Document:

Exhibit 4.2

 

CERTIFICATE OF DESIGNATION, PREFERENCES

AND RIGHTS OF SERIES A

CONVERTIBLE PREFERRED STOCK

OF

NEW HORIZONS WORLDWIDE, INC.

 

New Horizons Worldwide, 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 authority conferred upon the Board by the Restated Certificate of
Incorporation of the Corporation (the “Certificate of
Incorporation”), and pursuant to the provisions of Section 141 and
151 of the Delaware General Corporation Law, as amended, the Board, at a duly
convened meeting of the Board held on January 31, 2005, 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 A 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 Board is authorized under 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 Board deems it advisable
to, and hereby does, designate a Series A Convertible Preferred Stock and fixes
and determines the preferences, rights, qualifications, limitations and
restrictions relating to the Series A Convertible Preferred Stock as follows:

 

1.             Designation.  The shares of such series of Preferred Stock
shall be designated as “Series A Convertible Preferred Stock” (referred to
herein as the “Series A Convertible Preferred Stock”),
and shall have a per share purchase price of $3.75 (which amount shall be
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the Series A
Convertible Preferred Stock) (the “Original Series A Purchase
Price”).

 

2.             Authorized Number.  The authorized number of shares constituting
the Series A Convertible Preferred Stock shall be two million (2,000,000).

 

 

3.             Dividends.

 

(a)           The
holders of shares of Series A 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 A Convertible
Preferred Stock with respect to the payment of dividends, dividends in the
amounts set forth below, payable quarterly on the last day of March, June,
September and December in each year, commencing on March 31, 2005 (“Quarterly Dividend Date”). 
Dividends on each share of Series A Convertible Preferred Stock shall be
cumulative and accrue from the original issuance of such share of Series A
Convertible Preferred Stock (the “Series A Original Issue
Date”); provided, that
the amount of dividends on the first quarterly dividend date after the Series A
Original Issue Date for any share of Series A 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 A 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 A Convertible Preferred Stock (the
“First Issue Date”) until the third (3rd)
anniversary of such date, the Corporation shall pay to the holders of the
issued and outstanding shares of the Series A Convertible Preferred Stock
dividends in accordance with Section 3(a)
above and this Section 3(b)
in an amount equal to 6.0% per annum of
the Original Series A Purchase Price (the “Initial Dividend Rate”).  The Initial Dividend Rate shall be extended
and remain in effect until the fourth (4th) anniversary (rather than
the third (3rd) anniversary) of the First Issue Date unless the
volume weighted average trading price of the Corporation’s Common Stock for the
last twenty (20) trading days immediately preceding the third (3rd)
anniversary of the First Issue Date as reported on Nasdaq National Market or
such other principal exchange is equal to or less than two and one-quarter (2.25)
times the Original Series A Purchase Price, in which case from the day after
the third (3rd) anniversary of the First Issue Date until the fourth
anniversary of such date, the Corporation shall pay to the holders of the
issued and outstanding shares of the Series A Convertible Preferred Stock
cumulative dividends in an amount equal to 8.0% per annum of the Original
Series A Purchase Price (the “Default Dividend Rate”).  In any event, from and after the day after
the fourth (4th) anniversary of the First Issue Date, the
Corporation shall pay to the holders of the issued and outstanding shares of
the Series A Convertible Preferred Stock cumulative dividends in an amount equal
to 12.0% per annum of the Original Series A Purchase Price (the “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”).  Dividends with respect to the Series A
Convertible Preferred Stock shall be paid quarterly and, at the Company’s
option, may be paid in (i) cash, (ii) additional shares of Series A Convertible
Preferred Stock valued at the volume weighted average trading price of the
Corporation’s Common Stock for the last twenty (20) trading days immediately
preceding the Quarterly Dividend Date as reported on Nasdaq National Market (“Quarterly Trading Price”) or (iii) a combination thereof; provided that if the Quarterly Trading Price is less than
$3.00

 

