CERTIFICATE OFDESIGNATION OF THE RELATIVE RIGHTS AND PREFERENCES OFTHE

SERIES A CONVERTIBLEPREFERRED STOCK

OF

ON STAGE ENTERTAINMENT,INC.

 

 

                Theundersigned, being the President and Secretary, respectively, of On StageEntertainment, Inc., a Nevada corporation (the "Corporation"), dohereby certify that:

 

                1.             The total number of shares ofPreferred Stock that the Corporation is authorized to issue is 10,000,000,witha par value of $0.01 per share.

 

                2.*            *Pursuant to authority conferred upon the Board of Directors of theCorporation by its Articles of Incorporation, as amended (the “Articles”), and,pursuant to the provisions of Section 78.195 and 78.1955 of the Nevada RevisedStatutes the Board of Directors has duly adopted the following resolutions:

 

                RESOLVED, that pursuant to the authority vested inthe Board of Directors in accordance with the provisions of the Articles, theBoard of Directors does hereby create, authorize and provide for the issuanceof two series of Preferred Stock and does hereby fix the voting powers,designation, relative, participating, optional and other special rights,preferences, and qualifications, limitations and restrictions thereof asfollows:

 

                1.             Designationand Amount.  There shall be a seriesof Preferred Stock of the Corporation designated as “Series A Preferred Stock”and the number of shares constituting such series shall be 5,000,000.  There shall also be a series of PreferredStock of the Corporation designated as “Series A-1 Preferred Stock” and thenumber of shares constituting such series shall be 3,000,000.  Except as otherwise provided herein, theSeries A Preferred Stock and the Series A-1 Preferred Stock shall have the samerights and privileges and shall rank equally, share ratably and be identical inall respects as to all matters, including rights in liquidation.  Shares of the Series A Preferred Stock andSeries A-1 Preferred Stock are issuable solely in whole shares that shallentitle the holder thereof to participate in the distributions and to have the benefitof all other holders of the Series A Preferred Stock and Series A-1 PreferredStock as set forth herein.

 

                2.             Rank.  The Series A Preferred Stock and the SeriesA-1 Preferred Stock shall rank senior to the Common Stock of the Corporationand to any Preferred Stock issued after the date hereof with respect todividend rights and rights on liquidation, winding up and dissolution.

                3.             Dividends. The holders of the Series A Preferred Stock and the Series A-1 PreferredStock shall be entitled to receive, when, as and if declared by the Board ofDirectors of the Corporation, out of funds legally available therefore,cumulative preferential dividends on each share of the Series A Preferred Stockat a rate per annum equal to 12% of the Liquidation Preference (as definedbelow) of such share payable quarterly in arrears, in preference to any paymentof any dividends to be paid on the Corporation’s common stock and other seriesor class of equity security of the Corporation that does not expressly provide thatit is senior in right of payment of dividends to the Series A Preferred Stockand the Series A-1 Preferred Stock. The dividends shall be payable (i) 10% perannum in cash and (ii) 2% per annum through the issuance of a number ofadditional shares of Series A Preferred Stock and Series A-1 Preferred Stock,respectively (the “Dividend Shares”) equal to the dividend amount divided bythe Liquidation Preference of such shares of Series A Preferred Stock andSeries A-1 Preferred Stock.  Suchdividends shall accrue on any given share from day to day when and if declared,based on the actual number of days elapsed. For purposes of computing any per diem accrual, calculations shall bemade using a 365-day year.  Beginning onthe third anniversary of the date hereof, dividends will accrue and be payableonly if at the end of the each fiscal year thereafter, the holders of theSeries A Preferred Stock and Series A-1 Preferred Stock have not earned aminimum annualized rate of return of 35% per annum, calculated on a quarterlybasis using an internal rate of return calculation (the “IRRCalculation”).  The IRR Calculation willbe based on cash outflows equal to the equity value of the holders of theSeries A Preferred Stock and Series A-1 Preferred Stock upon liquidation, whichwill be calculated by multiplying the fully diluted ownership of the holders ofthe Series A Preferred Stock and Series A-1 Preferred Stock by the fiscal yearend earnings before interest, taxes, depreciation and amortization time fiveless the net debt on the Corporation’s balance sheet.  In addition, the holders of the Series A Preferred Stock andSeries A-1 Preferred Stock shall also be entitled to participate pro rata inany dividends paid on the Common Stock on an as converted basis.

