Exhibit 4.1


SPHERIX INCORPORATED


 


CERTIFICATE OF DESIGNATION OF
PREFERENCES,


RIGHTS AND LIMITATIONS


OF


SERIES B CONVERTIBLE PREFERRED
STOCK


 


PURSUANT TO SECTION 151 OF THE


DELAWARE GENERAL CORPORATION LAW


 


The undersigned, Claire L. Kruger and Robert L. Clayton,
do hereby certify that:


 


1.             They
are the Chief Executive Officer/Chief Operating Officer and Treasurer/Chief
Financial Officer, respectively, of Spherix Incorporated, a Delaware
corporation (the “Corporation”).


 


2.             The
Corporation is authorized to issue 2,000,000 shares of preferred stock, of
which 500,000 shares have been previously designated as “Series A Junior
Preferred Stock,” pursuant to Certificate of Designations filed with the
Secretary of State of the State of Delaware.


 


3.             The
following resolutions were duly adopted by the Board of Directors of the
Corporation (the “Board of Directors”):


 


WHEREAS, the Certificate of Incorporation of the
Corporation provides for a class of its authorized stock known as preferred
stock, consisting of 2,000,000 shares, $0.01 par value per share, issuable from
time to time in one or more series;


 


WHEREAS, the Board of Directors is authorized to fix the
dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series
of preferred stock and the number of shares constituting any series and the
designation thereof, of any of them; and


 


WHEREAS, it is the desire of the Board of Directors,
pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the preferred stock,
which shall consist of, except as otherwise set forth in the Purchase
Agreement, 5,250 shares of the preferred stock which the Corporation has the
authority to issue, as follows:


 


NOW, THEREFORE, BE IT RESOLVED, that the Board of
Directors does hereby provide for the issuance of a series of preferred stock
for cash or exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other matters
relating to such series of preferred stock as follows:


 


TERMS OF PREFERRED STOCK


 


Section 1.  Definitions.  For the purposes hereof, the following terms
shall have the following meanings:


 


“Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.


 


“Alternate Consideration” shall have the meaning set
forth in Section 7(e).


 


“Beneficial Ownership Limitation” shall have the meaning
set forth in Section 6(d).


 

















 


“Business Day” means any day except any Saturday, any
Sunday, any day which is a federal legal holiday in the United States or any
day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.


 


“Buy-In” shall have the meaning set forth in Section 6(c)(iv).


 


“Change of Control Transaction” means the occurrence
after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Corporation, by contract or otherwise) of in
excess of 33% of the voting securities of the Corporation (other than by means
of conversion or exercise of Preferred Stock and the Securities issued together
with the Preferred Stock), (b) the Corporation merges into or consolidates
with any other Person, or any Person merges into or consolidates with the
Corporation and, after giving effect to such transaction, the stockholders of
the Corporation immediately prior to such transaction own less than 66% of the
aggregate voting power of the Corporation or the successor entity of such
transaction, (c) the Corporation sells or transfers all or substantially
all of its assets to another Person and the stockholders of the Corporation
immediately prior to such transaction own less than 66% of the aggregate voting
power of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within a one year period of more than one-half of
the members of the Board of Directors which is not approved by a majority of
those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved
by a majority of the members of the Board of Directors who are members on the
Original Issue Date), or (e) the execution by the Corporation of an
agreement to which the Corporation is a party or by which it is bound providing
for any of the events set forth in clauses (a) through (d) above.


 


“Closing” means the closing of the purchase and sale of
the Securities pursuant to Section 2.1 of the Purchase Agreement.


 


“Closing Date” means the Trading Day on which all of the
Transaction Documents have been executed and delivered by the applicable
parties thereto and all conditions precedent to (i) each Holder’s
obligations to pay the Subscription Amount and (ii) the Corporation’s
obligations to deliver the Securities have been satisfied or waived.


 


“Commission” means the United States Securities and
Exchange Commission.


 


“Common Stock” means the Corporation’s common stock, par
value $0.005 per share, and stock of any other class of securities into which
such securities may hereafter be reclassified or changed.


 


“Common Stock Equivalents” means any securities of the
Corporation or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.


 


“Conversion Amount” means the sum of the Stated Value at
issue.


 


“Conversion Date” shall have the meaning set forth in Section 6(a).


 


“Conversion Price” shall have the meaning set forth in Section 6(b).


