Document:

Unassociated Document

    Exhibit
      10.2

     

    

      EMPLOYMENT
        AGREEMENT

      

       

      This
        EMPLOYMENT AGREEMENT (this “Agreement”)
        is
        entered into as of May 17, 2007, by and between SulphCo, Inc., a Nevada
        corporation (along with its successors and assigns, the “Company”),
        and
        Stanley W. Farmer (“Executive”).

       

      WHEREAS,
        the Company desires to employ Executive, and Executive desires to be employed
        by
        the Company, on the terms and conditions hereinafter set forth.

       

      NOW,
        THEREFORE, in consideration of the mutual promises contained herein and other
        good and valuable consideration, the Company and Executive agree as follows:
        

       

      1.     Employment.
        

       

      (a) Term.
        Subject
        to the terms hereof, Executive’s employment hereunder shall commence as of June
        11, 2007 (the
        “Effective
        Date”)
        and
        continue until the first anniversary of the Effective Date, with automatic
        one
        (1) year extensions thereafter, unless otherwise terminated by Executive
        or by
        the Company pursuant to Section 3 of the Agreement (such period, the
“Employment
        Period”).

       

      (b) Position,
        Place of Performance and Duties.
        Executive will serve as the Company’s Vice President and Chief Financial
        Officer, and Executive shall report directly to the Company’s Chief Executive
        Officer (“CEO”),
        the
        Company’s Board of Directors (the “Board”)
        and
        any committees thereof. Executive will have the responsibilities, duties
        and
        authority commensurate with the position of Vice President and Chief Financial
        Officer, and Executive will perform such other services of an executive nature
        as may be prescribed from time to time by the CEO and the Board. Executive
        will
        generally perform his services hereunder at the Company’s offices in Houston,
        TX, or such other place as may be agreed to by Executive and the Board. During
        the Employment Period, the Company shall pay for all reasonable travel expenses
        associated with Executive’s commute between Texas and Nevada for the purpose of
        performing services hereunder. During the Employment Period, Executive will
        be
        available to travel for business at such times and to such places as may
        be
        reasonably necessary in connection with the performance of his duties hereunder,
        including, but not limited to, anywhere in the United States, the Middle
        East
        and Europe. Executive
        shall devote his full business time and efforts to the performance of his
        duties
        hereunder. For
        the
        duration of the Employment Period, Executive agrees not to actively engage
        in
        any other employment, occupation or consulting activity for any direct or
        indirect remuneration without the prior written approval of the Board, which
        approval will not be unreasonably withheld; provided, however, that Executive
        may, without the approval of the Board, serve in any capacity with any civic,
        educational or charitable organization, subject to Executive’s obligations under
        this Agreement and any agreement contemplated under Section 5 of this
        Agreement.

       

      2.     Compensation.

       

      (a) Base
        Salary.
        During
        the Employment Period, the Company will pay Executive a base salary at the
        annual rate of $250,000, which amount will be reviewed annually and subject
        to
        adjustment at the good faith discretion of the Board (or the Compensation
        Committee of the Board (the “Compensation
        Committee”)),
        including without limitation, discretionary cost of living adjustments (as
        adjusted from time to time, the “Base
        Salary”).
        The
        Base Salary will be payable in substantially equal installments in accordance
        with the Company’s payroll practices as in effect from time to
        time.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (b) Annual
        Bonus.
        During
        the Employment Period, based on Executive’s performance relative to targets set
        by the Board and/or the Compensation Committee in its sole discretion, and
        subject to the overall performance of the Company, Executive will be eligible
        to
        receive annual bonuses, with a target bonus of up to 50% of Base Salary,
        in
        accordance with the terms and conditions established by the Board and/or
        the
        Compensation Committee from time to time.

       

      (c) Equity
        Compensation.
        On the
        Effective Date, Executive will be granted a stock option to purchase one
        hundred
        fifty thousand (150,000) shares of the Company's common stock at an exercise
        price equal to the fair market value of the Company’s common stock on the date
        of grant (the “Option”).
        The
        Option will vest over a three-year period, with 1/3
        of
        the shares subject to the Option vesting on each of the first three
        anniversaries following the date of grant.
        The
        Option will be subject to the terms, definitions and provisions of the SulphCo,
        Inc. 2006 Stock Option Plan, and the accompanying stock option agreement
        under
        which it is granted. In addition, Executive may further be entitled to annual
        option grants as part of the annual review process at the discretion of the
        Board and the Compensation Committee.

       

      (d) Vacation.
        During
        the Employment Period, Executive will be entitled to (i) five weeks paid
        vacation in each calendar year (to be taken at such times and in such number
        of
        days as Executive and the Company shall mutually agree), (ii) paid sick days
        as
        needed due to illness or other incapacity, and (iii) paid Company holidays,
        all
        in accordance with the Company’s policies for its senior executives as in effect
        from time to time. Any accrued unused vacation may be carried over from one
        year
        to the following year, provided that no more than five weeks vacation may
        be
        carried over at any time. 

       

      (e) Benefits.
        During
        the Employment Period, Executive (and his eligible dependents) will be entitled
        to participate in the same manner as the Company’s other senior executives in
        any employee benefit plans which the Company provides or may establish for
        the
        benefit of its senior executives generally; provided that the Company reserves
        the right to cancel or change any of its employee benefit plans and programs
        at
        any time.

       

      (f) Reimbursement
        of Expenses.
        During
        the Employment Period, the Company will reimburse Executive for all
        out-of-pocket business expenses that are incurred by him in furtherance of
        the
        Company’s business in accordance with the Company’s policies with respect
        thereto as in effect from time to time. Without limiting the generality of
        the
        foregoing, the Company shall pay or reimburse Executive for charges relating
        to
        the use of his cellular phone and reasonable business travel
        expenses.

       

      (g) Signing
        Bonus.
        Within
        ten (10) days following the Effective Date, the Company shall pay to Executive
        a
        one-time signing bonus of $75,000.

       

      (h) Incentive
        Compensation.
        During
        the Employment Period, Executive will be entitled to participate in the same
        manner as the Company’s other senior executives in any executive incentive
        compensation plans which the Company provides or may establish for the benefit
        of its senior executives generally; provided that the Company reserves the
        right
        to cancel or change any of such plans and programs at any time.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      3.     Termination.
        Executive’s employment
        hereunder will terminate upon the first to occur of the following: 

       

      (a) Executive’s
        death; 

       

      (b) by
        the
        Company in the event of Executive’s Disability (as defined below);

       

      (c) by
        the
        Company for Cause (as defined below);

       

      (d) by
        the
        Company without Cause; or 

       

      (e) by
        Executive, with or without Good Reason (as defined below). 

       

      For
        purposes of this Agreement, the following terms shall have the following
        meanings:

       

      “Cause”
means:
        (i) Executive’s conviction of, or plea of nolo
        contendere
        to, a
        felony, or a crime involving dishonesty, disloyalty or moral
        turpitude; (ii)
        Executive’s willful disloyalty or deliberate dishonesty; (iii) the commission by
        Executive of an act of fraud or embezzlement against the Company; (iv)
        Executive’s failure to use his good faith efforts to perform in all material
        respects such duties as are contemplated by this Agreement, or to follow
        any
        lawful direction of the CEO, the Board or any committee thereof; (v) Executive’s
        gross negligence in the performance of his duties hereunder; or (vi) a material
        breach by Executive of any provision of this Agreement or of any Company
        policy,
        which breach is not cured within thirty (30) days after delivery to Executive
        by
        the Company of written notice of such breach, provided that, if such breach
        is
        not capable of being cured within such 30-day period, Executive will have
        a
        reasonable additional period to cure such breach. No act or omission on
        Executive’s part will be considered “willful” unless done, or admitted to be
        done, by Executive in bad faith or without his reasonable belief that such
        act
        or omission was in the best interests of the Company. Any determination of
        “Cause” shall be made in good faith by a majority vote of the
        Board.

       

      “Disability”
means
        Executive’s mental, physical or other disability, the condition of which renders
        him incapable of performing his obligations under this Agreement for a period
        of
        90 consecutive days or an aggregate of 120 days (whether or not consecutive)
        in
        any 12-month period. Any determination of “Disability” shall be made in good
        faith by a majority vote of the Board.

       

      “Good
        Reason”
means,
        without Executive’s consent: (i) a failure by the Company to comply with any
        material provision of this Agreement which is not cured within thirty (30)
        days
        after Executive has given written notice of such noncompliance to the Company,
        provided that, if such failure is not capable of being cured within such
        30-day
        period, the Company will have a reasonable additional period to cure such
        failure; (ii) a material adverse change by the Company in Executive’s
        responsibilities, duties or authority as the Vice President and Chief Financial
        Officer of the Company, which causes Executive’s position with the Company to
        have less responsibility or authority than Executive’s position immediately
        prior to such change, provided that any such change is not in connection
        with
        the termination of Executive’s employment with the Company; or (iii) at
        Executive’s election, a Change in Control of the Company if, following such
        Change in Control, Executive is no longer the Vice President and Chief Financial
        Officer of the Company (or the surviving or successor company, as applicable),
        provided that Executive’s election under this subsection (iii) may only be
        exercised within the thirty (30) day period following the first six (6) month
        anniversary following the Change in Control. 

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      “Change
        in Control”
means:
        (i) the acquisition by any person, entity or affiliated group becoming the
        beneficial owner of more than 50% of the outstanding equity securities of
        the
        Company or otherwise becoming entitled to vote more than 50% of the voting
        power
        of the Company; (ii) a consolidation or merger (in one transaction or a series
        of related transactions) of the Company pursuant to which the holders of
        the
        Company’s equity securities immediately prior to such transaction or series of
        related transactions would not be the holders immediately after such transaction
        or series of related transactions of at least 50% of the voting power of
        the
        entity surviving such transaction or series of related transactions; or (iii)
        the sale, lease, exchange or other transfer (in one transaction or a series
        of
        related transactions) of all or substantially all of the assets of the Company.
        In all respects, the definition of “Change in Control” shall be interpreted to
        comply with Section 409A of the Internal Revenue Code of 1986, as amended
        (the
“Code”),
        and
        any successor statute, regulation and guidance thereto.