                4.             Liquidation Preference.  In the event of any Liquidation Event (asdefined below) liquidation, dissolution or winding up of the Corporation,either voluntary or involuntary, the holders of the Series A Preferred Stockand Series A-1 Preferred Stock shall be entitled to receive, out of the assetsof the Corporation available for distribution to stockholders, prior and inpreference to any distribution of any of the assets or surplus funds of theCorporation to the holders of the Common Stock by reason of their ownershipthereof, the amount of $5.00 per share of Series A Preferred Stock and theSeries A-1 Preferred Stock then held by them (as adjusted for any combinations,consolidations, subdivisions, splits or stock dividends with respect to suchSeries A Preferred Stock and Series A-1 Preferred Stock), and an amount equalto all accrued but unpaid dividends on the Series A Preferred Stock and SeriesA-1 Preferred Stock (the “Liquidation Preference”).  If, upon the occurrence of such event, the assets and funds thusdistributed among the holders of the Series A Preferred Stock and Series A-1Preferred Stock shall be insufficient to permit the payment to such holders ofthe full preferential amounts for the Series A Preferred Stock and Series A-1Preferred Stock, then the entire assets and funds of the Corporation legallyavailable for distribution shall be distributed ratably among the holders ofthe Series A Preferred Stock and Series A-1 Preferred Stock in proportion tothe preferential amount each such holder would have otherwise been entitled toreceive.

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##                                 (a) For purposes of this Section 2, a “Liquidation Event” means:(i) any liquidation, dissolution or winding up, either voluntary orinvoluntary, of the Corporation, (ii) the sale of all or substantially allof the assets of the Corporation and (iii) at the option of the holders of amajority of the outstanding shares of the Series A Preferred Stock andSeries A-1 Preferred Stock, a merger, reorganization or other transaction inwhich control of the Corporation is transferred.

##                                 (b) Whenever the distribution or consideration provided for in this Section4 shall be payable in any form other than cash, subject to the provisions ofSection 4(c), the value of such distribution or consideration shall be the fairmarket value of such assets as determined in good faith by the Board ofDirectors of the Corporation subject to the reasonable approval of the holdersof a majority in interest of the then outstanding Series A Preferred Stock andSeries A-1 Preferred Stock.

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##                                 (c)  If the Corporation distributes securitiespursuant to this Section 4 and the value of such securities is notdetermined pursuant to a separate agreement relating to such distribution, suchsecurities shall be valued as follows:

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###                                                         (i)    Securities not subject to restrictions onfree marketability:

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####                                                                 (A)  If traded on a securities exchange or theNasdaq Stock Market, the value shall be deemed to be the average of the closingprices of the securities on such exchange or quotation system over a 30-dayperiod ending three days prior to the applicable determination date;

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####                                                                 (B)  If actively traded over-the-counter, thevalue shall be deemed to be the average of the closing bid or sale prices(whichever is applicable) over the 30–day period ending three days priorto the applicable determination date; and

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###                                                         (ii)    The method of valuation of securitiessubject to restrictions on free marketability (other than restrictions arisingsolely by virtue of a stockholder’s status as an affiliate or former affiliate)shall be to make an appropriate discount from the market value determined asabove in (i)(A) or (B) to reflect the approximate fair market value thereof.

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##                                 (d)  The Corporation shall give each holder ofrecord of Series A Preferred Stock and the Series A-1 Preferred Stock writtennotice of such impending transaction not later than 20 days prior to thestockholders’ meeting called to approve such transaction, or 20 days prior tothe closing of such transaction, whichever is earlier, and shall also notifysuch holders in writing of the final approval of such transaction.  The first of such notices shall describe thematerial terms and conditions of the impending transaction and the provisionsof this Section 4, and the Corporation shall thereafter give such holdersprompt notice of any material changes. The transaction shall in no event take place sooner than 20 days afterthe Corporation has given the first notice provided for herein or sooner thantwo business days after the Corporation has given notice of any materialchanges provided for herein; provided, however, that such periods may beshortened upon the written consent of the holders of Series A Preferred Stockand Series A-1 Preferred Stock that are entitled to such notice rights or similarnotice rights and that represent at least a majority of the voting power of allthen outstanding shares of such Series A Preferred Stock and Series A-1Preferred Stock.