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per share or greater than $4.25 per share (each such share price
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the Common
Stock) the Dividends shall be paid in cash.  If and to the extent the payment of
a quarterly dividend in additional shares of Series A Convertible Preferred
Stock would, when added to the number of shares of Common Stock into which the
Series A 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 National Market or the NASD
(as determined in good faith by the Board of Directors of the Corporation (the “Board”)), 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 A 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.  Except to the extent that the
Company has declared and paid a dividend in additional shares of Series A
Preferred Stock in accordance with this Section 3, if
the Corporation fails to declare or pay a cash dividend for any reason, such
unpaid cash dividends shall accrue interest at 12% per annum, compounded
annually.  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 a conversion of any such holder’s Series A Convertible Preferred
Stock pursuant to Sections 5
or 6 hereof.

 

(c)           If
a dividend on the Common Stock is declared by the Board, then the Board shall
simultaneously declare a dividend on the Series A Convertible Preferred Stock
in an amount per share equal to: (a) the product of (i) the dividend per share
of Common Stock, multiplied by (ii) the number of shares of Common Stock into
which all of the outstanding Series A Convertible Preferred Stock could then be
converted, divided by (b) the number of Series A 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 A Convertible Preferred Stock shall be
entitled to receive before any distribution or payment is made upon any Common
Stock or any other class or series of stock ranking junior to the Series A
Convertible Preferred Stock as to distribution of assets upon liquidation, an
amount per share equal to the Original Series A Purchase Price, plus any
accrued but unpaid dividends (the “Series A Liquidation
Preference”).  If upon such
Liquidation Event, the assets to be distributed among the holders of Series A
Convertible Preferred Stock shall be insufficient to permit payment to the
holders of

 

3

 

Series A Convertible Preferred Stock of the entire amount of the
Liquidation Payment (as defined below), then the entire assets of the
Corporation available for distribution to the stockholders shall be distributed
ratably among the holders of Series A Convertible Preferred Stock and any other
class or series of stock ranking pari passu to
the Series A 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. 
Notwithstanding the foregoing, upon any Liquidation Event, without
duplication, the holders of the Series A Convertible Preferred Stock shall be
entitled to receive the greater of (i) the Series A 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 A 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 A Convertible Preferred Stock and any other class or
series of stock ranking pari passu to
the Series A 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 any other class or series of stock ranking junior to the Series
A Convertible Preferred Stock as to distribution of assets upon liquidation.

 

(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 twenty (20)
days prior to the payment date stated therein, to the holders of record of
Series A 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.

 

(c)           Notwithstanding
the foregoing, a Change of Control (as defined below), shall be deemed to be a
Liquidation Event unless the holders of a majority of the then outstanding
Series A Convertible Preferred Stock, voting together as a single class on an
as-if converted basis, elect otherwise by giving written notice thereof to the
Corporation prior to the effective date of such event.  For purposes hereof, a “Change of
Control” means (x) a merger, reorganization or consolidation of the
Corporation into or with another entity, a sale of stock or other similar
transaction or series or related transactions in which the stockholders of the
Corporation immediately prior to such merger, reorganization, consolidation,
sale or stock by the Corporation or similar transaction own less than fifty
percent (50%) of the outstanding voting power of the surviving entity immediately
after such merger, reorganization, consolidation, sale of stock or other
similar transaction or (y) the sale, transfer or lease of all or substantially
all of the assets of the Corporation, including assets of the Corporation’s
subsidiaries taken as a whole, to an unaffiliated third party in one
transaction or a series of related transactions.  For the avoidance of any doubt, a Change of
Control transaction shall not include any merger of the Company with or into a
wholly-owned subsidiary of the Company.

 

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5.             Optional
Conversion.

 

(a)           Subject
to the limitations set forth in Section 5(b)
below, any or all of the shares of Series A 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 A 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 A 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 A 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 A
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 A 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 A Convertible
Preferred Stock upon conversion of the same into Common Stock, if any
fractional interest in a share of Common Stock would be deliverable upon such
conversion of Series A 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 A Purchase Price by the conversion rate then in effect.  Initially, the conversion price shall be
Original Series A 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 A 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 National Market (as determined
in good faith by 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 National
Market 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 A Convertible Preferred Stock shall be issued,
upon conversion of Series A Convertible Preferred Stock, shares of Common Stock
in an amount greater than the

 

5

 

product of (x) the Exchange Cap amount multiplied by (y) a fraction,
the numerator of which is the number of shares of Common Stock issuable to such
holder upon the requested conversion of such holder’s Series A 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 A Convertible Preferred Stock at
the original conversion price (the “Cap Allocation Amount”).

