Document:

Unassociated Document

    EXHIBIT
      10.1

    
SCHNITZER
      STEEL INDUSTRIES, INC.

    LONG-TERM
      INCENTIVE AWARD AGREEMENT

    (FY
      20__-20__ Performance Period)

     

    This
      Agreement is entered into as of _________ __, 20__, between Schnitzer Steel
      Industries, Inc., an Oregon corporation (the “Company”), and _____________
      (“Recipient”).

     

    On
      _________ __, 20__, the Compensation Committee (the “Committee”) of the
      Company’s Board of Directors (the “Board”) authorized a performance-based award
      to the Recipient pursuant to Section 11 of the Company’s 1993 Stock Incentive
      Plan (the “Plan”). Compensation paid pursuant to the award is intended to
      qualify as performance-based compensation under Section 162(m) of the Internal
      Revenue Code of 1986 (the “Code”). Recipient desires to accept the award subject
      to the terms and conditions of this Agreement.

     

    NOW,
      THEREFORE, the parties agree as follows:

     

    1. 
Award.
      Subject
      to the terms and conditions of this Agreement, the Company shall issue to the
      Recipient the number of shares of Class A Common Stock of the Company
      (“Performance Shares”) determined under this Agreement based on (a) the
      performance of the Company during the three-year period from September 1, 20__
      to August 31, 20__ (the “Performance Period”) as described in Section 2, and (b)
      Recipient’s continued employment during the Performance Period as described in
      Section 3. Recipient’s “Target Share Amount” for purposes of this Agreement is
      _______ shares.

     

    2. 
Performance
      Conditions.

     

     
      2.1 
Payout
      Factor.
      Subject
      to adjustment under Sections 3, 4, 5 and 6, the number of Performance Shares
      to
      be issued to Recipient shall be determined by multiplying the Payout Factor
      by
      the Target Share Amount. The “Payout Factor” shall be equal to the sum of (a)
      50% of the EPS Payout Factor as determined under Section 2.2 below, plus (b)
      50%
      of the ROCE Payout Factor as determined under Section 2.3 below.

     

     
      2.2 
EPS
      Payout Factor.

     

          2.2.1 The
“EPS
      Payout Factor” shall be determined under the table below based on the Average
      EPS Growth of the Company for the Performance Period.

     

    
      
        	 	
                Average
                  EPS
                  Growth

              	 	
                EPS
                  Payout Factor

              	 
	 	
                Less
                  than _%

              	 	
                0%

              	 
	 	
                _%

              	 	
                __%

              	 
	 	
                _%

              	 	
                __%

              	 
	 	
                _%

              	 	
                100%

              	 
	 	
                _%

              	 	
                ___%

              	 
	 	
                _%
                  or more

                 

              	 	
                200%

                 

              	 

      

    

    
 

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    If
      the
      Average EPS Growth is between any two data points set forth in the first column
      of the above table, the EPS Payout Factor shall be determined by interpolation
      between the corresponding data points in the second column of the table as
      follows: the difference between the Average EPS Growth and the lower data point
      shall be divided by the difference between the higher data point and the lower
      data point, the resulting fraction shall be multiplied by the difference between
      the two corresponding data points in the second column of the table, and the
      resulting product shall be added to the lower corresponding data point in the
      second column of the table, with the resulting sum being the EPS Payout
      Factor.

     

          2.2.2 The
      Company’s “Average EPS Growth” for the Performance Period shall be equal to the
      average of the EPS Growth determined for each of the three fiscal years of
      the
      Performance Period. The “EPS Growth” for any fiscal year shall be equal to the
      EPS for that year minus the EPS for the prior fiscal year, with that difference
      then divided by the EPS for the prior fiscal year. For purposes of this
      Agreement, the “EPS” for fiscal 20__ shall be deemed to be $____ reflecting the
      elimination of certain large non-recurring items. Subject to adjustment in
      accordance with Section 2.4 below, the “EPS” for any fiscal year of the
      Performance Period shall mean the Company’s diluted earnings per share for that
      fiscal year, before extraordinary items and cumulative effects of changes in
      accounting principles, if any, as set forth in the audited consolidated
      financial statements of the Company and its subsidiaries for that fiscal year.
      

     

     
      2.3 
ROCE
      Payout Factor.

     

         
      2.3.1 The
“ROCE
      Payout Factor” shall be determined under the table below based on the Average
      ROCE of the Company for the Performance Period.

     

    
      
        
          	 	
                  Average
                    ROCE

                	 	
                  ROCE Payout Factor

                	 
	 	
                  Less
                    than _%

                	 	
                  0%

                	 
	 	
                  _%

                	 	
                  __%

                	 
	 	
                  _%

                	 	
                  __%

                	 
	 	
                  _%

                	 	
                  100%

                	 
	 	
                  _%

                	 	
                  ___%

                	 
	 	
                  _%
                    or more

                   

                	 	
                  200%

                   

                	 

        

      

      
 

    

    If
      the
      Average ROCE is between any two data points set forth in the first column of
      the
      above table, the ROCE Payout Factor shall be determined by interpolation between
      the corresponding data points in the second column of the table as follows:
      the
      difference between the Average ROCE and the lower data point shall be divided
      by
      the difference between the higher data point and the lower data point, the
      resulting fraction shall be multiplied by the difference between the two
      corresponding data points in the second column of the table, and the resulting
      product shall be added to the lower corresponding data point in the second
      column of the table, with the resulting sum being the ROCE Payout
      Factor.

     

         
      2.3.2 The
      Company’s “Average ROCE” for the Performance Period shall be equal to the
      average of the ROCE determined for each of the three fiscal years of
      the

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Performance
      Period. The “ROCE” for any fiscal year shall be equal to the Company’s Adjusted
      Net Income for that fiscal year divided by the Company’s Average Capital
      Employed for that fiscal year. “Adjusted Net Income” for any fiscal year shall
      mean the amount determined by excluding interest expense from the Company’s
      income before income taxes for the fiscal year, recalculating the income tax
      expense for the year based on the adjusted income before income taxes, and
      then
      calculating net income before extraordinary items and cumulative effects of
      changes in accounting principles, if any, all in a manner consistent with the
      actual calculations reflected in the audited consolidated financial statements
      of the Company and its subsidiaries for that fiscal year. “Average Capital
      Employed” for any fiscal year shall mean the average of five (5) numbers
      consisting of the Capital Employed as of the last day of the fiscal year and
      as
      of the last day of the four preceding fiscal quarters. “Capital Employed” as of
      any date shall mean the Company’s total assets minus the sum of all of its
      liabilities other than debt for borrowed money and capital lease obligations,
      in
      each case as set forth on the consolidated balance sheet of the Company and
      its
      subsidiaries as of the applicable date.

     

     
      2.4 
Change
      in Accounting Principle.
      If the
      Company implements a change in accounting principle during the Performance
      Period either as a result of issuance of new accounting standards or otherwise,
      and the effect of the accounting change was not reflected in the Company’s
      business plan at the time of approval of this award, then Average EPS Growth
      and
      Average ROCE shall be adjusted to eliminate the impact of the change in
      accounting principle.

     

    3. 
Employment
      Condition.

     

     
      3.1 
Full
      Payout.
      In
      order to receive the full number of Performance Shares determined under Section
      2, Recipient must be employed by the Company on the October 31 immediately
      following the end of the Performance Period (the “Vesting Date”).

     

     
      3.2 
Retirement;
      Termination Without Cause After 12 Months.
      If
      Recipient’s employment with the Company is terminated at any time prior to the
      Vesting Date because of retirement (as defined in paragraph 6(a)(iv)(D) of
      the
      Plan), or if Recipient’s employment is terminated by the Company without Cause
      (as defined below) after the end of the 12th
      month of
      the Performance Period and prior to the Vesting Date, Recipient shall be
      entitled to receive a pro-rated award to be paid following completion of the
      Performance Period. The number of Performance Shares to be issued as a pro-rated
      award under this Section 3.2 shall be determined by multiplying the number
      of
      Performance Shares determined under Section 2 by a fraction, the numerator
      of
      which is the number of days Recipient was employed by the Company since the
      beginning of the Performance Period and the denominator of which is the number
      of days in the period from the beginning of the Performance Period to the
      Vesting Date. Any obligation of the Company to issue a pro-rated award under
      this Section 3.2 shall be subject to and conditioned upon the execution and
      delivery by Recipient of a Release of Claims in such form as may be requested
      by
      the Company. For purposes of this Section 3.2, “Cause” shall mean (a) the
      conviction (including a plea of guilty or nolo contendere) of Recipient of
      a
      felony involving theft or moral turpitude or relating to the business of the
      Company, other than a felony predicated on Recipient's vicarious liability,
      (b)
      Recipient’s continued failure or refusal to perform with reasonable competence
      and in good faith any of the lawful duties assigned by (or any lawful directions
      of) the Company that are commensurate with Recipient’s position with the Company

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (not
      resulting from any illness, sickness or physical or mental incapacity), which
      continues after the Company has given notice thereof (and a reasonable
      opportunity to cure) to Recipient, (c) deception, fraud, misrepresentation
      or
      dishonesty by Recipient in connection with Recipient’s employment with the
      Company, (d) any incident materially compromising Recipient’s reputation or
      ability to represent the Company with the public, (e) any willful misconduct
      by
      Recipient that substantially impairs the Company’s business or reputation, or
      (f) any other willful misconduct by Recipient that is clearly inconsistent
      with
      Recipient’s position or responsibilities.

