible Preferred Stock, which resolution is as follows:
WHEREAS, the Certificate of Incorporation of the Corporation provides
for two classes of shares known as Common Stock and Preferred Stock; and
WHEREAS, the Committee is authorized by the Board and the Certificate
of Incorporation to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable law
of the State of Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix the designation,
preferences and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Committee deems it advisable
to, and hereby does, designate a Series F Convertible Preferred Stock and
fixes and determines the preferences, rights, qualifications, limitations
and restrictions relating to the Series F Convertible Preferred Stock as
follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated as "Series F Convertible Preferred Stock" (referred to herein as the
"Series F Convertible Preferred Stock"), and shall have a per share purchase
price of $5.10 (which amount shall be subject to equitable adjustment whenever
there shall occur a
stock split, combination, reclassification or other similar event involving the
Series F Convertible Preferred Stock) (the "Original Series F Purchase Price").
2. Authorized Number. The number of shares constituting Series F
Convertible Preferred Stock shall be Eight Hundred Thousand (800,000).
3. Dividends.
(a) The holders of shares of Series F Convertible Preferred Stock
shall be entitled to receive, prior and in preference to the declaration or
payment of any dividend or distribution to the holders of shares of Common Stock
or of any other shares or securities of the Corporation ranking junior to such
Series F Convertible Preferred Stock with respect to the payment of dividends
and pari passu with the holders of shares of Series A Convertible Preferred
Stock and Series E Convertible Preferred Stock, dividends in the amounts set
forth below, payable quarterly on the last day of March, June, September and
December in each year, commencing on September 30, 2003. Dividends on each share
of Series F Convertible Preferred Stock shall be cumulative and accrue from the
original issuance of such share of Series F Convertible Preferred Stock (the
"Series F Original Issue Date"); provided, that the amount of dividends on the
first quarterly dividend date after the Series F Original Issue Date for any
share of Series F Convertible Preferred Stock shall equal the applicable
Dividend Rate (as that term is defined in Section 3(b) below) multiplied by a
fraction (A) the numerator of which shall equal the number of days from and
including the Series F Original Issue Date for such share to and including such
first quarterly dividend, and (B) the denominator of which is ninety (90).
(b) From the date of the first issuance of the Series F Convertible
Preferred Stock (the "First Issue Date") until the third anniversary of such
date, the Corporation shall pay to the holders of the issued and outstanding
shares of the Series F Convertible Preferred Stock dividends in accordance with
Section 3(a) above and this Section 3(b) in an amount equal to 5.0% per annum of
the Original Series F Purchase Price (the "Initial Dividend Rate"). The Initial
Dividend Rate shall be extended and remain in effect until the fifth anniversary
(rather than the third anniversary) of the First Issue Date unless the average
closing price of the Corporation's Common Stock for the last five (5) trading
days immediately preceding the third anniversary of the First Issue Date as
reported on Nasdaq or such other principal exchange is equal to or less than
$8.00 per share (which amount shall be subject to equitable adjustment whenever
there shall occur a stock split, combination, reclassification or other similar
event involving the Common Stock), in which case from the day after the third
anniversary of the First Issue Date until the fifth anniversary of such date,
the Corporation shall pay to the holders of the issued and outstanding shares of
the Series F Convertible Preferred Stock cumulative dividends in an amount equal
to 8.0% per annum of the Original Series F Purchase Price (the "Default Dividend
Rate"). In any event, from and after the day after the fifth anniversary of the
First Issue Date, the Corporation shall pay to the holders of the issued and
outstanding shares of the Series F Convertible Preferred Stock cumulative
dividends in an amount equal to 12.0% per annum of the Original Series F
Purchase Price (the
