Exhibit 4.1


CERTIFICATE OF DESIGNATIONS, PREFERENCES

AND RIGHTS OF

SERIES D CONVERTIBLE PARTICIPATING PREFERRED STOCK

OF

‘mktg, inc.’


          ‘mktg,
inc.’ (the “Company”), a corporation organized and existing under the
General Corporation Law of the State of Delaware (the “DGCL”), does
hereby certify that, pursuant to authority conferred upon the Board of
Directors of the Company by the Certificate of Incorporation, as amended, of
the Company, and pursuant to Sections 151 and 141 of the DGCL, the Board of
Directors of the Company adopted resolutions (i) designating a series of the
Company’s previously authorized preferred stock, and (ii) providing for the
designations, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, of TWO
MILLION FIVE HUNDRED THOUSAND (2,500,000) shares of Series D Convertible
Participating Preferred Stock of the Company, as follows:


          RESOLVED,
that the Company is authorized to issue 2,500,000 shares of Series D
Convertible Participating Preferred Stock (the “Preferred Shares”), par
value $0.001 per share, which shall have the following powers, designations,
preferences and other special rights:


1.       Dividends. Other
than as set forth in Section 10 hereof, no dividends shall be payable to
holders of the Preferred Shares (each, a “Holder” and collectively, the
“Holders”).


2.       Conversion of Preferred
Shares. Preferred Shares shall be convertible into shares of the Company’s
Common Stock, par value $0.001 per share (the “Common Stock”), on the
terms and conditions set forth in this Section 2.


          (a)     Certain
Defined Terms. For purposes of this Certificate of Designations, the
following terms shall have the following meanings:


                    (i)          “Accretion
Amount” means, on a per Preferred Share basis, an amount accruing on the
Stated Value thereof at the Accretion Rate on an annual compounded basis from
the Initial Issuance Date through and including the date of determination for
such Preferred Share. For any partial year, the Accretion Amount shall be
calculated based on the number of days that have actually elapsed and a year of
365 or 366 days, as applicable.


                    (ii)         “Accretion
Rate” means fourteen percent (14%) per annum compounding annually, and for
the period from and after the occurrence of a Triggering Event through such
time that such Triggering Event is cured, sixteen and one half percent (16.5%)
per annum.


                    (iii)        “Adjusted
Price” means, for any Dilutive Issuance, the product of (A) the Conversion
Price in effect immediately prior to such Dilutive Issuance and (B) a fraction,


	
  

 	
  

 
	
  

 	
           (x)          the
 numerator of which shall be (A) the number of shares of Common Stock Deemed
 Outstanding immediately prior to such Dilutive Issuance, plus (B) the number
 of shares of Common Stock which the aggregate consideration received upon
 such Dilutive Issuance would purchase at such then-existing Conversion Price,
 and

 













	
  

 	
  

 
	
  

 	
           (y)          the
 denominator of which shall be the number of shares of Common Stock Deemed
 Outstanding immediately after such Dilutive Issuance.

 


                    (iv)         “Approved
Stock Plan” means any benefit plan created after the Subscription Date
which has been approved by both the Board of Directors of the Company and by
the Required Holders, pursuant to which the Company’s securities may be issued
to any employee, officer, or consultant for services provided to the Company.


                    (v)          “Bloomberg”

means Bloomberg Financial Markets.


                    (vi)         “Business
Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.


                    (vii)        “Capital
Stock” means: (1) in the case of a corporation, corporate stock; (2) in the
case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock; (3) in the case of a partnership or limited liability company,
partnership interests (whether general or limited) or membership interests; and
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.


                    (viii)       “Change
of Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Stock in
which holders of a majority of the Company’s voting power immediately prior to
such reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Company.


                    (ix)         “Closing
Sale Price” means, for any security as of any date, the last closing trade
price for such security on the Principal Market, as reported by Bloomberg, or,
if the Principal Market begins to operate on an extended hours basis and does
not designate the closing trade price then the last trade price of such
security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or trading market
for such security the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last trade
price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no last trade
price is reported for such security by Bloomberg, the average of the ask prices
of any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Sale Price of such
security on such date shall be the fair market value as mutually determined by
the Company and the Required Holders. If the Company and the Required Holders
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 2(d)(iii). All such
determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.


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                    (x)          “Common
Stock Deemed Outstanding” means, at any given time, the number of shares of
Common Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding pursuant to Sections 2(f)(i)(A)
and 2(f)(i)(B) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any shares of
Common Stock owned or held by or for the account of the Company or issuable
upon conversion of the Preferred Shares.


                    (xi)         “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness,
lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof,
is to provide assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in
whole or in part) against loss with respect thereto.


                    (xii)        “Conversion
Amount” means the Stated Value.


                    (xiii)       “Conversion
Price” means $0.47, subject to adjustment as provided herein.


                    (xiv)       “Convertible
Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exchangeable or exercisable for Common Stock.


                    (xv)        “Eligible
Market” means the NYSE, The NASDAQ Global Select Market, The NASDAQ Global
Market, or The NASDAQ Capital Market.


                    (xvi)       “Equity
Interests” means Capital Stock and all warrants, options or other rights to
acquire Capital Stock.


                    (xvii)      “Excluded
Securities” means any Common Stock issued or issuable or deemed to be
issued in accordance with Section 2(f) hereof by the Company: (i) in connection
with any Approved Stock Plan; (ii) upon conversion of the Preferred Shares;
(iii) upon exercise of the Warrants (as defined in the Securities Purchase
Agreement), (iv) as consideration in connection with any strategic acquisition
or transaction whether through an acquisition of stock or a merger of any
business, assets or technologies the primary purpose of which is not to raise
equity capital, provided, that such acquisition or transaction has been
approved by the Required Holders (for the avoidance of doubt, any issuances
pursuant to Section 3 of the Maritz Agreement shall not be considered an
Excluded Security); and (v) in connection with any stock split, stock dividend,
recapitalization or similar transaction by the Company for which adjustment is
made pursuant to Section 2(f)(ii).


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                    (xviii)     “Fair
Market Value” means


                              (a)          in
the case of cash, the amount thereof;


                              (b)          in
the case of shares of stock where, at least thirty (30) days prior to the
issuance thereof, other shares of the same class had been listed on an Eligible
Market, the VWAP of such stock for the five (5) consecutive Trading Days
immediately preceding the day as of which Fair Market Value is being
determined;


                              (c)          in
the case of shares of stock where, at least thirty (30) days prior to the
issuance thereof, other shares of the same class had not been listed on an
Eligible Market, but had been listed in the over-the-counter market as reported
by Pink Sheets LLC or similar organization, the VWAP of such stock for the five
(5) consecutive trading days on which shares of such stock have traded on such
over-the-counter market immediately preceding the day as of which Fair Market
Value is being determined; or


                              (d)          in
the case of securities not covered by clause (b) or (c) above and in the case
of other property not covered by clause (a), (b) or (c) above, the Fair Market
Value of such securities or other property, as the case may be, shall be
determined by an independent financial expert appointed for such purpose, using
one or more valuation methods that the independent financial expert in its best
professional judgment determines to be most appropriate, assuming, in the case
of securities, such securities are fully distributed and in each case, such
securities or other property are to be sold in an arm’s-length transaction and
there was no compulsion on the part of any party to such sale to buy or sell
and taking into account all relevant factors.


                    (xix)       “Fundamental
Transaction” means that the Company shall (or, in the case of clause (vi),
any “person” or “group” (as these terms are used for purposes of Sections 13(d)
and 14(d) of the Exchange Act), but excluding a UCC Investor (as defined in the
Securities Purchase Agreement) shall), directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into (whether or not the
Company is the surviving corporation) another Person, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person or Persons to make a purchase, tender or exchange offer that is accepted
by the holders of more than fifty percent (50%) of the outstanding shares of
Voting Stock (not including any shares of Voting Stock held by the Person or
Persons making or party to, or associated or affiliated with the Person or
Persons making or party to, such purchase, tender or exchange offer), or (iv)
consummate a stock 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
the fifty percent (50%) of either the outstanding shares of Voting Stock (not
including any shares of Voting 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 purchase agreement or other business combination), or (v)
reorganize, recapitalize or reclassify its Common Stock, or (vi) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of fifty percent (50%) of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.



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                    (xx)        “Indebtedness”
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations (as
defined herein) in respect of indebtedness or obligations of others of the
kinds referred to in clauses (A) through (G) above.


                    (xxi)       “Initial
Issuance Date” means December [________], 2009.


                    (xxii)      “Liquidation
Event” means the voluntary or involuntary liquidation, dissolution or
winding up of the Company or such Subsidiaries the assets of which constitute
all or substantially all of the assets of the business of the Company and its
Subsidiaries taken as a whole, in a single transaction or series of
transactions.


                    (xxiii)     “Maritz
Agreement” means that agreement dated as of May 27, 2009 by and among the
Company and Maritz LLC.


                    (xxiv)     “Maturity
Date” means, with respect to a Preferred Share, December [__],
2015, unless extended pursuant to Section 2(d)(vii)(B).


                    (xxv)      “Nasdaq”
means the Nasdaq Capital Market.


                    (xxvi)     “NYSE”
means The New York Stock Exchange, Inc.


                    (xxvii)    “Options”
means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.


                    (xxviii)   “Parent
Entity” of a Person means an entity that, directly or indirectly, controls
the applicable Person and whose common stock or equivalent equity security is
quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public
market capitalization as of the date of consummation of the Fundamental
Transaction.