     

     
      3.3 
Death
      or Total Disability.
      If
      Recipient’s employment with the Company is terminated at any time prior to the
      Vesting Date because of death or total disability (as defined in paragraph
      6(a)(iv)(B) of the Plan), Recipient shall be entitled to receive a pro-rated
      award to be paid as soon as reasonably practicable following such event. For
      purposes of calculating the pro-rated award under this Section 3.3, the EPS
      Payout Factor and the ROCE Payout Factor shall both be calculated as if the
      Performance Period ended on the last day of the Company’s most recently
      completed fiscal quarter prior to the date of death or total disability. For
      this purpose, the EPS for any partial fiscal year shall be annualized
      (e.g.,
      multiplied by 4/3 if the partial period is three quarters) before determining
      EPS Growth for that partial fiscal year, and the Average EPS Growth shall be
      determined by averaging however many full and partial fiscal years for which
      an
      EPS Growth percentage shall have been determined. Also for this purpose, the
      Adjusted Net Income for any partial fiscal year shall be annualized and the
      Average Capital Employed shall be determined based on the average of Capital
      Employed as of the last day of only those quarters that have been completed,
      before determining ROCE for that partial fiscal year, and the Average ROCE
      shall
      be determined by averaging however many full and partial fiscal years for which
      an ROCE percentage shall have been determined. The number of Performance Shares
      to be issued as a pro-rated award under this Section 3.3 shall be determined
      by
      multiplying the number of Performance Shares determined after applying the
      modifications described in the preceding sentences by a fraction, the numerator
      of which is the number of days Recipient was employed by the Company since
      the
      beginning of the Performance Period and the denominator of which is the number
      of days in the period from the beginning of the Performance Period to the
      Vesting Date.

     

     
      3.4 
Other
      Terminations.
      If
      Recipient’s employment by the Company is terminated at any time prior to the
      Vesting Date and neither Section 3.2 nor Section 3.3 applies to such
      termination, Recipient shall not be entitled to receive any Performance
      Shares.

     

    4. 
Company
      Sale.

     

     
      4.1 
If
      a
      Company Sale (as defined below) occurs before the Vesting Date, Recipient shall
      be entitled to receive an award payout no later than the earlier of fifteen
      (15)
      days following such event or the last day on which the Performance Shares could
      be issued so that Recipient may participate as a shareholder in receiving
      proceeds from the Company Sale. The amount of the award payout under this
      Section 4 shall be the amount determined using a Payout Factor equal to the
      greater of (a) 100%, or (b) the Payout Factor calculated as if the Performance
      Period ended on the last day of the Company’s most recently completed fiscal
      quarter prior to the date of the Company Sale. For this purpose, the EPS for
      any
      partial fiscal year shall be annualized (e.g.,
      multiplied by 4/3 if the partial period is three quarters) before determining
      EPS Growth for that partial fiscal year, and the Average EPS Growth shall be
      determined by 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    averaging
      however many full and partial fiscal years for which an EPS Growth percentage
      shall have been determined. Also for this purpose, the Adjusted Net Income
      for
      any partial fiscal year shall be annualized and the Average Capital Employed
      shall be determined based on the average of Capital Employed as of the last
      day
      of only those quarters that have been completed, before determining ROCE for
      that partial fiscal year, and the Average ROCE shall be determined by averaging
      however many full and partial fiscal years for which an ROCE percentage shall
      have been determined.

     

     
      4.2 
For
      purposes of this Agreement, a “Company Sale” shall mean the occurrence of any of
      the following events:

     

         
      4.2.1 any
      consolidation, merger or plan of share exchange involving the Company (a
“Merger”) in which the Company is not the continuing or surviving corporation or
      pursuant to which outstanding shares of Class A Common Stock would be converted
      into cash, other securities or other property; or

     

         
      4.2.2 any
      sale,
      lease, exchange or other transfer (in one transaction or a series of related
      transactions) of all, or substantially all, the assets of the
      Company.

     

    5. 
Certification
      and Payment.
      As soon
      as practicable following the completion of the audit of the Company’s
      consolidated financial statements for the final fiscal year of the Performance
      Period, the Company shall calculate the Payout Factor and the corresponding
      number of Performance Shares issuable to Recipient. This calculation shall
      be
      submitted to the Committee. No later than the Vesting Date the Committee shall
      certify in writing (which may consist of approved minutes of a Committee
      meeting) the levels of Average EPS Growth and Average ROCE attained by the
      Company for the Performance Period and the number of Performance Shares issuable
      to Recipient based on such performance. Subject to applicable tax withholding,
      the number of Performance Shares so certified shall be issued to Recipient
      as
      soon as practicable following the Vesting Date, but no Performance Shares shall
      be issued prior to certification. No fractional shares shall be issued and
      the
      number of Performance Shares deliverable shall be rounded to the nearest whole
      share. In the event of the death or total disability of Recipient as described
      in Section 3.3 or a Company Sale as described in Section 4, each of which
      requires an award payout earlier than the Vesting Date, a similar calculation
      and certification process shall be followed within the time frames required
      by
      those sections.

     

    6. 
Tax
      Withholding.
      Recipient acknowledges that, on the date the Performance Shares are issued
      to
      Recipient (the “Payment Date”), the Value (as defined below) on that date of the
      Performance Shares will be treated as ordinary compensation income for federal
      and state income and FICA tax purposes, and that the Company will be required
      to
      withhold taxes on these income amounts. To satisfy the required minimum
      withholding amount, the Company shall withhold the number of Performance Shares
      having a Value equal to the minimum withholding amount. For purposes of this
      Section 6, the “Value” of a Performance Share shall be equal to the closing
      market price for Class A Common Stock on the last trading day preceding the
      Payment Date.

     

    7. 
Changes
      in Capital Structure.
      If the
      outstanding Class A Common Stock of the Company is hereafter increased or
      decreased or changed into or exchanged for a different

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    number
      or
      kind of shares or other securities of the Company by reason of any stock split,
      combination of shares or dividend payable in shares, recapitalization or
      reclassification, appropriate adjustment shall be made by the Committee in
      the
      number and kind of shares subject to this Agreement so that the Recipient’s
      proportionate interest before and after the occurrence of the event is
      maintained.

     

    8. 
Approvals.
      The
      obligations of the Company under this Agreement are subject to the approval
      of
      state, federal or foreign authorities or agencies with jurisdiction in the
      matter. The Company will use its reasonable best efforts to take steps required
      by state, federal or foreign law or applicable regulations, including rules
      and
      regulations of the Securities and Exchange Commission and any stock exchange
      on
      which the Company’s shares may then be listed, in connection with the award
      evidenced by this Agreement. The foregoing notwithstanding, the Company shall
      not be obligated to deliver Class A Common Stock under this Agreement if such
      delivery would violate or result in a violation of applicable state or federal
      securities laws.

     

    9. 
No
      Right to Employment.
      Nothing
      contained in this Agreement shall confer upon Recipient any right to be employed
      by the Company or to continue to provide services to the Company or to interfere
      in any way with the right of the Company to terminate Recipient’s services at
      any time for any reason, with or without cause.

     

    10. 
Miscellaneous.

     

      
      10.1 
Entire
      Agreement; Amendment.
      This
      Agreement constitutes the entire agreement of the parties with regard to the
      subjects hereof and may be amended only by written agreement between the Company
      and Recipient.

     

      
      10.2 
Notices.
      Any
      notice required or permitted under this Agreement shall be in writing and shall
      be deemed sufficient when delivered personally to the party to whom it is
      addressed or when deposited into the United States Mail as registered or
      certified mail, return receipt requested, postage prepaid, addressed to the
      Company, Attention: Corporate Secretary, at its principal executive offices
      or
      to Recipient at the address of Recipient in the Company’s records, or at such
      other address as such party may designate by ten (10) days’ advance written
      notice to the other party.

     

      
      10.3 
Assignment;
      Rights and Benefits.
      Recipient shall not assign this Agreement or any rights hereunder to any other
      party or parties without the prior written consent of the Company. The rights
      and benefits of this Agreement shall inure to the benefit of and be enforceable
      by the Company’s successors and assigns and, subject to the foregoing
      restriction on assignment, be binding upon Recipient’s heirs, executors,
      administrators, successors and assigns.

     

      
      10.4 
Further
      Action.
      The
      parties agree to execute such further instruments and to take such further
      action as may reasonably be necessary to carry out the intent of this
      Agreement.

     

      
      10.5 
Applicable
      Law; Attorneys’ Fees.
      The
      terms and conditions of this Agreement shall be governed by the laws of the
      State of Oregon. In the event either party

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    institutes
      litigation hereunder, the prevailing party shall be entitled to reasonable
      attorneys’ fees to be set by the trial court and, upon any appeal, the appellate
      court.

     

      
      10.6 
Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original.

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      day
      and year first above written.

     

    SCHNITZER
      STEEL INDUSTRIES, INC.

    

    By_______________________________________________

    Title______________________________________________

    

    RECIPIENT

    

    ___________________________________________

    

    
 

     

     

     

     

     

     

     

     

     

    
      
         

      

      
        7Exhibit 4.3 - Certificate of Designation of Series B Preferred

    
      

      

    

    
       

      OXFORD
        MEDIA, INC.