       

      4.     Termination
        Procedures; Effect of Termination.
        

       

      (a) Notice
        of Termination.
        Any
        termination of Executive’s employment by the Company or Executive (other than
        termination on account of Executive’s death) shall be communicated by written
        notice (a “Notice
        of Termination”)
        to the
        other party hereto in accordance with Section 7(a) below, which notice shall
        indicate the specific termination provision in Section 3 of this Agreement
        relied upon and, if the termination is by the Company for Cause or by Executive
        for Good Reason, the specific reasons therefor.

       

      (b) Date
        of Termination.
        As used
        herein, “Date
        of Termination”
shall
        mean: (i) if Executive’s employment is terminated as a result of Executive’s
        death, the date of Executive’s death; (ii) if Executive’s employment is
        terminated by reason of Executive’s Disability, on the date Notice of
        Termination is given or such later date specified in the Notice of Termination
        as the effective date of termination; (iii) if Executive’s employment is
        terminated by the Company for Cause, on the date Notice of Termination is
        given
        or such later date specified in the Notice of Termination as the effective
        date
        of termination; (iv) if Executive’s employment is terminated by the Company
        without Cause, such date which is specified in the Notice of Termination
        as the
        effective date of termination; and (v) if Executive’s employment is terminated
        by Executive, with or without Good Reason, such date which is specified in
        the
        Notice of Termination as the effective date of termination, which date shall
        be
        at least thirty (30) days following the date the Notice of Termination is
        given.

       

      (c) Compensation
        Upon Termination.
        

       

      (i) At
        any
        time that Executive’s employment is terminated, the Company will pay the Accrued
        Obligations (as defined below) to Executive (or to his estate or legal
        representative, if applicable) on or promptly following the Date of Termination.
        For purposes of this Agreement, “Accrued
        Obligations”
means
        (A) the portion of Executive’s Base Salary as has accrued up through the Date of
        Termination which the Executive has not yet been paid, (B) an amount equal
        to
        any unpaid bonus which has already been earned and awarded by the Board and/or
        the Compensation Committee through the Date of Termination, (C) an amount
        equal
        to the value of Executive’s accrued unused vacation days, and (D) the amount of
        expenses incurred by Executive on behalf of the Company prior to the Date
        of
        Termination and not yet reimbursed as of such date.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (ii) In
        addition to the Accrued Obligations, if Executive’s employment is terminated by
        the Company without Cause or by Executive for Good Reason (and other than
        due to
        Executive’s death or Disability), then in exchange for Executive’s execution and
        delivery to the Company of a full general release (which Executive does not
        later revoke in accordance with its terms), in a form acceptable to the Company,
        releasing all claims, known or unknown, that Executive may have against the
        Company, and any subsidiary or related entity, their officers, directors,
        employees and agents, the Company will (A) within thirty (30) days following
        the
        Date of Termination, pay to Executive (or his estate or legal representative
        if
        applicable) a lump-sum severance payment equal to one year of his then current
        Base Salary, and (B) upon proper election of continuation coverage under
        Title X
        of the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”)
        under
        the Company’s group health plans, continue to pay the group medical and dental
        COBRA premiums for Executive and Executive’s eligible dependents until the
        earlier of (x) the date Executive first becomes eligible for coverage under
        a
        subsequent employer’s applicable group health plan(s), (y) the date such
        coverage terminates under applicable law, or (z) twelve (12) months after
        the
        Date of Termination.

       

      Notwithstanding
        any other provision with respect to the timing of payments under this Section
        4(c), if, at the time of Executive’s termination,
        Executive is deemed to be a “specified employee”  (within the meaning
        of Code Section 409A, and any
        successor statute, regulation and guidance thereto)
        of the
        Company, then only to the extent necessary to comply with the requirements
        of
        Code Section 409A, any payments to which Executive may become entitled
        under Section 4(c) which are subject to Code Section 409A (and not otherwise
        exempt from its application) will be withheld until the first business day
        of
        the seventh month following the Date of Termination, at which time the Executive
        shall be paid an aggregate amount of any withheld payments otherwise
        due under Section 4(c), as applicable.

       

      (d) Other
        Provisions.
        The
        effect of termination on any stock options or restricted stock granted or
        issued
        to Executive shall be governed by the terms and provisions of any applicable
        option agreement, restricted stock agreement and/or equity incentive plan.
        The
        amount of any benefit due to Executive after the date of such termination
        pursuant to this Agreement will not be reduced or offset by any payment or
        benefit that Executive may receive from any other source.

       

      5.     Restrictive
        Covenants.
        On the
        Effective Date, Executive will enter into a confidentiality, non-competition,
        non-solicitation, assignment of inventions and non-disparagement agreement,
        substantially similar to the Company’s standard form of agreement used for its
        senior executives, and the non-competition and non-solicitation covenants
        shall
        last for two years following the Date of Termination.

       

      6.     Indemnification.
        The
        Company shall, to the fullest extent permitted by law and by its Articles
        of
        Incorporation and Bylaws, indemnify Executive and hold him harmless for any
        acts
        or decisions made by him in good faith while performing his duties to the
        Company, and the Company shall at all times during Executive’s employment with
        the Company, maintain directors’ and officers’ liability insurance, at and upon
        commercially reasonable terms and limits.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      7.     General.

       

      (a) Notices.
        All
        notices, requests, consents and other communications hereunder will be in
        writing, will be addressed to the receiving party’s address set forth below or
        to such other address as a party may designate by notice hereunder, and will
        be
        either (i) delivered by hand, (ii) sent by overnight courier, or
        (iii) sent by registered or certified mail, return receipt requested,
        postage prepaid. All notices, requests, consents and other communications
        hereunder will be deemed to have been given either (A) if by hand, at the
        time of the delivery thereof to the receiving party at the address of such
        party
        set forth above, (B) if sent by overnight courier, on the next business day
        following the day such notice is delivered to the courier service, or (C)
        if
        sent by registered or certified mail, on the third business day following
        the
        day such mailing is made. All notices, requests, consents and other
        communications hereunder will be sent as follows:

       

      
        	
              	If
                to the Company:	
                SulphCo,
                  Inc.

              

      

      850
        Spice
        Islands Drive

      Sparks,
        Nevada 89431

      Attention:
        Chief Executive Officer

       

      
        	
              	If
                to Executive:	
                Stanley
                  W. Farmer

              

      

      13418
        North Bend Landing

      Cypress,
        Texas 77429

       

      (b) Entire
        Agreement.
        This
        Agreement (together with any other agreements referenced herein) embodies
        the
        entire agreement and understanding between the parties hereto with respect
        to
        the subject matter hereof and supersedes all prior oral or written agreements
        and understandings relating to the subject matter hereof. No statement,
        representation, warranty, covenant or agreement of any kind not expressly
        set
        forth in this Agreement will affect, or be used to interpret, change or
        restrict, the express terms and provisions of this Agreement.

       

      (c) Modifications
        and Amendments.
        The
        terms and provisions of this Agreement may be modified or amended only by
        written agreement executed by the parties hereto. The
        Company and Executive agree that they will negotiate in good faith and jointly
        execute an amendment to modify this Agreement to the extent necessary to
        comply
        with the requirements of Code Section 409A, or any successor statute, regulation
        and guidance thereto, provided, however, no such amendment will increase
        the
        financial obligations of the Company to Executive.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      (d) Waivers
        and Consents.
        The
        terms and provisions of this Agreement may be waived, or consent for the
        departure therefrom granted, only by written document executed by the party
        entitled to the benefits of such terms or provisions. No such waiver or consent
        will be deemed to be or will constitute a waiver or consent with respect
        to any
        other terms or provisions of this Agreement, whether or not similar Each
        such
        waiver or consent will be effective only in the specific instance and for
        the
        purpose for which it was given, and will not constitute a continuing waiver
        or
        consent.

       

      (e) Successors
        and Assigns; Third Party Beneficiaries.
        All
        statements, representations, warranties, covenants and agreements in this
        Agreement will be binding on the parties hereto and will inure to the benefit
        of
        the respective successors, heirs, executors and permitted assigns of each
        party
        hereto. Any such successor of the Company will be deemed substituted for
        the
        Company under the terms of this Agreement for all purposes. For this purpose,
        “successor” means any person, firm, corporation or other business entity which
        at any time, whether by purchase, merger or otherwise, directly or indirectly
        acquires all or substantially all of the assets or business of the Company.
        Executive may not assign any of Executive’s rights to compensation or other
        benefits under this Agreement, except by will or the laws of descent and
        distribution. Any other attempted assignment, transfer, conveyance or other
        disposition of Executive’s right to compensation or other benefits will be null
        and void. Nothing in this Agreement will be construed to create any rights
        or
        obligations except among the parties hereto, and (except for Executive’s estate
        or other legal representative) no person or entity will be regarded as a
        third-party beneficiary of this Agreement.

       

      (f) Governing
        Law.
        This
        Agreement and the rights and obligations of the parties hereunder will be
        construed in accordance with and governed by the law of the State of Texas,
        without giving effect to the conflict of law principles thereof.

       

      (g) Jurisdiction,
        Venue.
        Any
        legal action or proceeding with respect to this Agreement will be brought
        in the
        Federal or state courts of Harris County, Texas with competent subject matter
        jurisdiction. By execution and delivery of this Agreement, each of the parties
        hereto accepts for itself and in respect of its property, generally and
        unconditionally, the exclusive jurisdiction of the aforesaid courts

       

      (h) Severability.
        The
        parties intend this Agreement to be enforced as written. However, if
        any
        court of competent jurisdiction determines any provision, or any portion
        thereof, of this Agreement to be unenforceable or invalid, then such provision
        shall be deemed limited to the extent that such court deems it valid or
        enforceable and the remaining provisions of this Agreement shall nevertheless
        remain in full force and effect.

       

      (i) Headings
        and Captions.
        The
        headings and captions of the various subdivisions of this Agreement are for
        convenience of reference only and will in no way modify or affect the meaning
        or
        construction of any of the terms or provisions hereof.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      (j) No
        Waiver of Rights, Powers and Remedies.
        No
        failure or delay by a party hereto in exercising any right, power or remedy
        under this Agreement, and no course of dealing between the parties hereto,
        will
        operate as a waiver of any such right, power or remedy of the party No single
        or partial exercise of any right, power or remedy under this Agreement by
        a
        party hereto, nor any abandonment or discontinuance of steps to enforce any
        such
        right, power or remedy, will preclude such party from any other or further
        exercise thereof or the exercise of any other right, power or remedy hereunder.
        The election of any remedy by a party hereto will not constitute a waiver
        of the
        right of such party to pursue other available remedies. No notice to or demand
        on a party not expressly required under this Agreement will entitle the party
        receiving such notice or demand to any other or further notice or demand
        in
        similar or other circumstances or constitute a waiver of the rights of the
        party
        giving such notice or demand to any other or further action in any circumstances
        without such notice or demand.