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                    (xxix)      “Participation
Amount” means the quotient of (A) the product of (x) the total of the Common
Stock Deemed Outstanding at such time multiplied by (y) the Trading Price
multiplied by (z) three percent (3%) divided by (B) 2,500,000, as appropriately
adjusted for any stock dividend, stock split, combination or other similar
recapitalization affecting such shares.



                    (xxx)       “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.


                    (xxxi)      “Principal
Market” means Nasdaq, or if the Common Stock is not traded on the Principal
Market, an Eligible Market.


                    (xxxii)     “Registration
Rights Agreement” means that certain registration rights agreement by and
among the Company and the initial Holders of the Preferred Shares dated as of
the Initial Issuance Date, as such agreement may be amended from time to time
as provided in such agreement.


                    (xxxiii)    “Required
Holders” means the Holders of Preferred Shares representing at least a
majority of the aggregate Preferred Shares then outstanding.


                    (xxxiv)    “SEC”
means the Securities and Exchange Commission.


                    (xxxv)     “Securities
Purchase Agreement” means that certain securities purchase agreement by and
among the Company and the initial Holders, dated as of the Subscription Date,
as such agreement further may be amended from time to time as provided in such
agreement.


                    (xxxvi)    “Senior
Notes” shall mean the Senior Secured Notes in the initial aggregate
principal amount of $2,500,000 issued pursuant to the Securities Purchase
Agreement, as such notes may be further amended, supplemented, restated, refinanced,
or otherwise modified from time to time.


                    (xxxvii)   “Series
D Preferred Stock” shall mean the Series D Convertible Participating
Preferred Stock of the Company, par value $0.001 per share.


                    (xxxviii)  “Stated
Value” means $1.00.


                    (xxxix)    “Subscription
Date” means November 25, 2009.


                    (xl)          “Subsidiaries”
shall have the meaning as set forth in the Securities Purchase Agreement.


                    (xli)         “Successor
Entity” means the Person, which may be the Company, formed by, resulting
from or surviving any Fundamental Transaction or the Person with which such
Fundamental Transaction shall have been made, provided that if such Person is
not a publicly traded entity whose common stock or equivalent equity security
is quoted or listed for trading on an Eligible Market, Successor Entity shall
mean such Person’s Parent Entity.


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                    (xlii)        “Tax”
means any tax, levy, impost, duty or other charge or withholding of a similar
nature (including any related penalty or interest).



                    (xliii)       “Tax
Deduction” means a deduction or withholding for or on account of Tax from a
payment under this Certificate of Designations.


                    (xliv)       “Trading
Day” means any day on which the Common Stock are traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the
Common Stock, then on the principal securities exchange or securities market on
which the shares of Common Stock are then traded.


                    (xlv)        “Trading
Price” means:


                              (a)          with
respect to any determinations to be made hereunder in connection with the
Participation Amount upon the occurrence of any Liquidation Event pursuant to Section
8(b), the VWAP for the 20 consecutive Trading Days immediately prior to the
date of such Liquidation Event;


                              (b)          with
respect to any determinations to be made hereunder in connection with
redemption of Preferred Shares upon the Maturity Date pursuant to Section
2(d)(vii), the VWAP for the 20 consecutive Trading Days immediately prior
to the Maturity Date;


                              (c)          with
respect to any determinations to be made hereunder in connection with the
redemption of Preferred Shares upon the occurrence of a Change of Control
pursuant to Section 8, the highest of (i) the Fair Market Value of the
aggregate consideration paid to the holders of Common Stock on account of a
share of Common Stock in connection with such Change of Control, (ii) the VWAP
for the 20 consecutive Trading Days which are immediately prior to the
announcement of a transaction or execution of an agreement that could result in
such Change of Control, and (iii) the VWAP for the 20 consecutive Trading Days
which are immediately prior to the date of payment and which, if applicable,
follow the date of announcement of a transaction or execution of an agreement
that could result in such Change of Control (provided, that in the case of this
clause (iii), if the number of consecutive Trading Days from and after the
announcement of a transaction or execution of an agreement that could result in
a Change of Control, up to but not including the date of such Change of
Control, is less than 20, then the VWAP for such lesser number of consecutive
Trading Days shall be used instead); and


                              (d)          with
respect to any determinations to be made hereunder in connection with the
redemption of Preferred Shares upon the occurrence of a Triggering Event
pursuant to Section 3(a), the VWAP for the 20 consecutive Trading Days
immediately prior to the Triggering Event.


                    (xlvi)       “Voting
Stock” of a Person means Capital Stock of such Person of the class or
classes pursuant to which the holders thereof have the general voting power to
elect, or the general power to appoint, at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time Capital Stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).


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                    (xlvii)       “VWAP”
means, for any period, the per share volume-weighted average price of Common
Stock for each Trading Day in such period as displayed under the heading
“Bloomberg VWAP” on Bloomberg page [“CMKG <equity> AQR”] (or any
successor thereto) in respect of the period from the scheduled open of trading
on the first Trading Day in such period until the scheduled close of trading on
the last Trading Day in such period (or if such volume-weighted average price
is unavailable, the market price of one share of the Common Stock for such
period determined, using a volume weighted average method, by an independent
financial expert).


          (b)          Holder’s
Conversion Right. At any time or times on or after the Initial Issuance
Date until the Maturity Date, any Holder shall be entitled to convert any whole
number of Preferred Shares into fully paid and nonassessable shares of Common
Stock in accordance with Section 2(d) at the Conversion Rate (as defined
below).


          (c)          Conversion.
The number of shares of Common Stock issuable upon conversion of each Preferred
Share pursuant to Section 2(b) shall be determined according to the
following formula (the “Conversion Rate”):


Conversion Amount
Conversion Price


          No
fractional shares of Common Stock are to be issued upon the conversion of any
Preferred Share, but rather the number of shares of Common Stock to be issued
shall be rounded to the nearest whole number.


          (d)          Mechanics
of Conversion. The conversion of Preferred Shares shall be conducted in the
following manner:


                    (i)          Holder’s
Delivery Requirements. To convert Preferred Shares into shares of Common
Stock on any date (a “Conversion Date”), the Holder shall (A) transmit
by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New
York City Time, on such date, a copy of a properly completed notice of
conversion executed by the registered Holder of the Preferred Shares subject to
such conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company and the Company’s designated transfer agent (the “Transfer
Agent”) and (B) if required by Section 2(d)(viii), surrender to a
common carrier for delivery to the Company as soon as practicable following
such date the original certificates representing the Preferred Shares being
converted (or compliance with the procedures set forth in Section 13)
(the “Preferred Stock Certificates”).


                    (ii)         Company’s
Response. Upon receipt by the Company of copy of a Conversion Notice, the
Company shall (I) as soon as practicable, but in any event within two (2)
Trading Days, send, via facsimile, a confirmation of receipt of such Conversion
Notice to such Holder and the Transfer Agent, which confirmation shall
constitute an instruction to the Transfer Agent to process such Conversion
Notice in accordance with the terms herein and (II) (A) on or before the third
(3rd) Trading Day following the date of receipt by the Company of
such Conversion Notice provided the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer Program, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (B) on or before the fifth (5th) Trading Day
following the date of receipt by the Company of such Conversion Notice if the
Transfer Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver on the applicable date (the “Share Delivery Date”),
to the address as specified in the Conversion Notice, a certificate, registered
in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled. If the number of Preferred Shares
represented by the Preferred Stock Certificate(s) submitted for conversion, as
may be required pursuant to Section 2(d)(viii), is greater than the
number of Preferred Shares being converted, then the Company shall, as soon as
practicable and in no event later than five (5) Business Days after receipt of
the Preferred Stock Certificate(s) (the “Preferred Stock Delivery Date”)
and at its own expense, issue and deliver to the Holder a new Preferred Stock
Certificate representing the number of Preferred Shares not converted. The
Person or Persons entitled to receive the shares of Common Stock issuable upon
a conversion of Preferred Shares shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion Date.


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                    (iii)        Dispute
Resolution. In the case of a dispute as to the determination of the Closing
Sale Price or the arithmetic calculation of the Conversion Rate, the Company
shall instruct the Transfer Agent to issue to the Holder the number of shares
of Common Stock that is not disputed and shall transmit an explanation of the
disputed determinations or arithmetic calculations to the Holder via facsimile
within five (5) Business Days of receipt of such Holder’s Conversion Notice or
other date of determination. If such Holder and the Company are unable to agree
upon the determination of the Closing Sale Price or arithmetic calculation of
the Conversion Rate within five (5) Business Days of such disputed
determination or arithmetic calculation being transmitted to the Holder, then
the Company shall within two (2) Business Days submit via facsimile (A) the
disputed determination of the Closing Sale Price to an independent, reputable
investment bank selected by the Company and approved by the Required Holders or
(B) the disputed arithmetic calculation of the Conversion Rate to the Company’s
independent, outside accountant. The Company shall cause, at the Company’s
expense, the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holders of
the results no later than two (2) Business Days from the time it receives the
disputed determinations or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent error.


                    (iv)        Record
Holder. The Person or Persons entitled to receive the shares of Common
Stock issuable upon a conversion of Preferred Shares shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
Conversion Date.


                    (v)          Company’s
Failure to Timely Convert.


	
  

 	
  

 
	
  

 	
                     (A)          Cash
 Damages.