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##                 5.             VotingRights.  The holders of the Series APreferred Stock and Series A-1 Preferred Stock will vote on all matters withthe holders of the Common Stock, on an as-converted basis, except that theaffirmative vote of the holders of a majority of the Series A Preferred Stockand Series A-1 Preferred Stock, voting together as a separate class, will berequired to: (i) adversely alter or change the rights, preferences orprivileges of the Series A Preferred Stock and Series A-1 Preferred Stock,provided that the consent of two-thirds of the holders of Series A PreferredStock and Series A-1 Preferred Stock will be required for an amendment thatchanges any dividend, the Liquidation Preference or any other amount payable onthe Series A Preferred Stock and Series A-1 Preferred Stock; (ii) issue anyadditional shares of Series A Preferred Stock and Series A-1 Preferred Stock;(iv ) cause a change in control (as defined below); (v) cause a liquidation ofthe Corporation or (vi) change the size of the Board of Directors.

##                 6.             Conversion.

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##                                 (a) Right to Convert.  Eachshare of Series A Preferred Stock and Series A Preferred Stock shall beconvertible, at the option of the holder thereof, at any time after the date ofissuance of such share, at the office of the Corporation or any transfer agentfor the Series A Preferred Stock and Series A-1 Preferred Stock.

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##                                 (b) Conversion Price.  Eachshare of Series A Preferred Stock has a conversion price equal to $.50 pershare (the “Series A Conversion Price”). Each share of Series A-1 Preferred Stock has a conversion price equal to$.75 per share (the “Series A-1 Conversion Price” and together with the SeriesA Conversion Price, (the “Conversion Price”). Each share of Series A Preferred Stock and Series A-1 Preferred Stock isconvertible into a number shares of the Corporation’s Common Stock equal to theLiquidation Preference divided by the applicable Conversion Price.

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##                                 (c) Automatic Conversion. Each share of Series A Preferred Stock and Series A-1 Preferred Stockshall automatically be converted into shares of Common Stock at the theneffective Conversion Price upon the earlier of (i) the closing of a firmcommitment underwritten public offering pursuant to an effective registrationstatement under the Securities Act of 1933, as amended, covering the offerand sale of Common Stock to the public involving gross proceeds to theCorporation of not less than $15,000,000 at a per share offering price (asadjusted for recapitalizations, stock combinations, stock dividends, stocksplits and the like) of at least $15.00 (a “Qualified IPO”) or (ii) the consentof at least a majority of the holders of the then outstanding shares of SeriesA Preferred Stock and Series A-1 Preferred Stock.