       

      (k) Expenses.
        Each
        party shall bear its own fees and expenses incurred in connection with the
        preparation, negotiation, execution and delivery of this Agreement. The
        prevailing party in any legal proceeding to enforce this Agreement shall
        be
        entitled to legal fees and costs reasonably incurred. 

       

      (l) Deductions
        and Withdrawals.
        The
        Company will deduct from each payment to be made to Executive under this
        Agreement such amounts, if any, required to be deducted or withheld under
        applicable law or under any Company-sponsored employee benefit plan in which
        Executive participates.

       

      (m) Tax
        Consequences.
        Executive hereby acknowledges and agrees that the Company makes no
        representations or warranties regarding the tax treatment or tax consequences
        of
        any compensation, benefits or other payments under the Agreement, including,
        without limitation, by operation of Code Section 409A, or any successor statute,
        regulation and guidance thereto.

       

      (n) Counterparts.
        This
        Agreement may be executed in two or more counterparts, and by different parties
        hereto on separate counterparts, each of which will be deemed an original,
        but
        all of which together will constitute one and the same instrument. This
        Agreement may be delivered by facsimile, and facsimile signatures shall be
        treated as original signatures for all applicable purposes.

       

      (o) Opportunity
        to Review.
        Executive hereby acknowledges that Executive has had adequate opportunity
        to
        review these terms and conditions and to reflect upon and consider the terms
        and
        conditions of this Agreement, and that Executive has had the opportunity
        to
        consult with counsel of Executive’s
        own
        choosing regarding such terms.  Executive
        further acknowledges that Executive fully understands the terms of this
        Agreement and has voluntarily executed this Agreement.

       

      [Remainder
        of page left intentionally blank. Signature page(s) to follow.]

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      IN
        WITNESS WHEREOF, the undersigned have executed and delivered this Agreement
        as
        of the date and year first above written.

       

       

      SULPHCO,
        INC.

      

      By:__________________________

      

      Name:________________________

      

      Title:_________________________

      

      

      EXECUTIVE

       

      

      _____________________________

      Stanley
        W. Farmer  

       

      

      9<PAGE>
EXHIBIT 4.1

                           CERTIFICATE OF DESIGNATION
                                       OF
                            SERIES A PREFERRED STOCK,
                          SERIES B PREFERRED STOCK AND
                           SERIES C PREFERRED STOCK OF
                                 FMN MERGER CO.

          (PURSUANT TO SECTION 78.1955 OF THE NEVADA REVISED STATUTES)

JUSTIN F. BECKETT AND MICHAEL D. RAEFORD, JR. CERTIFY THAT:

     1. They are the President and Secretary, respectively, of FMN Merger Co., a
Nevada corporation (the "CORPORATION").

     2. The total number of shares of capital stock which the Corporation shall
have authority to issue is: ONE HUNDRED TEN MILLION (110,000,000). These shares
shall be divided into two classes with ONE HUNDRED MILLION (100,000,000) shares
designated as common stock at $0.0001 par value (the "COMMON STOCK") and TEN
MILLION (10,000,000) shares designated as preferred stock at $0.0001 par value
(the "PREFERRED STOCK").

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

     WHEREAS, the Articles of Incorporation (the "ARTICLES OF INCORPORATION") of
the Corporation provides for a class of its authorized stock known as preferred
stock, comprising TEN MILLION (10,000,000) shares, par value $0.0001 (the
"PREFERRED STOCK"); and

     WHEREAS, the Board of Directors of the Corporation is authorized to
determine the rights, preferences, privileges and restrictions, including the
dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series of
the Preferred Stock and the number of shares constituting any series and the
designation thereof, of any of them.

     NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the designation of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock and by this Certificate of Designation of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
(the "CERTIFICATE OF DESIGNATION") does hereby fix and determine the rights,
preferences, privileges, restrictions and other matters relating to Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as
follows:

A.   SERIES A PREFERRED STOCK

     1. DESIGNATION. The series of Preferred Stock shall consist of ONE MILLION
EIGHT HUNDRED THOUSAND (1,800,000) shares designated "SERIES A PREFERRED STOCK."

<PAGE>

     2. DIVIDEND PREFERENCE.

          (a) The holders of Series A Preferred Stock shall be entitled to
receive, out of funds legally available therefor, cumulative dividends at an
annual rate equal to five percent (5.0%) of the "Original Series A Issue Price"
(as defined below) (appropriately adjusted for stock splits, subdivisions,
combinations, consolidations and the like with respect to such shares),
compounded quarterly, for each outstanding share of Series A Preferred Stock
held by them, payable upon a "Liquidation Event" (as defined below), a
redemption at the Original Series A Issue Price (as provided in Section A.3
below), or otherwise when and if declared by the Board of Directors, in
preference and priority to the payment of dividends on any shares of Common
Stock (other than those payable solely in Common Stock or involving the
repurchase of shares of Common Stock from terminated directors, officers,
employees, consultants or advisors of the Corporation or its subsidiaries
pursuant to contractual arrangements), and PARI PASSU with any dividends on
Series B Preferred Stock and Series C Preferred Stock. In the event dividends
are paid to the holders of Series A Preferred Stock that are less than the full
amounts to which such holders are entitled pursuant to this Section A.2(a), such
holders shall share ratably in the total amount of dividends paid according to
the respective amounts due each such holder if such dividends were paid in full.

          (b) After payment of dividends to the holders of Series A Preferred
Stock as set forth above, and with respect to Series B Preferred Stock and
Series C Preferred Stock, dividends may be declared and distributed, out of
funds legally available therefor, among all holders of Common Stock; provided,
however, that no dividend may be declared and distributed among holders of
Common Stock at a rate greater than the rate at which dividends are paid to the
holders of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock based on the number of shares of Common Stock into which such
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock are convertible on the date such dividend is declared.

          (c) In the event that the Corporation shall have declared but unpaid
dividends outstanding immediately prior to, and in the event of, a conversion of
Series A Preferred Stock (as provided in Section A.5 below), the Corporation
shall, at the option of the Corporation, pay in cash to the holders of Series A
Preferred Stock subject to conversion the full amount of any such dividends or
allow such dividends to be converted into Common Stock in accordance with, and
pursuant to the terms specified in Section A.5 below.

     3. LIQUIDATION PREFERENCE.

          (a) Unless the holders of a majority of the then outstanding Series A
Preferred Stock, voting as a separate class, agree otherwise, in the event of
(i) any liquidation, dissolution or winding up of the Corporation, whether
voluntary or not, (ii) the sale, lease, assignment, transfer, conveyance or
disposal of all or substantially all of the assets of the Corporation or (iii)
the acquisition of the Corporation by another entity by means of consolidation,
corporate reorganizations, merger or other transaction or series of related
transactions in which stockholders of the Corporation immediately prior to such
transaction do not hold a majority of the voting power of the outstanding
securities of the successor entity (each a "LIQUIDATION EVENT"), distributions
to the Corporation's stockholders shall be made in the following manner:

                                       2
<PAGE>

               (i) Each holder of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of Common Stock, but PARI PASSU
to any distribution of any of the assets or surplus funds of the Corporation to
the holders of Series B Preferred Stock and Series C Preferred Stock, by reason
of their ownership of such stock, the amount of $1.00 (appropriately adjusted
for stock splits, subdivisions, combinations, consolidations and the like with
respect to such shares) (the "ORIGINAL SERIES A ISSUE PRICE") for each share of
Series A Preferred Stock then held by such holder, plus an amount equal to all
declared but unpaid dividends on such shares of Series A Preferred Stock
(collectively, the "SERIES A PREFERENCE"). If, upon the occurrence of a
Liquidation Event, the assets and funds available to be distributed among the
holders of Series A Preferred Stock shall be insufficient to permit the payment
to such holders of the full Series A Preference, then the entire assets and
funds of the Corporation legally available for distribution to the holders of
Series A Preferred Stock shall be distributed ratably based on the total Series
A Preference due each such holder under this Section A.3(a)(i).

               (ii) After payment has been made to the holders of Series A
Preferred Stock of the full amounts to which they are entitled pursuant to
Section A.3(a)(i) above, and after payment has been made to the holders of
Series B Preferred Stock and Series C Preferred Stock of the full amounts to
which they are entitled, each holder of Class A Common Stock of the Corporation
("CLASS A COMMON") shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of Common Stock (other than the Class A Common), by reason of their
ownership of such stock, the amount of $1.00 (appropriately adjusted for stock
splits, subdivisions, combinations, consolidations and the like with respect to
such shares) for each share of Class A Common then held by such holder, plus an
amount equal to all declared but unpaid dividends on such shares of Class A
Common (collectively, the "CLASS A PREFERENCE"). If, upon the occurrence of a
Liquidation Event, the assets and funds available to be distributed among the
holders of Class A Common shall be insufficient to permit the payment to such
holders of the full Class A Preference, then the entire assets and funds of the
Corporation legally available for distribution to the holders of Class A Common
shall be distributed ratably based on the total Class A Preference due each such
holder under this Section A.3(a)(ii).

               (iii) After payment has been made to the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Class A
Common of the full amounts to which they are entitled pursuant to Sections
A.3(a)(i) and (ii) above, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed ratably among the holders of
Common Stock (including Class A Common), Series A Preferred Stock (assuming
conversion of all shares of Series A Preferred Stock), Series B Preferred Stock
(assuming conversion of all shares of Series B Preferred Stock) and Series C
Preferred Stock (assuming conversion of all shares of Series C Preferred Stock).

          (b) Each holder of Preferred Stock shall be deemed to have consented
to distributions made by the Corporation in connection with the repurchase of
shares of Common Stock issued to or held by directors, officers, employees,
consultants or advisors of the Corporation or its subsidiaries upon termination
of their employment or services pursuant to agreements (whether now existing or
hereafter entered into) providing for the right of said repurchase between the
Corporation and such persons.