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"Subsequent Dividend Rate;" each of the Initial Dividend Rate, the Default
Dividend Rate and the Subsequent Dividend Rate being sometimes referred to
herein as the "Dividend Rate"). Notwithstanding the foregoing, the Initial
Dividend Rate shall be increased to the Default Dividend Rate if, during the
twelve (12) month period ending as of the last day of the fiscal month of June,
2004, the Corporation's EBITDA (calculated in accordance with GAAP) is not
$12,000,000 or greater and thereafter, the Default Dividend Rate shall remain in
place until the Corporation concludes a fiscal year with an EBITDA of
$14,000,000 or greater, whereupon the Default Dividend Rate shall revert back to
the Initial Dividend Rate; provided, however, if at the time the Corporation
achieves an EBITDA of $14,000,000 or greater, the Default Dividend Rate or the
Subsequent Dividend Rate is otherwise applicable under one of the foregoing
provisions of this Section 3(b) then the Default Dividend Rate shall then be set
at the Default Dividend Rate or the Subsequent Dividend Rate, as otherwise
applicable in accordance with such provision. The Dividend Rate applicable in
accordance with the foregoing sentence shall begin and/or end as of the
beginning or end of the applicable fiscal period. Dividends with respect to the
Series F Convertible Preferred Stock shall be paid quarterly as follows: (A)
until the third anniversary of the First Issue Date (or if the first quarterly
dividend payable is less than a full quarterly dividend, until an aggregate of
twelve quarters have been paid), dividends will be paid in additional shares of
Series F Convertible Preferred Stock valued at the Original Series F Purchase
Price on any given quarterly dividend date, and (B) from and after the third
anniversary of the First Issue Date (or if the first quarterly dividend payable
is less than a full quarterly dividend, from and after the date that an
aggregate of twelve quarters have been paid under clause (A) above), at the
Corporation's option and in its sole discretion, dividends will be paid (i) in
cash or (ii) in additional shares of Series F Convertible Preferred Stock,
valued as described in clause (A) above, provided, however, if and to the extent
the payment of a quarterly dividend in additional shares of Series F Convertible
Preferred Stock would, when added to the number of shares of Common Stock into
which the Series F Convertible Preferred Stock is then convertible, exceed the
number of shares then permitted to be issued without stockholder approval in
violation of the rules, regulations and interpretation of Nasdaq or the NASD (as
determined in good faith in the sole discretion of the Board of the
Corporation), such quarterly dividend shall be paid in cash unless the
Corporation shall obtain such stockholder approval with respect to the issuance
of such additional shares of Series F Convertible Preferred Stock. The
Corporation shall be obligated to declare and pay each quarterly dividend as set
forth above so long as the Corporation has funds that may be paid out as
dividends without violating any law, rule or regulation by which the Corporation
or its directors are bound. Any accrued but unpaid dividends shall be paid (in
cash or in kind at the holders' election, subject to the limitations set forth
above), immediately prior to, a Liquidation Event (as defined in Section 4(a)
below) or conversion of the Series F Convertible Preferred Stock pursuant to
Sections 5 or 6 hereof, as well as immediately prior to the completion by the
Corporation of a public offering of Common Stock raising net proceeds of at
least $10 million.
(c) If a dividend on the Common Stock is declared by the Board, then
the Board shall simultaneously declare a dividend on the Series F Convertible
Preferred Stock in an amount per share equal to (a) the product of (i) the
dividend per share of
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Common Stock, multiplied by (ii) the number of shares of Common Stock into which
all of the outstanding Series F Convertible Preferred Stock could then be
converted, divided by (b) the number of Series F Convertible Preferred Stock
then outstanding, and rounded to the nearest cent, each such determination to be
made as of the record date for the determination of the dividend.
(d) The term "dividend," when used in this Section 3, shall refer to
any dividend which is not a stock dividend described in Section 8(d) hereof.
4. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (each a "Liquidation Event"), the
holders of the shares of Series F Convertible Preferred Stock shall be entitled
to receive, pari passu with the respective Liquidation Payments due to holders
of the Corporation's Series A Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock or Series E Convertible
Preferred Stock, but before any distribution or payment is made upon any Common
Stock or any other class or series of stock ranking junior to the Series F
Convertible Preferred Stock as to distribution of assets upon liquidation, an
amount per share equal to the Original Series F Purchase Price, plus any accrued
but unpaid dividends. If upon such Liquidation Event, the assets to be
distributed among the holders of Series F Convertible Preferred Stock and any
other class or series of stock ranking pari passu to the Series F Convertible
Preferred Stock as to distribution of assets upon liquidation shall be
insufficient to permit payment to the holders of Series F Convertible Preferred
Stock of the entire amount of the Liquidation Payment, then the entire assets of
the Corporation available for distribution to the stockholders shall be
distributed ratably among the holders of Series F Convertible Preferred Stock
and any other class or series of stock ranking pari passu to the Series F
Convertible Preferred Stock as to distribution of assets upon liquidation in
accordance with the sums that would be payable on such distribution if all sums
payable thereon to holders of all shares of such series were paid in full. Upon
any such Liquidation Event, after the holders of Series F Convertible Preferred
Stock and any other class or series of stock ranking pari passu to the Series F
Convertible Preferred Stock as to distribution of assets upon liquidation shall
have been paid in full the liquidation payment amounts to which they shall be
entitled, the remaining net assets of the Corporation shall be distributed to
the holders of Series F Convertible Preferred Stock until the amount so
distributed under this Section 4 in respect of each share of Series F
Convertible Preferred Stock shall equal 1.5 times the Original Series F Purchase
Price (the "Series F Liquidation Preference"), it being understood and agreed
that such distribution shall be made on a pari passu basis with the holders of
Series E Convertible Preferred Stock in satisfaction of the rights such holders
have under Section 4(a) of the Certificate of Designation, Preferences and
Rights of Series E Convertible Preferred Stock of the Corporation.
Notwithstanding the foregoing, upon any Liquidation Event, the holders of the
Series F Convertible Preferred Stock shall be entitled to receive the greater of
(i) the Series F Liquidation Preference (in accordance with the procedures set
forth above), or (ii) the amount per share such holders would have received if
all shares of Series F
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Convertible Preferred Stock had been converted into Common Stock immediately
prior to the Liquidation Event (such amount, the "Liquidation Payment"). Upon
any such Liquidation Event, after the holders of the Series F Convertible
Preferred Stock and any other class or series of stock ranking pari passu to the
Series F Convertible Preferred Stock as to distribution of assets upon
liquidation shall have been paid in full the amounts to which they shall be
entitled, the remaining net assets of the Corporation shall be distributed to
the holders of Common Stock.
(b) Written notice of such Liquidation Event, stating a payment date,
the amount of the Liquidation Payment and the place where said Liquidation
Payment shall be payable, shall be given by mail, postage prepaid, not less than
30 days prior to the payment date stated therein, to the holders of record of
Series F Convertible Preferred Stock, such notice to be addressed to each such
holder at its post office address as shown by the records of the Corporation. A
consolidation or merger of the Corporation into or with any other corporation or
corporations shall not be deemed to be a Liquidation Event of the Corporation
within the meaning of the provisions of this Section 4.
(c) For purposes of this Section 4, the Series F Convertible Preferred
Stock shall rank pari passu to the Series A Convertible Preferred Stock, the
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and
the Series E Convertible Preferred Stock, with respect to payment upon
liquidation.
5. Optional Conversion.
(a) Subject to the limitations set forth in Section 5(b) below, any or
all of the shares of Series F Convertible Preferred Stock shall be convertible,
at any time and from time to time, at the option of each holder of record
thereof, into fully paid and non-assessable shares of Common Stock of the
Corporation upon surrender to the Corporation of the certificate or certificates
representing the Series F Convertible Preferred Stock to be converted; and, upon
receipt by the Corporation of such surrendered certificate or certificates with
any appropriate endorsement thereon as may be prescribed by the Board, such
holder shall be entitled to receive a certificate or certificates representing
the shares of Common Stock into which such shares of Series F Convertible
Preferred Stock are convertible. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series F Convertible Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. The basis for such
conversion shall be the "conversion rate" in effect at the time of conversion,
which for the purposes hereof shall mean the number of shares of Common Stock
issuable for each share of Series F Convertible Preferred Stock surrendered for
conversion. Initially, the conversion rate shall be 1, i.e., one (1) share of
Common Stock for one (1) share of Series F Convertible Preferred Stock; and such
conversion rate shall be subject to adjustment as provided in Section 8 below.