 


“Conversion Shares” means, collectively, the shares of
Common Stock issuable upon conversion of the shares of Preferred Stock in
accordance with the terms hereof.


 


“Dividend Payment Date” shall have the meaning set forth
in Section 3(a).


 


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“Exchange Act” means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.


 


“Fundamental Transaction” shall have the meaning set
forth in Section 7(e).


 


“GAAP” means United States generally accepted accounting
principles.


 


“Holder” means a holder of shares of Preferred Stock.


 


“Indebtedness” means (a) any liabilities for
borrowed money or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the Corporation’s balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, and (c) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance
with GAAP.


 


“Junior Securities” means the Common Stock and all other
Common Stock Equivalents of the Corporation other than those securities which
are explicitly senior or pari  passu to the Preferred Stock in
dividend rights or liquidation preference.


 


“Liens” means a lien, charge, security interest,
encumbrance, right of first refusal, preemptive right or other restriction.


 


“Liquidation” shall have the meaning set forth in Section 5.


 


“New York Courts” shall have the meaning set forth in Section 11(d).


 


“Notice of Conversion” shall have the meaning set forth
in Section 6(a).


 


“Original Issue Date” means the date of the first
issuance of any shares of the Preferred Stock regardless of the number of
transfers of any particular shares of Preferred Stock and regardless of the
number of certificates which may be issued to evidence such Preferred Stock.


 


“Permitted Indebtedness” means (a) the Indebtedness
existing on the Original Issue Date and set forth on Schedule 3.1(aa)
attached to the Purchase Agreement and (b) lease obligations and purchase
money indebtedness of up to $100,000, in the aggregate, incurred in connection
with the acquisition of capital assets and lease obligations with respect to
newly acquired or leased assets.


 


“Permitted Lien” means the individual and collective
reference to the following:  (a) Liens
for taxes, assessments and other governmental charges or levies not yet due or
Liens for taxes, assessments and other governmental charges or levies being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Corporation) have
been established in accordance with GAAP, (b) Liens imposed by law which
were incurred in the ordinary course of the Corporation’s business, such as
carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and
other similar Liens arising in the ordinary course of the Corporation’s
business, and which (x) do not individually or in the aggregate materially
detract from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Corporation and its
consolidated Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing for
the foreseeable future the forfeiture or sale of the property or asset subject
to such Lien, (c) Liens incurred in connection with Permitted Indebtedness
under clause (a) thereunder, and (d) Liens incurred in connection
with Permitted Indebtedness under clause (b) thereunder, provided that
such Liens are not secured by assets of the Corporation or its Subsidiaries
other than the assets so acquired or leased.


 


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“Person” means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.


 


“Preferred Stock” shall have the meaning set forth in Section 2.


 


“Purchase Agreement” means the Securities Purchase
Agreement dated as of the Original Issue Date among the Corporation and the
original Holders, as amended, modified or supplemented from time to time in
accordance with its terms.


 


“Securities” means the Preferred Stock, the Warrants,
the Warrant Shares and the Underlying Shares.


 


“Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.


 


“Shareholder Approval” means such approval as may be
required by the applicable rules and regulations of the Nasdaq Stock
Market (or any successor entity) from the shareholders of the Corporation with
respect to the transactions contemplated by the Transaction Documents,
including the issuance of all of the Underlying Shares in excess of 19.99% of
the issued and outstanding Common Stock on the Closing Date (including all
shares issuable in lieu of cash dividends hereunder).


 


“Share Delivery Date” shall have the meaning set forth
in Section 6(c).


 


“Stated Value” shall have the meaning set forth in Section 2,
as the same may be increased pursuant to Section 3.


 


“Subscription Amount” shall mean, as to each Holder, the
aggregate amount to be paid for the Preferred Stock purchased pursuant to the
Purchase Agreement as specified below such Holder’s name on the signature page of
the Purchase Agreement and next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.


 


“Subsidiary” means any subsidiary of the Corporation as
set forth on Schedule 3.1(a) of the Purchase Agreement and shall, where
applicable, also include any direct or indirect subsidiary of the Corporation
formed or acquired after the date of the Purchase Agreement.


 


“Successor Entity” shall have the meaning set forth in Section 7(e).


 


“Trading Day” means a day on which the principal Trading
Market is open for business.