##                                 (d) Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion ofSeries A Preferred Stock and Series A-1 Preferred Stock.  In lieu of any fractional shares to whichthe holder would otherwise be entitled (after aggregating all shares of SeriesA Preferred Stock and Series A-1 Preferred Stock held by such holder to beconverted, such that the maximum number of whole shares of Common Stock isissued to such holder upon conversion), the Corporation shall pay cash equal tosuch fraction multiplied by the then effective Conversion Price of such seriesof Series A Preferred Stock and Series A-1 Preferred Stock.  Before any holder of Series A PreferredStock and Series A-1 Preferred Stock shall be entitled to convert the same intoshares of Common Stock pursuant to Section 6(a), such holder shall surrenderthe certificate or certificates therefor, duly endorsed, at the office of theCorporation or of any transfer agent for such Series A Preferred Stock andSeries A-1 Preferred Stock, and shall give written notice by mail, postageprepaid, to the Corporation at its principal corporate office, of the electionto convert the same.  Such conversionshall be deemed to have been made immediately prior to the close of business onthe date of such surrender of the shares of Series A Preferred Stock and SeriesA-1 Preferred Stock to be converted, and the person or persons entitled toreceive the shares of Common Stock issuable upon such conversion shall betreated for all purposes as the record holder or holders of such shares ofCommon Stock as of such date.  In theevent of an automatic conversion pursuant to Section 6(c), the outstandingshares of Series A Preferred Stock and Series A-1 Preferred Stock shall beconverted automatically without any further action by the holder of such sharesand whether or not the certificates representing such shares are surrendered tothe Corporation or the transfer agent for such Series A Preferred Stock andSeries A-1 Preferred Stock Preferred Stock; and the Corporation shall not beobligated to issue certificates evidencing the shares of Common Stock issuableupon such automatic conversion unless the certificates evidencing such sharesof Series A Preferred Stock and Series A-1 Preferred Stock are either deliveredto the Corporation or the transfer agent for such Series A Preferred Stock andSeries A-1 Preferred Stock as provided above, or the holder notifies theCorporation or the transfer agent for such Series A Preferred Stock and SeriesA-1 Preferred Stock that such certificates have been lost, stolen or destroyedand executes an agreement satisfactory to the Corporation to indemnify theCorporation from any loss incurred by it in connection with suchcertificates.  The Corporation shall, assoon as practicable thereafter, issue and deliver to such address as the holdermay direct, a certificate or certificates for the number of shares of CommonStock to which such holder shall be entitled. If the conversion is in connection with a public offering of securitiesdescribed in Section 6(c), the conversion shall be conditioned upon theclosing with the underwriters of the sale of securities pursuant to suchoffering, and the conversion shall not be deemed to have occurred untilimmediately prior to the closing of such sale of securities.

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##                                 (e) Status of Converted Stock. In the event any shares of Series A Preferred Stock and Series A-1Preferred Stock Preferred Stock shall be converted pursuant to thisSection 6, the shares so converted shall be canceled and shall not bereissued by the Corporation.

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##                                 (f) Partial Conversion.  Inthe event some but not all of the shares of Series A Preferred Stock or SeriesA-1 Preferred Stock represented by a certificate or certificates are converted,the Corporation shall execute and deliver to or to the order of the holder, atthe expense of the Corporation, a new certificate representing the number ofshares of Series A Preferred Stock or Series A-1 Preferred Stock which were notconverted.

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##                                 (g) Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of itsauthorized but unissued shares of Common Stock, solely for the purpose ofeffecting the conversion of the shares of the Series A Preferred Stock andSeries A-1 Preferred Stock, such number of its shares of Common Stock as shallfrom time to time be sufficient or as may be available to effect the conversionof all outstanding shares of the Series A Preferred Stock and Series A-1Preferred Stock and if at any time the number of authorized but unissued sharesof Common Stock shall not be sufficient to effect the conversion of all thethen outstanding shares of the Series A Preferred Stock and Series A-1Preferred Stock, the Corporation shall use its best efforts to take suchcorporate action as may be necessary to increase its authorized but unissuedshares of Common Stock to such number of shares as shall be sufficient for suchpurpose.

##                                 (h) Adjustment of Conversion Price of Series A Preferred Stock and SeriesA- 1 Preferred Stock.      TheConversion Price shall be subject to adjustment from time to time as follows:

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###                                                 i.              Adjustments for Subdivisions orCombinations of Common Stock.  Inthe event the outstanding shares of Common Stock shall be subdivided by stocksplit, stock dividend or otherwise, into a greater number of shares of CommonStock, the Conversion Price of the Series A Preferred Stock and Series A-1Preferred Stock then in effect shall, concurrently with the effectiveness ofsuch subdivision, be proportionately decreased.  In the event the outstanding shares of Common Stock shall becombined or consolidated into a lesser number of shares of Common Stock, theConversion Price of the Series A Preferred Stock and Series A-1 Preferred Stockthen in effect shall, concurrently with the effectiveness of such combinationor consolidation, be proportionately increased.

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###                                                 ii.             Adjustments for Stock Dividendsand Other Distributions.  In theevent the Corporation makes, or fixes a record date for the determination ofholders of Common Stock entitled to receive, any distribution (excludingrepurchases of securities by the Corporation not made on a pro rata basis)payable in property, in securities of other persons or of the Corporation otherthan shares of Common Stock or evidences of indebtedness of other persons or ofthe Corporation, and other than as otherwise adjusted for in this Section 6or as provided for in Section 3 in connection with a dividend, then and ineach such event the holders of Series A Preferred Stock and Series A-1Preferred Stock shall receive, at the time of such distribution, the amount ofany such distribution that they would have received had their shares of SeriesA Preferred Stock and Series A-1 Preferred Stock been converted into CommonStock immediately prior to the date of such event.