 


                                             (1)
If (x) on any Share Delivery Date, the Company shall fail to credit a Holder’s
balance account with DTC or issue and deliver a certificate to such Holder for
the number of shares of Common Stock to which such Holder is entitled upon such
Holder’s conversion or the Company’s conversion, as applicable, of Preferred
Shares or (y) within three (3) Trading Days of the Company’s receipt of a
Preferred Stock Certificate, the Company shall fail to issue and deliver a new
Preferred Stock Certificate representing the number of Preferred Shares to
which such Holder is entitled pursuant to Section 2(d)(ii), then due to
the uncertainty and difficulty of estimating a Holder’s damages for such delay
and as a reasonable estimate of such Holder’s actual loss due to the delay and
not as a penalty, the Company shall pay additional damages to such Holder for
each day after the Share Delivery Date or the Company Delivery Date, as
applicable, that such conversion is not timely effected and/or each day after
the Preferred Stock Delivery Date that such Preferred Stock Certificate is not
delivered in an amount equal to one and one half percent (1.5%) of the product
of (I) the sum of the number of shares of Common Stock not issued to the Holder
on or prior to the Share Delivery Date or Company Delivery Date, as applicable,
and to which such Holder is entitled as set forth in the applicable Conversion
Notice or in any Company Conversion Notice and, in the event the Company has
failed to deliver a Preferred Stock Certificate to the Holder on or prior to
the Preferred Stock Delivery Date, the number of shares of Common Stock
issuable upon conversion of the Preferred Shares represented by such Preferred Stock
Certificate as of the Preferred Stock Delivery Date and (II) the Closing Sale
Price of the Common Stock on the Share Delivery Date or Company Delivery Date,
as applicable, in the case of the failure to deliver Common Stock, or the
Preferred Stock Delivery Date, in the case of failure to deliver a Preferred
Stock Certificate.


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                                             (2)
If the Company fails to pay the additional damages set forth in Section
2(d)(v)(A)(1) within five (5) Trading Days of the date incurred, then the
Holder entitled to such payments shall have the right at any time, so long as
the Company continues to fail to make such payments, to require the Company,
upon written notice, to immediately issue, in lieu of such cash damages, the
number of shares of Common Stock equal to the quotient of (X) the aggregate
amount of the damages payments described herein divided by (Y) the Conversion
Price in effect on such Conversion Date as specified by the Holder in the
Conversion Notice or in effect on the Company Delivery Date.


                                             (3)
The foregoing damages set forth in Sections 2(d)(v)(A)(1) and (2)
shall not be payable if the failure of the Company to credit a Holder’s balance
account with DTC or to issue and deliver a certificate to such Holder for
Common Stock or the failure to issue and deliver a new Preferred Stock
Certificate is due to acts beyond the control of the Company (for example, the
failure of DTC to credit the account despite instructions from the Company).


                                             (4)
In addition to the foregoing, if (i) on the Share Delivery Date or (ii) on any
Company Delivery Date, the Company shall fail to issue and deliver a
certificate to a Holder or credit such Holder’s balance account with DTC for
the number of shares of Common Stock to which such Holder is entitled upon such
Holder’s conversion or the Company’s Conversion, as applicable, of Preferred
Shares, and if on or after such Trading Day, the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the shares of Common Stock issuable
upon such conversion that the Holder anticipated receiving from the Company (a
“Buy-In”), then the Company shall, within three (3) Trading Days after
the Holder’s request and in the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions and out-of-pocket expenses, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Sale Price on the Conversion Date.


10









	
  

 	
  

 
	
  

 	
                     (B)          Void
 Conversion Notice; Adjustment of Conversion Price. If for any reason a
 Holder has not received all of the shares of Common Stock to which such
 Holder is entitled prior to the sixth (6th) Trading Day after the Share Delivery
 Date or Company Delivery Date, as applicable, with respect to a conversion of
 Preferred Shares, then the Holder, upon written notice to the Company, with a
 copy to the Transfer Agent, may void its Conversion Notice or any applicable
 Company Conversion Notice, with respect to, and retain or have returned, as
 the case may be, any Preferred Shares that have not been converted pursuant
 to such Holder’s Conversion Notice or Company Conversion Notice; provided
 that the voiding of a Holder’s Conversion Notice or Company Conversion
 Notice, as applicable, shall not effect the Company’s obligations to make any
 payments which have accrued prior to the date of such notice pursuant to Section
 2(d)(v)(A) or otherwise.

 
	
  

 	
  

 
	
  

 	
                     (C)          Conversion
 Failure. If for any reason a Holder has not received all of the shares of
 Common Stock to which such Holder is entitled prior to the tenth (10th)
 Trading Day after the Share Delivery Date with respect to a conversion of
 Preferred Shares (a “Conversion Failure”), then the Holder, upon
 written notice to the Company, may require that the Company redeem all
 Preferred Shares held by such Holder, including the Preferred Shares
 previously submitted for conversion and with respect to which the Company has
 not delivered shares of Common Stock, in accordance with Section 3.
 Notwithstanding anything to the contrary in this Certificate of Designations,
 a Holder’s exclusive remedies for the Company’s failure to deliver shares of
 Common Stock on any Share Delivery Date shall be as set forth in Section
 2(d)(v) and Section 3.

 


                    (vi)         Pro
Rata Conversion; Disputes. In the event the Company receives a Conversion
Notice from more than one Holder for the same Conversion Date and the Company
can convert some, but not all, of such Preferred Shares, the Company shall
convert from each Holder electing to have Preferred Shares converted at such
time a pro rata amount of such Holder’s Preferred Shares submitted for
conversion based on the number of Preferred Shares submitted for conversion on
such date by such Holder relative to the number of Preferred Shares submitted
for conversion on such date. In the event of a dispute as to the number of
shares of Common Stock issuable to a Holder in connection with a conversion of
Preferred Shares, the Company shall issue to such Holder the number of shares
of Common Stock not in dispute and resolve such dispute in accordance with Section
2(d)(iii).


                    (vii)        Mandatory
Redemption at Maturity.


	
  

 	
  

 
	
  

 	
                     (A)          If
 any Preferred Share remains outstanding on the Maturity Date and not
 otherwise converted pursuant to Section 2(b), the Company shall redeem
 such Preferred Share for an amount in cash per Preferred Share (the “Maturity
 Date Redemption Price”) equal to the Conversion Amount plus the greater
 of (i) the Accretion Amount and (ii) the Participation Amount, by wire
 transfer of immediately available funds to an account designated in writing
 by such Holder.

 


11









	
  

 	
  

 
	
  

 	
                     (B)          If
 the Company fails to redeem all of the Preferred Shares outstanding on the
 Maturity Date by payment of the Maturity Date Redemption Price for each such
 Preferred Share, then in addition to any other remedy such Holder may have under
 any Transaction Document, the conversion rights of each Holder shall remain
 in full force and effect. If the Company has failed to pay the Maturity Date
 Redemption Price in a timely manner as described above, then the Maturity
 Date shall be automatically extended for any Preferred Shares until the date
 on which the Holders receive shares of Common Stock (upon conversion thereof)
 or the Maturity Date Redemption Price, as applicable, and shall be further
 extended for any Preferred Shares for as long as a Triggering Event or an
 event that with the passage of time or giving of notice would constitute a
 Triggering Event shall have occurred and be continuing. For the avoidance of
 doubt, any such failure to redeem any Preferred Shares outstanding on the
 Maturity Date shall be deemed a Triggering Event.

 
	
  

 	
  

 
	
  

 	
                     (C)          Other
 than as specifically permitted by this Certificate of Designations, the
 Company may not redeem any of the outstanding Preferred Shares.

 


                    (viii)       Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of
Preferred Shares in accordance with the terms hereof, the Holder thereof shall
not be required to physically surrender the certificate representing the
Preferred Shares to the Company unless (A) the full or remaining number of
Preferred Shares represented by the certificate are being converted or (B) a
Holder has provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of Preferred Shares upon
physical surrender of any Preferred Shares. The Holder and the Company shall
maintain records showing the number of Preferred Shares so converted and the
dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of the certificate representing the Preferred Shares upon each such
conversion. In the event of any dispute or discrepancy, such records of the
Company establishing the number of Preferred Shares to which the record holder
is entitled shall be controlling and determinative in the absence of manifest
error. In connection with any transfer of all or any portion of Preferred
Shares held by any Holder, such Holder may physically surrender the certificate
representing the Preferred Shares to the Company, whereupon the Company will
forthwith issue and deliver upon the order of such Holder a new certificate or
certificates of like tenor, registered as such Holder may request, representing
in the aggregate the remaining number of Preferred Shares represented by such
certificate. A Holder and any assignee, by acceptance of a certificate,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of any Preferred Shares, the number of Preferred Shares
represented by such certificate may be less than the number of Preferred Shares
stated on the face thereof. Each certificate for Preferred Shares shall bear
the following legend:


	
  

 	
  

 
	
  

 	
 ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS
 OF THE COMPANY’S CERTIFICATE OF DESIGNATIONS RELATING TO THE PREFERRED SHARES
 REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 2(d)(viii) THEREOF. THE
 NUMBER OF PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN
 THE NUMBER OF PREFERRED SHARES STATED ON THE FACE HEREOF PURSUANT TO SECTION
 2(d)(viii) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE PREFERRED
 SHARES REPRESENTED BY THIS CERTIFICATE.

 


12






          (e)          Taxes.


                    (i)          Any
and all payments made by the Company hereunder, including any amounts received
on a conversion or redemption of the Preferred Shares and any amounts on
account of dividends or deemed dividends, must be made by it without any Tax
Deduction, unless a Tax Deduction is required by law. If the Company is aware
that it must make a Tax Deduction (or that there is a change in the rate or the
basis of a Tax Deduction), it must notify the affected Holders promptly.