                                       3
<PAGE>

          (c) The value of securities and property paid or distributed pursuant
to this Section A.3 shall be computed at fair market value at the time of
payment to the Corporation or at the time made available to stockholders, all as
determined by the Board of Directors in the good faith exercise of its
reasonable business judgment, provided that (i) if such securities are listed on
any established stock exchange or a national market system, their fair market
value shall be the closing sales price for such securities as quoted on such
system or exchange (or the largest such exchange) for the date the value is to
be determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication, and (ii) if such securities are regularly
quoted by a recognized securities dealer but selling prices are not reported,
their fair market value shall be the mean between the high bid and low asked
prices for such securities on the date the value is to be determined (or if
there are no quoted prices for such date, then for the last preceding business
day on which there were quoted prices).

          (d) Nothing hereinabove set forth shall affect in any way the right of
each holder of Preferred Stock to convert such shares at any time and from time
to time into Common Stock in accordance with Section A.5 below.

     4. VOTING RIGHTS. Except as otherwise required by law or hereunder, the
holder of each share of Common Stock issued and outstanding shall have one vote
and the holder of each share of Series A Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
such share of Series A Preferred Stock could be converted at the record date for
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or the effective
date of any written consent of stockholders, such votes to be counted together
with all other shares of stock of the Corporation having general voting power
and not separately as a class. Fractional votes by the holders of Series A
Preferred Stock shall not, however, be permitted and any fractional voting
rights shall (after aggregating all shares into which shares of Series A
Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number (with one-half being rounded upward). Holders of Common
Stock and Series A Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the Corporation's Bylaws.

     5. CONVERSION RIGHTS. The holders of Series A Preferred Stock shall have
conversion rights as follows:

          (a) RIGHT TO CONVERT. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and, if such share is subject to redemption, prior to the
date of termination of the right to convert such share, as determined in Section
A.6 below, at the office of the Corporation or any transfer agent for such
Series A Preferred Stock into such number of fully-paid and non-assessable
shares of Common Stock as is determined by dividing the Original Series A Issue
Price by the then effective Series A Conversion Price for such Series A
Preferred Stock, determined as hereinafter provided, in effect at the time of
conversion. The price at which shares of Common Stock shall be deliverable upon
conversion of Series A Preferred Stock (the "SERIES A CONVERSION PRICE") shall
initially be the Original Series A Issue Price. The initial Series A Conversion
Price shall be subject to adjustment as provided in accordance with Section
A.5(d) below.

                                       4
<PAGE>

          (b) AUTOMATIC CONVERSION. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Series A Conversion Price upon the earliest of: (i) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, (the "SECURITIES ACT")
covering the offer and sale of Common Stock for the account of the Corporation
to the public with aggregate proceeds to the Corporation of at least $5,000,000
(before deduction for underwriters commissions and expenses), (ii) the
affirmative vote or written consent of a majority of the then outstanding shares
of Series A Preferred Stock, and (iii) the conversion into Common Stock of a
majority of the originally issued shares of Series A Preferred Stock (each such
event is an "SERIES A AUTOMATIC CONVERSION"). In the event of a Series A
Automatic Conversion of Series A Preferred Stock upon a public offering as
aforesaid, the person(s) entitled to receive the Common Stock issuable upon such
conversion of such Series A Preferred Stock shall not be deemed to have
converted such Series A Preferred Stock until immediately prior to the closing
of such sale of securities.

          (c) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair value
of such fractional share, as determined in good faith by the Board of Directors.
Before any holder of Series A Preferred Stock shall be entitled to convert the
same into full shares of Common Stock and to receive certificates therefor, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for Series A Preferred
Stock and shall give written notice to the Corporation at such office that such
holder elects to convert the same; provided, however, that in the event of a
Series A Automatic Conversion pursuant to Section A.5(b) above, the outstanding
shares of Series A Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, and provided further that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such Series A
Automatic Conversion unless the certificates evidencing such shares of Series A
Preferred Stock are either delivered to the Corporation or its transfer agent,
as provided above, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. The Corporation shall,
as soon as practicable after such delivery, or such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Preferred Stock to be converted, or
in the case of a Series A Automatic Conversion, on the date of closing of the
offering, the date of the affirmative vote or written consent or the date of
conversion of Series A Preferred Stock, as applicable, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.

                                       5
<PAGE>

          (d) ADJUSTMENTS TO CONVERSION PRICE.

               (I) ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS, SUBDIVISIONS,
COMBINATIONS OR CONSOLIDATIONS WITH RESPECT TO COMMON STOCK. In the event the
outstanding shares of Common Stock shall be increased by a stock dividend
payable in Common Stock, stock split, subdivision or other similar transaction
occurring after the filing of this Certificate of Designation into a greater
number of shares of Common Stock, the Series A Conversion Price then in effect
shall, concurrently with the effectiveness of such event, be decreased in
proportion to the percentage increase in the outstanding number of shares of
Common Stock. In the event the outstanding shares of Common Stock shall be
decreased by a reverse stock split, combination, consolidation or other similar
transaction occurring after the filing of this Certificate of Designation into a
lesser number of shares of Common Stock, the Series A Conversion Price then in
effect shall, concurrently with the effectiveness of such event, be increased in
proportion to the percentage decrease in the outstanding number of shares of
Common Stock.

               (II) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the
Corporation at any time or from time to time makes or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section A.5, then and
in each such event provision shall be made so that the holders of Preferred
Stock shall receive upon conversion thereof, the amount of securities of the
Corporation which they would have received had their Preferred Stock been
converted into Common Stock on the date of such event.

               (III) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable upon conversion of Series A Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than a stock split, stock dividend,
subdivision, combination or consolidation of shares, provided for above), the
Series A Conversion Price then in effect shall, concurrently with the
effectiveness of such reclassification, exchange, substitution or other
transaction, be proportionately adjusted such that Series A Preferred Stock
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of such Series A Preferred Stock immediately before that change.

          (e) NO IMPAIRMENT. Except as expressly provided in this Certificate of
Designation, the Corporation shall not, by amendment of its Articles of
Incorporation or through any voluntary liquidation, dissolution, winding up,
transfer of assets, consolidation, corporate reorganization, merger or issue or
sale of securities, or through any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but shall at all times in good faith
assist in the carrying out of all the provisions of this Section A.5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Preferred Stock against impairment.

                                       6
<PAGE>

          (f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price of Series A
Preferred Stock pursuant to this Section A.5, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series A Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Series A Conversion Price for
Series A Preferred Stock at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Series A Preferred Stock.

          (g) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes (other than income taxes) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.

          (h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its Articles of
Incorporation.

          (i) STATUS OF CONVERTED OR REDEEMED PREFERRED STOCK. In the event that
any shares of Series A Preferred Stock shall be converted pursuant to this
Section A.5 or redeemed, the shares so converted or redeemed shall resume the
status of authorized but unissued shares of Preferred Stock undesignated as to
series.

     6. REDEMPTION RIGHTS.

          (a) At the election in writing by the holders of a majority of the
then outstanding shares of Series A Preferred Stock delivered to the Corporation
at any time after the fifth anniversary of the Series A Original Issue Date, the
Corporation shall redeem, on the terms and conditions stated herein, out of
funds legally available therefor, all of the outstanding Series A Preferred
Stock in three annual installments beginning on the first anniversary of the
Corporation's receipt of the request for redemption from the holders of a
majority of the then outstanding shares of Series A Preferred Stock (the "SERIES
A INITIAL REDEMPTION DATE"), and continuing thereafter on the first and second
anniversaries of the Series A Initial Redemption Date (each a "SERIES A
REDEMPTION DATE"), by paying in cash therefor a sum equal to the greater of the
Original Series A Issue Price or the "Series A Fair Market Value" (as defined

                                       7
<PAGE>

below) for each share of Series A Preferred Stock, plus all accrued but unpaid
dividends thereon (the "SERIES A REDEMPTION PRICE"). The number of shares of
Series A Preferred Stock that the Corporation shall be required to redeem under
this Section A.5(a) on any one Series A Redemption Date shall be equal to the
amount determined by dividing (i) the aggregate number of shares of Series A
Preferred Stock outstanding immediately prior to the Series A Redemption Date by
(ii) the number of remaining Series A Redemption Dates (including the Series A
Redemption Date to which such calculation applies). For purposes of this
provision, the "SERIES A FAIR MARKET VALUE" shall mean the fair market value per
share of Series A Preferred Stock agreed upon by the Corporation and by the
holders of a majority of the then outstanding shares of Series A Preferred Stock
or, in the absence of such agreement, the fair market value of each share of
Series A Preferred Stock as determined by an independent third party valuator
appointed by the Corporation and reasonably acceptable to the holders of a
majority of the then outstanding shares of Series A Preferred Stock.

          (b) In the event that the Corporation is unable to redeem the full
number of shares of Series A Preferred Stock to be redeemed on any Series A
Redemption Date, the shares not redeemed shall be redeemed by the Corporation as
provided in this Section A.6 as soon as practicable after funds are legally
available therefor. Any redemption effected pursuant to this Section A.6(b)
shall be made ratably among the holders of Series A Preferred Stock in
proportion to the aggregate Series A Redemption Price to which each holder is
entitled under subsection (a) of this Section A.6. The redemption rights
afforded the holders of Series A Preferred Stock pursuant to this Section A6
shall be PRO RATA with such redemption rights provided to holders of Series B
Preferred Stock and Series C Preferred Stock.

          (c) If the holders of Series A Preferred Stock have elected to have
the shares of Series A Preferred Stock redeemed as provided in subsections (a)
and (b) of this Section A.6, then at least 30 but no more than 60 days prior to
each Series A Redemption Date, the Corporation shall give written notice via
personal delivery or first class mail, postage prepaid, to all holders of
outstanding Series A Preferred Stock whose shares are being redeemed, at the
address last shown on the records of the Corporation for such holder, stating
the applicable Series A Redemption Date, Series A Redemption Price and Series A
Conversion Price for such shares and the date of termination of the right to
convert (which date shall not be earlier than 30 days after the written notice
by the Corporation has been given), and the Corporation shall call upon such
holder to surrender to the Corporation on such Series A Redemption Date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On or after the Series A Redemption Date
stated in such notice, the holder of each share of Series A Preferred Stock
called for redemption shall surrender the certificate evidencing such shares to
the Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Series A Redemption Price for the shares
surrendered. If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If such notice of redemption shall have been duly given, and
if on such Series A Redemption Date funds necessary for the redemption shall be
available therefor, then, as to any certificates evidencing any Series A
Preferred Stock so called for redemption and not surrendered, all rights of the
holders of such shares so called for redemption and not surrendered shall cease
with respect to such shares, except only the right of the holders to receive the
Series A Redemption Price for Series A Preferred Stock called for redemption
which they hold, without interest, upon surrender of their certificates
therefor.