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###                                                 iii.            Adjustments for Reorganizations,Reclassifications or Similar Events. If the Common Stock shall be changed into the same or a different numberof shares of any other class or classes of stock or other securities orproperty, whether by capital reorganization, reclassification or otherwise,then each share of Series A Preferred Stock and Series A-1 Preferred Stockshall thereafter be convertible into the number of shares of stock or othersecurities or property to which a holder of the number of shares of CommonStock of the Corporation deliverable upon conversion of such shares of Series APreferred Stock and Series A-1 Preferred Stock shall have been entitled uponsuch reorganization, reclassification or other event.

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###                                                 iv.            Sale of Shares Below ConversionPrice.

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###                                                                 (A)          If, at any time or from time to timeafter the date hereof, the Corporation issues or sells, or is deemed by theexpress provisions of this subparagraph (h) to have issued or sold,Additional Shares of Common Stock (as defined in clause (D) below), otherthan upon a subdivision or combination of, or as a dividend or otherdistribution on, the Common Stock as provided in subparagraph(h)(i) above, for an Effective Price (as defined in clause (D) below)less than the then existing Conversion Price (or, if an adjusted ConversionPrice shall be in effect by reason of a previous adjustment, then less thansuch adjusted Conversion Price) applicable to Series A Preferred Stock and theSeries A-1 Preferred Stock, the then-existing Conversion Price of suchPreferred Stock shall be reduced, as of the opening of business on the date ofsuch issue or sale, to a price determined by multiplying the then-existingConversion Price of such series of Preferred Stock by a fraction (i) thenumerator of which shall be (A) the number of shares of Common Stockoutstanding at the close of business on the day next preceding the date of suchissue or sale, plus (B) the number of shares of Common Stock that theaggregate consideration received (or by the express provisions hereof deemed tohave been received) by the Corporation for the total number of AdditionalShares of Common Stock so issued would purchase at the then-existing ConversionPrice with respect to any series of the Preferred Stock, and (ii) thedenominator of which shall be the number of shares of Common Stock outstandingat the close of business on the date of such issue after giving effect to suchissue of Additional Shares of Common Stock; provided, however,that for the purposes of this clause (i), only shares of Common Stock andPreferred Stock then outstanding shall be deemed to be outstanding CommonStock.

###                                                                 (B)           For the purpose of making anyadjustment required under this subparagraph (h), the consideration received bythe Corporation for any issue or sale of securities shall (A) to theextent it consists of cash, be computed at the gross amount of cash received bythe Corporation, before deducting any expenses payable by the Corporation andany underwriting or similar commissions, compensation or concessions paid orallowed by the Corporation in connection with such issue or sale, (B) tothe extent it consists of property, be computed as determined in good faith bythe Board, and (C) if Additional Shares of Common Stock, or rights oroptions to purchase either Additional Shares of Common Stock are issued or soldtogether with other stock or securities or other assets of the Corporation fora consideration which covers both, be computed as the portion of theconsideration so received that may be reasonably determined in good faith bythe Board to be allocable to such Additional Shares of Common Stock, or rightsor options, as the case may be.