                    (ii)         If
a Tax Deduction is required by law to be made by the Company, subject to Section
2(e)(i) above, the amount of the payment due from the Company will be
increased to an amount which (after making the Tax Deduction including a Tax
Deduction applicable to additional sums payable pursuant to this Section
2(e)) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.


          As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Company must deliver to the
Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.


                    (iii)        In
addition, the Company agrees to pay in accordance with applicable law any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made hereunder or
in connection with the execution, delivery, registration or performance of, or
otherwise with respect to, the Preferred Shares (“Other Taxes”). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to such Holder any official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.


                    (iv)        The
obligations of the Company under this Section 2(e) shall survive the
Maturity Date of the Preferred Shares and the payment for the Preferred Shares
and all other amounts payable hereunder.


          (f)          Adjustments
to Conversion Price. The Conversion Price will be subject to adjustment
from time to time as provided in this Section 2(f).


                    (i)          Adjustment
of Conversion Price upon Issuance of Common Stock Before and After 18 month
Anniversary. If and whenever on or after the Subscription Date and prior to
the eighteen (18) month anniversary of the Initial Issuance Date, the Company
issues or sells, or in accordance with this Section 2(f)(i) is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company,
but excluding shares of Common Stock deemed to have been issued or sold by the
Company in connection with any Excluded Security) for a consideration per share
(the “New Issuance Price”) less than a price (the “Applicable Price”)
equal to the Conversion Price in effect immediately prior to such issue or sale
(the foregoing a “Dilutive Issuance”), then immediately after such
Dilutive Issuance, the Conversion Price then in effect shall be reduced to an
amount equal to the New Issuance Price. If and whenever after the eighteen (18)
month anniversary of the Initial Issuance Date, the Company issues or sells, or
in accordance with this Section 2(f)(i) is deemed to have issued or
sold, any shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company, but excluding
shares of Common Stock deemed to have been issued or sold by the Company in
connection with any Excluded Security) in a Dilutive Issuance, then immediately
after such Dilutive Issuance, the Conversion Price then in effect shall be
reduced to an amount equal to the Adjusted Price. For purposes of determining
the adjusted Conversion Price under this Section 2(f)(i), the following
shall be applicable:


13









	
  

 	
  

 
	
  

 	
                     (A)          Issuance
 of Options. If the Company in any manner grants or sells any Options
 (other than Excluded Securities) and the lowest price per share for which one
 share of Common Stock is issuable upon the exercise of any such Option or
 upon conversion or exchange or exercise of any Convertible Securities
 issuable upon exercise of such Option is less than the Applicable Price, then
 each such share of Common Stock underlying such Option shall be deemed to be
 outstanding and to have been issued and sold by the Company at the time of
 the granting or sale of such Option for such price per share. For purposes of
 this Section 2(f)(i)(A), the “lowest price per share for which one
 share of Common Stock is issuable upon the exercise of any such Option or
 upon conversion or exchange or exercise of any Convertible Securities
 issuable upon exercise of such Option” shall be equal to the sum of the
 lowest amounts of consideration (if any) received or receivable by the
 Company with respect to any one share of Common Stock upon granting or sale
 of the Option, upon exercise of the Option and upon conversion or exchange or
 exercise of any Convertible Security issuable upon exercise of such Option.
 No further adjustment of the Conversion Price shall be made upon the actual
 issuance of such share of Common Stock or of such Convertible Securities upon
 the exercise of such Options or upon the actual issuance of such Common Stock
 upon conversion or exchange or exercise of such Convertible Securities.

 
	
  

 	
  

 
	
  

 	
                     (B)          Issuance
 of Convertible Securities. If the Company in any manner issues or sells
 any Convertible Securities (other than Excluded Securities) and the lowest
 price per share for which one share of Common Stock is issuable upon such
 conversion or exchange or exercise thereof is less than the Applicable Price,
 then each such share of Common Stock underlying such Convertible Securities
 shall be deemed to be outstanding and to have been issued and sold by the
 Company at the time of the issuance or sale of such Convertible Securities
 for such price per share. For the purposes of this Section 2(f)(i)(B),
 the “lowest price per share for which one share of Common Stock is issuable
 upon such conversion or exchange or exercise” shall be equal to the sum of
 the lowest amounts of consideration (if any) received or receivable by the
 Company with respect to any one share of Common Stock upon the issuance or
 sale of the Convertible Security and upon the conversion or exchange or
 exercise of such Convertible Security. No further adjustment of the
 Conversion Price shall be made upon the actual issuance of such share of
 Common Stock upon conversion or exchange or exercise of such Convertible
 Securities, and if any such issue or sale of such Convertible Securities is
 made upon exercise of any Options for which adjustment of the Conversion
 Price had been or are to be made pursuant to other provisions of this Section
 2(f)(i), no further adjustment of the Conversion Price shall be made by
 reason of such issue or sale.

 


14









	
  

 	
  

 
	
  

 	
                     (C)          Change
 in Option Price or Rate of Conversion. If the purchase price provided for
 in any Option, the additional consideration, if any, payable upon the issue,
 conversion, exchange or exercise of any Convertible Securities, or the rate
 at which any Convertible Securities are convertible into or exchangeable or
 exercisable for Common Stock changes at any time, the Conversion Price in
 effect at the time of such change shall be adjusted to the Conversion Price
 which would have been in effect at such time had such Options or Convertible
 Securities provided for such changed purchase price, additional consideration
 or changed conversion rate, as the case may be, at the time initially
 granted, issued or sold. For purposes of this Section 2(f)(i)(C), if
 the terms of any Option or Convertible Security that was outstanding as of
 the Subscription Date are changed in the manner described in the immediately
 preceding sentence, then such Option or Convertible Security and the Common
 Stock deemed issuable upon exercise, conversion or exchange thereof shall be
 deemed to have been issued as of the date of such change. No adjustment shall
 be made if such adjustment would result in an increase of the Conversion
 Price then in effect.

 
	
  

 	
  

 
	
  

 	
                     (D)          Expiration
 of Options or Convertible Securities. If any rights or options or the
 conversion privileges represented by any Options or Convertible Securities
 shall expire without having been exercised, the Conversion Price as adjusted
 upon the issuance of such Options or Convertible Securities shall be
 readjusted to the Conversion Price which would have been in effect had an
 adjustment been made on the basis that the only shares of Common Stock so
 issued were the shares of Common Stock, if any, actually issued or sold on
 the exercise of such Options or conversion of such Convertible Securities,
 and such shares of Common Stock, if any, were issued or sold for the
 consideration actually received by the Company upon such exercise, plus the
 consideration, if any, actually received by the Company for the granting of
 all such Options, whether or not exercised, plus the consideration received
 for issuing or selling the Convertible Securities actually converted, plus
 the consideration, if any, actually received by the Company (other than by
 cancellation of liabilities or obligations evidenced by such Convertible Securities)
 on the conversion of such Convertible Securities. No readjustment pursuant to
 this clause (D) shall have the effect of increasing the Conversion Price to
 an amount which exceeds the Conversion Price on the original adjustment date.

 


15









	
  

 	
  

 
	
  

 	
                     (E)          Calculation
 of Consideration Received. In case any Option is issued in connection
 with the issue or sale of other securities of the Company, together
 comprising one integrated transaction in which no specific consideration is allocated
 to such Options by the parties thereto, the Options will be deemed to have
 been issued for a consideration of $0.001. If any Common Stock, Options or
 Convertible Securities are issued or sold or deemed to have been issued or
 sold for cash, the consideration received therefor will be deemed to be the
 net amount received by the Company therefor. If any Common Stock, Options or
 Convertible Securities are issued or sold for a consideration other than
 cash, the amount of the consideration other than cash received by the Company
 will be the fair value of such consideration, except where such consideration
 consists of publicly traded securities, in which case the amount of
 consideration received by the Company will be the Closing Sale Price of such
 securities on the date of receipt of such securities. If any Common Stock,
 Options or Convertible Securities are issued to the owners of the
 non-surviving entity in connection with any merger in which the Company is
 the surviving entity, the amount of consideration therefor will be deemed to
 be the fair value of such portion of the net assets and business of the
 non-surviving entity as is attributable to such Common Stock, Options or
 Convertible Securities, as the case may be. The fair value of any
 consideration other than cash or publicly traded securities will be
 determined jointly by the Company and the Required Holders. If such parties
 are unable to reach agreement within ten (10) days after the occurrence of an
 event requiring valuation, the fair value of such consideration will be
 determined by a reputable investment bank selected by the Company and
 approved by the Required Holders. The Company shall cause, at the Company’s
 expense, the investment bank to perform the determinations or calculations
 and notify the Company and the Holders of the results no later than two (2)
 Business Days from the time it receives the disputed determinations or
 calculations. Such investment bank’s calculation shall be binding upon all
 parties absent error.

 
	
  

 	
  

 
	
  

 	
                     (F)          Record
 Date. If the Company takes a record of the holders of Common Stock for
 the purpose of entitling them (I) to receive a dividend or other distribution
 payable in Common Stock, Options or in Convertible Securities or (II) to
 subscribe for or purchase Common Stock, Options or Convertible Securities,
 then such record date will be deemed to be the date of the issue or sale of
 the shares of Common Stock deemed to have been issued or sold upon the
 declaration of such dividend or the making of such other distribution or the
 date of the granting of such right of subscription or purchase, as the case
 may be.

 


                    (ii)         Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. If the
Company at any time after the Subscription Date subdivides (by any stock split,
stock dividend, recapitalization or otherwise) its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company at any time after the Subscription Date combines (by combination,
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.


                    (iii)        Issuances
of Common Stock upon Exercise of Options or Convertible Securities.