                                       8
<PAGE>

          (d) Notwithstanding anything herein to the contrary, if, on or prior
to any Series A Redemption Date (and after a redemption election has been made
pursuant to this Section A.6), the Corporation deposits, with any bank or trust
company in the State of California having aggregate capital and surplus in
excess of $100,000,000, as a trust fund, a sum sufficient to redeem on such
Series A Redemption Date the shares called for redemption, with irrevocable
instructions and authority to the bank or trust company to give the notice of
redemption thereof (or to complete the giving of such notice if theretofore
commenced) and to pay, on or after the Series A Redemption Date or prior
thereto, the Series A Redemption Price of the shares to their respective holders
upon the surrender of their share certificates, then from and after the date of
the deposit (although prior to such Series A Redemption Date), the shares so
called for redemption on such Series A Redemption Date (but not any subsequent
Series A Redemption Date) shall be redeemed. The deposit of such sum shall
constitute full payment of such shares to their holders and from and after the
date of the deposit such shares shall no longer be outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares and shall
have no rights with respect thereto except the right to receive from the bank or
trust company payment of the Series A Redemption Price for Series A Preferred
Stock called for redemption on such Series A Redemption Date, without interest,
upon the surrender of their certificates therefor and the right to convert said
shares as provided herein at any time up to but not after the close of business
on the fifth day prior to the Series A Redemption Date of such shares (which
conversion date shall not be earlier than 30 days after the written notice of
redemption has been given). Any monies so deposited on account of the Series A
Redemption Price of Series A Preferred Stock converted into Common Stock
subsequent to the making of such deposit shall be repaid to the Corporation
forthwith upon the conversion of such Series A Preferred Stock. Any interest
accrued on any funds so deposited shall be the property of, and paid to, the
Corporation. If the holders of Series A Preferred Stock so called for redemption
shall not, at the end of two years after the applicable Series A Redemption
Date, have claimed any funds so deposited, such bank or trust company shall
thereupon pay over to the Corporation such unclaimed funds, and such bank or
trust company shall thereafter be relieved of all responsibility in respect
thereof to such holders and such holders shall look only to the Corporation for
payment of the Series A Redemption Price for Series A Preferred Stock called for
redemption which they hold.

B.   SERIES B PREFERRED STOCK

     1. DESIGNATION. The series of Preferred Stock shall consist of ONE MILLION
FIVE HUNDRED THOUSAND (1,500,000) shares designated "SERIES B PREFERRED STOCK."

     2. DIVIDEND PREFERENCE.

          (a) The holders of Series B Preferred Stock shall be entitled to
receive, out of funds legally available therefor, cumulative dividends at an
annual rate equal to five percent (5.0%) of the "Original Series B Issue Price"
(as defined below) (appropriately adjusted for stock splits, subdivisions,
combinations, consolidations and the like with respect to such shares),
compounded quarterly, for each outstanding share of Series B Preferred Stock
held by them, payable upon a Liquidation Event, a redemption at the Original

                                       9
<PAGE>

Series B Issue Price (as provided in Section B.3 below), or otherwise when and
if declared by the Board of Directors, in preference and priority to the payment
of dividends on any shares of Common Stock (other than those payable solely in
Common Stock or involving the repurchase of shares of Common Stock from
terminated directors, officers, employees, consultants or advisors of the
Corporation or its subsidiaries pursuant to contractual arrangements), and PARI
PASSU with any dividends on Series A Preferred Stock and Series C Preferred
Stock. In the event dividends are paid to the holders of Series B Preferred
Stock that are less than the full amounts to which such holders are entitled
pursuant to this Section B.2(a), such holders shall share ratably in the total
amount of dividends paid according to the respective amounts due each such
holder if such dividends were paid in full.

          (b) After payment of dividends to the holders of Series B Preferred
Stock as set forth above, and with respect to Series A Preferred Stock and
Series C Preferred Stock, dividends may be declared and distributed, out of
funds legally available therefor, among all holders of Common Stock; provided,
however, that no dividend may be declared and distributed among holders of
Common Stock at a rate greater than the rate at which dividends are paid to the
holders of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock based on the number of shares of Common Stock into which such
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock are convertible on the date such dividend is declared.

          (c) In the event that the Corporation shall have declared but unpaid
dividends outstanding immediately prior to, and in the event of, a conversion of
Series B Preferred Stock (as provided in Section B.5 below), the Corporation
shall, at the option of the Corporation, pay in cash to the holders of Series B
Preferred Stock subject to conversion the full amount of any such dividends or
allow such dividends to be converted into Common Stock in accordance with, and
pursuant to the terms specified in, Section B.5 below.

     3. LIQUIDATION PREFERENCE.

          (a) Unless the holders of a majority of the then outstanding Series B
Preferred Stock, voting as a separate class, agree otherwise, in the event of a
Liquidation Event, distributions to the Corporation's stockholders shall be made
in the following manner:

               (i) Each holder of Series B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of Common Stock, but PARI PASSU
to any distribution of any of the assets or surplus funds of the Corporation to
the holders of Series A Preferred Stock and Series C Preferred Stock, by reason
of their ownership of such stock, the amount of $1.75 (appropriately adjusted
for stock splits, subdivisions, combinations, consolidations and the like with
respect to such shares) (the "ORIGINAL SERIES B ISSUE PRICE") for each share of
Series B Preferred Stock then held by such holder, plus an amount equal to all
declared but unpaid dividends on such shares of Series B Preferred Stock
(collectively, the "SERIES B PREFERENCE"). If, upon the occurrence of a
Liquidation Event, the assets and funds available to be distributed among the
holders of Series B Preferred Stock shall be insufficient to permit the payment
to such holders of the full Series B Preference, then the entire assets and
funds of the Corporation legally available for distribution to the holders of
Series B Preferred Stock shall be distributed ratably based on the total Series
B Preference due each such holder under this Section B.3(a)(i).

                                       10
<PAGE>

               (ii) After payment has been made to the holders of Series B
Preferred Stock of the full amounts to which they are entitled pursuant to
Section B.3(a)(i) above, and after payment has been made to the holders of
Series A Preferred Stock and Series C Preferred Stock of the full amounts to
which they are entitled, each holder of Class A Common shall be entitled to
receive the Class A Preference. If, upon the occurrence of a Liquidation Event,
the assets and funds available to be distributed among the holders of Class A
Common shall be insufficient to permit the payment to such holders of the full
Class A Preference, then the entire assets and funds of the Corporation legally
available for distribution to the holders of Class A Common shall be distributed
ratably based on the total Class A Preference due each such holder under this
Section B.3(a)(ii).

               (iii) After payment has been made to the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Class A
Common of the full amounts to which they are entitled pursuant to Sections
B.3(a)(i) and (ii) above, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed ratably among the holders of
Common Stock (including Class A Common), Series A Preferred Stock (assuming
conversion of all shares of Series A Preferred Stock), Series B Preferred Stock
(assuming conversion of all shares of Series B Preferred Stock), and Series C
Preferred Stock (assuming conversion of all shares of Series C Preferred Stock).

          (b) Each holder of Preferred Stock shall be deemed to have consented
to distributions made by the Corporation in connection with the repurchase of
shares of Common Stock issued to or held by directors, officers, employees,
consultants or advisors of the Corporation or its subsidiaries upon termination
of their employment or services pursuant to agreements (whether now existing or
hereafter entered into) providing for the right of said repurchase between the
Corporation and such persons.

          (c) The value of securities and property paid or distributed pursuant
to this Section B.3 shall be computed at fair market value at the time of
payment to the Corporation or at the time made available to stockholders, all as
determined by the Board of Directors in the good faith exercise of its
reasonable business judgment, provided that (i) if such securities are listed on
any established stock exchange or a national market system, their fair market
value shall be the closing sales price for such securities as quoted on such
system or exchange (or the largest such exchange) for the date the value is to
be determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication, and (ii) if such securities are regularly
quoted by a recognized securities dealer but selling prices are not reported,
their fair market value shall be the mean between the high bid and low asked
prices for such securities on the date the value is to be determined (or if
there are no quoted prices for such date, then for the last preceding business
day on which there were quoted prices).

          (d) Nothing hereinabove set forth shall affect in any way the right of
each holder of Preferred Stock to convert such shares at any time and from time
to time into Common Stock in accordance with Section B.5 below.

                                       11
<PAGE>

     4. VOTING RIGHTS. Except as otherwise required by law or hereunder, the
holder of each share of Common Stock issued and outstanding shall have one vote
and the holder of each share of Series B Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
such share of Series B Preferred Stock could be converted at the record date for
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or the effective
date of any written consent of stockholders, such votes to be counted together
with all other shares of stock of the Corporation having general voting power
and not separately as a class. Fractional votes by the holders of Series B
Preferred Stock shall not, however, be permitted and any fractional voting
rights shall (after aggregating all shares into which shares of Series B
Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number (with one-half being rounded upward). Holders of Common
Stock and Series B Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the Corporation's Bylaws.

     5. CONVERSION RIGHTS. The holders of Series B Preferred Stock shall have
conversion rights as follows:

          (a) RIGHT TO CONVERT. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and, if such share is subject to redemption, prior to the
date of termination of the right to convert such share, as determined in Section
B.6 below, at the office of the Corporation or any transfer agent for such
Series B Preferred Stock into such number of fully-paid and non-assessable
shares of Common Stock as is determined by dividing the Original Series B Issue
Price by the then effective Series B Conversion Price for such Series B
Preferred Stock, determined as hereinafter provided, in effect at the time of
conversion. The price at which shares of Common Stock shall be deliverable upon
conversion of Series B Preferred Stock (the "SERIES B CONVERSION PRICE") shall
initially be the Original Series B Issue Price. The initial Series B Conversion
Price shall be subject to adjustment as provided in accordance with Section
B.5(d) below.

          (b) AUTOMATIC CONVERSION. Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Series B Conversion Price upon the earliest of: (i) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of Common Stock
for the account of the Corporation to the public with aggregate proceeds to the
Corporation of at least $5,000,000 (before deduction for underwriters
commissions and expenses), (ii) the affirmative vote or written consent of a
majority of the then outstanding shares of Series B Preferred Stock, and (iii)
the conversion into Common Stock of a majority of the originally issued shares
of Series B Preferred Stock (each such event is an "SERIES B AUTOMATIC
CONVERSION"). In the event of a Series B Automatic Conversion of Series B
Preferred Stock upon a public offering as aforesaid, the person(s) entitled to
receive the Common Stock issuable upon such conversion of such Series B
Preferred Stock shall not be deemed to have converted such Series B Preferred
Stock until immediately prior to the closing of such sale of securities.