 


“Trading Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading on the date
in question:  the NYSE AMEX, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of
the foregoing).


 


“Transaction Documents” means this Certificate of
Designation, the Purchase Agreement, the Warrants, all exhibits and schedules
thereto and hereto and any other documents or agreements executed in connection
with the transactions contemplated pursuant to the Purchase Agreement.


 


“Transfer Agent” means American Stock Transfer &
Trust Company LLC, the current transfer agent of the Company, and any successor
transfer agent of the Corporation.


 


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“Underlying Shares” means the shares of Common Stock
issued and issuable upon conversion or redemption of the Preferred Stock, and
upon exercise of the Warrants and issued and issuable in lieu of the cash
payment of dividends on the Preferred Stock in accordance with this Certificate
of Designation.


 


“VWAP” means, for any date, the price determined by the
first of the following clauses that applies: 
(a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if the OTC Bulletin Board is not a Trading Market,
the volume weighted  average price
of the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported,
or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Holders of a majority in interest of the Securities then outstanding and
reasonably acceptable to the Corporation, the fees and expenses of which shall
be paid by the Corporation.


 


“Warrants” means, collectively, the Common Stock
purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a) of
the Purchase Agreement, which Warrants shall be exercisable immediately and
have a term of exercise equal to 5 years, in the form of Exhibit C
attached to the Purchase Agreement.


 


“Warrant Shares” means the shares of Common Stock
issuable upon exercise of the Warrants.


 


Section 2.  Designation, Amount and Par Value.  The series of preferred stock shall be
designated as the Series B Convertible Preferred Stock (the “Preferred Stock”)
and the number of shares so designated shall be 5,250.  Each share of Preferred Stock shall have a
par value of $0.01 per share and a stated value equal to $1,000, subject to
increase set forth in Section 3 below (the “Stated Value”).


 


Section 3.  Dividends.


 


a)             Dividends.  Holders shall be entitled to
receive, and the Corporation shall pay, dividends on shares of Preferred Stock
equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as
dividends (other than dividends in the form of Common Stock) actually paid on
shares of the Common Stock when, as and if such dividends (other than dividends
in the form of Common Stock) are paid on shares of the Common Stock.  Other than as set forth in the previous
sentence, no other dividends shall be paid on shares of Preferred Stock; and
the Corporation shall pay no dividends (other than dividends in the form of
Common Stock) on shares of the Common Stock unless it simultaneously complies
with the previous sentence.  All accrued
but unpaid dividends on shares of Preferred Stock shall increase the Stated
Value of such shares, but when such dividends are actually paid any such
increase in the Stated Value shall be rescinded.


 


b)            So long as any Preferred Stock
shall remain outstanding, neither the Corporation nor any Subsidiary thereof
shall redeem, purchase or otherwise acquire directly or indirectly more than a de
minimis amount of any Junior Securities other than as to repurchases of
Common Stock or Common Stock Equivalents from departing officers or directors,
and provided that, while any of the Preferred Stock remains outstanding, such
repurchases shall not exceed an aggregate of $100,000 in any fiscal year from
all officers and directors.


 


Section 4.  Voting Rights.  Except as otherwise provided herein or as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, as long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of at least
67% of the then outstanding shares of the Preferred Stock, (a) alter or
change adversely the powers, preferences or rights given to the Preferred Stock
or alter or amend this Certificate of Designation, (b) authorize or create
any class of stock ranking as to dividends,


 


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redemption or distribution of assets upon a Liquidation
(as defined in Section 5) senior to, or otherwise pari  passu
with, the Preferred Stock, (c) amend its certificate of incorporation or
other charter documents in any manner that adversely affects any rights of the
Holders, (d) increase the number of authorized shares of Preferred Stock,
or (e) enter into any agreement with respect to any of the foregoing.
Notwithstanding anything to the contrary set forth in this Section 4, the
holders of Preferred Stock shall not have a separate class vote with respect to
any action taken in connection with a Change of Control Transaction.


 


Section 5.  Liquidation.  Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”),
the Holders shall be entitled to receive out of the assets, whether capital or
surplus, of the Corporation an amount equal to the Stated Value, plus any
accrued and unpaid dividends thereon and any other fees or liquidated damages
then due and owing thereon under this Certificate of Designation, for each  share of Preferred Stock before any distribution
or payment shall be made to the holders of any Junior Securities, and if the
assets of the Corporation shall be insufficient to pay in full such amounts,
then the entire assets to be distributed to the Holders shall be ratably
distributed among the Holders in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were paid in
full. A Fundamental Transaction or Change of Control Transaction shall not be
deemed a Liquidation. The Corporation shall mail written notice of any such
Liquidation, not less than 45 days prior to the payment date stated therein, to
each Holder.