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####                                                                 (C)           For the purpose of the adjustmentrequired under this subparagraph (h), if the Corporation issues or sells anyrights or options to purchase Common Stock or any other securities convertibleinto shares of Common Stock of the Corporation (“Convertible Securities”) andif the Effective Price of the Additional Shares of Common Stock underlying suchrights or options or Convertible Securities is less than the then applicableConversion Price in effect for the Series Preferred Stock, then the Corporationshall be deemed to have issued at the time of the issuance of such rights oroptions or Convertible Securities the maximum number of Additional Shares ofCommon Stock issuable upon exercise or conversion thereof and to have receivedas consideration for the issuance of such shares an amount equal to the totalamount of the consideration, if any, received by the Corporation for theissuance of such rights or options or Convertible Securities, plus, in the caseof such rights or options, the minimum amount of consideration, if any, payableto the Corporation upon the exercise of such rights or options, plus, in thecase of Convertible Securities, the minimum amounts of consideration, if any,payable to the Corporation (other than by cancellation of liabilities orobligations evidenced by such Convertible Securities) upon the conversionthereof.  No further adjustment of theapplicable Conversion Price with respect to the Series A Preferred Stock or theSeries A-1 Preferred Stock, adjusted upon the issuance of such rights, optionsor Convertible Securities, shall be made as a result of the actual issuance ofAdditional Shares of Common Stock on the exercise of any such rights, optionsor the conversion of any such Convertible Securities.  If the purchase price provided for in any option or theadditional consideration (if any) payable upon the issue, conversion orexchange of any Convertible Securities or the rate at which any Convertible Securitiesare convertible into or exchangeable for Common Stock changes at any time, theapplicable Conversion Price in effect with respect to the Series A PreferredStock or Series A-1 Preferred Stock at the time of such change shall beadjusted immediately to the Conversion Price which would have been in effect atsuch time had such option or Convertible Security originally provided for suchchanged purchase price, additional consideration or conversion rate, as thecase may be, at the time initially granted, issued or sold.  If any such rights or options or theconversion privilege represented by any such Convertible Securities shallexpire without having been exercised, the applicable Conversion Price withrespect to the Series A Preferred Stock and Series A-1 Preferred Stock,adjusted upon the issuance of such rights, options or Convertible Securitiesshall be readjusted to the applicable Conversion Price that would have been ineffect had an adjustment been made on the basis that the only Additional Sharesof Common Stock so issued were the Additional Shares of Common Stock, if any,actually issued or sold on the exercise of such rights or options or rights ofconversion of such Convertible Securities, and such Additional Shares of CommonStock, if any, were issued or sold for the consideration actually received bythe Corporation upon such exercise, plus the consideration, if any, actuallyreceived by the Corporation for the granting of all such rights or options,whether or not exercised, plus the consideration received for issuing orselling the Convertible Securities actually converted, plus the consideration,if any, actually received by the Corporation (other than by cancellation ofliabilities or obligations evidenced by such Convertible Securities) on theconversion of such Convertible Securities.

####                                                 (D)          “AdditionalShares of Common Stock” means all shares of Common Stock issued by theCorporation after the date hereof, whether or not subsequently reacquired orretired by the Corporation, other than shares of Common Stock issued:

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####                                 1)             uponconversion of any Preferred Stock;

 

####                                 2)             toofficers, employees or directors of, or consultants and advisors to, theCorporation or any subsidiary pursuant to any stock purchase or stock optionplans or other arrangements that are approved by the Board, as adjusted for anystock splits, stock dividends or other similar capital modifications;

 

####                                 3)             asa dividend or distribution on any Preferred Stock;

 

####                                 4)             inconnection with a Qualified IPO.

 

The “EffectivePrice” of Additional Shares of Common Stock shall mean the quotient determinedby dividing the total number of Additional Shares of Common Stock issued orsold, or deemed to have been issued or sold by the Corporation under thissubparagraph (h), into the aggregate consideration received, or deemed to havebeen received by the Corporation for such issue under this subparagraph (h),for such Additional Shares of Common Stock.

 

                                                (i)  Duration of Adjusted Conversion Price.  Following each computation or readjustmentof an adjusted Conversion Price with respect to the Series A Preferred Stockand Series A-1 Preferred Stock as provided above in this Section 6, thenew adjusted Conversion Price for such series of Preferred Stock shall remainin effect until a further computation or readjustment thereof is required bythis Section 6.

                                                (j)  Other Action Affecting Common Stock.  If, after the filing of this Certificate ofDesignation, the Corporation shall take any action affecting its shares ofCommon Stock, other than an action described above in this Section 6, thatin the good faith opinion of the Board would have a materially adverse effectupon the Conversion Rights of any series of Preferred Stock set forth herein,the applicable Conversion Price of the affected Preferred Stock shall beadjusted in a manner and at a time as the Board may in good faith determine tobe equitable in the circumstances.