                                       12
<PAGE>

          (c) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair value
of such fractional share, as determined in good faith by the Board of Directors.
Before any holder of Series B Preferred Stock shall be entitled to convert the
same into full shares of Common Stock and to receive certificates therefor, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for Series B Preferred
Stock and shall give written notice to the Corporation at such office that such
holder elects to convert the same; provided, however, that in the event of a
Series B Automatic Conversion pursuant to Section B.5(b) above, the outstanding
shares of Series B Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, and provided further that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such Series B
Automatic Conversion unless the certificates evidencing such shares of Series B
Preferred Stock are either delivered to the Corporation or its transfer agent,
as provided above, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. The Corporation shall,
as soon as practicable after such delivery, or such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be converted, or
in the case of a Series B Automatic Conversion, on the date of closing of the
offering, the date of the affirmative vote or written consent or the date of
conversion of Series B Preferred Stock, as applicable, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.

          (d) ADJUSTMENTS TO CONVERSION PRICE.

               (I) ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS, SUBDIVISIONS,
COMBINATIONS OR CONSOLIDATIONS WITH RESPECT TO COMMON STOCK. In the event the
outstanding shares of Common Stock shall be increased by a stock dividend
payable in Common Stock, stock split, subdivision or other similar transaction
occurring after the filing of this Certificate of Designation into a greater
number of shares of Common Stock, the Series B Conversion Price then in effect
shall, concurrently with the effectiveness of such event, be decreased in
proportion to the percentage increase in the outstanding number of shares of
Common Stock. In the event the outstanding shares of Common Stock shall be
decreased by a reverse stock split, combination, consolidation or other similar
transaction occurring after the filing of this Certificate of Designation into a
lesser number of shares of Common Stock, the Series B Conversion Price then in
effect shall, concurrently with the effectiveness of such event, be increased in
proportion to the percentage decrease in the outstanding number of shares of
Common Stock.

                                       13
<PAGE>

               (II) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the
Corporation at any time or from time to time makes or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section B.5, then and
in each such event provision shall be made so that the holders of Preferred
Stock shall receive upon conversion thereof, the amount of securities of the
Corporation which they would have received had their Preferred Stock been
converted into Common Stock on the date of such event.

               (III) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable upon conversion of the Series B
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than a stock split, stock dividend,
subdivision, combination or consolidation of shares, provided for above), the
Series B Conversion Price then in effect shall, concurrently with the
effectiveness of such reclassification, exchange, substitution or other
transaction, be proportionately adjusted such that Series B Preferred Stock
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of such Series B Preferred Stock immediately before that change.

          (e) NO IMPAIRMENT. Except as expressly provided in this Certificate of
Designation, the Corporation shall not, by amendment of its Articles of
Incorporation or through any voluntary liquidation, dissolution, winding up,
transfer of assets, consolidation, corporate reorganization, merger or issue or
sale of securities, or through any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but shall at all times in good faith
assist in the carrying out of all the provisions of this Section B.5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Preferred Stock against impairment.

          (f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price of Series B
Preferred Stock, pursuant to this Section B.5, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series B Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request of any holder of Series B Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Series B Conversion Price for
Series B Preferred Stock at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Series B Preferred Stock.

          (g) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes (other than income taxes) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.

                                       14
<PAGE>

          (h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its Articles of
Incorporation.

          (i) STATUS OF CONVERTED OR REDEEMED PREFERRED STOCK. In the event that
any shares of Series B Preferred Stock shall be converted pursuant to this
Section B.5 or redeemed, the shares so converted or redeemed shall resume the
status of authorized but unissued shares of Preferred Stock undesignated as to
series.

     6. REDEMPTION RIGHTS.

          (a) At the election in writing by the holders of a majority of the
then outstanding shares of Series B Preferred Stock delivered to the Corporation
at any time after the fifth anniversary of the Series B Original Issue Date, the
Corporation shall redeem, on the terms and conditions stated herein, out of
funds legally available therefor, all of the outstanding Series B Preferred
Stock in three annual installments beginning on the first anniversary of the
Corporation's receipt of the request for redemption from the holders of a
majority of the then outstanding shares of Series B Preferred Stock (the "SERIES
B INITIAL REDEMPTION DATE"), and continuing thereafter on the first and second
anniversaries of the Series B Initial Redemption Date (each a "SERIES B
REDEMPTION DATE"), by paying in cash therefor a sum equal to the greater of the
Original Series B Issue Price or the "Series B Fair Market Value" (as defined
below) for each share of Series B Preferred Stock, plus all accrued but unpaid
dividends thereon (the "SERIES B REDEMPTION PRICE"). The number of shares of
Series B Preferred Stock that the Corporation shall be required to redeem under
this Section B.6(a) on any one Series B Redemption Date shall be equal to the
amount determined by dividing (i) the aggregate number of shares of Series B
Preferred Stock outstanding immediately prior to the Series B Redemption Date by
(ii) the number of remaining Series B Redemption Dates (including the Series B
Redemption Date to which such calculation applies). For purposes of this
provision, the "SERIES B FAIR MARKET VALUE" shall mean the fair market value per
share of Series B Preferred Stock agreed upon by the Corporation and by the
holders of a majority of the then outstanding shares of Series B Preferred Stock
or, in the absence of such agreement, the fair market value of each share of
Series B Preferred Stock as determined by an independent third party valuator
appointed by the Corporation and reasonably acceptable to the holders of a
majority of the then outstanding shares of Series B Preferred Stock.

                                       15
<PAGE>

          (b) In the event that the Corporation is unable to redeem the full
number of shares of Series B Preferred Stock to be redeemed on any Series B
Redemption Date, the shares not redeemed shall be redeemed by the Corporation as
provided in this Section B.6 as soon as practicable after funds are legally
available therefor. Any redemption effected pursuant to this Section B.6(b)
shall be made ratably among the holders of Series B Preferred Stock in
proportion to the aggregate Series B Redemption Price to which each holder is
entitled under subsection (a) of this Section B.6. The redemption rights
afforded the holders of Series B Preferred Stock pursuant to this Section B6
shall be PRO RATA with such redemption rights provided to holders of Series A
Preferred Stock and Series C Preferred Stock.

          (c) If the holders of Series B Preferred Stock have elected to have
the shares of Series B Preferred Stock redeemed as provided in subsections (a)
and (b) of this Section B.6, then at least 30 but no more than 60 days prior to
each Series B Redemption Date, the Corporation shall give written notice via
personal delivery or first class mail, postage prepaid, to all holders of
outstanding Series B Preferred Stock whose shares are being redeemed, at the
address last shown on the records of the Corporation for such holder, stating
the applicable Series B Redemption Date, Series B Redemption Price and Series B
Conversion Price for such shares and the date of termination of the right to
convert (which date shall not be earlier than 30 days after the written notice
by the Corporation has been given), and the Corporation shall call upon such
holder to surrender to the Corporation on such Series B Redemption Date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On or after the Series B Redemption Date
stated in such notice, the holder of each share of Series B Preferred Stock
called for redemption shall surrender the certificate evidencing such shares to
the Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Series B Redemption Price for the shares
surrendered. If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If such notice of redemption shall have been duly given, and
if on such Series B Redemption Date funds necessary for the redemption shall be
available therefor, then, as to any certificates evidencing any Series B
Preferred Stock so called for redemption and not surrendered, all rights of the
holders of such shares so called for redemption and not surrendered shall cease
with respect to such shares, except only the right of the holders to receive the
Series B Redemption Price for Series B Preferred Stock called for redemption
which they hold, without interest, upon surrender of their certificates
therefor.

          (d) Notwithstanding anything herein to the contrary, if, on or prior
to any Series B Redemption Date (and after a redemption election has been made
pursuant to this Section B.6), the Corporation deposits, with any bank or trust
company in the State of California having aggregate capital and surplus in
excess of $100,000,000, as a trust fund, a sum sufficient to redeem on such
Series B Redemption Date the shares called for redemption, with irrevocable
instructions and authority to the bank or trust company to give the notice of
redemption thereof (or to complete the giving of such notice if theretofore
commenced) and to pay, on or after the Series B Redemption Date or prior
thereto, the Series B Redemption Price of the shares to their respective holders
upon the surrender of their share certificates, then from and after the date of
the deposit (although prior to such Series B Redemption Date), the shares so
called for redemption on such Series B Redemption Date (but not any subsequent
Series B Redemption Date) shall be redeemed. The deposit of such sum shall

                                       16
<PAGE>

constitute full payment of such shares to their holders and from and after the
date of the deposit such shares shall no longer be outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares and shall
have no rights with respect thereto except the right to receive from the bank or
trust company payment of the Series B Redemption Price for Series B Preferred
Stock called for redemption on such Series B Redemption Date, without interest,
upon the surrender of their certificates therefor and the right to convert said
shares as provided herein at any time up to but not after the close of business
on the fifth day prior to the Series B Redemption Date of such shares (which
conversion date shall not be earlier than 30 days after the written notice of
redemption has been given). Any monies so deposited on account of the Series B
Redemption Price of Series B Preferred Stock converted into Common Stock
subsequent to the making of such deposit shall be repaid to the Corporation
forthwith upon the conversion of such Series B Preferred Stock. Any interest
accrued on any funds so deposited shall be the property of, and paid to, the
Corporation. If the holders of Series B Preferred Stock so called for redemption
shall not, at the end of two years after the applicable Series B Redemption
Date, have claimed any funds so deposited, such bank or trust company shall
thereupon pay over to the Corporation such unclaimed funds, and such bank or
trust company shall thereafter be relieved of all responsibility in respect
thereof to such holders and such holders shall look only to the Corporation for
payment of the Series B Redemption Price for Series B Preferred Stock called for
redemption which they hold.

C.   SERIES C PREFERRED STOCK

     1. DESIGNATION. The series of Preferred Stock shall consist of ONE MILLION
THREE HUNDRED THOUSAND (1,300,000) shares designated "SERIES C PREFERRED STOCK."