In connection with effecting any transfer to the Corporation for cancellation of
any Series F Convertible Preferred Stock upon conversion of the same into Common
Stock, if any fractional interest in a share of
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Common Stock would be deliverable upon such conversion of Series F Convertible
Preferred Stock, the Corporation shall pay in lieu of such fractional share an
amount equal to the "conversion price" (as defined in the following sentence) of
such fractional share (computed to the nearest one thousandth of a share) in
effect at the close of business on the date of conversion. As used herein, the
term "conversion price" shall be an amount computed by dividing the Original
Series F Purchase Price by the conversion rate then in effect. Initially, the
conversion price shall be Original Series F Purchase Price. The Board shall at
all times reserve a sufficient number of authorized but unissued shares of
Common Stock, which shall be issued only in satisfaction of the conversion
rights and privileges aforesaid.
(b) Notwithstanding any other provision herein, the Corporation shall
not be obligated to issue any shares of Common Stock upon conversion of the
Series F Convertible Preferred Stock if and to the extent the issuance of such
shares of Common Stock would exceed the number of shares (the "Exchange Cap")
then permitted to be issued without stockholder approval in violation of the
rules, regulations and interpretations of Nasdaq or the NASD (as determined in
good faith in the sole discretion of the Board), except that such limitation
shall not apply in the event that the Corporation obtains the approval of its
stockholders as required by then applicable rules, regulations and
interpretations of Nasdaq or the NASD for issuances of Common Stock in excess of
the Exchange Cap. If and to the extent the Exchange Cap applies, no holder of
Series F Convertible Preferred Stock shall be issued, upon conversion of Series
F Convertible Preferred Stock, shares of Common Stock in an amount greater than
the product of (x) the Exchange Cap amount multiplied by (y) a fraction, the
numeration of which is the number of shares of Common Stock issuable to such
holder upon the requested conversion of such holder's Series F Convertible
Preferred Stock at the original conversion price, and the denominator of which
is the aggregate number of shares of Common Stock issuable to holders of all of
the issued (whether or not outstanding) Series F Convertible Preferred Stock at
the original conversion price (the "Cap Allocation Amount").
6. Involuntary Conversion. At any time after December 17, 2004, the
Corporation, by way of written notice (a "Involuntary Conversion Notice") to the
holders of Series F Convertible Preferred Stock, shall be able to cause all
holders of the Series F Convertible Preferred Stock to convert automatically all
shares of Series F Convertible Preferred Stock into fully paid and
non-assessable shares of Common Stock at the then-applicable conversion rate for
Series F Convertible Preferred Stock (subject to the limitations set forth in
Section 5(b) above), so long as either (a) the trading price of the Common Stock
as reported on Nasdaq or such other principal exchange closes above 2.5 times
the Original Series F Purchase Price for any twenty (20) trading days within a
period of thirty (30) consecutive trading days occurring after December 17,
2004, or (b) the Corporation consummates an offering of its equity securities at
a per share purchase price of at least 2.5 times the Original Series F Purchase
Price. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of the mailing of the Involuntary Conversion
Notice, and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for
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all purposes as the record holder or holders of such shares of Common Stock as
of such date. The holders of Series F Convertible Preferred Stock shall, within
five (5) days of receiving the Involuntary Conversion Notice, surrender all
certificates representing Series F Convertible Preferred Stock to be converted;
and, upon receipt by the Corporation of such surrendered certificate or
certificates with any appropriate endorsement thereon as may be prescribed by
the Board, the Corporation shall issue and deliver to such holder a certificate
or certificates representing the shares of Common Stock into which such shares
of Series F Convertible Preferred Stock are convertible.
7. Issue Taxes. The Corporation shall pay all issue taxes, if any,
incurred in respect of the issue of shares of Common Stock on conversion. If a
holder of shares surrendered for conversion specifies that the shares of Common
Stock to be issued on conversion are to be issued in a name or names other than
the name or names in which such surrendered shares stand, the Corporation shall
not pay any transfer or other taxes incurred by reason of the issuance of such
shares of Common Stock to the name of another, and if the appropriate transfer
taxes shall not have been paid to the Corporation or the transfer agent for the
Series F Convertible Preferred Stock at the time of surrender of the shares
involved, the shares of Common Stock issued upon conversion thereof may be
registered in the name or names in which the surrendered shares were registered,
despite the instructions to the contrary.
8. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series F Convertible
Preferred Stock, the conversion price and the conversion rate shall be subject
to adjustment from time to time upon the happening of certain events as follows:
(a) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value to par value or a
transaction described in Sections 8(b) or (c) below, each share of Series F
Convertible Preferred Stock shall, after such reorganization, share exchange or
reclassification, be convertible into the kind and number of shares of stock or
other securities or property of the Corporation to which the holder of Series F
Convertible Preferred Stock would have been entitled if the holder had held the
Common Stock issuable upon conversion of such holder's Series F Convertible
Preferred Stock immediately prior to such reorganization, share exchange, or
reclassification.
(b) Consolidation, Merger. In the event of a merger or consolidation
to which the Corporation is a party, each share of Series F Convertible
Preferred Stock shall, after such merger or consolidation, be convertible into
the kind and number of shares of stock and/or other securities, cash or other
property to which the holder of such share of Series F Convertible Preferred
Stock would have been entitled if the holder had held the Common Stock issuable
upon conversion of his share of Series F Convertible Preferred Stock immediately
prior to such consolidation or merger.
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(c) Subdivision or Combination of Shares. In case outstanding shares
of Common Stock shall be subdivided or combined, the conversion price shall be
reduced proportionately, in case of subdivision of such shares, as of the
effective date of such subdivision, or as of the date a record is taken of the
holders of Common Stock for the purpose of so subdividing, whichever is earlier,
or shall be increased proportionately, in case of combination of such shares, as
of the effective date of such combination, or as of the date a record is taken
of the holders of Common Stock for the purpose of so combining, whichever is
earlier.
(d) Stock Dividends. In case shares of Common Stock are issued as a
dividend or other distribution on the Common Stock, then the conversion price
shall be adjusted, as of the date a record is taken of the holders of Common
Stock for the purpose of receiving such dividend or other distribution (or if no
such record is taken, as at the date of such payment or other distribution), to
that price determined by multiplying the conversion price in effect immediately
prior to such payment or other distribution by a fraction (i) the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such dividend or other distribution, and (ii) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such dividend or other distribution.
(e) Issuance of Additional Shares of Common Stock.
(i) In the event the Corporation, at any time during the period
beginning on the First Issue Date and ending on March 9, 2005, shall issue
Additional Shares of Common Stock (as defined in Section 8(i)(v)(B) and other
than as provided in the foregoing Sections 8(a) through (d)) for a consideration
per share less than the conversion price in effect on the date of and
immediately prior to such issue, then and in such event such conversion price
shall be reduced, concurrently with such issue, to equal the price per share
paid for such Additional Shares of Common Stock.
(ii) In the event the Corporation shall issue at any time after
March 9, 2005, any Additional Shares of Common Stock (as defined in Section
8(i)(v)(B) and other than as provided in the foregoing Sections 8(a) through
(d)) for a consideration per share less than the conversion price in effect on
the date of and immediately prior to such issue, then and in such event, such
conversion price shall be reduced, concurrently with such issue, to a price
equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale multiplied
by the conversion price in effect immediately prior to such issuance or sale,
plus (y) the consideration, if any, received or deemed to be received by the
Corporation upon such issuance or sale, by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
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For purposes of the foregoing formula, all shares of Common Stock issuable upon
the exercise of outstanding warrants, options or other rights described in
Section 8(f) below or issuable upon the conversion of the Corporation's
outstanding Series A Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred
Stock and Series F Convertible Preferred Stock and any other convertible
securities, shall be deemed outstanding shares of Common Stock.
No adjustment of the conversion price shall be made under this Section 8(e) upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants, options or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange rights in any
convertible securities if any such adjustments shall previously have been made
upon the issuance of any such warrants, options or other rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) pursuant to Sections 8(f) or 8(g).