 


Section 6.  Conversion.


 


a)             Conversions at Option
of Holder.  Each share of Preferred Stock shall be
convertible, at any time and from time to time from and after the Original
Issue Date at the option of the Holder thereof, into that number of shares of
Common Stock (subject to the limitations set forth in Section 6(d))
determined by dividing the Stated Value of such share of Preferred Stock by the
Conversion Price. Holders shall effect conversions by providing the Corporation
with the form of conversion notice attached hereto as Annex A (a “Notice of
Conversion”).  Each Notice of Conversion
shall specify the number of shares of Preferred Stock to be converted, the
number of shares of Preferred Stock owned prior to the conversion at issue, the
number of shares of Preferred Stock owned subsequent to the conversion at issue
and the date on which such conversion is to be effected, which date may not be
prior to the date the applicable Holder delivers by facsimile such Notice of Conversion
to the Corporation (such date, the “Conversion Date”).  If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of
Conversion to the Corporation is deemed delivered hereunder. The calculations
and entries set forth in the Notice of Conversion shall control in the absence
of manifest or mathematical error. To effect conversions of shares of Preferred
Stock, a Holder shall not be required to surrender the certificate(s) representing
the shares of Preferred Stock to the Corporation unless all of the shares of
Preferred Stock represented thereby are so converted, in which case such Holder
shall deliver the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of Preferred Stock
converted into Common Stock or redeemed in accordance with the terms hereof
shall be canceled and shall not be reissued, The Company shall maintain records
showing the number of shares of Preferred Stock converted for each Holder and
the applicable Conversion Date. Each Holder and any
assignee, by acceptance of a certificate for the Preferred Stock, acknowledges
and agrees that, by reason of the provisions of this paragraph, the number of
shares of Preferred Stock represented by such certificate may at any given time
be less than the amount stated on the face thereof.


 


b)            Conversion Price.  The conversion price for the
Preferred Stock shall equal $1.25, subject to adjustment herein (the “Conversion
Price”).


 


c)             Mechanics of Conversion.


 


i)              Delivery of Certificate
Upon Conversion.  Not later than three (3) Trading Days
after each Conversion Date (the “Share Delivery Date”), the Corporation shall
deliver, or cause to be delivered, to the converting Holder (A) a certificate
or certificates representing the Conversion Shares which shall be free of
restrictive legends and trading restrictions representing the number of
Conversion Shares being acquired upon the conversion of the Preferred Stock.
The Corporation shall use its best efforts to deliver any certificate or
certificates


 


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required to be delivered by the Corporation under this Section 6
electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.


 


ii)             Failure to Deliver
Certificates.  If, in the case of any Notice of Conversion,
such certificate or certificates are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Corporation at any time on or before its receipt
of such certificate or certificates, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original Preferred
Stock certificate delivered to the Corporation and the Holder shall promptly
return to the Corporation the Common Stock certificates issued to such Holder
pursuant to the rescinded Conversion Notice.


 


iii)            Obligation
Absolute;  Partial Liquidated Damages.  The Corporation’s obligation to
issue and deliver the Conversion Shares upon conversion of Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by a Holder to enforce the same, any waiver or  consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by such Holder or any other Person of any obligation
to the Corporation or any violation or alleged violation of law by such Holder
or any other person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Corporation to such Holder in connection
with the issuance of such Conversion Shares; provided, however, that such
delivery shall not operate as a waiver by the Corporation of any such action
that the Corporation may have against such Holder. In the event a Holder shall
elect to convert any or all of the Stated Value of its Preferred Stock, the
Corporation may not refuse conversion based on any claim that such Holder or
any one associated or affiliated with such Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from
a court, on notice to Holder, restraining and/or enjoining conversion of all or
part of the Preferred Stock of such Holder shall have been sought and obtained,
and the Corporation posts a surety bond for the benefit of such Holder in the
amount of 150% of the Stated Value of Preferred Stock which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which
shall be payable to such Holder to the extent it obtains judgment. In the
absence of such injunction, the Corporation shall issue Conversion Shares and,
if applicable, cash, upon a properly noticed conversion. If the Corporation
fails to deliver to a Holder such certificate or certificates pursuant to Section 6(c)(i) on
the second Trading Day after the Share Delivery Date applicable to such
conversion, the Corporation shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $10,000 of Stated Value of Preferred
Stock being converted, $10 per Trading Day (increasing to $20 per Trading Day
on the fifth Trading Day after such damages begin to accrue) for each Trading
Day after such second Trading Day after the Share Delivery Date until such
certificates are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages for the Corporation’s
failure to deliver Conversion Shares within the period specified herein and
such Holder shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of any such rights
shall not prohibit a Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.