 

6.             Involuntary
Conversion.

 

(a)           At
any time after February 7, 2007, the Corporation, by way of written notice (a “Involuntary Conversion Notice”) to the holders of Series A
Convertible Preferred Stock shall have the right to convert, and to declare to
be so converted all shares of Series A Convertible Preferred Stock into fully
paid and non-assessable shares of Common Stock at the then-applicable
conversion price for Series A Convertible Preferred Stock (subject to the
limitations set forth in Section 5(b)
above), so long as (i) the volume weighted average trading price of the Common
Stock for the twenty (20) trading days immediately preceding the date of the Involuntary
Conversion Notice as reported on Nasdaq National Market or such other principal
exchange is greater than two and one-quarter (2.25) times the Original
Series A Purchase Price, (ii) the average daily trading volume of the Common
Stock as reported on Nasdaq National Market or such other principal exchange
for the forty-five (45) trading days immediately preceding the date of Involuntary
Conversion Notice is greater than 30,000 shares and (iii) the Common Stock
issued upon conversion of the Series A Convertible Preferred Stock hereunder
may be sold immediately pursuant to an effective registration statement
registering the resale of the shares.

 

(b)           At
any time after February 7, 2009, the Corporation, by way of an Involuntary
Conversion Notice to the holders of Series A Convertible Preferred Stock, shall
have the right to convert, and to declare to be so converted up to 50% of the
shares of Series A Convertible Preferred Stock held by holders of the Series A
Convertible Preferred Stock into fully paid and non-assessable shares of Common
Stock at the then-applicable conversion price for Series A Convertible
Preferred Stock (subject to the limitations set forth in Section
5(b) above), so long as (i) the volume weighted average trading
price of the Common Stock for the twenty (20) trading days immediately
preceding the date of the Involuntary Conversion Notice as reported on Nasdaq
National Market or such other principal exchange is greater than two and
one-half (2.50) times the Original Series A Purchase Price and (ii) the
Common Stock issued upon conversion of the Series A Preferred Stock hereunder
may be sold immediately pursuant to an effective registration statement
registering the resale of the shares.

 

(c)           At
any time after February 7, 2011, the Corporation, by way of an Involuntary
Conversion Notice to the holders of Series A Convertible Preferred Stock, shall
have the right to convert, and to declare to be so converted all of the shares
of Series A Convertible Preferred Stock not previously converted under Section 6(b) into fully paid and
non-assessable shares of Common Stock at the then-applicable conversion price

 

6

 

for Series A Convertible Preferred Stock (subject to the limitations
set forth in Section 5(b) above), so long
as (i) the volume weighted average trading price of the Common Stock for the twenty
(20) trading days immediately preceding the date of the Involuntary Conversion
Notice as reported on Nasdaq National Market or such other principal exchange
is greater than two and one-half (2.50) times the Original Series A
Purchase Price and (ii) the Common Stock issued upon conversion of the Series A
Preferred Stock hereunder may be sold immediately pursuant to an effective
registration statement registering the resale of the shares.

 

(d)           Such
conversions 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 conversions shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.  The holders of Series A Convertible Preferred
Stock shall, within five (5) business days of receiving the Involuntary
Conversion Notice, surrender all certificates representing Series A 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 A 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, other than an affiliate, 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 A 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 A 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 A
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 A
Convertible Preferred Stock would have

 

7

 

been entitled if the holder had held the Common Stock issuable upon
conversion of such holder’s Series A 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 A
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
A Convertible Preferred Stock would have been entitled if the holder had held
the Common Stock issuable upon conversion of his share of Series A Convertible
Preferred Stock immediately prior to such consolidation or merger.