(f) Issuance of Warrants, Options or Other Rights. If the Corporation
at any time shall issue any warrants, options or other rights to subscribe for
or purchase any Additional Shares of Common Stock and the price per share for
which Additional Shares of Common Stock may at any time thereafter be issuable
pursuant to such warrants, options or other rights shall be less than the
conversion price per share in effect immediately prior to such issuance, then
upon such issuance the conversion price shall be adjusted as provided in Section
8(e) on the basis that the aggregate consideration for the Additional Shares of
Common Stock issuable pursuant to such warrants, options or other rights, shall
be deemed to be the consideration received by the Corporation for the issuance
of such warrants, options, or other rights plus the minimum consideration to be
received by the Corporation for the issuance of Additional Shares of Common
Stock pursuant to such warrants, options, or other rights.
(g) Issuance of Convertible Securities. In case the Corporation shall
issue any securities convertible into Common Stock and the consideration per
share for which Additional Shares of Common Stock may at any time thereafter be
issuable pursuant to the terms of such convertible securities shall be less than
the conversion price per share in effect immediately prior to such issuance,
then upon such issuance the conversion price shall be adjusted as provided in
Section 8(e) on the basis that (i) the maximum number of Additional Shares of
Common Stock necessary to effect the conversion or exchange of all such
convertible securities shall be deemed to have been issued as of the date of
issuance of such convertible securities, and (ii) the aggregate consideration
for such maximum number of Additional Shares of Common Stock shall be deemed to
be the consideration received by the Corporation for the issuance of such
convertible securities plus the minimum consideration received by the
Corporation for the issuance of such Additional Shares of Common Stock pursuant
to the terms of such convertible securities. No adjustment of the conversion
price shall be made under this Section 8(g) upon the issuance of any convertible
securities which are issued pursuant to the exercise of any warrants, options or
other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights pursuant to Section 8(f).
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(h) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 8, the conversion rate
shall be adjusted to an amount determined by dividing $5.10 by such adjusted
conversion price.
(i) Other Provisions Applicable to Adjustments Under This Section.
The following provisions will be applicable to the making of adjustments in
conversion price hereinabove provided in this Section 8:
(i) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any convertible securities or any warrants,
options or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any convertible securities shall be issued for a cash
consideration, the consideration received by the Corporation therefor shall be
deemed to be the amount of the cash received by the Corporation therefor, or, if
such Additional Shares of Common Stock or convertible securities are offered by
the Corporation for subscription, the subscription price, or, if such Additional
Shares of Common Stock or convertible securities are sold to underwriters or
dealers for public offering without a subscription offering, or through
underwriters or dealers for public offering without a subscription offering, the
initial public offering price, in any such case excluding any amounts paid or
incurred by the Corporation for and in the underwriting of, or otherwise in
connection with the issue thereof. To the extent that such issuance shall be for
a consideration other than cash, then, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time of such issuance
as determined in good faith by the Corporation's board of directors. The
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants, options or other rights to subscribe for or purchase the same shall be
the consideration received by the Corporation for issuing such warrants, options
or other rights, plus the additional consideration payable to the Corporation
upon the exercise of such warrants, options or other rights. The consideration
for any Additional Shares of Common Stock issuable pursuant to the terms of any
convertible securities shall be the consideration paid or payable to the
Corporation in respect of the subscription for or purchase of such convertible
securities, plus the additional consideration, if any, payable to the
Corporation upon the exercise of the right of conversion or exchange of such
convertible securities. In case of the issuance at any time of any Additional
Shares of Common Stock or convertible securities in payment or satisfaction of
any dividend upon any class of stock preferred as to dividends in a fixed
amount, the Corporation shall be deemed to have received for such Additional
Shares of Common Stock or convertible securities a consideration equal to the
amount of such dividend so paid or satisfied.