 

                                                (k)  Certificate as to Adjustments.  Upon the occurrence of each adjustment orreadjustment of the applicable Conversion Price of any series of PreferredStock pursuant to this Section 6, the Corporation at its expense promptlyshall compute the adjustment or readjustment in accordance with the termshereof and furnish to each holder of the affected Preferred Stock a certificatesetting forth the adjustment or readjustment and showing in detail the factsupon which the adjustment or readjustment is based.  The Corporation, upon the written request, at any time, of anyholder of Series A Preferred Stock and Series A-1 Preferred Stock, shallfurnish or cause to be furnished to that holder a like certificate settingforth:  (i) the adjustments andreadjustments; (ii) the applicable Conversion Price of the such holder’s seriesof Preferred Stock at the time in effect; and (iii) the number of sharesof Common Stock and the amount, if any, of other property that at the timewould be received upon the conversion of such holder’s Preferred Stock.

 

                7.             Redemption. Upon the occurrence of (i) any transaction or series of relatedtransactions involving any corporate reorganization, merger or consolidationthat will result in the holders of the capital stock of the Corporationimmediately after such transaction not holding at least 50% of the voting powerof the surviving or continuing entity entitled to vote in an election of theBoard of Directors of such acquiring or surviving entity or (ii) a sale ofsubstantially all of the assets of the Corporation whether pursuant to one or aseries of related transactions that will result in the Corporation’sstockholders immediately after such sale no holding at least 50% of the votingpower of the surviving or acquiring entitled to vote in an election of theBoard of the Directors of the surviving or acquiring entity (collectively, a“Change of Control”), at the option of the holders of a majority of the SeriesA Preferred Stock and Series A-1 Preferred Stock, the Corporation will berequired to redeem all of the outstanding shares of Series A Preferred Stockand Series A-1 Preferred Stock at a price per share equal to the greater of (i)the Liquidation Preference plus accrued and unpaid dividends or (ii) the pershare price of the Common Stock to be received in connection with the Change of Control times the number of sharesof  Common Stock into which the sharesof Series A Preferred Stock and Series A-1 Preferred Stock  are convertible.

 

                8.             Lost or Stolen Certificates.  Uponreceipt by the Corporation of evidence of the loss, theft, destruction ormutilation of any Series A Preferred Stock or Series A-1 Preferred Stockcertificate(s), and (in the case of loss, theft or destruction) of indemnity orsecurity reasonably satisfactory to the Corporation, and upon the cancellationof the Series A Preferred Stock or Series A-1 Preferred Stock certificate(s),as the case may be, if mutilated, the Corporation shall execute and deliver newcertificates for Series A Preferred Stock or Series A-1 Preferred Stock of liketenure and date. However, the Corporation shall not be obligated to reissuesuch lost or stolen certificates for shares of Series A Preferred Stock orSeries A-1 Preferred Stock if the holder contemporaneously requests theCorporation to convert such Series A Preferred Stock or Series A-1 PreferredStock into Common Stock.

                9.             No Reissuance of Series A Preferred Stock or SeriesA-1 Preferred Stock.  Any share orshares of Series A Preferred Stock or Series A-1 Preferred Stock acquired bythe Corporation by reason of purchase, conversion or otherwise shall becanceled, shall return to the status of authorized but unissued preferred stockof no designated series, and shall not be reissuable or re-sellable by theCorporation as Series A Preferred Stock or Series A-1 Preferred Stock.

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##                                 IN WITNESS WHEREOF, the Corporationhas caused this Certificate to be signed by Timothy J. Parrot and ChristopherR. Grobl, the President and Secretary, respectively, as of this ___ day of______ 2001.

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|   |   |   |   |   |   |   |   |                  |
|--------|--------|--------|--------|--------|--------|--------|--------|-----------------------|
|   |   |   |   |   |   |   |   | Timothy  J. Parrott   |
|   |   |   |   |   |   |   |   | President             |
|   |   |   |   |   |   |   |   |                  |
|   |   |   |   |   |   |   |   |                  |
|   |   |   |   |   |   |   |   |                  |
|   |   |   |   |   |   |   |   |                  |
|   |   |   |   |   |   |   |   | Christopher  R. Grobl |
|   |   |   |   |   |   |   |   | Secretary             |

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