      

      CERTIFICATE
        OF DESIGNATION OF PREFERENCES, 

      RIGHTS
        AND LIMITATIONS

      OF

      SERIES
        B CONVERTIBLE PREFERRED STOCK

      

      PURSUANT
        TO SECTION 78.1955 OF THE 

      NEVADA
        GENERAL CORPORATION LAW

      

      The
        undersigned, LEWIS JAFFE, does hereby certify that:

      

      1.    He
        is the
        President of OXFORD MEDIA, INC., a Nevada corporation (the “Corporation”).

      

      2.    The
        Corporation is authorized to issue 1,000,000 shares of preferred stock, 4,000
        of
        which have been issued.

      

      3.    The
        following resolutions were duly adopted by the Board of Directors:

      

      WHEREAS,
        the Articles of Incorporation of the Corporation provides for a class of
        its
        authorized stock known as preferred stock, comprised of 1,000,000 shares,
        $0.001
        par value, issuable from time to time in one or more series;

      

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

      

      WHEREAS,
        it is the desire of the Board of Directors of the Corporation, pursuant to
        its
        authority as aforesaid, to fix the rights, preferences, restrictions and
        other
        matters relating to a series of the preferred stock, which shall consist
        of,
        except as otherwise set forth in the Purchase Agreement, up to 3,857 shares
        of
        the preferred stock which the corporation has the authority to issue, as
        follows:

      

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

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

      TERMS
        OF PREFERRED STOCK

      

      Section
        1. Designation,
        Amount and Par Value.
        The
        series of preferred stock shall be designated as its SERIES B Convertible
        Preferred Stock (the “Preferred
        Stock”)
        and
        the number of shares so designated shall be 3,857 (which shall not be subject
        to
        increase without the consent of all of the holders of the Preferred Stock
        (each,
        a “Holder”
and
        collectively, the “Holders”)).
        Each
        share of Preferred Stock shall have a par value of $0.001 per share and a
        stated
        value equal to $1,000 (the “Stated
        Value”).
        Capitalized terms not otherwise defined herein shall have the meaning given
        such
        terms in Section 8 hereof.

      

      Section
        2.  Dividends.

      

      (a)
        Holders shall be entitled to receive and the Corporation shall pay, cumulative
        dividends at the rate per share (as a percentage of the Stated Value per
        share)
        of 8% per annum (subject to increase pursuant to Section 7(a)) payable quarterly
        on March 1, June 1, September 1 and December 1, beginning with December 31,
        2006, the first such date after the Original Issue Date, and on any Conversion
        Date or redemption date pursuant to the terms hereunder (except that, if
        such
        date is not a Trading Day, the payment date shall be the next succeeding
        Trading
        Day)(“Dividend
        Payment Date”).
        The
        form of dividend payments to each Holder shall be made in the following order:
        (i) if funds are legally available for the payment of dividends and the Equity
        Conditions have not been met, in cash only, (ii) if funds are legally available
        for the payment of dividends and the Equity Conditions have been met, at
        the
        sole election of the Corporation, in cash or shares of Common Stock which
        shall
        be valued solely for such purpose at 80% of the average of the 5 VWAPs
        immediately prior to the Dividend Payment Date; (iii) if funds are not legally
        available for the payment of dividends and the Equity Conditions have been
        met,
        in shares of Common Stock which shall be valued at 80% of the average of
        the 5
        VWAPs immediately prior to the Dividend Payment Date; (iv) if funds are not
        legally available for the payment of dividends and the Equity Conditions
        relating to registration have been waived by such Holder, as to such Holder
        only, in unregistered shares of Common Stock which shall be valued at 80%
        of the
        average of the 5 VWAPs immediately prior to the Dividend Payment Date; and
        (v)
        if funds are not legally available for the payment of dividends and the Equity
        Conditions have not been met, then, at the election of such Holder, such
        dividends shall accrue to the next Dividend Payment Date or shall be accreted
        to
        the outstanding Stated Value. The Holders shall have the same rights and
        remedies with respect to the delivery of any such shares as if such shares
        were
        being issued pursuant to Section 5. On the Closing Date the Corporation shall
        have notified the Holders whether or not it may lawfully pay cash dividends.
        The
        Corporation shall promptly notify the Holders at any time the Corporation
        shall
        become able or unable, as the case may be, to lawfully pay cash dividends.
        If at
        any time the Corporation has the right to pay dividends in cash or Common
        Stock,
        the Corporation must provide the Holder with at least 20 Trading Days’ notice of
        its election to pay a regularly scheduled dividend in Common Stock. Dividends
        on
        the Preferred Stock shall be calculated on the basis of a 360-day year, shall
        accrue daily commencing on the Original Issue Date, and shall be deemed to
        accrue from such date whether or not earned or declared and whether or not
        there
        are profits, surplus or other funds of the Corporation legally available
        for the
        payment of dividends. Except as otherwise provided herein, if at any time
        the
        Corporation pays dividends partially in cash and partially in shares, then
        such
        payment shall be distributed ratably among the Holders based upon the number
        of
        shares of Preferred Stock held by each Holder. Any dividends, whether paid
        in
        cash or shares, that are not paid within three Trading Days following a Dividend
        Payment Date shall continue to accrue and shall entail a late fee, which
        must be
        paid in cash, at the rate of 18% per annum or the lesser rate permitted by
        applicable law (such fees to accrue daily, from the Dividend Payment Date
        through and including the date of payment).

      

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (b)
        So
        long as any Preferred Stock shall remain outstanding, neither the Corporation
        nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly
        or indirectly any Junior Securities. So long as any Preferred Stock shall
        remain
        outstanding, neither the Corporation nor any Subsidiary thereof shall directly
        or indirectly pay or declare any dividend or make any distribution (other
        than a
        dividend or distribution described in Section 5 or dividends due and paid
        in the
        ordinary course on preferred stock of the Corporation at such times when
        the
        Corporation is in compliance with its payment and other obligations hereunder)
        upon, nor shall any distribution be made in respect of, any Junior Securities
        so
        long as any dividends due on the Preferred Stock remain unpaid, nor shall
        any
        monies be set aside for or applied to the purchase or redemption (through
        a
        sinking fund or otherwise) of any Junior Securities or shares pari passu
        with
        the Preferred Stock.

      

      (c)
        The
        Corporation acknowledges and agrees that the capital of the Corporation in
        respect of the Preferred Stock and any future issuances of the Corporation’s
        capital stock shall be equal to the aggregate par value of such Preferred
        Stock
        or capital stock, as the case may be, and that, on or after the date of the
        Purchase Agreement, it shall not increase the capital of the Corporation
        with
        respect to any shares of the Corporation’s capital stock issued and outstanding
        on such date. The Corporation also acknowledges and agrees that it shall
        not
        create any special reserves under the General Corporation Law of Nevada without
        the prior written consent of each Holder.

      

      Section
        3. Voting
        Rights.
        Except
        as otherwise provided herein and as otherwise required by law, the Preferred
        Stock shall have no voting rights. However, so long as any shares of Preferred
        Stock are outstanding, the Corporation shall not, without the affirmative
        vote
        of a majority-in-interest of the Holders of the shares of the Preferred Stock
        then outstanding, (a) alter or change adversely the powers, preferences or
        rights given to the Preferred Stock or alter or amend this Certificate of
        Designation, (b) authorize or create any class of stock ranking as to dividends,
        redemption or distribution of assets upon a Liquidation (as defined in Section
        4) senior to or otherwise pari passu with the Preferred Stock, (c) amend
        its
        articles of incorporation or other charter documents so as to affect adversely
        any rights of the Holders, (d) increase the authorized number of shares of
        Preferred Stock, or (e) enter into any agreement with respect to the
        foregoing.

      

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

      

      
        
           

        

        
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      Section
        5.  Conversion.

      

      (a)       
        (i)
        Conversions
        at Option of Holder.
        Each
        share of Preferred Stock shall be convertible into that number of shares
        of
        Common Stock (subject to the limitations set forth in Sections 5(a)(ii) and
        (iii)) determined by dividing the Stated Value of such share of Preferred
        Stock
        by the Set Price, at the option of the Holder, at any time and from time
        to time
        from and after the Original Issue Date. Holders shall effect conversions
        by
        providing the Corporation with the form of conversion notice attached hereto
        as
Annex
        A
        (a
“Notice
        of Conversion”).
        Each
        Notice of Conversion shall specify the number of shares of Preferred Stock
        to be
        converted, the number of shares of Preferred Stock owned prior to the conversion
        at issue, the number of shares of Preferred Stock owned subsequent to the
        conversion at issue and the date on which such conversion is to be effected,
        which date may not be prior to the date the Holder delivers such Notice of
        Conversion to the Corporation by facsimile (the “Conversion
        Date”).
        If no
        Conversion Date is specified in a Notice of Conversion, the Conversion Date
        shall be the date that such Notice of Conversion to the Corporation is deemed
        delivered hereunder. The calculations and entries set forth in the Notice
        of
        Conversion shall control in the absence of manifest or mathematical
        error.