 

(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 of 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 February 7 2006, 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 after February 7, 2006, shall issue at any time 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

 

8

 

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.

 

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 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

 

9

 

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).

 

(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 $3.75 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.  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

 

10

 

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 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 A 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.

 

11

 

(v)            Certain
Definitions.  For purposes of
this Section 8:

 

(A)          The
term “Common Stock” shall be deemed to mean
(i) the Common Stock, $.01 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 A Convertible Preferred Stock, except:

 

(1)           shares
of Common Stock issuable upon conversion of 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; and

 

(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 Series A Preferred
Stock for which adjustment is made in accordance with Sections
8(c) or 8(d).

 

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)(1)-(4)) at an offering price that is less than the
then-applicable conversion price for Series A Convertible Preferred Stock, if
the adjustment pursuant to Section 8
hereof to the conversion price of the Series A Convertible Preferred Stock
would result in the issuance of shares of Common Stock upon conversion of the
Series A 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 by the
Board).

 

12

 

(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 A Convertible Preferred Stock.

 

9.             Notices
of Record Dates and Effective Dates.

 

(a)           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 assets 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 A 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.

 

(b)           Except
for notices provided for in Section 9(a),
which shall be provided in the manner described in Section
9(a), in the event that the Corporation provides any notice,
report or statement to any holder of Common Stock, the Corporation shall at the
same time provide a copy of any such notice, report or statement to each holder
of outstanding Series A Preferred Stock.

 

10.          Voting
Rights.  Holders of Series A
Convertible Preferred Stock shall be entitled to notice of any stockholders’
meeting.  Except as otherwise required by
law, this Certificate of Designations or as otherwise limited by applicable
rules, regulations and interpretations of Nasdaq or the NASD, as determined in
good faith by 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 A Convertible Preferred Stock shall
be entitled to the number of votes equal to the number

 

13

 

of full shares of Common Stock into which such share of Series A
Convertible Preferred Stock is then convertible (calculated by rounding any
fractional share down to the nearest whole number) multiplied by .8260.  Except as otherwise required by law, this
Certificate of Designations or as otherwise limited by applicable rules,
regulations and interpretations of Nasdaq or the NASD, as determined in good
faith by the Board, 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 a majority of the outstanding shares of Series A 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 A Convertible Preferred Stock. 
Until such time that the holders of Series A Convertible Preferred Stock
hold less than fifty percent (50%) of the shares of Series A 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
a majority of the outstanding shares of Series A Convertible Preferred Stock (voting
together as a separate class): (i) 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 A
Convertible Preferred Stock, (ii) authorize the Corporation, or permit any
subsidiary, to incur, create, assume, become or be liable, directly, indirectly
or contingently, in any manner with respect to, or permit to exist, any
indebtedness including, without limitation, indebtedness under guarantees,
letters of credit, capital leases or the like, in any one transaction or series
of related transactions in excess of $5,000,000 other than trade payables
incurred in the ordinary course of business; and
no material term of any such indebtedness approved in accordance with this Section 11 shall thereafter be modified or amended in any
material respect, nor shall payment thereof be extended, without the written
consent of holders of a majority of the outstanding shares of Series A
Convertible Preferred Stock (voting together as a separate class), (iii)
authorize or effect, or cause any subsidiary to authorize or effect, any single
capital expenditure equal to or in excess of $2,500,000 or (iv) make any
acquisition of the capital stock or assets of another entity, or enter into any
joint venture or partnership with another entity where the consideration or
other capital commitment payable by the Corporation is equal to or in excess of
$2,500,000.