 


iv)           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion.  In addition to any other rights
available to the Holder, if the Corporation fails for any reason to deliver to
a Holder the applicable certificate or certificates by the Share Delivery Date
pursuant to Section 6(c)(i), and if after such Share Delivery Date such
Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by such Holder of
the Conversion Shares which such Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a “Buy-In”), then the
Corporation shall (A) pay in cash to such Holder (in addition to any other
remedies available to or elected by such Holder) the amount, if any, by which (x) such
Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder was entitled to
receive from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the option of
such Holder, either reissue (if surrendered) the shares of Preferred Stock
equal to the number of shares of Preferred Stock submitted for conversion (in which
case, such conversion shall be deemed rescinded) or deliver to such Holder the
number of


 


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shares of Common Stock that would have been issued if
the Corporation had timely complied with its delivery requirements under Section 6(c)(i).
For example, if a Holder purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Preferred Stock with respect to which the actual sale
price of the Conversion Shares (including any brokerage commissions) giving
rise to such purchase obligation was a total of $10,000 under clause (A) of
the immediately preceding sentence, the Corporation shall be required to pay
such Holder $1,000. The Holder shall provide the Corporation written notice
indicating the amounts payable to such Holder in respect of the Buy-In and,
upon request of the Corporation, evidence of the amount of such loss. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to
it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Corporation’s
failure to timely deliver certificates representing shares of Common Stock upon
conversion of the shares of Preferred Stock as required pursuant to the terms
hereof.


 


v)            Reservation of Shares
Issuable Upon Conversion.  The Corporation covenants that it will at all
times reserve and keep available out of its authorized and unissued shares of
Common Stock for the sole purpose of issuance upon conversion of the Preferred
Stock, as herein provided, free from preemptive rights or any  other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the Preferred Stock),
not less than such aggregate number of shares of the Common Stock as shall
(subject to the terms and conditions set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section 7)
upon the conversion of the then outstanding shares of Preferred Stock
hereunder. The Corporation covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly authorized, validly issued, fully
paid and nonassessable.


 


vi)           Fractional Shares.  No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of the
Preferred Stock. As to any fraction of a share which the Holder would otherwise
be entitled to purchase upon such conversion, the Corporation shall at its
election, either pay a cash adjustment in respect of such final fraction in an
amount equal to such fraction multiplied by the Conversion Price or round up to
the next whole share.


 


vii)          Transfer Taxes.  The issuance of certificates for
shares of the Common Stock on conversion of this Preferred Stock shall be made
without charge to any Holder for any documentary stamp or similar taxes that
may be payable in respect of the issue or delivery of such certificates,
provided that the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the Holders of
such shares of Preferred Stock and the Corporation shall not be required to
issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Corporation the amount
of such tax or shall have established to the satisfaction of the Corporation that
such tax has been paid.


 


d)            Beneficial Ownership
Limitation.  The Corporation shall not effect any
conversion of the Preferred Stock, and a Holder shall not have the right to
convert any portion of the Preferred Stock, to the extent that, after giving effect
to the conversion set forth on the applicable Notice of Conversion, such Holder
(together with such Holder’s Affiliates, and any Persons acting as a group
together with such Holder or any of such Holder’s Affiliates) would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Preferred
Stock with respect to which such determination is being made, but shall exclude
the number of shares of Common Stock which are issuable upon (i) conversion
of the remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Corporation subject to a limitation on conversion or exercise analogous to
the limitation contained herein (including, without limitation, the Preferred
Stock or the Warrants) beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder. The
submission of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the shares of Preferred Stock may be converted (in
relation to other securities


 