      

      (ii)
        Beneficial Ownership Limitation. The
        Corporation shall not effect any conversion of the Preferred Stock, and the
        Holder shall not have the right to convert any portion of the Preferred Stock
        to
        the extent that after giving effect to such conversion, the Holder (together
        with the Holder’s affiliates), as set forth on the applicable Notice of
        Conversion, would beneficially own in excess of 4.99% of the number of shares
        of
        the Common Stock Outstanding immediately after giving effect to such
        conversion.  For purposes of the foregoing sentence, the number of shares
        of Common Stock beneficially owned by the Holder and its affiliates shall
        include the number of shares of Common Stock issuable upon conversion of
        the
        Preferred Stock with respect to which the determination of such sentence
        is
        being made, but shall exclude the number of shares of Common Stock which
        would
        be issuable upon (A) conversion of the remaining, nonconverted Stated Value
        of
        Preferred Stock beneficially owned by the Holder or any of its affiliates
        and
        (B) exercise or conversion of the unexercised or nonconverted portion of
        any
        other securities of the Corporation subject to a limitation on conversion
        or
        exercise analogous to the limitation contained herein beneficially owned
        by the
        Holder or any of its affiliates.  Except as set forth in the preceding
        sentence, for purposes of this Section 5(a)(ii), beneficial ownership shall
        be
        calculated in accordance with Section 13(d) of the Exchange Act. To the extent
        that the limitation contained in this Section 5(a)(ii) applies, the
        determination of whether the Preferred Stock is convertible (in relation
        to
        other securities owned by the Holder together with any affiliates) and of
        which
        shares of Preferred Stock is convertible shall be in the sole discretion
        of such
        Holder, and the submission of a Notice of Conversion shall be deemed to be
        such
        Holder’s determination of whether the shares of Preferred Stock may be converted
        (in relation to other securities owned by such Holder) and which shares of
        the
        Preferred Stock is convertible, in each case subject to such aggregate
        percentage limitations. To ensure compliance with this restriction, the Holder
        will be deemed to represent to the Corporation each time it delivers a Notice
        of
        Conversion that such Notice of Conversion has not violated the restrictions
        set
        forth in this paragraph and the Corporation shall have no obligation to verify
        or confirm the accuracy of such determination. For purposes of this Section
        5(a)(ii), in determining the number of outstanding shares of Common Stock,
        the
        Holder may rely on the number of outstanding shares of Common Stock as reflected
        in the most recent of the following: (A) the Corporation’s most recent Form 10-Q
        or Form 10-K, as the case may be, (B) a more recent public announcement by
        the
        Corporation or (C) any other notice by the Corporation or the Corporation’s
        transfer agent setting forth the number of shares of Common Stock
        Outstanding.  Upon the written or oral request of the Holder, the
        Corporation shall within two Trading Days confirm orally and in writing to
        the
        Holder the number of shares of Common Stock then outstanding.  In any case,
        the number of outstanding shares of Common Stock shall be determined after
        giving effect to the conversion or exercise of securities of the Corporation,
        including the Preferred Stock, by the Holder or its affiliates since the
        date as
        of which such number of outstanding shares of Common Stock was reported.
        The
        provisions of this Section 5(a)(ii) may be waived by the Holder upon, at
        the
        election of the Holder, not less than 61 days’ prior notice to the Corporation,
        and the provisions of this Section 5(a)(ii) shall continue to apply until
        such
        61st day (or such later date, as determined by the Holder, as may be specified
        in such notice of waiver).

       

      
        
           

        

        
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      (b) (i)
        Not
        later than three Trading Days after each Conversion Date (the “Share
        Delivery Date”),
        the
        Corporation shall deliver to the Holder (A) a certificate or certificates
        which,
        after the Effective Date, shall be free of restrictive legends and trading
        restrictions (other than those required by Section 4.1 of the Purchase
        Agreement) representing the number of shares of Common Stock being acquired
        upon
        the conversion of shares of Preferred Stock, and (B) a bank check in the
        amount
        of accrued and unpaid dividends (if the Corporation has elected or is required
        to pay accrued dividends in cash). After the Effective Date, the Corporation
        shall, upon request of the Holder, deliver any certificate or certificates
        required to be delivered by the Corporation under this Section electronically
        through the Depository Trust Corporation or another established clearing
        corporation performing similar functions. If in the case of any Notice of
        Conversion such certificate or certificates are not delivered to or as directed
        by the applicable Holder by the third Trading Day after the Conversion Date,
        the
        Holder shall be entitled to elect by written notice to the Corporation at
        any
        time on or before its receipt of such certificate or certificates thereafter,
        to
        rescind such conversion, in which event the Corporation shall immediately
        return
        the certificates representing the shares of Preferred Stock tendered for
        conversion.

      

      

      

      

      

      

      

      

      

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      (ii)
        The
        Corporation’s obligations to issue and deliver the Conversion Shares upon
        conversion and redemption of Preferred Stock in accordance with the terms
        hereof
        are absolute and unconditional, irrespective of any action or inaction by
        the
        Holder to enforce the same, any waiver or consent with respect to any provision
        hereof, the recovery of any judgment against any Person or any action to
        enforce
        the same, or any setoff, counterclaim, recoupment, limitation or termination,
        or
        any breach or alleged breach by the Holder or any other Person of any obligation
        to the Corporation or any violation or alleged violation of law by the Holder
        or
        any other person, and irrespective of any other circumstance which might
        otherwise limit such obligation of the Corporation to the Holder in connection
        with the issuance of such Conversion Shares. In the event a Holder shall
        elect
        to convert any or all of the Stated Value of its Preferred Stock, the
        Corporation may not refuse conversion based on any claim that such Holder
        or any
        one associated or affiliated with the Holder of has been engaged in any
        violation of law, agreement or for any other reason, unless, an injunction
        from
        a court, on notice, restraining and or enjoining conversion of all or part
        of
        this Preferred Stock shall have been sought and obtained and the Corporation
        posts a surety bond for the benefit of the Holder in the amount of 150% of
        the
        Stated Value of Preferred Stock outstanding, which is subject to the injunction,
        which bond shall remain in effect until the completion of arbitration/litigation
        of the dispute and the proceeds of which shall be payable to such Holder
        to the
        extent it obtains judgment. In the absence of an injunction precluding the
        same,
        the Corporation shall issue Conversion Shares or, if applicable, cash, upon
        a
        properly noticed conversion. If the Corporation fails to deliver to the Holder
        such certificate or certificates pursuant to Section 5(b)(i) by the Share
        Delivery Date applicable to such conversion, the Corporation shall pay to
        such
        Holder, in cash, as liquidated damages and not as a penalty, for each $5,000
        of
        Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing
        to $100 per Trading Day after 3 Trading Days and increasing to $200 per Trading
        Day 6 Trading Days after such damages begin to accrue) for each Trading Day
        after the Share Delivery Date until such certificates are delivered. Nothing
        herein shall limit a Holder’s right to pursue actual damages for the
        Corporation’s failure to deliver certificates representing shares of Common
        Stock upon conversion within the period specified herein and such Holder
        shall
        have the right to pursue all remedies available to it hereunder, at law or
        in
        equity including, without limitation, a decree of specific performance and/or
        injunctive relief.

      

      (iii)
        If
        the Corporation fails to deliver to the Holder such certificate or certificates
        pursuant to Section 5(b)(i) by a Share Delivery Date, and if after such Share
        Delivery Date the Holder purchases (in an open market transaction or otherwise)
        Common Stock to deliver in satisfaction of a sale by such Holder of the
        Conversion Shares which the Holder was entitled to receive upon the conversion
        relating to such Share Delivery Date (a “Buy-In”),
        then
        the Corporation shall pay in cash to the Holder the amount by which (x) the
        Holder’s total purchase price (including brokerage commissions, if any) for the
        Common Stock so purchased exceeds (y) the product of (1) the aggregate number
        of
        shares of Common Stock that such Holder was entitled to receive from the
        conversion at issue multiplied by (2) the price at which the sell order giving
        rise to such purchase obligation was executed. For example, if the Holder
        purchases Common Stock having a total purchase price of $11,000 to cover
        a
        Buy-In with respect to an attempted conversion of shares of Preferred Stock
        with
        respect to which the aggregate sale price giving rise to such purchase
        obligation is $10,000, under clause (A) of the immediately preceding sentence
        the Corporation shall be required to pay the Holder $1,000. The Holder shall
        provide the Corporation written notice indicating the amounts payable to
        the
        Holder in respect of the Buy-In, together with applicable confirmations and
        other evidence reasonably requested by the Corporation. Nothing herein shall
        limit a Holder’s right to pursue any other remedies available to it hereunder,
        at law or in equity including, without limitation, a decree of specific
        performance and/or injunctive relief with respect to the Corporation’s failure
        to timely deliver certificates representing shares of Common Stock upon
        conversion of the shares of Preferred Stock as required pursuant to the terms
        hereof.

      

      
        
           

        

        
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      (c)       
        (i)
        The
        conversion price for each share of Preferred Stock shall equal $1.00
        (the
“Set
        Price”),
        subject to adjustment below.

      

      (ii)
        if
        the Corporation, at any time while the Preferred Stock is outstanding: (A)
        shall
        pay a stock dividend or otherwise make a distribution or distributions on
        shares
        of its Common Stock or any other equity or equity equivalent securities payable
        in shares of Common Stock and the Series A Preferred Stock, provided the
        terms
        of such issuance of interest or dividends, as the case may be, is not amended
        after the Original Issue Date to an effective conversion price less than
        the
        then Set Price, (B) subdivide outstanding shares of Common Stock into a larger
        number of shares, (C) combine (including by way of reverse stock split)
        outstanding shares of Common Stock into a smaller number of shares, or (D)
        issue
        by reclassification of shares of the Common Stock any shares of capital stock
        of
        the Corporation, then the Set Price shall be multiplied by a fraction of
        which
        the numerator shall be the number of shares of Common Stock (excluding treasury
        shares, if any) outstanding before such event and of which the denominator
        shall
        be the number of shares of Common Stock Outstanding after such event. Any
        adjustment made pursuant to this Section shall become effective immediately
        after the record date for the determination of stockholders entitled to receive
        such dividend or distribution and shall become effective immediately after
        the
        effective date in the case of a subdivision, combination or
        reclassification.