     2. DIVIDEND PREFERENCE.

          (a) The holders of Series C Preferred Stock shall be entitled to
receive, out of funds legally available therefor, cumulative dividends at an
annual rate equal to five percent (5.0%) of the "Original Series C Issue Price"
(as defined below) (appropriately adjusted for stock splits, subdivisions,
combinations, consolidations and the like with respect to such shares),
compounded quarterly, for each outstanding share of Series C Preferred Stock
held by them, payable upon a Liquidation Event, a redemption at the Original
Series C Issue Price (as provided in Section C.3 below), or otherwise when and
if declared by the Board of Directors, in preference and priority to the payment
of dividends on any shares of Common Stock (other than those payable solely in
Common Stock or involving the repurchase of shares of Common Stock from
terminated directors, officers, employees, consultants or advisors of the
Corporation or its subsidiaries pursuant to contractual arrangements) and PARI
PASSU with any dividends on Series A Preferred Stock and Series B Preferred
Stock. In the event dividends are paid to the holders of Series C Preferred
Stock that are less than the full amounts to which such holders are entitled
pursuant to this Section C.2(a), such holders shall share ratably in the total
amount of dividends paid according to the respective amounts due each such
holder if such dividends were paid in full.

          (b) After payment of dividends to the holders of Series C Preferred
Stock as set forth above, and with respect to Series A Preferred Stock and
Series B Preferred Stock, dividends may be declared and distributed, out of
funds legally available therefor, among all holders of Common Stock; provided,
however, that no dividend may be declared and distributed among holders of
Common Stock at a rate greater than the rate at which dividends are paid to the
holders of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock based on the number of shares of Common Stock into which such
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock are convertible on the date such dividend is declared.

                                       17
<PAGE>

          (c) In the event that the Corporation shall have declared but unpaid
dividends outstanding immediately prior to, and in the event of, a conversion of
Series C Preferred Stock (as provided in Section C.5 below), the Corporation
shall, at the option of the Corporation, pay in cash to the holders of Series C
Preferred Stock subject to conversion the full amount of any such dividends or
allow such dividends to be converted into Common Stock in accordance with, and
pursuant to the terms specified in, Section C.5 below.

     3. LIQUIDATION PREFERENCE.

          (a) Unless the holders of a majority of the then outstanding Series C
Preferred Stock, voting as a separate class, agree otherwise, in the event of a
Liquidation Event, distributions to the Corporation's stockholders shall be made
in the following manner:

               (i) Each holder of Series C Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of Common Stock, but PARI PASSU
to any distribution of any of the assets or surplus funds of the Corporation to
the holders of Series A Preferred Stock and Series B Preferred Stock, by reason
of their ownership of such stock, the amount of $2.00 (appropriately adjusted
for stock splits, subdivisions, combinations, consolidations and the like with
respect to such shares) (the "ORIGINAL SERIES C ISSUE PRICE") for each share of
Series C Preferred Stock then held by such holder, plus an amount equal to all
declared but unpaid dividends on such shares of Series C Preferred Stock
(collectively, the "SERIES C PREFERENCE"). If, upon the occurrence of a
Liquidation Event, the assets and funds available to be distributed among the
holders of Series C Preferred Stock shall be insufficient to permit the payment
to such holders of the full Series C Preference, then the entire assets and
funds of the Corporation legally available for distribution to the holders of
Series C Preferred Stock shall be distributed ratably based on the total Series
C Preference due each such holder under this Section C.3(a)(i).

               (ii) After payment has been made to the holders of Series C
Preferred Stock of the full amounts to which they are entitled pursuant to
Section C.3(a)(i) above, and after payment has been made to the holders of
Series A Preferred Stock and Series B Preferred Stock of the full amounts to
which they are entitled, each holder of Class A Common shall be entitled to
receive the Class A Preference. If, upon the occurrence of a Liquidation Event,
the assets and funds available to be distributed among the holders of Class A
Common shall be insufficient to permit the payment to such holders of the full
Class A Preference, then the entire assets and funds of the Corporation legally
available for distribution to the holders of Class A Common shall be distributed
ratably based on the total Class A Preference due each such holder under this
Section C.3(a)(ii).

                                       18
<PAGE>

               (iii) After payment has been made to the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Class A
Common of the full amounts to which they are entitled pursuant to Sections
C.3(a)(i) and (ii) above, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed ratably among the holders of
Common Stock (including Class A Common), Series A Preferred Stock (assuming
conversion of all shares of Series A Preferred Stock), Series B Preferred Stock
(assuming conversion of all shares of Series B Preferred Stock), and Series C
Preferred Stock (assuming conversion of all shares of Series C Preferred Stock).

          (b) Each holder of Preferred Stock shall be deemed to have consented
to distributions made by the Corporation in connection with the repurchase of
shares of Common Stock issued to or held by directors, officers, employees,
consultants or advisors of the Corporation or its subsidiaries upon termination
of their employment or services pursuant to agreements (whether now existing or
hereafter entered into) providing for the right of said repurchase between the
Corporation and such persons.

          (c) The value of securities and property paid or distributed pursuant
to this Section C.3 shall be computed at fair market value at the time of
payment to the Corporation or at the time made available to stockholders, all as
determined by the Board of Directors in the good faith exercise of its
reasonable business judgment, provided that (i) if such securities are listed on
any established stock exchange or a national market system, their fair market
value shall be the closing sales price for such securities as quoted on such
system or exchange (or the largest such exchange) for the date the value is to
be determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication, and (ii) if such securities are regularly
quoted by a recognized securities dealer but selling prices are not reported,
their fair market value shall be the mean between the high bid and low asked
prices for such securities on the date the value is to be determined (or if
there are no quoted prices for such date, then for the last preceding business
day on which there were quoted prices).

          (d) Nothing hereinabove set forth shall affect in any way the right of
each holder of Preferred Stock to convert such shares at any time and from time
to time into Common Stock in accordance with Section C.5 below.

     4. VOTING RIGHTS. Except as otherwise required by law or hereunder, the
holder of each share of Common Stock issued and outstanding shall have one vote
and the holder of each share of Series C Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
such share of Series C Preferred Stock could be converted at the record date for
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or the effective
date of any written consent of stockholders, such votes to be counted together
with all other shares of stock of the Corporation having general voting power
and not separately as a class. Fractional votes by the holders of Series C
Preferred Stock shall not, however, be permitted and any fractional voting
rights shall (after aggregating all shares into which shares of Series C
Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number (with one-half being rounded upward). Holders of Common
Stock and Series C Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the Corporation's Bylaws.

                                       19
<PAGE>

     5. CONVERSION RIGHTS. The holders of Series C Preferred Stock shall have
conversion rights as follows:

          (a) RIGHT TO CONVERT. Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and, if such share is subject to redemption, prior to the
date of termination of the right to convert such share, as determined in Section
C.6 below, at the office of the Corporation or any transfer agent for such
Series C Preferred Stock into such number of fully-paid and non-assessable
shares of Common Stock as is determined by dividing the Original Series C Issue
Price by the then effective Series C Conversion Price for such Series C
Preferred Stock, determined as hereinafter provided, in effect at the time of
conversion. The price at which shares of Common Stock shall be deliverable upon
conversion of Series C Preferred Stock (the "SERIES C CONVERSION PRICE") shall
initially be the Original Series C Issue Price. The initial Series C Conversion
Price shall be subject to adjustment as provided in accordance with Section
C.5(d) below.

          (b) AUTOMATIC CONVERSION. Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Series C Conversion Price upon the earliest of: (i) the listing of the
Corporation's Series C Preferred Stock or Common Stock on any of the Toronto
Stock Exchange, the TSX Venture Exchange, Nasdaq or the Alternative Investment
Market of the London Stock Exchange, or (B) a reverse take-over, merger,
amalgamation, arrangement, take-over bid, insider bid, reorganization, joint
venture, sale of all or substantially all of the Corporation's assets, exchange
of assets or similar transaction or other combination with an issuer listed on
any of the Toronto Stock Exchange, the TSX Venture Exchange, Nasdaq or the
Alternative Investment Market of the London Stock Exchange (each event included
in this Section C.5(b)(i), a "LIQUIDITY EVENT"); (ii) the affirmative vote or
written consent of a majority of the then outstanding shares of Series C
Preferred Stock, and (iii) the conversion into Common Stock of a majority of the
originally issued shares of Series C Preferred Stock (each such event is an
"SERIES C AUTOMATIC CONVERSION"). In the event of a Series C Automatic
Conversion of Series C Preferred Stock upon a public offering as aforesaid, the
person(s) entitled to receive the Common Stock issuable upon such conversion of
such Series C Preferred Stock shall not be deemed to have converted such Series
C Preferred Stock until immediately prior to the closing of such sale of
securities.

          (c) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Series C Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair value
of such fractional share, as determined in good faith by the Board of Directors.
Before any holder of Series C Preferred Stock shall be entitled to convert the
same into full shares of Common Stock and to receive certificates therefor, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for Series C Preferred
Stock and shall give written notice to the Corporation at such office that such
holder elects to convert the same; provided, however, that in the event of a
Series C Automatic Conversion pursuant to Section C.5(b) above, the outstanding
shares of Series C Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, and provided further that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such Series C
Automatic Conversion unless the certificates evidencing such shares of Series C
Preferred Stock are either delivered to the Corporation or its transfer agent,
as provided above, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any

                                       20
<PAGE>

loss incurred by it in connection with such certificates. The Corporation shall,
as soon as practicable after such delivery, or such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C Preferred Stock to be converted, or
in the case of a Series C Automatic Conversion, on the date of closing of the
offering, the date of the affirmative vote or written consent or the date of
conversion of Series C Preferred Stock, as applicable, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.

          (d) ADJUSTMENTS TO CONVERSION PRICE; LIMITED ADJUSTMENT TO ORIGINAL
SERIES C ISSUE PRICE.

               (I) ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS, SUBDIVISIONS,
COMBINATIONS OR CONSOLIDATIONS WITH RESPECT TO COMMON STOCK. In the event the
outstanding shares of Common Stock shall be increased by a stock dividend
payable in Common Stock, stock split, subdivision or other similar transaction
occurring after the filing of this Certificate of Designation into a greater
number of shares of Common Stock, the Series C Conversion Price then in effect
shall, concurrently with the effectiveness of such event, be decreased in
proportion to the percentage increase in the outstanding number of shares of
Common Stock. In the event the outstanding shares of Common Stock shall be
decreased by a reverse stock split, combination, consolidation or other similar
transaction occurring after the filing of this Certificate of Designation into a
lesser number of shares of Common Stock, the Series C Conversion Price then in
effect shall, concurrently with the effectiveness of such event, be increased in
proportion to the percentage decrease in the outstanding number of shares of
Common Stock.