(ii) Readjustment of Conversion Price. Upon the expiration of the
right to convert or exchange any convertible securities, or upon the expiration
of any rights, options or warrants, without conversion, exchange or exercise,
the issuance of which convertible securities, rights, options or warrants
effected an adjustment in the conversion price, such conversion price shall
forthwith be readjusted and thereafter be the price which it would have been
(but reflecting any other adjustments in the conversion
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price made pursuant to the provisions of this Section 8 after the issuance of
such convertible securities, rights, options or warrants) had the adjustment of
the conversion price made upon the issuance or sale of such convertible
securities or issuance of rights, options or warrants been made on the basis of
the issuance only of the number of Additional Shares of Common Stock actually
issued upon conversion or exchange of such convertible securities, or upon the
exercise of such rights, options or warrants, and thereupon only the number of
Additional Shares of Common Stock actually so issued, if any, shall be deemed to
have been issued and only the consideration actually received by the Corporation
(computed as set forth in Section 8(i)(i)) shall be deemed to have been received
by the Corporation. If the purchase price provided for in any rights, options or
warrants, or the additional consideration (if any) payable upon the conversion
or exchange of any convertible securities, or the rate at which any convertible
securities are convertible into or exchangeable for shares of Common Stock
changes at any time (other than under or by reason of provisions designed to
protect against dilution), the conversion price in effect at the time of the
change shall be adjusted to the conversion price that would have been in effect
at such time had such rights, options, warrants or convertible securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold.
(iii) Treasury Shares. The number of shares of Common Stock at
any time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the accounts of the Corporation.
(iv) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding number of shares of
Common Stock, other than an action described in any of the foregoing Sections
8(a) to 8(g), inclusive, which in the opinion of the Board would have a
materially adverse effect upon the rights of the holders of the Series F
Convertible Preferred Stock, the conversion price shall be adjusted in such
manner and at such time as the Board on the advice of the Corporation's
independent public accountants may in good faith determine to be equitable in
the circumstances.
(v) Certain Definitions. For purposes of this Section 8:
(A) The term "Common Stock" shall be deemed to mean (i) the
Common Stock, $0.001 par value, and (ii) the stock of the Corporation of any
other class, or series within such a class, whether now or hereafter authorized,
which has the right to participate in the distribution of either earnings or
assets of the Corporation without limit as to the amount or percentage.
(B) The term "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation after the initial issuance
of the Series F Convertible Preferred Stock, except:
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(1) shares of Common Stock issuable upon conversion of the
Series F Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series D Convertible Preferred Stock, the Series C Convertible Preferred Stock
or the Series A Convertible Preferred Stock;
(2) shares of Common Stock, warrants, options and other
rights to purchase shares of Common Stock and securities convertible into shares
of Common Stock, issued to officers, directors and employees of, and consultants
to, the Corporation as compensation for bona fide services provided or to be
provided to the Corporation by such persons and approved by the Board or the
Compensation Committee, as the case may be;
(3) shares of Common Stock issuable upon exercise of
warrants, options, notes or other rights to acquire securities of the
Corporation issued on or outstanding on the First Issue Date;
(4) shares of Common Stock issued after the First Issue Date
as a stock dividend or upon any subdivision or combination of shares of Common
Stock or Preferred Stock for which adjustment is made in accordance with
Sections 8(c) or 8(d);
(5) shares of Common Stock issued after the First Issue Date
in connection with a bona fide business acquisition of or by the Corporation,
whether by merger, consolidation, sale of assets, sale or exchange of stock or
otherwise, approved by the Board;
(6) shares of Common Stock issued after the First Issue Date
in connection with a firm commitment underwritten public offering; and
(7) shares of Common Stock that are issued after the First
Issue Date to financial institutions or lessors in connection with commercial
credit transactions, equipment financing, lease line, bank financing or other
similar arrangement and that is not intended to serve as an equity financing for
the Corporation and is approved by the Board.
No reduction of the conversion price shall be made if the amount of any such
reduction would be an amount less than $.05, but any such amount shall be
carried forward and reduction with respect thereof shall be made at the time of
and together with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall aggregate $.05 or more.
(j) Stockholder Approval. The Corporation shall not issue, without
first obtaining the requisite stockholder approval, any equity securities (other
than those equity securities set forth in Section 8(i)(v)(B)) at an offering
price that is less than the then-applicable conversion price for Series F
Convertible Preferred Stock, if the adjustment pursuant to Section 8 hereof to
the conversion price of the Series F
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Convertible Preferred Stock would result in the issuance of shares of Common
Stock upon conversion of the Series F Convertible Preferred Stock that would
exceed the Exchange Cap then permitted to be issued without violation of the
rules, regulations or interpretations of Nasdaq or the NASD (as determined in
good faith in the sole discretion of the Board).