	
  

 	
  

 
	
  

 	
                     (A)          If,
 at any time after the Subscription Date, any holder of Options or Convertible
 Securities which are outstanding on the day immediately preceding the
 Subscription Date, converts, exercises or exchanges such Options or
 Convertible Securities and the Closing Sale Price of the Common Stock on the
 date of conversion, exercise or exchange is greater than the price per share
 paid (or deemed paid) by the holder of such Options or Convertible Securities
 to convert, exercise or exchange such securities, then the Company shall
 promptly issue to holders of Preferred Shares in aggregate (and such
 aggregate amount shall be distributed among the holders of Preferred Shares
 based on the percentage of Preferred Shares purchased by such holder on the
 Initial Issuance Date), that number of shares of Common Stock as equals the
 product of (1) the number of shares of Common Stock issued upon conversion,
 exercise or exchange of such Options or Convertible Securities and (2) a
 fraction, the numerator of which is (x) the Closing Sale Price of the Common
 Stock on the date of conversion, exercise or exchange, less (y) the
 per share price paid (or deemed paid) by the holder of such Options or
 Convertible Securities to convert, exercise or exchange such securities, and
 the denominator of which is the Closing Sale Price of the Common Stock on the
 date of such conversion, exercise or exchange.

 


16









	
  

 	
  

 
	
  

 	
                     (B)          If,
 at any time after the Subscription Date the Company grants any Options or
 Convertible Securities under the Company’s management incentive plan in effect
 on the Subscription Date, then upon the conversion, exercise or exchange of
 such Options or Convertible Securities, the Company shall promptly issue to
 the holders of Preferred Stock in aggregate (and such aggregate amount shall
 be distributed among holders of Preferred Shares based on the percentage of
 Preferred Shares purchased by such holder on the Initial Issuance Date), that
 number of shares of Common Stock as equals the number of shares of Common
 Stock issued upon conversion, exercise or exchange of such Options or
 Convertible Securities.

 


                    (iv)        Other
Events. If any event occurs of the type contemplated by the provisions of
this Section 2(f) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company’s
Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holders; provided that no such adjustment
will increase the Conversion Price as otherwise determined pursuant to this Section
2(f).


          (g)          Notices.


                    (i)          Promptly
following any adjustment of the Conversion Price pursuant to Section 2(f),
the Company will give written notice thereof to each Holder, setting forth in
reasonable detail, and certifying, the calculation of such adjustment. In the
case of a dispute as to the determination of such adjustment, then such dispute
shall be resolved in accordance with the procedures set forth in Section
2(d)(iii).


                    (ii)         Subject
to the provisions set forth below, the Company will give written notice to each
Holder at least ten (10) Business Days prior to the date on which the Company
closes its books or takes a record (I) with respect to any dividend or
distribution upon the Common Stock, (II) with respect to any pro rata
subscription offer to holders of Common Stock or (III) for determining rights
to vote with respect to any Fundamental Transaction or Liquidation Event,
provided that such notice will be provided only if such information has been
made known to the public prior to or in conjunction with such notice being
provided to such Holder.


17






                    (iii)        Subject
to the provisions set forth below, the Company will also give written notice to
each Holder at least ten (10) Business Days prior to the date on which any
Fundamental Transaction or Liquidation Event will take place, provided that such
notice will be provided only if such information has been made known to the
public prior to or in conjunction with such notice being provided to such
Holder.


          (h)          Additional
Preferred Shares; Variable Securities; Dilutive Issuances. For so long as
any Preferred Shares are outstanding, the Company will not, without the prior
written consent of the Required Holders, issue any Preferred Shares and the
Company shall not issue any other securities that would cause a breach or
default under this Certificate of Designations other than those issued pursuant
to the Securities Purchase Agreement. For so long as any Preferred Shares
remain outstanding, the Company shall not, in any manner, issue or sell any
rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a conversion, exchange or exercise price which varies or may
vary after issuance with the market price of the Common Stock, including by way
of one or more reset(s) to any fixed price unless the conversion, exchange or
exercise price of any such security cannot be less than the then applicable
Conversion Price with respect to the Common Stock into which any Preferred
Shares are convertible.


3.       Redemption at Option of
Holders.


          (a)          Triggering
Event. A “Triggering Event” shall be deemed to have occurred at such
time as any of the following events:


                    (i)          the
Company’s (A) failure to cure a Conversion Failure by delivery of the required
number of shares of Common Stock within ten (10) Business Days after the
applicable Share Delivery Date or (B) notice, written or oral, to any Holder,
including by way of public announcement, or through any of its agents, at any
time, of the Company’s intention not to comply, as required, with a request for
conversion of any Preferred Shares into shares of Common Stock that is tendered
in accordance with the provisions of this Certificate of Designations;


                    (ii)         the
Company’s failure to pay to any Holder any amounts when and as due pursuant to
this Certificate of Designations (including any payments due in respect of any
redemption) or any other Transaction Document (as defined in the Securities
Purchase Agreement), only if such failure continues for a period of at least
five (5) Business Days after the date in which the Company is notified of such
failure by the affected Holder(s);


                    (iii)        the
entry by a court having jurisdiction in the premises of (A) a decree or order
for relief in respect of the Company or any Subsidiary of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company or any Subsidiary as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Subsidiary under any applicable Federal
or State law or (C) appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for a
period of sixty (60) consecutive days;


18






                    (iv)        the
commencement by the Company or any Subsidiary of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or order
for relief in respect of the Company or any Subsidiary in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any
Subsidiary or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the taking
of corporate action by the Company in furtherance of any such action;


                    (v)          any
event of default occurs with respect to any Indebtedness of the Company or its
subsidiaries in excess of $100,000, and any applicable grace periods in such
Indebtedness with respect to such event of default shall have expired; provided
that if such event of default is waived by the holders of such Indebtedness
prior to any Holder taking any action pursuant to this Certificate of
Designations, no Triggering Event under this clause (v) shall be deemed to have
occurred; or


                    (vi)        the
Company breaches any representation, warranty, covenant or other term or
condition of any Transaction Document in any material respect, except, in the
case of a breach of a covenant which is curable, only if such breach remains
uncured for a period of at least ten (10) Business Days.


          (b)          Redemption
Option Upon Triggering Event. In addition to all other rights of the
Holders contained herein, after a Triggering Event, each Holder shall have the
right, at such Holder’s option, to require the Company to redeem all or a
portion of such Holder’s Preferred Shares at a price per Preferred Share equal
to the Conversion Amount plus the greater of (i) the Accretion Amount and (ii)
the Participation Amount (the “Triggering Event Redemption Price”).


          (c)          Mechanics
of Redemption at Option of Buyer. Within one (1) Business Day after the
occurrence of a qualifying Triggering Event, the Company shall deliver written
notice thereof via facsimile and overnight courier (“Notice of Triggering
Event”) to each Holder. At any time after the earlier of a Holder’s receipt
of a Notice of Triggering Event and such Holder becoming aware of a Triggering
Event, any Holder of Preferred Shares then outstanding may require the Company
to redeem up to all of such Holder’s Preferred Shares by delivering written
notice thereof via facsimile and overnight courier (“Notice of Redemption at
Option of Holder”) to the Company, which Notice of Redemption at Option of
Holder shall indicate the number of Preferred Shares that such Holder is
electing to redeem.


19






          (d)          Payment
of Triggering Event Redemption Price. Upon the Company’s receipt of a
Notice(s) of Redemption at Option of Buyer from any Holder, the Company shall
within three (3) Business Days of such receipt notify each other Holder by
facsimile of the Company’s receipt of such notice(s). The Company shall deliver
on the tenth (10th) Business Day after the Company’s receipt of the
first Notice of Redemption at Option of Holder the applicable Triggering Event
Redemption Price (the “Triggering Event Redemption Date”) to all Holders
that deliver a Notice of Redemption at Option of Holder prior to the fifth (5th)
Business Day after the Company’s receipt of the first Notice of Redemption at
Option of Holder. To the extent redemptions required by this Section 3
are deemed or determined by a court of competent jurisdiction to be prepayments
of the Preferred Shares by the Company, such redemptions shall be deemed to be
voluntary prepayments. If the Company is unable to redeem all of the Preferred
Shares submitted for redemption, the Company shall (i) redeem a pro rata amount
from each Holder based on the number of Preferred Shares submitted for
redemption by such Holder relative to the total number of Preferred Shares
submitted for redemption by all Holders and (ii) in addition to any remedy such
Holder may have under this Certificate of Designations and the Securities
Purchase Agreement, pay to each Holder interest at the rate of one and one-half
percent (1.5%) per month (prorated for partial months) in respect of each
unredeemed Preferred Share until paid in full. The Holders and Company agree
that in the event of the Company’s redemption of any Preferred Shares under
this Section 3, the Holders’ damages would be uncertain and difficult to
estimate because of the parties’ inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment
opportunity for the Holders. Accordingly, any redemption premium due under this
Section 3 is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holders’ actual loss of its investment opportunity
and not as a penalty.


          (e)          Void
Redemption. In the event that the Company does not pay the Triggering Event
Redemption Price within the time period set forth in Section 3(d), at
any time thereafter and until the Company pays such unpaid applicable
Triggering Event Redemption Price in full, a Holder shall have the option, in
lieu of redemption, to require the Company to promptly return to such Holder
any or all of the Preferred Shares that were submitted for redemption by such
Holder under this Section 3 and for which the applicable Triggering
Event Redemption Price has not been paid, by sending written notice thereof to
the Company via facsimile (the “Void Optional Redemption Notice”). Upon
the Company’s receipt of such Void Optional Redemption Notice, (i) the Notice
of Redemption at Option of Holder shall be null and void with respect to those
Preferred Shares subject to the Void Optional Redemption Notice and (ii) the
Company shall immediately return any Preferred Shares subject to the Void
Optional Redemption Notice.