      

      (iii) if
        the
        Corporation, at any time while the Preferred Stock is outstanding, shall
        issue
        rights, options or warrants to all holders of Common Stock (and not to Holders)
        entitling them to subscribe for or purchase shares of Common Stock at a price
        per share less than the VWAP at the record date mentioned below, then the
        Set
        Price shall be multiplied by a fraction, of which the denominator shall be
        the
        number of shares of the Common Stock Outstanding on the date of issuance
        of such
        rights or warrants plus the number of additional shares of Common Stock offered
        for subscription or purchase, and of which the numerator shall be the number
        of
        shares of the Common Stock Outstanding on the date of issuance of such rights
        or
        warrants plus the number of shares which the aggregate offering price of
        the
        total number of shares so offered (assuming receipt by the Corporation in
        full
        of all consideration payable upon exercise of such rights, options or warrants)
        would purchase at such VWAP. Such adjustment shall be made whenever such
        rights
        or warrants are issued, and shall become effective immediately after the
        record
        date for the determination of stockholders entitled to receive such rights,
        options or warrants.

      

      

      

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      (iv) if
        the
        Corporation or any subsidiary thereof at any time while any of the Preferred
        Stock is outstanding, shall offer, sell, grant any option or warrant to purchase
        or offer, sell or grant any right to reprice its securities, or otherwise
        dispose of or issue (or announce any offer, sale, grant or any option to
        purchase or other disposition) any Common Stock or any equity or equity
        equivalent securities (including any equity, debt or other instrument that
        is at
        any time over the life thereof convertible into or exchangeable for Common
        Stock) (collectively, “Common
        Stock Equivalents”)
        entitling any Person to acquire shares of Common Stock, at an effective price
        per share less than the Set Price (such lower price, the “Base
        Conversion Price”
and
        such issuances collectively, a “Dilutive
        Issuance”),
        as
        adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalent
        so issued shall at any time, whether by operation of purchase price adjustments,
        reset provisions, floating conversion, exercise or exchange prices or otherwise,
        or due to warrants, options or rights per share which are issued in connection
        with such issuance, be entitled to receive shares of Common Stock at a effective
        price per share which is less than the Set Price, such issuance shall be
        deemed
        to have occurred for less than the Set Price), then the Set Price shall be
        reduced to equal the Base Conversion Price. Such adjustment shall be made
        whenever such Common Stock or Common Stock Equivalents are issued. The
        Corporation shall notify the Holder in writing, no later than the Business
        Day
        following the issuance of any Common Stock or Common Stock Equivalents subject
        to this section, indicating therein the applicable issuance price, or of
        applicable reset price, exchange price, conversion price and other pricing
        terms
        (such notice the “Dilutive
        Issuance Notice”).
        For
        purposes of clarification, whether or not the Corporation provides a Dilutive
        Issuance Notice pursuant to this Section 7(b), upon the occurrence of any
        Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
        entitled to receive a number of Conversion Shares based upon the Base Conversion
        Price regardless of whether the Holder accurately refers to the Base Conversion
        Price in the Notice of Conversion.

      

      (v) if
        the
        Corporation, at any time while the Preferred Stock is outstanding, shall
        distribute to all holders of Common Stock (and not to Holders) evidences
        of its
        indebtedness or assets or rights or warrants to subscribe for or purchase
        any
        security other than the Common Stock (which shall be subject to Section
        5(c)(iii), then in each such case the Set Price shall be adjusted by multiplying
        the Set Price in effect immediately prior to the record date fixed for
        determination of stockholders entitled to receive such distribution by a
        fraction of which the denominator shall be the VWAP determined as of the
        record
        date mentioned above, and of which the numerator shall be such VWAP on such
        record date less the then per share fair market value at such record date
        of the
        portion of such assets or evidence of indebtedness so distributed applicable
        to
        one outstanding share of the Common Stock as determined by the Board of
        Directors in good faith. In either case the adjustments shall be described
        in a
        statement provided to the Holders of the portion of assets or evidences of
        indebtedness so distributed or such subscription rights applicable to one
        share
        of Common Stock. Such adjustment shall be made whenever any such distribution
        is
        made and shall become effective immediately after the record date mentioned
        above.

      

      
        
           

        

        
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      (vi) All
        calculations under this Section 5(c) shall be made to the nearest cent or
        the
        nearest 1/100th of a share, as the case may be. The number of shares of Common
        Stock outstanding at any given time shall not include shares owned or held
        by or
        for the account of the Corporation, and the disposition of any such shares
        shall
        be considered an issue or sale of Common Stock. For purposes of this Section
        5(c), the number of shares of Common Stock deemed to be outstanding (the
        “Common
        Stock Outstanding”)
        as of
        a given date shall be the sum of the number of shares of Common Stock (excluding
        treasury shares, if any) issued and outstanding.

      

      (vii) Notwithstanding
        anything to the contrary herein, no adjustment shall be made hereunder in
        connection with an Exempt Issuance.

      

      (viii) Whenever
        the Set Price is adjusted pursuant to this Section the Corporation shall
        promptly mail to each Holder, a notice setting forth the Set Price after
        such
        adjustment and setting forth a brief statement of the facts requiring such
        adjustment. If the Corporation issues a variable rate security, despite the
        prohibition thereon in the Purchase Agreement, the Corporation shall be deemed
        to have issued Common Stock or Common Stock Equivalents at the lowest possible
        conversion or exercise price at which such securities may be converted or
        exercised in the case of a Variable Rate Transaction (as defined in the Purchase
        Agreement), or the lowest possible adjustment price in the case of an MFN
        Transaction (as defined in the Purchase Agreement).

      

      Section
        6. Force
        Conversion.
        The
        Corporation shall have the following rights to force a conversion of the
        Preferred Stock if after the Effective Date, each of the Closing Prices for
        any
        20 consecutive Trading Days (such 20 day period commencing only after the
        later
        of the Effective Date, such period the “Threshold
        Period”))
        exceeds 250% of the then Conversion Price, the Corporation may, within 1
        Trading
        Day of the end of any such Threshold Period, deliver a notice to the Holder
        (a
“Forced
        Conversion Notice”
and
        the
        date such notice is received by the Holder, the “Forced
        Conversion Notice Date”)
        to
        cause the Holder to immediately convert all or part of the then outstanding
        Stated Value amount of Preferred Stocks. The Corporation may only effect
        a
        Forced Conversion Notice if all of the Equity Conditions are met through
        the
        applicable Threshold Period until the date of the applicable Forced Conversion
        and through and including the date such shares of Common Stock are issued
        to the
        Holder. Any Forced Conversion shall be applied ratably to all Holders based
        on
        their initial purchases of Preferred Stocks pursuant to the Purchase Agreement.
        For purposes of clarification, a Forced Conversion shall be subject to all
        of
        the provisions of Section 5, including, without limitation, the provision
        requiring payment of liquidated damages and limitations on conversions.

      

      

      
        
           

        

        
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      Section
        7. Redemption
        Upon Triggering Events.

      

      (a)
        Upon
        the occurrence of a Triggering Event, each Holder shall (in addition to all
        other rights it may have hereunder or under applicable law) have the right,
        exercisable at the sole option of such Holder, to require the Corporation
        to,
        (i) with respect to the Triggering Events set forth in Sections 7(b)(iii),
        (v),
        (vii), (ix), (x)(as to voluntary filings only) and (xii)), redeem all of
        the
        Preferred Stock then held by such Holder for a redemption price, in cash,
        equal
        to the Triggering Redemption Amount; or, (ii) at the option of the Holder
        and
        with respect to the Triggering Events set forth in Sections 7(b)(i), (ii),
        (iv),
        (vi), (viii), (x)(as to involuntary filings only) and (xi), either (A) redeem
        all of the Preferred Stock then held by such Holder for a redemption price,
        in
        shares of Common Stock, equal to a number of shares of Common Stock equal
        to the
        Triggering Redemption Amount divided by 75% of the average of the 10 VWAPs
        immediately prior to the date of election hereunder or (B) increase the dividend
        on all of the outstanding Preferred Stock held by such Holder to equal 18%
        per
        annum thereafter. The Triggering Redemption Amount, in cash or in shares,
        if the
        Corporation elects clauses (i) or (ii)(B) above, shall be due and payable
        or
        issuable, as the case may be, within 5 Trading Days of the date on which
        the
        notice for the payment therefor is provided by a Holder (the “Triggering
        Redemption Payment Date”).
        If
        the Corporation fails to pay the Triggering Redemption Amount hereunder in
        full
        pursuant to this Section on the date such amount is due in accordance with
        this
        Section (whether in cash or shares of Common Stock), the Corporation will
        pay
        interest thereon at a rate of 18% per annum (or such lesser amount permitted
        by
        applicable law), accruing daily from such date until the Triggering Redemption
        Amount, plus all such interest thereon, is paid in full. For purposes of
        this
        Section, a share of Preferred Stock is outstanding until such date as the
        Holder
        shall have received Conversion Shares upon a conversion (or attempted
        conversion) thereof that meets the requirements hereof or has been paid the
        Triggering Redemption Amount plus all accrued but unpaid dividends and all
        accrued but unpaid liquidated damages in cash.