 

12.          Board
Representation.  For so long as
at least fifty percent (50%) of the shares of Series A Convertible Preferred
Stock issued on the First Issue Date remain outstanding, the holders thereof
shall be entitled to elect, at a meeting of such shareholders or by written
consent in lieu thereof, one (1) member of the Board (the “Series A
Director Designee”).  The
Series A Director Designee elected by the holders of the Series A Convertible
Preferred Stock shall not serve a classified term with the directors elected by
the holders of Common Stock together with the holders of any other

 

14

 

class or series of capital stock entitled to vote thereon.  Any director elected by the holders of the
Series A Convertible Preferred Stock who serves as a member of the Board may be
removed without cause only by the holders of a majority of the outstanding
shares of Series A Convertible Preferred Stock, voting together as a separate
class.  If a vacancy is created on the
Board by reason of the death, removal or resignation of any director elected by
the holders of the Series A Convertible Preferred Stock, the holders of a
majority of the outstanding shares of Series A Convertible Preferred Stock,
voting together as a single class, may elect a replacement director to the
Board.

 

13.          Corporate
Opportunities.  Pursuant to Section 122(17) of the Delaware General Corporation Law, the
Corporation hereby renounces any interest or expectancy of the Corporation in,
or in being offered an opportunity to participate in, specified business
opportunities that are presented to the holders of the Series A Convertible
Preferred Stock, their Affiliates, or the Series A Director Designee o
(collectively, the “Preferred Investor Parties”).  The Corporation acknowledges that the
Preferred Investor Parties are in the business of making investments in, and
have investments in, other businesses similar to and that may compete with the
Corporation’s businesses (“Competing Businesses”),
and agrees that the Preferred Investor Parties may retain the right to make
additional investments in other Competing Businesses independent of their
investments in the Corporation.  By
virtue of a Preferred Investor Party holding securities of the Corporation or
by having persons designated by or affiliated with such Preferred Investor
Party serving on or observing at meetings of the Board of Directors or
otherwise, no Preferred Investor Party shall have any obligation to the
Corporation, any of its subsidiaries or any other holder of securities of the
Corporation to refrain from competing with the Corporation and any of its
subsidiaries, making investments in Competing Businesses, or otherwise engaging
in any commercial activity; and none of the Corporation, any of its
subsidiaries or any other holder of Capital Securities shall have any right
with respect to any such investments or activities undertaken by such Preferred
Investor Party.  Without limitation of
the foregoing, each Preferred Investor Party may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Corporation or any
of its subsidiaries, and none of the Corporation, any of its subsidiaries or
any other holder of securities of the Corporation shall have any rights or
expectancy by virtue of such Preferred Investor Party’s relationships with the
Corporation, or otherwise in and to such independent ventures or the income or
profits derived therefrom; and the pursuit of any such venture, even if such
investment is in a Competing Business shall not be deemed wrongful or
improper.  No Preferred Investor Party
shall be obligated to present any particular investment opportunity to the
Corporation or any of its subsidiaries even if such opportunity is of a character
that, if presented to the Corporation or such subsidiary, could be taken by the
Corporation or such subsidiary, and the Preferred Investor Party shall continue
to have the right to take for its own respective account or to recommend to
others any such particular investment opportunity.  The provisions of this Section 13 shall
in no way limit or eliminate any Preferred Investor Party’s duties,
responsibilities and obligations with respect to any proprietary information of
the Corporation and any of its subsidiaries, including the duty to not disclose
or use such proprietary information improperly or to obtain therefrom an
improper personal benefit.

 

15

 

14.          No
Closing of Transfer Books.  The
Corporation shall not close its books against the transfer of the Series A
Convertible Preferred Stock in any manner that would interfere with the timely
conversion of any Series A Convertible Preferred Stock.

 

15.          Rank.  The Series A Preferred Stock shall rank
senior in right as to dividends, upon the occurrence of a Liquidation Event and
in all other respects to all Common Stock and any other shares or securities of
the Corporation ranking junior to such Series A Convertible Preferred Stock,
whenever issued.

 

B.            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]

 

16

 

IN WITNESS WHEREOF, the
undersigned has executed this Certificate this 7th day of February,
2005.