          (f)          Disputes;
Miscellaneous. In the event of a dispute as to the determination of the arithmetic
calculation of the Triggering Event Redemption Price, such dispute shall be
resolved pursuant to Section 2(d)(iii) above, with the term “Triggering
Event Redemption Price” being substituted for the term “Conversion Rate”.
In the event of a redemption pursuant to this Section 3 of less than all
of the Preferred Shares represented by a particular Preferred Stock
Certificate, the Company shall promptly cause to be issued and delivered to the
Holder of such Preferred Shares a Preferred Stock Certificate representing the
remaining Preferred Shares which have not been redeemed, if necessary.


20






4.       Other Rights of Holders.


          (a)          Assumption.
The Company shall not enter into or be party to a Fundamental Transaction
unless (i) the Successor Entity assumes in writing (with the purchase or other
acquisition (whether by merger, consolidation or otherwise) of at least a
majority of the outstanding shares of the Company’s Common Stock automatically
constituting an assumption in writing) all of the obligations of the Company
under this Certificate of Designations and the other Transaction Documents in
accordance with the provisions of this Section 4(a) pursuant to written
agreements in form and substance reasonably satisfactory to the Required
Holders, including agreements to deliver to each Holder of Preferred Shares in
exchange for such Preferred Shares a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to this
Certificate of Designations including, without limitation, having a stated
value and accretion rate equal to the stated value and accretion rate of the
Preferred Shares held by such Holder and having similar ranking to the
Preferred Shares, and satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on the Principal Market
or an Eligible Market. Upon the occurrence of any 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 Designations referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Certificate
of Designations with the same effect as if such Successor Entity had been named
as the Company herein. Upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon conversion of the Preferred Shares at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of Common Stock
(or other securities, cash, assets or other property) issuable upon the
conversion of the Preferred Shares prior to such Fundamental Transaction, such
shares of publicly traded common stock (or their equivalent) of the Successor
Entity, as adjusted in accordance with the provisions of this Certificate of
Designations. The provisions of this Section shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without regard to
any limitations on the conversion of the Preferred Shares.


          (b)          Purchase
Rights. If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
“Purchase Rights”), then the Holders will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of the Preferred
Shares (without taking into account any limitations or restrictions on the
convertibility of the Preferred Shares) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase
Rights.


21






5.       Reservation of Shares.


          (a)          The
Company shall have sufficient authorized and unissued shares of Common Stock
for each of the Preferred Shares equal to one hundred thirty percent (130%) of
the number of shares of Common Stock necessary to effect the conversion at the
Conversion Rate with respect to the Conversion Amount of each such Preferred
Share as of the Initial Issuance Date. The Company shall, so long as any of the
Preferred Shares are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversions of the Preferred Shares, such number of
shares of Common Stock as shall from time to time be necessary to effect the
conversion of all of the Preferred Shares then outstanding; provided that at no
time shall the number of shares of Common Stock so reserved be less than one
hundred thirty percent (130%) of the number of shares of Common Stock for which
the Preferred Shares are at any time convertible (the “Required Reserve
Amount”). The initial number of shares of Common Stock reserved for
conversions of the Preferred Shares and each increase in the number of shares
so reserved shall be allocated pro rata among the Holders based on the number
of Preferred Shares held by each Holder at the time of issuance of the
Preferred Shares or increase in the number of reserved shares, as the case may
be (the “Authorized Share Allocation”). In the event a Holder shall sell
or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall
be allocated a pro rata portion of the number of reserved shares of Common
Stock reserved for such transferor. Any shares of Common Stock reserved and
allocated to any Person which ceases to hold any Preferred Shares (other than
pursuant to a transfer of Preferred Shares in accordance with the immediately
preceding sentence) shall be allocated to the remaining Holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
Holders.


          (b)          Insufficient
Authorized Shares. If at any time while any of the Preferred Shares remain
outstanding, the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Preferred Shares at least a number of shares of
Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for the
Preferred Shares then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than one hundred twenty
(120) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its stockholders for the approval of an increase in the
number of authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders’ approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal.


6.       Voting Rights. Each
Holder shall be entitled to the whole number of votes equal to the number of
shares of Common Stock into which such Holder’s Preferred Shares would be convertible
based on the Conversion Price on the record date for the vote or consent of
stockholders, and shall otherwise have voting rights and powers equal to the
voting rights and powers of the Common Stock. Each Holder shall be entitled to
receive the same prior notice of any stockholders’ meeting as is provided to
the holders of Common Stock in accordance with the bylaws of the Company, as
well as prior notice of all stockholder actions to be taken by legally
available means in lieu of a meeting, and shall vote as a class with the
holders of Common Stock as if they were a single class of securities upon any
matter submitted to a vote of stockholders, except those matters required by
law or by the terms hereof to be submitted to a class vote of the Holders of
Preferred Shares, in which case the Holders of Preferred Shares only shall vote
as a separate class.


22






7.       Nomination of Directors.


          (a)          So
long as at least twenty-five percent (25%) of the Preferred Shares issued on
the Initial Issuance Date (subject to adjustment for stock splits, reverse
stock splits, stock dividends, combination or other similar recapitalizations)
are outstanding, the Required Holders shall have the right to nominate two (2)
directors, and so long as at least fifteen percent (15%) of the Preferred
Shares issued on the Initial Issuance Date (subject to adjustment for stock
splits, reverse stock splits, stock dividends, combination or other similar
recapitalizations) are outstanding, the Required Holders shall have the right
to nominate one (1) director (collectively, the “Investor Directors” and any
such director, an “Investor Director”) to be elected to the Company’s board of
directors (the “Board”). Any such nominee for Investor Director shall be
subject to (a) the reasonable approval of the Board’s nominating and corporate
governance committee (the “Governance Committee”) (such approval not to
be unreasonably withheld, conditioned or delayed), and (b) satisfaction of all
legal and governance requirements regarding service as a director of the
Company; provided, that the Company shall at the reasonable request of the
Required Holders, so long as such request is not inconsistent with applicable
law or exchange requirements, amend or modify any such requirements so as not
to in any way impede the right of the Required Holders to nominate directors.
The Company from time to time shall take all actions necessary or reasonably
required such that the number of members on the Board shall (i) except as
otherwise provided herein, consist of no more than three (3) non-Investor
Directors, and (ii) if necessary and requested by the Required Holders, be
increased such that there are sufficient seats on the Board for the Investor
Directors to serve on the Board and such vacancies (the “Investor Director
Seats”) shall be filled by the Investor Directors, effective as of the date
that the Required Holders determine to appoint such Investor Directors. Each
Investor Director appointed pursuant to this Section 7 shall continue to
hold office until such Investor Director’s term expires, subject, however, to
prior death, resignation, retirement, disqualification or termination of term
of office as provided herein.


          (b)          Continuing
Designation of Investor Directors. So long as any Preferred Shares are
outstanding, at each meeting of the Company’s stockholders at which the
election of directors to the Investor Director Seats is to be considered, the
Company shall, subject to the provisions this Section 7, nominate the Investor
Director(s) designated by the Required Holders for election to the Board by the
holders of voting capital stock and solicit proxies from the Company’s
stockholders in favor of the election of Investor Directors. Subject to the
provisions of this Section 7, the Company shall use all reasonable best
efforts to cause each Investor Director to be elected to the Board (including
voting all unrestricted proxies in favor of the election of such Investor
Director and including recommending approval of such Investor Director’s
appointment to the Board) and shall not take any action which would diminish
the prospects of such Investor Director(s) of being elected to the Board.


          (c)          Resignation
from the Board. Any elected Investor Director may resign from the Board at
any time by giving written notice to the Board. The resignation shall be
effective without acceptance when the notice is given to the Board, unless a
later effective time is specified in the notice.


          (d)          Removal.
Any Investor Director may be removed, with or without cause, solely by the
holders of a majority of Preferred Shares outstanding.


23






          (e)          Vacancies.
In the event of a vacancy on the Board resulting from the death,
disqualification, resignation, retirement or termination of term of office of
an Investor Director nominated by the Required Holders, the Company shall use
all reasonable best efforts to fill such vacancy with a representative
designated by the Required Holders as provided hereunder, in either case, to
serve until the next annual or special meeting of the stockholders (and at such
meeting, such representative, or another representative designated by the
Required Holders, will be elected to the Board in the manner set forth in this Section
7).


          (f)          Reimbursement
of Expenses. The Investor Directors and any Board Observer (as defined
below), if any, shall be entitled to reimbursement of reasonable expenses
incurred in such capacities, but shall not otherwise be entitled to any
compensation from the Company in such capacities as Investor Directors or the
Board Observer.


          (g)          Board
Observer. The Required Holders shall also have the right to designate two
(2) non-compensated, non-voting observers (the “Board Observers”) to
attend all meetings of the Board and all meetings of committees of the Board,
including the audit committee as an observer. Each Board Observer shall be
entitled to notice of all meetings of the Board and committees of the Board in
the manner that notice is provided to members of the Board, shall be entitled
to receive all materials provided to members of the Board and applicable
committees, and shall be entitled to attend (whether in person, by telephone,
or otherwise), all meetings of the Board and committees of the Board as a
non-voting observer.