      

      (b)
        “Triggering
        Event”
means
        any one or more of the following events (whatever the reason and whether
        it
        shall be voluntary or involuntary or effected by operation of law or pursuant
        to
        any judgment, decree or order of any court, or any order, rule or regulation
        of
        any administrative or governmental body):

      

      (i)
        the
        failure of a Conversion Shares Registration Statement to be declared effective
        by the Commission on or prior to the 165th
        day
        after the Original Issue Date;

      

      (ii)
        if,
        during the Effectiveness Period, the effectiveness of the Conversion Shares
        Registration Statement lapses for any reason for more than an aggregate of
        25
        calendar days (which need not be consecutive days) during any 12 month period,
        or the Holder shall not be permitted to resell Registrable Securities under
        the
        Conversion Shares Registration Statement for more than an aggregate of 25
        calendar days (which need not be consecutive days) during any 12 month
        period;

      

      (iii)
        the
        Corporation shall fail to deliver certificates representing Conversion Shares
        issuable upon a conversion hereunder that comply with the provisions hereof
        prior to the 5th
        Trading
        Day after such shares are required to be delivered hereunder, or the Corporation
        shall provide written notice to any Holder, including by way of public
        announcement, at any time, of its intention not to comply with requests for
        conversion of any shares of Preferred Stock in accordance with the terms
        hereof;

      

      
        
           

        

        
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      (iv)
        one
        of the Events (as defined in the Registration Rights Agreement) described
        in
        subsections (i), (ii) or (iii) of Section 2(c) of the Registration Rights
        Agreement shall not have been cured to the satisfaction of the Holders prior
        to
        the expiration of 30 days from the Event Date (as defined in the Registration
        Rights Agreement) relating thereto (other than an Event resulting from a
        failure
        of a Conversion Shares Registration Statement to be declared effective by
        the
        Commission on or prior to the 145th day after the Original Issue Date, which
        shall be covered by Section 7(b)(i));

      

      (v)
        the
        Corporation shall fail for any reason to pay in full the amount of cash due
        pursuant to a Buy-In within 5 days after notice therefor is delivered hereunder
        or shall fail to pay all amounts owed on account of an Event within five
        days of
        the date due;

      

      (vi)
         the
        Corporation shall fail to have available a sufficient number of authorized
        and
        unreserved shares of Common Stock to issue to such Holder upon a conversion
        hereunder;

      

      (vii)
         the
        Corporation shall fail to observe or perform any other covenant, agreement
        or
        warranty contained in, or otherwise commit any breach of the Transaction
        Documents, and such failure or breach shall not, if subject to the possibility
        of a cure by the Corporation, have been remedied within 30 calendar days
        after
        the date on which written notice of such failure or breach shall have been
        given;

      

      (viii)
        any breach of the agreements delivered to the initial Holders at the Closing
        pursuant to Section 2.2(a)(vi) of the Purchase Agreement;

      

      (ix) the
        Corporation shall redeem more than a de minimis number of Junior
        Securities;

       

      (x) the
        Corporation shall be party to a Change of Control Transaction;

       

      (xi) there
        shall have occurred a Bankruptcy Event; or

       

      (xii) the
        Common Stock shall fail to be listed or quoted for trading on a Principal
        Market
        for more than 5 Trading Days, which need not be consecutive Trading
        Days.

       

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

      

      “Alternate
        Consideration”
shall
        have the meaning set forth in Section 9.

      

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      “Bankruptcy
        Event”
means
        any of the following events: (a) the Corporation or any Significant Subsidiary
        (as such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences
        a
        case or other proceeding under any bankruptcy, reorganization, arrangement,
        adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
        or
        similar law of any jurisdiction relating to the Corporation or any Significant
        Subsidiary thereof; (b) there is commenced against the Corporation or any
        Significant Subsidiary thereof any such case or proceeding that is not dismissed
        within 60 days after commencement; (c) the Corporation or any Significant
        Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
        or other order approving any such case or proceeding is entered; (d) the
        Corporation or any Significant Subsidiary thereof suffers any appointment
        of any
        custodian or the like for it or any substantial part of its property that
        is not
        discharged or stayed within 60 days; (e) the Corporation or any Significant
        Subsidiary thereof makes a general assignment for the benefit of creditors;
        (f)
        the Corporation or any Significant Subsidiary thereof calls a meeting of
        its
        creditors with a view to arranging a composition, adjustment or restructuring
        of
        its debts; or (g) the Corporation or any Significant Subsidiary thereof,
        by any
        act or failure to act, expressly indicates its consent to, approval of or
        acquiescence in any of the foregoing or takes any corporate or other action
        for
        the purpose of effecting any of the foregoing.

      

      “Base
        Conversion Price”
shall
        have the meaning set forth in Section 5(c)(iv). 

      

      “Buy-In”
shall
        have the meaning set forth in Section 5(b)(iii).

      

      “Change
        of Control Transaction”
means
        the occurrence after the date hereof of any of (a) an acquisition after the
        date
        hereof by an individual or legal entity or “group” (as described in Rule
        13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
        through legal or beneficial ownership of capital stock of the Corporation,
        by
        contract or otherwise) of in excess of 33% of the voting securities of the
        Corporation, or (b) a replacement at one time or within a one year period
        of
        more than one-half of the members of the Corporation’s board of directors which
        is not approved by a majority of those individuals who are members of the
        board
        of directors on the date hereof (or by those individuals who are serving
        as
        members of the board of directors on any date whose nomination to the board
        of
        directors was approved by a majority of the members of the board of directors
        who are members on the date hereof), or (c) the execution by the Corporation
        of
        an agreement to which the Corporation is a party or by which it is bound,
        providing for any of the events set forth above in (a) or (b).

      

      “Closing”
means
        closing of the purchase and sale of the Preferred Stock.

       

      “Closing
        Date”
means
        the Trading Day when all of the Transaction Documents have been executed
        and
        delivered by the applicable parties thereto, and all conditions precedent
        to (i)
        the Holders’ obligations to pay the Subscription Amount and (ii) the
        Corporation’s obligations to deliver the shares of Preferred Stock and Warrants
        have been satisfied or waived. 

      

      “Commission”
means
        the Securities and Exchange Commission.

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      “Common
        Stock”
means
        the Corporation’s common stock, par value $0.01 per share, and stock of any
        other class into which such shares may hereafter have been reclassified or
        changed.

      

      “Common
        Stock Outstanding”
shall
        have the meaning set forth in Section 5(c)(vi).

      

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

      

      “Conversion
        Date”
shall
        have the meaning set forth in Section 5(b)(i).

      

      “Conversion
        Shares”
means,
        collectively, the shares of Common Stock into which the shares of Preferred
        Stock are convertible in accordance with the terms hereof.

      

      “Conversion
        Shares Registration Statement”
means
        a
        registration statement that meets the requirements of the Registration Rights
        Agreement and registers the resale of all Conversion Shares by the Holder,
        who
        shall be named as a “selling stockholder” thereunder, all as provided in the
        Registration Rights Agreement.

      

      “Dilutive
        Issuance”
shall
        have the meaning set forth in Section 5(c)(iv).

      

      “Dilutive
        Issuance Notice”
shall
        have the meaning set forth in Section 5(c)(iv).

      

      “Dividend
        Payment Date”
shall
        have the meaning set forth in Section 2(a).

      

      “Effective
        Date”
means
        the date that the Conversion Shares Registration Statement is declared effective
        by the Commission.

      

      “Equity
        Conditions”
Unless
        waived by a Holder as to a particular event (which waiver shall apply only
        to
        such Holder), as of such event date, the following conditions have been met:
        (i)
        the Corporation shall have duly honored all conversions and redemptions
        scheduled to occur or occurring prior to such date, (ii) there is an effective
        Conversion Shares Registration Statement pursuant to which the Holders are
        permitted to utilize the prospectus thereunder to resell all of the Conversion
        Shares issued to the Holders and all of the Conversion Shares as are issuable
        to
        the Holders upon conversion in full of the Preferred Stock (and the Corporation
        believes, in good faith, that such effectiveness will continue uninterrupted
        for
        the foreseeable future), (iii) the Common Stock is listed for trading on
        the
        Principal Market (and the Corporation believes, in good faith, that trading
        of
        the Common Stock on the Principal Market will continue uninterrupted for
        the
        foreseeable future), (iv) all liquidated damages and other amounts owing
        in
        respect of the Preferred Stock shall have been paid or will, concurrently
        with
        the issuance of the Conversion Shares, be paid in cash; (v) there is a
        sufficient number of authorized but unissued and otherwise unreserved shares
        of
        Common Stock for the issuance of all the Conversion Shares as are issuable
        to
        the Holder upon conversion in full of the Preferred Stock; (vi) no Triggering
        Event has occurred and is continuing; (vii) all of the Conversion Shares
        issuable to the Holder upon conversion in full of the Preferred Stock will
        not
        violate the limitations set forth in Sections 5(a)(ii) and (iii); and (viii)
        no
        public announcement of a pending or proposed Fundamental Transaction or Change
        of Control Transaction has occurred that has not been consummated.