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owned by such Holder together with any Affiliates) and
how many shares of the Preferred Stock are convertible, in each case subject to
the Beneficial Ownership Limitation. To ensure compliance with this
restriction, each Holder will be deemed to represent to the Corporation each
time it delivers a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the Corporation shall
have no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.  For purposes of this Section 6(d), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Corporation’s most recent periodic or
annual report filed with the Commission, as the case may be, (ii) a more
recent public announcement by the Corporation or (iii) a more recent
written notice by the Corporation or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request
of a Holder, the Corporation shall within two Trading Days confirm orally and
in writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Corporation, including the Preferred Stock, by such Holder or
its Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99%
of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon
conversion of Preferred Stock held by the applicable Holder. A Holder, upon not
less than 61 days’ prior notice to the Corporation, may increase or decrease
the Beneficial Ownership Limitation provisions of this Section 6(d) applicable
to its Preferred Stock provided that the Beneficial Ownership Limitation in no
event exceeds 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Preferred Stock held by the Holder and the provisions of
this Section 6(d) shall continue to apply. Any such increase or
decrease will not be effective until the 61st day after such notice is delivered to the
Corporation and shall only apply to such Holder and no other Holder. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 6(d) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein
or to make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this paragraph shall
apply to a successor holder of Preferred Stock.


 


Section 7.  Certain Adjustments.


 


a)             Stock
Dividends and Stock Splits.  If the
Corporation, at any time while this Preferred Stock is outstanding:  (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any other Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Corporation upon conversion of, or payment of a dividend on, this Preferred
Stock), (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues,
in the event of a reclassification of shares of the Common Stock, any shares of
capital stock of the Corporation, then the Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding any treasury shares of the Corporation) outstanding
immediately before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or re-classification.


 


b)            RESERVED.


 


c)             Subsequent
Rights Offerings.  If the
Corporation, at any time while this Preferred Stock is outstanding, shall issue
rights, options or warrants to all holders of Common Stock (and not to the
Holders) entitling them to subscribe for or purchase shares of Common Stock at
a price per share that is lower than the VWAP on the record date referenced
below, then the Conversion Price shall be multiplied by a fraction of which the
denominator 


 


9

















 


shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights, options or warrants plus
the number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the
Common Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming delivery to the Corporation in full
of all consideration payable upon exercise of such rights, options or warrants)
would purchase at such VWAP. Such adjustment shall be made whenever such
rights, options or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights, options or warrants.


 


d)            Pro
Rata Distributions.  If the
Corporation, at any time while this Preferred Stock is outstanding, distributes
to all holders of Common Stock (and not to the Holders) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security, then in each such case the
Conversion Price shall be adjusted by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
fair market value at such record date of the portion of such assets or evidence
of indebtedness or rights or warrants so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors
of the Corporation in good faith. In either case the adjustments shall be
described in a statement delivered to the Holders describing the portion of
assets or evidences  of indebtedness
so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.


 


e)             Fundamental
Transaction.  If, at any time while
this Preferred Stock is outstanding, (i) the Corporation, directly or
indirectly, in one or more related transactions effects any merger or
consolidation of the Corporation with or into another Person, (ii) the
Corporation, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any,
direct or indirect, purchase offer, tender offer or exchange offer (whether by
the Corporation or another Person) is completed pursuant to which holders of
Common Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or
more of the outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, (v) the Corporation,
directly or indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent conversion of this Preferred Stock,
the Holder shall have the right to receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction (without regard to any limitation in
Section 6(d) on the conversion of this Preferred Stock), the number
of shares of Common Stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of Common Stock for
which this Preferred Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) on the
conversion of this Preferred Stock). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Corporation shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of
this


 


10

















 


Preferred Stock following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any successor
to the Corporation or surviving entity in such Fundamental Transaction shall
file a new Certificate of Designation with the same terms and conditions and
issue to the Holders new preferred stock consistent with the foregoing
provisions and evidencing the Holders’ right to convert such preferred stock
into Alternate Consideration. The Corporation shall cause any successor entity
in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Corporation under
this Certificate of Designation and the other Transaction Documents (as defined
in the Purchase Agreement) in accordance with the provisions of this Section 7(e) pursuant
to written agreements in form and substance reasonably satisfactory to the
Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of this
Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Preferred Stock which is
convertible for a corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common Stock
acquirable and receivable upon conversion of this Preferred Stock (without
regard to any limitations on the conversion of this Preferred Stock) prior to
such Fundamental Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the
purpose of protecting the economic value of this Preferred Stock immediately
prior to the consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental  Transaction, the provisions of
this Certificate of Designation and the other Transaction Documents referring
to the “Corporation” shall refer instead to the Successor Entity), and may
exercise every right and power of the Corporation and shall assume all of the
obligations of the Corporation under this Certificate of Designation and the
other Transaction Documents with the same effect as if such Successor Entity
had been named as the Corporation herein.