(k) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the Corporation
shall compute the adjusted conversion rate and conversion price in accordance
with the foregoing provisions and shall prepare a written instrument setting
forth such adjusted conversion rate and conversion price and showing in detail
the facts upon which such adjustment is based, and such written instrument shall
promptly be delivered to the record holders of the Series F Convertible
Preferred Stock.
9. Notices of Record Dates and Effective Dates. In case at any time: (a)
the Corporation shall declare a dividend (or any other distribution) on the
Common Stock payable otherwise than in shares of Common Stock, or (b) the
Corporation shall authorize the granting to the holders of Common Stock of
rights to subscribe for or purchase any shares of capital stock of any class or
any other rights, or (c) the Corporation shall authorize any reorganization,
share exchange or reclassification of the capital stock of the Corporation
(other than a subdivision or combination of outstanding shares of Common Stock),
or of any consolidation or merger to which the Corporation is party or of the
sale, lease or exchange of all or substantially all of the property of the
Corporation, or (d) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, then the Corporation shall cause
to be mailed to the record holders of the Series F Convertible Preferred Stock
at least 20 days prior to the applicable record date or effective date
thereafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights, or, if a record
is not to be taken, the date as of which the holders of record of Common Stock
to be entitled to such dividend, distribution or rights are to be determined, or
(ii) the date on which such reclassification, reorganization, share exchange,
consolidation, merger, sale, lease, exchange, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, reorganization, share exchange, consolidation,
liquidation, merger, sale, lease, exchange, dissolution, liquidation or winding
up.
10. Voting Rights. Holders of Series F Convertible Preferred Stock shall
be entitled to notice of any stockholders' meeting. Except as otherwise required
by law, this Certificate of Designation or as otherwise limited by applicable
rules, regulations and interpretations of Nasdaq or the NASD, as determined in
good faith in the sole discretion of the Board, at any annual or special meeting
of the Corporation's stockholders, or in connection with any written consent in
lieu of any such meeting, each outstanding share of Series F Convertible
Preferred Stock shall be entitled to the number of votes equal to the number of
full shares of Common Stock into which such share of Series F Convertible
Preferred Stock is then convertible (calculated by rounding any fractional
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share down to the nearest whole number) multiplied by .9623. Except as otherwise
required by law, this Certificate of Designation or as otherwise limited by
applicable rules, regulations and interpretations of Nasdaq or the NASD, as
determined in good faith in the sole discretion of the Board, the Series F
Convertible Preferred Stock, the Series E Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series A Convertible Preferred Stock and the Common Stock shall vote
together on each matter submitted to the stockholders, and not by separate class
or series.
11. Protective Provisions. The Corporation shall not (directly or
indirectly, whether through amendment of the Certificate of Incorporation,
merger, recapitalization or otherwise), without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least fifty
percent (50%) of the outstanding shares of Series F Convertible Preferred Stock
(voting as a separate class), alter or change any right, preference, privilege
or power of (or restriction for the benefit of) the Series F Convertible
Preferred Stock. Until such time that the holders of Series F Convertible
Preferred Stock hold less than twenty-five percent (25%) of the shares of Series
F Convertible Preferred Stock issued on the First Issue Date, the Corporation
shall not (directly or indirectly, whether through amendment of the Certificate
of Incorporation, merger, recapitalization or otherwise), without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least fifty percent (50%) of the outstanding shares of Series F
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series D
Convertible Preferred Stock, Series C Convertible Preferred Stock and Series A
Convertible Preferred Stock (voting together as a separate class), create,
designate, authorize or issue any new equity securities having rights,
preferences, privileges or powers (or restrictions for the benefit of) senior to
or on parity with the Series F Convertible Preferred Stock.
C. The recitals and resolutions contained herein have not been modified,
altered or amended and are presently in full force and effect.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this 3rd
day of September, 2003.
NOBEL LEARNING COMMUNITIES, INC.
By: /s/ George H. Bernstein
-----------------------------------------
Name: George H. Bernstein
Title: Chief Executive Officer
By: /s/ D. Scott Clegg
-----------------------------------------
Name: D. Scott Clegg
Title: Vice Chairman, President and
Chief Operating Officer
Attest:
/s/ Yvonne DeAngelo
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Yvonne DeAngelo
Secretary