      

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

      

      “Exempt
        Issuance”
means
        the issuance of (a) shares of Common Stock or options to employees, officers
        or
        directors of the Corporation pursuant to any stock or option plan duly adopted
        by a majority of the non-employee members of the Board of Directors of the
        Corporation or a majority of the members of a committee of non-employee
        directors established for such purpose, (b) securities upon the exercise
        of or
        conversion of any securities issued hereunder, convertible securities, options
        or warrants issued and outstanding on the date of the Purchase Agreement,
        provided that such securities have not been amended since the date of the
        Purchase Agreement to increase the number of such securities or to decrease
        the
        exercise or conversion price of any such securities, and (c) securities issued
        pursuant to acquisitions or strategic transactions, provided any such issuance
        shall only be to a Person which is, itself or through its subsidiaries, an
        operating company in a business synergistic with the business of the Corporation
        and in which the Corporation receives benefits in addition to the investment
        of
        funds, but shall not include a transaction in which the Corporation is issuing
        securities primarily for the purpose of raising capital or to an entity whose
        primary business is investing in securities. 

      

      “Fundamental
        Transaction”
means
        the occurrence after the date hereof of any of (a) the Corporation effects
        any
        merger or consolidation of the Corporation with or into another Person, (b)
        the
        Corporation effects any sale of all or substantially all of its assets in
        one or
        a series of related transactions, (c) any tender offer or exchange offer
        (whether by the Corporation or another Person) is completed pursuant to which
        holders of Common Stock are permitted to tender or exchange their shares
        for
        other securities, cash or property, or (d) the Corporation effects any
        reclassification of the Common Stock or any compulsory share exchange pursuant
        to which the Common Stock is effectively converted into or exchanged for
        other
        securities, cash or property.

      

      “Holder”
shall
        have the meaning given such term in Section 1 hereof.

      

      “Junior
        Securities”
means
        the Common Stock and all other equity or equity equivalent securities of
        the
        Corporation other than those securities that are (a) outstanding on the Original
        Issue Date and (b) which are explicitly senior in rights or liquidation
        preference to the Preferred Stock.

      

      “Liquidation”
shall
        have the meaning given such term in Section 4. 

      

      “Notice
        of Conversion”
shall
        have the meaning given such term in Section 5(a). 

      

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

      

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      “Person”
means
        a
        corporation, an association, a partnership, an organization, a business,
        an
        individual, a government or political subdivision thereof or a governmental
        agency.

      

      “Principal
        Market”
        initially means the Over-the-Counter Bulletin Board and shall also include
        the
        American Stock Exchange, NASDAQ Small-Cap Market, the New York Stock Exchange,
        or the NASDAQ National Market, whichever is at the time the principal trading
        exchange or market for the Common Stock, based upon share volume.

       

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

      

      “Registration
        Rights Agreement”
means
        the Registration Rights Agreement, dated as of the Original Issue Date, to
        which
        the Corporation and the original Holders are parties, as amended, modified
        or
        supplemented from time to time in accordance with its terms.

      

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

      

      “Set
        Price”
shall
        have the meaning set forth in Section 5(c)(i).

      

      “Share
        Delivery Date”
shall
        have the meaning given such term in Section 5(b). 

      

      “Stated
        Value”
shall
        have the meaning given such term in Section 1.

      

      “Subscription
        Amount”
shall
        mean, the amount to be paid by the Purchaser for the Preferred Stock purchased
        pursuant to the Purchase Agreement as specified therein.

      

      “Subsidiary”
shall
        have the meaning given to such term in the Purchase Agreement.

      

      “Trading
        Day”
shall
        mean any day during which the Principal Market shall be open for
        business.

      

      “Transaction
        Documents”
shall
        mean the Purchase Agreement and all agreements entered into in connection
        therewith, including the Registration Rights Agreement.

      

      “Triggering
        Event”
shall
        have the meaning set forth in Section 7(b).

      

      “Triggering
        Redemption Amount”
for
        each share of Preferred Stock means the sum of (i) the greater of (A) 130%
        of
        the Stated Value and (B) the product of (a) the VWAP on the Trading Day
        immediately preceding the date of the Triggering Event and (b) the Stated
        Value
        divided by the then Set Price, (ii) all accrued but unpaid dividends thereon
        and
        (iii) all liquidated damages and other amounts due in respect of the Preferred
        Stock

      

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      “VWAP”
means,
        for any date, the price determined by the first of the following clauses
        that
        applies: (a) if the Common Stock is then listed or quoted on a Principal
        Market,
        the daily volume weighted average price of the Common Stock for such date
        (or
        the nearest preceding date) on the Principal Market on which the Common Stock
        is
        then listed or quoted as reported by Bloomberg Financial L.P. (based on a
        Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)  if
        the Common Stock is not then listed or quoted on a Principal Market and if
        prices for the Common Stock are then quoted on the OTC Bulletin Board, the
        volume weighted average price of the Common Stock for such date (or the nearest
        preceding date) on the OTC Bulletin Board; (c)  if the Common Stock is not
        then listed or quoted on the OTC Bulletin Board and if prices for the Common
        Stock are then reported in the “Pink Sheets” published by the National Quotation
        Bureau Incorporated (or a similar organization or agency succeeding to its
        functions of reporting prices), the most recent bid price per share of the
        Common Stock so reported; or (d) in all other cases, the fair market value
        of a share of Common Stock as determined by an independent appraiser selected
        in
        good faith by the Purchasers and reasonably acceptable to the
        Corporation.

      

      Section
        9. Fundamental
        Transactions and Change of Control Transactions.
        If a
        Fundamental Transaction occurs, then upon any subsequent conversion of shares
        of
        Preferred Stock, the Holder shall have the right to receive, for each Conversion
        Share that would have been issuable upon such conversion absent such Fundamental
        Transaction, the same kind and amount of securities, cash or property as
        it
        would have been entitled to receive upon the occurrence of such Fundamental
        Transaction if it had been, immediately prior to such Fundamental Transaction,
        the holder of one share of Common Stock (the “Alternate
        Consideration”).
        For
        purposes of any such conversion, the determination of the Set Price shall
        be
        appropriately adjusted to apply to such Alternate Consideration based on
        the
        amount of Alternate Consideration issuable in respect of one share of Common
        Stock in such Fundamental Transaction, and the Corporation shall apportion
        the
        Set Price among the Alternate Consideration in a reasonable manner reflecting
        the relative value of any different components of the Alternate Consideration.
        If holders of Common Stock are given any choice as to the securities, cash
        or
        property to be received in a Fundamental Transaction, then the Holder shall
        be
        given the same choice as to the Alternate Consideration it receives upon
        any
        conversion of shares of Preferred Stock following such Fundamental Transaction.
        To the extent necessary to effectuate the foregoing provisions, any successor
        to
        the Corporation or surviving entity in such Fundamental Transaction shall
        issue
        to the Holder new preferred stock consistent with the foregoing provisions
        and
        evidencing the Holder’s right to convert such preferred stock into Alternate
        Consideration. The terms of any agreement pursuant to which a Fundamental
        Transaction is effected shall include terms requiring any such successor
        or
        surviving entity to comply with the provisions of this Section 9 and insuring
        that the Preferred Stock (or any such replacement security) will be similarly
        adjusted upon any subsequent transaction analogous to a Fundamental Transaction
        or Change of Control Transaction. In the event of a Fundamental Transaction
        or a
        Change of Control Transaction, then at the request of the Holder delivered
        before the 90th day after such Fundamental Transaction, the Corporation (or
        any
        such successor or surviving entity) will purchase the Preferred Stock from
        the
        Holder for a purchase price, payable in cash within five Trading Days after
        such
        request (or, if later, on the effective date of the Fundamental Transaction),
        equal to the Triggering Redemption Amount on such date.

      

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      Section
        10. Miscellaneous.
        

      

      (a) If
        (i)
        the Corporation shall declare a dividend (or any other distribution) on the
        Common Stock, (ii) the Corporation shall declare a special nonrecurring cash
        dividend on or a redemption of the Common Stock, (iii) the Corporation shall
        authorize the granting to all holders of Common Stock rights or warrants
        to
        subscribe for or purchase any shares of capital stock of any class or of
        any
        rights, (iv) the approval of any stockholders of the Corporation shall be
        required in connection with any reclassification of the Common Stock, any
        consolidation or merger to which the Corporation is a party, any sale or
        transfer of all or substantially all of the assets of the Corporation, of
        any
        compulsory share exchange whereby the Common Stock is converted into other
        securities, cash or property;, or (v) the Corporation shall authorize the
        voluntary or involuntary dissolution, liquidation or winding up of the affairs
        of the Corporation; then the Corporation shall cause to be filed at each
        office
        or agency maintained for the purpose of conversion of the Preferred Stock,
        and
        shall caused to be mailed to the Holders at their last addresses as they
        shall
        appear upon the stock books of the Corporation, at least 20 calendar days
        prior
        to the applicable record or effective date hereinafter specified, a notice
        stating (x) the date on which a record is to be taken for the purpose of
        such
        dividend, distribution, redemption, rights or warrants, or if a record is
        not to
        be taken, the date as of which the holders of the Common Stock of record
        to be
        entitled to such dividend, distributions, redemption, rights or warrants
        are to
        be determined or (y) the date on which any such reclassification, consolidation,
        merger, sale, transfer or share exchange is expected to become effective
        or
        close, and the date as of which it is expected that holders of Common Stock
        of
        record shall be entitled to exchange their shares of Common Stock for
        securities, cash or other property deliverable upon such reclassification,
        consolidation, merger, sale, transfer or share exchange; provided, that the
        failure to mail such notice or any defect therein or in the mailing thereof
        shall not affect the validity of the corporate action required to be specified
        in such notice. Holders are entitled to convert the Conversion Amount of
        Preferred Stock during the 20-day period commencing the date of such notice
        to
        the effective date of the event triggering such notice.