 


f)             Calculations.  All calculations under this Section 7
shall be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 7, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding any treasury shares
of the Corporation) issued and outstanding.


 


g)            Notice
to the Holders.


 


i)              Adjustment
to Conversion Price.  Whenever the
Conversion Price is adjusted pursuant to any provision of this Section 7,
the Corporation shall promptly deliver to each Holder a notice setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.


 


ii)             Notice
to Allow Conversion by Holder.  If (A) the
Corporation shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Corporation shall authorize the granting to all holders of the Common Stock of
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights, (D) the approval of any stockholders of the
Corporation shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Corporation is a party,
any sale or transfer of all or substantially all of the assets of the
Corporation, or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) the Corporation
shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation, then, in each case, the
Corporation shall cause to be filed at each office or agency maintained for the
purpose of conversion of this Preferred Stock, and shall cause to be delivered
to each Holder at its last address as it shall appear upon the stock books of
the Corporation, at least twenty (20) calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants


 


11

















 


are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that
any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. 
The Holder shall remain entitled to convert the Conversion Amount of
this Preferred Stock (or any part hereof) during the 20-day period commencing
on the date of such notice through the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.


 


Section 8.  RESERVED


 


Section 9.  Negative Covenants.  As long as any shares of Preferred Stock are
outstanding, unless the holders of at least 67% in Stated Value of the then
outstanding shares of Preferred Stock shall have otherwise given prior written
consent, the Corporation shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:


 


a)             other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any indebtedness for borrowed money of any kind, including but
not limited to, a guarantee, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any income or
profits therefrom;


 


b)            other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any
Liens of any kind, on or with respect to any of its property or assets now
owned or hereafter acquired or any interest therein or any income or profits
therefrom;


 


c)             amend
its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder; provided, however, that this covenant shall in no
event apply to amendments to increase the Corporation’s authorized number of
shares of Common Stock;


 


d)            repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de
minimis number of shares of its Common Stock, Common Stock Equivalents
or Junior Securities, other than as to (i) the Conversion Shares or
Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases
of Common Stock or Common Stock Equivalents of departing officers and directors
of the Corporation, provided that such repurchases shall not exceed an
aggregate of $100,000 in any fiscal year for all officers and directors for so
long as the Preferred Stock is outstanding;


 


e)             pay
cash dividends or distributions on Junior Securities of the Corporation; or


 


f)             enter
into any agreement with respect to any of the foregoing.


 


Section 10.  Miscellaneous.


 


a)             Notices.  Any and all notices or other communications
or deliveries to be provided by the Holders hereunder including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier
service, addressed to the Corporation, at 6430 Rockledge Drive, #503, Bethesda,
Maryland  20817, Attention:  Corporate Secretary, facsimile number (301)
897-2567, or such other facsimile number or address as the Corporation may
specify for such purposes by notice to the Holders delivered in accordance with
this Section 10, with a copy sent by facsimile or overnight courier
service to:  James E. Baker, Jr.,
Baxter, Baker, Sidle, Conn & Jones, P.A., 120 E. Baltimore Street, Suite 2100,
Baltimore, Maryland  21202, facsimile
number (410) 230-3801.  Any and all
notices or other communications or deliveries to 


 


12

















 


be provided by the Corporation hereunder shall be in
writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the Corporation, or
if no such facsimile number or address appears on the books of the Corporation,
at the principal place of business of such Holder, as set forth in the Purchase
Agreement. Any notice or other communication or deliveries hereunder shall be deemed
given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth in this Section prior to 5:30 p.m. (New York City time) on
any date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth in this Section on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (iii) the second
Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given.