 

	
   

  	
  NEW
  HORIZONS WORLDWIDE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Thomas
  Bresnan

  	
   

  
	
   

  	
  Name:

  	
  Thomas Bresnan

  
	
   

  	
  Title: President
  and Chief Executive OfficerExhibit 4.3

 

	
  Certificate
  No. PA-*** For ** Shares Issued to SPECIMEN

  	
  Transferred
  from

  	
  /    /

  
	
   

  	
  No. Original Certificate

  	
  No. Original Shares

  	
  No. Of Shares Transferred

  
	
  Dated  **  ,
  **  Receipt acknowledged

  	
   

  	
   

  
				

 

 

	
  NUMBER

  	
   

  	
  INCORPORATED UNDER THE LAWS OF

  	
   

  	
  SHARES

  
	
  PA-***

  	
   

  	
  THE STATE OF DELAWARE

  	
   

  	
  **

  

 

 

NEW HORIZONS WORLDWIDE, INC.

 

Series A convertible Preferred Stock, Without Par value

 

 

This Certifies
that SPECIMEN is the owner of *******************************************
fully paid and non-assessable Shares of the Capital
Stock of the above named Corporation transferable only on the books of the
Corporation by the holder hereof in person or by duly authorized Attorney upon
surrender of this Certificate properly endorsed.

 

In Witness
Whereof,  the said Corporation has
caused this Certificate to be signed by its duly authorized officers and its
Corporate Seal to be hereunto affixed this ** day of ** A.D.**

 

 

	
  /s/ Stuart
  O. Smith

  	
   

  	
  /s/ Curtis
  Lee Smith

  	
   

  
	
  Stuart O.
  Smith, Secretary

  	
  Curtis Lee
  Smith, Chairman

  

 

© 1999 ALL-STATE LEGAL®
A DIVISION OF ALL-STATE INTERNATIONAL, INC. 
www.aslegal.com 800 222 0510  
99C13

 

 

EXPLANATION OF ABBREVIATIONS

 

The following
abbreviations, when used in the inscription of ownership on the face of this
certificate, shall be construed as if they were written out in full according
to applicable laws or regulations. 
Abbreviations, in addition to those appearing below, may be used.

	
  JT TEN

  	
   

  	
  As joint
  tenants with right of survivorship and not as tenants in common

  	
   

  	
  TEN ENT

  	
   

  	
  As tenants
  by the entireties

  
	
   

  	
   

  	
  UNIF GIFT
  MIN ACT

  	
   

  	
  Uniform
  Gifts to Minors Act

  
	
  TEN COM

  	
   

  	
  As tenants
  in common

  	
   

  	
  CUST

  	
   

  	
  Custodian
  for

  

 

For Value
Received,       hereby sell, assign and transfer
unto

 

	
  PLEASE INSERT SOCIAL SECURITY OR OTHER

  
	
  IDENTIFYING NUMBER OF ASSIGNEE

  
	
   

  

Shares represented by the within certificate, and do hereby irrevocably
constitute and
appoint                                                                                         
                                         Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.

 

	
  Dated

  	
   

  	
   

  
	
   

  	
  In presence of

  	
   

  
	
   

  	
   

  	
   

  

 

NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER

 

	
  CERTIFICATE

  
	
   

  
	
   

  
	
  FOR

  
	
   

  
	
   

  
	
  SHARES

  
	
   

  
	
  OF

  
	
   

  
	
   

  
	
   

  
	
  Issued to

  
	
   

  
	
   

  	
   

  	
   

  
	
  Dated

  
	
   

  
	
   

  	
   

  	
   

  

 

THE VOTING RIGHTS AND
OBLIGATIONS WITH RESPECT TO, AND SALE OR OTHER DISPOSITION OF, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY AND SUBJECT TO THE PROVISIONS
OF A STOCKHOLDERS’ AGREEMENT DATED AS OF FEBRUARY    ,
2005, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE
COMPANY.

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”) OR ANY STATE SECURITIES LAWS, MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW, (II)
A “NO ACTION” LETTER OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO
SUCH SALE OR OFFER, OR (III) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAW IS NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER.

 

THE COMPANY IS AUTHORIZED TO
ISSUE MORE THAN ONE CLASS OF STOCK.  A
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND THE RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS AND SERIES OF
STOCK AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREON WILL BE
PROVIDED WITHOUT CHARGE TO EACH STOCKHOLDER UPON REQUEST TO THE COMPANY.

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