      

      (b) The
        Corporation covenants that it will at all times reserve and keep available
        out
        of its authorized and unissued shares of Common Stock solely for the purpose
        of
        issuance upon conversion of Preferred Stock, each as herein provided, free
        from
        preemptive rights or any other actual contingent purchase rights of persons
        other than the Holders, not less than such number of shares of Common Stock
        as
        shall be issuable upon the conversion of all outstanding shares of Preferred
        Stock. The Corporation covenants that all shares of Common Stock that shall
        be
        so issuable shall, upon issue, be duly and validly authorized, issued and
        fully
        paid and nonassessable.

      

      (c)
        Upon
        a conversion hereunder the Corporation shall not be required to issue stock
        certificates representing fractions of shares of Common Stock, but may if
        otherwise permitted, make a cash payment in respect of any final fraction
        of a
        share based on the VWAP at such time. If any fraction of a Conversion Share
        would, except for the provisions of this Section, be issuable upon a conversion
        hereunder, the Corporation shall pay an amount in cash equal to the VWAP
        immediately prior to the applicable conversion multiplied by such
        fraction.

      

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      (d)
        The
        issuance of certificates for Common Stock on conversion of Preferred Stock
        shall
        be made without charge to the Holders thereof for any documentary stamp or
        similar taxes that may be payable in respect of the issue or delivery of
        such
        certificate, provided that the Corporation shall not be required to pay any
        tax
        that may be payable in respect of any transfer involved in the issuance and
        delivery of any such certificate upon conversion in a name other than that
        of
        the Holder of such shares of Preferred Stock so converted.

      

      (e)
        To
        effect conversions or redemptions, as the case may be, of shares of Preferred
        Stock, a Holder shall not be required to surrender the certificate(s)
        representing such shares of Preferred Stock to the Corporation unless all
        of the
        shares of Preferred Stock represented thereby are so converted, in which
        case
        the Holder shall deliver the certificate representing such share of Preferred
        Stock promptly following the Conversion Date at issue. Shares of Preferred
        Stock
        converted into Common Stock or redeemed in accordance with the terms hereof
        shall be canceled and may not be reissued.

      

      (f)
        Any
        and all notices or other communications or deliveries to be provided by the
        Holders of the Preferred Stock hereunder, including, without limitation,
        any
        Notice of Conversion, shall be in writing and delivered personally, by facsimile
        or sent by a nationally recognized overnight courier service, addressed to
        the
        attention of the President of the Corporation addressed to One Technology
        Drive,
        Building H, Irvine, California, 92618, Fax Number: 949-949-727-2043, or to
        such
        other address or facsimile number as shall be specified in writing by the
        Corporation for such purpose. Any and all notices or other communications
        or
        deliveries to be provided by the Corporation hereunder shall be in writing
        and
        delivered personally, by facsimile or sent by a nationally recognized overnight
        courier service, addressed to each Holder at the facsimile telephone number
        or
        address of such Holder appearing on the books of the Corporation, which address
        shall initially be the address of such Holder set forth on the signature
        pages
        of the Purchase Agreement, or such other address as the Corporation or a
        Holder
        may designate by ten days advance written notice to the other parties hereto.
        Any notice or other communication or deliveries hereunder shall be deemed
        given
        and effective on the earliest of (i) the date of transmission, if such notice
        or
        communication is delivered via facsimile at the facsimile telephone number
        specified in this Section prior to 6:30 p.m. (New York City time) (with
        confirmation of transmission), (ii) the date after the date of transmission,
        if
        such notice or communication is delivered via facsimile at the facsimile
        telephone number specified in this Section later than 6:30 p.m. (New York
        City
        time) on any date and earlier than 11:59 p.m. (New York City time) on such
        date
        (with confirmation of transmission), (iii) five days after having been sent
        by
        registered or certified mail, return receipt requested, postage prepaid,
        (iv)
        one day after deposit with a nationally recognized overnight courier service,
        specifying next day delivery, with written verification of service, or (v)
        upon
        actual receipt by the party to whom such notice is required to be
        given.

      

      (g) For
        purposes hereof, a share of Preferred Stock is outstanding until such date
        as
        the Holder shall have received the Conversion Shares or redemption amount
        (as
        the case may be) issuable or payable to it in accordance with this Certificate
        of Designations.

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      (h) Except
        as
        expressly provided herein, no provision of this Certificate of Designation
        shall
        alter or impair the obligation of the Corporation, which is absolute and
        unconditional, to pay the liquidated damages (if any) on, the shares of
        Preferred Stock at the time, place, and rate, and in the coin or currency,
        herein prescribed. 

      

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

      

      (j) All
        questions concerning the construction, validity, enforcement and interpretation
        of this Certificate of Designation shall be governed by and construed and
        enforced in accordance with the internal laws of the State of New York, without
        regard to the principles of conflicts of law thereof. Each party agrees that
        all
        legal proceedings concerning the interpretations, enforcement and defense
        of the
        transactions contemplated by any of the Transaction Documents (whether brought
        against a party hereto or its respective affiliates, directors, officers,
        shareholders, employees or agents) shall be commenced in the state and federal
        courts sitting in the City of New York, Borough of Manhattan (the “New York
        Courts”). Each party hereto hereby irrevocably submits to the exclusive
        jurisdiction of the New York Courts for the adjudication of any dispute
        hereunder or in connection herewith or with any transaction contemplated
        hereby
        or discussed herein (including with respect to the enforcement of any of
        the
        Transaction Documents), and hereby irrevocably waives, and agrees not to
        assert
        in any suit, action or proceeding, any claim that it is not personally subject
        to the jurisdiction of any such court, or such New York Courts are improper
        or
        inconvenient venue for such proceeding. Each party hereby irrevocably waives
        personal service of process and consents to process being served in any such
        suit, action or proceeding by mailing a copy thereof via registered or certified
        mail or overnight delivery (with evidence of delivery) to such party at the
        address in effect for notices to it under this Certificate of Designation
        and
        agrees that such service shall constitute good and sufficient service of
        process
        and notice thereof. Nothing contained herein shall be deemed to limit in
        any way
        any right to serve process in any manner permitted by law. Each party hereto
        hereby irrevocably waives, to the fullest extent permitted by applicable
        law,
        any and all right to trial by jury in any legal proceeding arising out of
        or
        relating to this Certificate of Designation or the transactions contemplated
        hereby. If either party shall commence an action or proceeding to enforce
        any
        provisions of this Certificate of Designation, then the prevailing party
        in such
        action or proceeding shall be reimbursed by the other party for its attorneys
        fees and other costs and expenses incurred with the investigation, preparation
        and prosecution of such action or proceeding.

       

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

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

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

      

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

      

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

      

      (o) RESOLVED,
        FURTHER, that the Chairman, the president or any vice-president, and the
        secretary or any assistant secretary, of the Corporation be and they hereby
        are
        authorized and directed to prepare and file a Certificate of Designation
        of
        Preferences, Rights and Limitations in accordance with the foregoing resolution
        and the provisions of Nevada law.

      

      IN
        WITNESS WHEREOF, the undersigned have executed this Certificate this
        4th
        day of
        August 2006.

      

      __________________________

      Name:
        Lewis Jaffe

      Title:
        President

      

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

      

      ANNEX
        A

      

      NOTICE
        OF
        CONVERSION

      

      (To
        be
        Executed by the Registered Holder in order to convert shares of Preferred
        Stock)

      

      The
        undersigned hereby elects to convert the number of shares of Convertible
        Preferred Stock indicated below, into shares of common stock, par value $0.001
        per share (the “Common
        Stock”),
        of
        Oxford Media, Inc., a Nevada corporation (the “Corporation”),
        according to the conditions hereof, as of the date written below. If shares
        are
        to be issued in the name of a person other than undersigned, the undersigned
        will pay all transfer taxes payable with respect thereto and is delivering
        herewith such certificates and opinions as reasonably requested by the
        Corporation in accordance therewith. No fee will be charged to the Holder
        for
        any conversion, except for such transfer taxes, if any.

      

      Conversion
        calculations:

      

      Date
        to
        Effect Conversion

      

      _____________________________

      Number
        of
        shares of Preferred Stock owned prior to Conversion

      

      _____________________________

      Number
        of
        shares of Preferred Stock to be Converted

      

      _____________________________

      Stated
        Value of shares of Preferred Stock to be Converted

      

      _____________________________

      Number
        of
        shares of Common Stock to be Issued

      

      _____________________________

      Applicable
        Set Price

      

      _____________________________

      Number
        of
        shares of Preferred Stock subsequent to Conversion

      

      _____________________________

      

      
        	 	
                [HOLDER]

              
	 	 
	 	
                By:_______________________

              
	 	
                Name:

              
	 	
                Title:

              

      

      
 

       

       21

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