 


b)            Absolute
Obligation.  Except as expressly
provided herein, no provision of this Certificate of Designation shall alter or
impair the obligation of the Corporation, which is absolute and unconditional,
to pay liquidated damages, accrued dividends and accrued interest, as
applicable, on the shares of Preferred Stock at the time, place, and rate, and
in the coin or currency, herein prescribed.


 


c)             Lost
or Mutilated Preferred Stock Certificate. 
If a Holder’s Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated certificate, or in lieu
of or in substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Preferred Stock so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such certificate, and of the ownership hereof reasonably satisfactory to the
Corporation.


 


d)            Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in accordance with
the internal laws of the State of Delaware, without regard to the principles of
conflict of laws thereof.


 


e)             Waiver.  Any waiver by the Corporation or a Holder of
a breach of any provision of this Certificate of Designation shall not operate
as or be construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Certificate of Designation or a
waiver by any other Holders. The failure of the Corporation or a Holder to
insist upon strict adherence to any term of this Certificate of Designation on
one or more occasions shall not be considered a waiver or deprive that party
(or any other Holder) of the right thereafter to insist upon strict adherence
to that term or any other term of this Certificate of Designation on any other
occasion. Any waiver by the Corporation or a Holder must be in writing.


 


f)             Severability.  If any provision of this Certificate of
Designation is invalid, illegal or unenforceable, the balance of this
Certificate of Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain
applicable to all other Persons and circumstances.  If it shall be found that any interest or
other amount deemed interest due hereunder violates the applicable law
governing usury, the applicable rate of interest due hereunder shall automatically
be lowered to equal the maximum rate of interest permitted under applicable
law.


 


g)            Next
Business Day.  Whenever any payment
or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.


 


h)            Headings.  The headings contained herein are for
convenience only, do not constitute a part of this Certificate of Designation
and shall not be deemed to limit or affect any of the provisions hereof.


 


i)              Status
of Converted or Redeemed Preferred Stock. 
Shares of Preferred Stock may only be issued pursuant to the Purchase
Agreement. If any shares of Preferred Stock shall be converted, redeemed or
reacquired by the Corporation, such shares shall resume the status of
authorized but unissued shares of preferred stock and shall no longer be
designated as Series B Convertible Preferred Stock.


 


13

















 


RESOLVED, FURTHER, that the Chief Executive
Officer/Chief Operating Officer, the Treasurer and the Secretary or any
assistant secretary, of the Corporation be and they hereby are authorized and
directed to prepare and file this Certificate of Designation of Preferences,
Rights and Limitations in accordance with the foregoing resolution and the
provisions of Delaware law.


 


IN WITNESS WHEREOF, the undersigned have executed this
Certificate this 7th  day of October, 2010.


 


 


	
   

  	
   

  	
   

  
	
  Name: Robert L. Clayton

  	
   

  	
  Name: Claire L. Kruger

  
	
  Title: Treasurer and Chief Financial Officer

  	
   

  	
  Title: Chief Executive Officer and Chief Operating
  Officer

  



 


14

















 


ANNEX A


 


NOTICE OF CONVERSION


 


(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO
CONVERT SHARES OF PREFERRED STOCK)


 


The undersigned hereby elects to convert the number of
shares of Series B Convertible Preferred Stock indicated below into shares
of common stock, par value $0.005 per share (the “Common Stock”), of Spherix
Incorporated, a Delaware corporation (the “Corporation”), according to the
conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in
the name of a Person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as may be required by the Corporation in accordance
with the Purchase Agreement.  No fee will
be charged to the Holders for any conversion, except for any such transfer
taxes.


 


Conversion calculations:


 


Date to Effect Conversion:


 


Number of shares of Preferred Stock owned prior to
Conversion:


 


Number of shares of Preferred Stock to be Converted:


 


Stated Value of shares of Preferred Stock to be
Converted:


 


Number of shares of Common Stock to be Issued:


 


Applicable Conversion Price:


 


Number of shares of Preferred Stock subsequent to
Conversion:


 


Address for Delivery:


 


or


 


DWAC Instructions*:


 


Name of DTC Participant (Holder’s prime broker-dealer):


 


DTC Participant Number:


 


Name of Account at DTC Participant to be credited with
the shares:


 


Account Number at DTS Participant to be credited with
the shares:


 






*You must contact your
broker-dealer and ask them to initiate the DWAC or you will not receive the
shares.


 


	
   

  	
   

  
	
   

  	
  (Print Name of Holder)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


15