          (h)          Subsidiaries
and Committees. Subject to satisfaction of all legal and governance
requirements regarding service as a director or member of any committee of the
Company or any of its subsidiaries, at the request of the Required Holders, the
Company shall cause the Investor Directors to have proportional representation
(relative to their percentage on the whole Board, but in no event less than one
(1) representative) on the boards (or equivalent governing body) of each
subsidiary (each, a “Sub Board”), and on each committee of the Board and
each Sub Board (except to the extent prohibited by applicable law or exchange
requirements). The Company shall at the reasonable request of the Required
Holders, so long as such request is not inconsistent with applicable law or
exchange requirements, amend or modify any requirements regarding service as a
director or member of any committee of the Company or any of its subsidiaries.


          (i)          Liability
Insurance. The Company shall purchase and maintain directors and officers
liability insurance covering such Investor Director in accordance with the
requirements of the indemnification agreement between the Company and such Investor
Director entered into upon such director’s appointment to the Board of
Directors.


24






8.       Change of Control
Redemption Right; Liquidation, Dissolution, Winding-Up.


          (a)          Change
of Control. No sooner than fifteen (15) days nor later than ten (10) days
prior to the consummation of a Change of Control, but not prior to the public
announcement of such Change of Control, the Company shall deliver written
notice thereof via facsimile and overnight courier to the Holders (a “Change
of Control Notice”). At any time during the period (the “Change of
Control Period”) beginning after a Holder’s receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, such Eligible Holder may require the
Company to redeem all or any portion of such Holder’s Preferred Shares by
delivering written notice thereof (“Change of Control Redemption Notice”)
to the Company, which Change of Control Redemption Notice shall indicate the
Conversion Amount the Holder is electing to redeem. Any Preferred Shares
subject to redemption pursuant to this Section 8 shall be redeemed by
the Company in cash at a price per Preferred Share equal to the greater of (i)
the Conversion Amount plus the greater of (y) the Accretion Amount and (z) the
Participation Amount, and (ii) (1) the product of (A) the Conversion Amount
being redeemed multiplied by (B) the quotient determined by dividing (I) the
aggregate cash consideration and the aggregate cash value of any non-cash
consideration per share of Common Stock to be paid to the holders of the share
of Common Stock upon consummation of the Change of Control (any such non-cash
consideration consisting of marketable securities to be valued at the higher of
(x) the Closing Sale Price of such securities as of the Trading Day immediately
prior to the consummation of such Change of Control, (y) the Closing Sale Price
as of the Trading Day immediately following the public announcement of such
proposed Change of Control and (z) the Closing Sale Price as of the Trading Day
immediately prior to the public announcement of such proposed Change of
Control) by (II) the Conversion Price (the “Change of Control Redemption
Price”). The Company shall make payment of the Change of Control Redemption
Price concurrently with the consummation of such Change of Control if such a
Change of Control Redemption Notice is received prior to the consummation of
such Change of Control and within five (5) Trading Days after the Company’s receipt
of such notice otherwise (the “Change of Control Redemption Date”). To
the extent redemptions required by this Section 8(a) are deemed or
determined by a court of competent jurisdiction to be prepayments of the
Preferred Shares by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything to the contrary in this Section
8(a), until the Change of Control Redemption Price is paid in full, the
Conversion Amount submitted for redemption under this Section 8 may be
converted, in whole or in part, by the Holder into shares of Common Stock, or
in the event the Conversion Date is after the consummation of the Change of
Control, shares or equity interests of the Successor Entity substantially
equivalent to the Company’s Common Stock pursuant to Section 2(c)(i).
The parties hereto agree that in the event of the Company’s redemption of any
portion of the Preferred Shares under this Section 8(a), the Holder’s
damages would be uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 8(a) is
intended by the parties to be, and shall be deemed, a reasonable estimate of
the Holder’s actual loss of its investment opportunity and not as a penalty. In
the event that the Company does not pay the Change of Control Redemption Price
on the Change of Control Redemption Date, then the Holder shall have the option
to, in lieu of redemption, require the Company to promptly return to such
Holder any or all of the Preferred Shares that were submitted for redemption by
such Holder under this Section 8(a) and for which the applicable Change of
Control Redemption Price (together with any interest thereon) has not been
paid, by sending written notice thereof to the Company via facsimile (the “Void
Change of Control Redemption Notice”). Upon the Company’s receipt of such
Void Change of Control Redemption Notice, (i) the Change of Control Redemption
Notice shall be null and void with respect to those Preferred Shares subject to
the Void Change of Control Redemption Notice and (ii) the Company shall
immediately return any Preferred Shares subject to the Void Change of Control
Redemption Notice.


25






          (b)          Liquidation.
In the event of a Liquidation Event, the Holders shall be entitled to receive
in cash out of the assets of the Company, whether from capital or from earnings
available for distribution to its stockholders (the “Liquidation Funds”),
before any amount shall be paid to the holders of any of the Capital Stock of
the Company of any class junior in rank to the Preferred Shares in respect of
the preferences as to distributions and payments on the liquidation,
dissolution and winding up of the Company, an amount per Preferred Share equal
to the Conversion Amount plus the greater of (i) the Accretion Amount and (ii)
the Participation Amount; provided that, if the Liquidation Funds are
insufficient to pay the full amount due to the Holders and holders of shares of
other classes or series of preferred stock of the Company that are of equal
rank with the Preferred Shares as to payments of Liquidation Funds (the “Pari
Passu Shares”), if any, then each Holder and each holder of any such Pari
Passu Shares shall receive a percentage of the Liquidation Funds equal to the
full amount of Liquidation Funds payable to such Holder as a liquidation
preference, in accordance with the respective Certificates of Designations,
Preferences and Rights governing the Preferred Shares and Pari Passu Shares, as
a percentage of the full amount of Liquidation Funds payable to all holders of
Preferred Shares and Pari Passu Shares. To the extent necessary, the Company
shall cause such actions to be taken by any of its Subsidiaries so as to
enable, to the maximum extent permitted by law, the proceeds of a Liquidation
Event to be distributed to the Holders in accordance with this Section. All the
preferential amounts to be paid to the Holders under this Section shall be paid
or set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of any Liquidation Funds of the Company to the
holders of shares of other classes or series of preferred stock of the Company
junior in rank to the Preferred Shares in connection with a Liquidation Event
as to which this Section applies. The purchase or redemption by the Company of
stock of any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as a Liquidation Event. Notwithstanding anything to the
contrary in this Section 8, until the Liquidation Funds are distributed
to the Holders, the Preferred Shares may be converted, in whole or in part, by
any Holder into Common Stock pursuant to Section 2(b).


9.       Ranking. All shares
of Common Stock and any other preferred stock (including, for the avoidance of
doubt, the Series A Preferred Stock, the Series B Preferred Stock and Series C
Preferred Stock) of the Company shall be of junior rank to all Preferred Shares
with respect to the preferences as to dividends, distributions, amortization
and/or redemption and/or payments upon the liquidation, dissolution and winding
up of the Company. The rights of the shares of Common Stock and any other
preferred stock of the Company shall be subject to the preferences and relative
rights of the Preferred Shares. Without the prior express written consent of
the Required Holders, the Company shall not hereafter authorize or issue
additional or other Capital Stock that is of senior or pari-passu rank to the
Preferred Shares in respect of the preferences as to dividends, distributions,
amortization and/or redemption and/or payments upon a Liquidation Event. The
Company shall be permitted to issue preferred stock that is junior in rank to
the Preferred Shares in respect of the preferences as to dividends,
distributions, amortization and/or redemption payments and/or payments upon the
liquidation, dissolution and winding up of the Company, provided that the
maturity date (or any other date requiring redemption or repayment (whether
through a scheduled amortization, redemption or otherwise) of such preferred
stock) of any such junior preferred stock is not on or before the ninety-first
(91st) day following the Maturity Date. In the event of the merger
or consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative powers, designations and preferences
provided for herein (except that the Preferred Shares may not be pari passu
with, or junior to, any Capital Stock of the successor entity) and no merger
shall result inconsistent therewith.


26






10.     Participation. Subject to
approval under Section 11(a)(v) or (vi), and subject to the
rights of the holders, if any, of the Pari Passu Shares, the Holders shall, as
holders of Preferred Stock, be entitled to such dividends paid and
distributions made to the holders of Common Stock to the same extent as if such
Holders had converted the Preferred Shares into Common Stock (without regard to
any limitations on conversion herein or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock. Following the occurrence of a
Liquidation Event and the payment in full to a Holder of its applicable
liquidation preference, such Holder shall cease to have any rights hereunder to
participate in any future dividends or distributions made to the holders of
Common Stock.


11.     Required Vote to Change the Terms
of or Issue Preferred Shares and/or Take Other Action.


          (a)          Except
where the vote or written consent of the holders of a greater number of shares
is required by law or by another provision of the Certificate of Incorporation,
the affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the Required Holders, voting together as a single
class, shall be required before the Company may:


                    (i)          amend
or repeal any provision of, or add any provision to, the Certificate of
Incorporation or bylaws, or file any articles of amendment, certificate of
designations, preferences, limitations and relative rights of any series of
preferred stock (including any amendment to the Certificate of Designations for
the Series D Preferred Stock), if such action would adversely alter or change
the preferences, rights, privileges or powers of, or restrictions provided for
the benefit of the Preferred Shares, regardless of whether any such action
shall be by means of amendment to the Certificate of Incorporation or by
merger, consolidation or otherwise;


                    (ii)         increase
or decrease (other than by conversion) the authorized number of shares of
Preferred Shares;


                    (iii)        issue,
create or authorize (by reclassification or otherwise) any new class or series
of shares that has a preference over or is on a parity with the Preferred
Shares with respect to dividends, redemption or the distribution of assets on
the liquidation, dissolution or winding up of the Company;


                    (iv)        issue
any shares of the Company’s Series A Preferred Stock, par value $0.001 per
share, Series B Preferred Stock, par value $0.001 per share, or Series C
Preferred Stock, par value $4.00 per share.


                    (v)          purchase,
repurchase or redeem any shares of Common Stock;


                    (vi)        pay
dividends or make any other distribution on the Common Stock;


27






                    (vii)       authorize,
approve or enter into any Approved Stock Plan, or other employee benefit plan
pursuant to which the Company’s securities may be issued to any employee,
consultant, officer or director for services provided to the Company;


                    (viii)       authorize,
approve or pay any compensation to a director of the Company for services rendered
in his or her capacity as a director (A) for cash compensation, if such
compensation is in excess of (i) $4,000 per attendance at a meeting of the
board of directors, (ii) $2,000 for participation in a telephonic meeting of
the board of directors, (iii) $2,000 per attendance at or participation in a
meeting of a committee of the board of directors, or (iv) $100,000 per year for
the Chairman of the Board of Directors (so long as Marc Particelli is the
Chairman) or (B) if such compensation is in a form other than cash;


                    (ix)        whether
or not prohibited by the terms of the Preferred Shares, circumvent a right of
the Preferred Shares; or


                    (x)          resolve
or agree to take any of the foregoing actions.


          (b)          In
addition, so long as at least fifty percent (50%) of the Preferred Shares
issued on the Initial Issuance Date (subject to stock splits, reverse stock splits,
stock dividends, recapitalizations or similar transactions) are outstanding,
except where the vote or written consent of the holders of a greater number of
shares is required by law or by another provision of the Certificate of
Incorporation, the affirmative vote at a meeting duly called for such purpose
or the written consent without a meeting of the Required Holders, voting
together as a single class, shall be required before the Company may:


                    (i)          materially
change the business of the Company or its subsidiaries;


                    (ii)         amend
or otherwise modify or obligate itself or any subsidiary to enter into any
agreement or transaction that would amend or otherwise modify, Section 3of
the Maritz Agreement;


                    (iii)        resolve
or agree to take any of the foregoing actions.


          (c)          In
addition, so long as at least fifteen percent (15%) of the Preferred Shares
issued on the Initial Issuance Date (subject to stock splits, reverse stock
splits, stock dividends, recapitalizations or similar transactions) are
outstanding, except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision of the
Certificate of Incorporation, the affirmative vote at a meeting duly called for
such purpose or the written consent without a meeting of the Required Holders,
voting together as a single class, shall be required before the Company may:


                    (i)          take
any action set forth in Sections 9(b), (c), (d), (e), (f), (h), (t),(u),
(v) or (w) of the Senior Notes, even if such Senior Notes cease to be
outstanding;


                    (ii)         offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale, grant or any option to purchase or other disposition of) any
Indebtedness of it or its Subsidiaries that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock, Options, Convertible Securities or other Capital Stock
of the Company;


28






                    (iii)        take
any action that would be a material deviation from the annual budget approved
by the Board of Directors;


                    (iv)        enter
into any material contract not contemplated by the annual budget approved by
the Board of Directors; or


                    (v)          resolve
or agree to take any of the foregoing actions.


12.     Lost or Stolen Certificates.
Upon receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing the Preferred Shares, and, in the case of loss, theft
or destruction, of an indemnification undertaking by the Holder to the Company
in customary form and, in the case of mutilation, upon surrender and
cancellation of the Preferred Stock Certificate(s), the Company shall execute
and deliver new preferred stock certificate(s) of like tenor and date;
provided, however, the Company shall not be obligated to re-issue preferred stock
certificates if the Holder contemporaneously requests the Company to convert
such Preferred Shares into Common Stock.


13.     Remedies, Characterizations, Other
Obligations, Breaches and Injunctive Relief. Except as otherwise
specifically set forth herein, the remedies provided in this Certificate of
Designations shall be cumulative and in addition to all other remedies
available under this Certificate of Designations, at law or in equity
(including a decree of specific performance and/or other injunctive relief).
Except as otherwise specifically set forth herein, no remedy contained herein
shall be deemed a waiver of compliance with the provisions giving rise to such
remedy. Except as otherwise specifically set forth herein, nothing herein shall
limit a Holder’s right to pursue actual damages for any failure by the Company
to comply with the terms of this Certificate of Designations. The Company
covenants to each Holder that there shall be no characterization concerning
this instrument other than as expressly provided herein. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holders and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, except as otherwise specifically set forth herein,
the Holders shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required. Notwithstanding
anything to the contrary contained herein, no Holder shall be entitled to
consequential, indirect or incidental damages hereunder. However, the foregoing
shall not in any way limit a Holder from being reimbursed for its costs, fees
or expenses, including, without limitation, reasonable attorneys’ fees and
disbursements in connection with any of its rights and remedies hereunder.


29






14.     Construction. This Certificate
of Designations shall be deemed to be jointly drafted by the Company and all
Buyers (as defined in the Securities Purchase Agreement) and shall not be
construed against any person as the drafter hereof.


15.     Failure or Indulgence Not Waiver.
No failure or delay on the part of a Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.


16.     Notice. Whenever notice or
other communication is required to be given under this Certificate of
Designations, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement
(provided that if the Preferred Shares are not held by a Buyer then
substituting the words “holder of Securities” for the word “Buyer”).


17.     Transfer of Preferred Shares. A
Holder may assign some or all of the Preferred Shares and the accompanying
rights hereunder held by such Holder without the consent of the Company so long
as such assignment is in compliance with the Transaction Documents and
applicable securities laws, as evidenced, if reasonably requested by the
Company, by an opinion of counsel reasonably satisfactory to the Company
(provided that no such opinion shall be required for sales pursuant to Rule 144
pursuant to the Securities Act of 1933).


18.     Preferred Share Register. The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the Holders), a
register for the Preferred Shares, in which the Company shall record the name
and address of the persons in whose name the Preferred Shares have been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Preferred Share is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any properly made transfers.


19.     Stockholder Matters. Any
stockholder action, approval or consent required, desired or otherwise sought
by the Company pursuant to the rules and regulations of the Principal Market,
the DGCL, this Certificate of Designations or otherwise with respect to the
issuance of the Preferred Shares or the Common Stock issuable upon conversion
thereof may be effected by written consent of the Company’s stockholders or at
a duly called meeting of the Company’s stockholders, all in accordance with the
applicable rules and regulations of the Principal Market and the DGCL. This
provision is intended to comply with the applicable sections of the DGCL permitting
stockholder action, approval and consent affected by written consent in lieu of
a meeting.


* * * * *


30






          IN WITNESS
WHEREOF, the Company has caused this Certificate of Designations to be signed
by Charles Horsey, its President, as of the _________ day of [December], 2009


	
  

 	
  

 	
  

 
	
  

 	
 ‘mktg, inc.’

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Charles Horsey

 
	
  

 	
  

 	 

 
	
  

 	
  

 	
 Name: Charles Horsey

 
	
  

 	
  

 	
 Title: President

 


31






EXHIBIT I


 ‘mktg, inc.’ CONVERSION NOTICE


Reference is made to the Certificate of Designations, Preferences and
Rights of Series D Convertible Preferred Stock of ‘mktg, inc.’ (the “Certificate
of Designations”). In accordance with and pursuant to the Certificate of
Designations, the undersigned hereby elects to convert the number of shares of
Series D Convertible Participating Preferred Stock, par value $0.001 per share
(the “Preferred Shares”), of ‘mktg, inc.’, a Delaware corporation (the “Company”),
indicated below into shares of Common Stock, par value $0.001 per share (the “Common
Stock”), of the Company, as of the date specified below.


Date of
Conversion:
__________________________________________________________________________________________


Number of
Preferred Shares to be
converted:_______________________________________________________________________


Stock
certificate no(s). of Preferred Shares to be converted:
___________________________________________________________


Tax ID Number
(If applicable):
_________________________________________________________________________________


Please confirm
the following information: _________________________________________________________________________


Conversion
Price:_____________________________________________________________________________________________


Number of
shares of Common Stock to be issued:
___________________________________________________________________


          Please issue
the Common Stock into which the Preferred Shares are being converted in the
following name and to the following address:


Issue to:


Address:
___________________________________________________________________________________________________
Telephone
Number: __________________________________________________________________________________________
Facsimile
Number:
___________________________________________________________________________________________


Authorization:
_______________________________________________________________________________________________


By:
_______________________________________________________________________________________________________


Title:
______________________________________________________________________________________________________


Dated:
_____________________________________________________________________________________________________


Account Number
(if electronic book entry transfer):
_________________________________________________________________


Transaction
Code Number (if electronic book entry transfer): __________________________________________________________


 [NOTE TO HOLDER — THIS FORM MUST BE SENT
CONCURRENTLY TO TRANSFER AGENT]






ACKNOWLEDGMENT


          The Company
hereby acknowledges this Conversion Notice and hereby directs [Transfer
Agent] to issue the above indicated number of shares of Common Stock
in accordance with the Irrevocable Transfer Agent Instructions dated October
[_________], 2009 from the Company and acknowledged and agreed to by [Transfer
Agent].


	
  

 	
  

 	
  

 
	
  

 	
 ‘mktg, inc.’

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	 

 
	
  

 	
  

 	
 Name: 

 
	
  

 	
  

 	
 Title: 

 



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