               (II) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the
Corporation at any time or from time to time makes or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section C.5, then and
in each such event provision shall be made so that the holders of Preferred
Stock shall receive upon conversion thereof, the amount of securities of the
Corporation which they would have received had their Preferred Stock been
converted into Common Stock on the date of such event.

               (III) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable upon conversion of Series C Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than a stock split, stock dividend,
subdivision, combination or consolidation of shares, provided for above), the

                                       21
<PAGE>

Series C Conversion Price then in effect shall, concurrently with the
effectiveness of such reclassification, exchange, substitution or other
transaction, be proportionately adjusted such that Series C Preferred Stock
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of such Series C Preferred Stock immediately before that change.

               (IV) LIMITED ADJUSTMENT TO ORIGINAL SERIES C ISSUE PRICE FOR
FAILURE TO OCCUR OF LIQUIDITY EVENT. For purposes of calculating the number of
fully paid and non-assessable shares of Common Stock into which each share of
Series C Preferred Stock shall be convertible, the Original Series C Issue Price
shall be multiplied by: (i) 1.06 in the event a Liquidity Event occurs after
January 26, 2007; (ii) 1.08 in the event a Liquidity Event occurs after February
26, 2007; or (iii) 1.10 in the event a Liquidity Event occurs after March 26,
2007, such that, assuming no adjustments to the Series C Conversion Price
pursuant to this Section C.5(d), each share of Series C Preferred Stock shall be
convertible into 1.06, 1.08 or 1.10 shares of Common Stock, as applicable.
Notwithstanding the foregoing, the adjustment to the Original Series C Issue
Price as set forth in this Section C.5(d)(iv) shall be solely and exclusively
for the purposes of calculating an adjustment to the number of fully paid and
non-assessable shares of Common Stock into which each share of Series C
Preferred Stock shall be convertible, and shall have no effect other than as
explicitly set forth in this Section C.5(d)(iv).

               (V) ADJUSTMENT FOR ISSUANCE AT LESS THAN THE ORIGINAL SERIES C
ISSUE PRICE. If the Corporation shall issue or sell, or is deemed to have issued
or sold pursuant to subsections C.5(d)(v)(A) through C.5(d)(v)(D) below, any
Additional Shares of Common Stock without consideration or for a consideration
per share less than the Series C Conversion Price in effect immediately prior to
the time of such issue or sale, then and in each such case (a "TRIGGER
ISSUANCE"), the then-existing Series C Conversion Price shall be reduced, as of
the close of business on the effective date of the Trigger Issuance, to a price
determined as follows:

         Adjusted Series C Conversion Price = (A x B) + D
                                              -----------
                                                  A+C

               where

               "A" equals the number of shares of Common Stock outstanding
(determined on a fully diluted, as-converted basis), including Additional Shares
of Common Stock (as defined below) deemed to be issued hereunder, immediately
preceding such Trigger Issuance;

               "B" equals the Series C Conversion Price in effect immediately
preceding such Trigger Issuance;

               "C" equals the number of Additional Shares of Common Stock issued
or deemed issued hereunder as a result of the Trigger Issuance; and

                                       22
<PAGE>

               "D" equals the aggregate consideration, if any, received or
deemed to be received by the Corporation upon such Trigger Issuance;

provided, however, that in no event shall the Series C Conversion Price after
giving effect to such Trigger Issuance be greater than the Series C Conversion
Price in effect prior to such Trigger Issuance.

For purposes of this subsection C.5(d)(v), "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued by the Corporation or deemed to be
issued as set forth below, excluding any Excluded Stock (as hereinafter
defined):

               (A) Issuances of Rights or Options. In case at any time the
Corporation shall in any manner grant (directly and not by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "OPTIONS" and such convertible or exchangeable
stock or securities being called "CONVERTIBLE SECURITIES") whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total amount, if any,
received or receivable by the Corporation as consideration for the granting of
such Options, plus (y) the aggregate amount of additional consideration payable
to the Corporation upon the exercise of all such Options, plus (z), in the case
of such Options which relate to Convertible Securities, the aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Series C Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued for such price per share as of the
date of granting of such Options or the issuance of such Convertible Securities
and thereafter shall be deemed to be outstanding for purposes of adjusting the
Series C Conversion Price. Except as otherwise provided in subsection
C.5(d)(v)(C), no adjustment of the Series C Conversion Price shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.

               (B) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (directly and not by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus (y) the aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by (ii) the

                                       23
<PAGE>

total number of shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities) shall be less than the Series C Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding for purposes of
adjusting the Series C Conversion Price, provided that (a) except as otherwise
provided in subsection C.5(d)(v)(C), no adjustment of the Series C Conversion
Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) no further
adjustment of the Series C Conversion Price shall be made by reason of the issue
or sale of Convertible Securities upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Series C Conversion
Price have been made pursuant to the other provisions of Section C.5.

               (C) Change in Option Price or Conversion Rate. Upon the happening
of any of the following events, namely, if the purchase price provided for in
any Option referred to in subsection C.5(d)(v)(A) hereof, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections C.5(d)(v)(A) or 5(d)(v)(B), or
the rate at which Convertible Securities referred to in subsections C.5(d)(v)(A)
or 5(d)(v)(B) are convertible into or exchangeable for Common Stock shall change
at any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Series C Conversion Price
in effect at the time of such event shall forthwith be readjusted to the Series
C Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. On the termination of any Option for
which any adjustment was made pursuant to this subsection C.5(d)(v) or any right
to convert or exchange Convertible Securities for which any adjustment was made
pursuant to this subsection C.5(d)(v) (including without limitation upon the
redemption or purchase for consideration of such Convertible Securities by the
Corporation), the Series C Conversion Price then in effect hereunder shall
forthwith be changed to the Series C Conversion Price which would have been in
effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.

               EXCLUDED STOCK means:

               (i) any issuance for which an adjustment in the Series C
Conversion Price may be made pursuant to the other provisions of this Section
C.5;

               (ii) any issuance to employees, consultants, officers or
directors of the Corporation or any of its subsidiaries pursuant to any stock or
option plan duly adopted by the Board of Directors of the Corporation;

               (iii) any issuance of Options or Convertible Securities issued
prior to the date hereof, provided that such securities have not been amended
since the date hereof; or

                                       24
<PAGE>

               (iv) capital stock, Options or Convertible Securities issued to a
lender in connection with the provision of credit to the Corporation or any of
its subsidiaries.

          (e) NO IMPAIRMENT. Except as expressly provided in this Certificate of
Designation, the Corporation shall not, by amendment of its Articles of
Incorporation or through any voluntary liquidation, dissolution, winding up,
transfer of assets, consolidation, corporate reorganization, merger or issue or
sale of securities, or through any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but shall at all times in good faith
assist in the carrying out of all the provisions of this Section C.5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Preferred Stock against impairment.

          (f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series C Conversion Price of Series C
Preferred Stock, pursuant to this Section C.5, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request of any holder of Series C Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Series C Conversion Price for
Series C Preferred Stock at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Series C Preferred Stock.

          (g) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes (other than income taxes) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.

          (h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its Articles of
Incorporation.

          (i) STATUS OF CONVERTED OR REDEEMED PREFERRED STOCK. In the event that
any shares of Series C Preferred Stock shall be converted pursuant to this
Section C.5 or redeemed, the shares so converted or redeemed shall resume the
status of authorized but unissued shares of Preferred Stock undesignated as to
series.

                                       25
<PAGE>

     6. REDEMPTION RIGHTS.

          (a) At the election in writing by the holders of a majority of the
then outstanding shares of Series C Preferred Stock delivered to the Corporation
at any time after the fifth anniversary of the Series C Original Issue Date, the
Corporation shall redeem, on the terms and conditions stated herein, out of
funds legally available therefor, all of the outstanding Series C Preferred
Stock in three annual installments beginning on the first anniversary of the
Corporation's receipt of the request for redemption from the holders of a
majority of the then outstanding shares of Series C Preferred Stock (the "SERIES
C INITIAL REDEMPTION DATE"), and continuing thereafter on the first and second
anniversaries of the Series C Initial Redemption Date (each a "SERIES C
REDEMPTION DATE"), by paying in cash therefor a sum equal to the greater of the
Original Series C Issue Price or the "Series C Fair Market Value" (as defined
below) for each share of Series C Preferred Stock, plus all accrued but unpaid
dividends thereon (the "SERIES C REDEMPTION PRICE"). The number of shares of
Series C Preferred Stock that the Corporation shall be required to redeem under
this Section C.6(a) on any one Series C Redemption Date shall be equal to the
amount determined by dividing (i) the aggregate number of shares of Series C
Preferred Stock outstanding immediately prior to the Series C Redemption Date by
(ii) the number of remaining Series C Redemption Dates (including the Series C
Redemption Date to which such calculation applies). For purposes of this
provision, the "SERIES C FAIR MARKET VALUE" shall mean the fair market value per
share of Series C Preferred Stock agreed upon by the Corporation and by the
holders of a majority of the then outstanding shares of Series C Preferred Stock
or, in the absence of such agreement, the fair market value of each share of
Series C Preferred Stock as determined by an independent third party valuator
appointed by the Corporation and reasonably acceptable to the holders of a
majority of the then outstanding shares of Series C Preferred Stock.

          (b) In the event that the Corporation is unable to redeem the full
number of shares of Series C Preferred Stock to be redeemed on any Series C
Redemption Date, the shares not redeemed shall be redeemed by the Corporation as
provided in this Section C.6 as soon as practicable after funds are legally
available therefor. Any redemption effected pursuant to this Section C.6(b)
shall be made ratably among the holders of Series C Preferred Stock in
proportion to the aggregate Series C Redemption Price to which each holder is
entitled under subsection (a) of this Section C.6. The redemption rights
afforded the holders of Series C Preferred Stock pursuant to this Section C6
shall be PRO RATA with such redemption rights provided to holders of Series A
Preferred Stock and Series B Preferred Stock.

          (c) If the holders of Series C Preferred Stock have elected to have
the shares of Series C Preferred Stock redeemed as provided in subsections (a)
and (b) of this Section C.6, then at least 30 but no more than 60 days prior to
each Series C Redemption Date, the Corporation shall give written notice via
personal delivery or first class mail, postage prepaid, to all holders of
outstanding Series C Preferred Stock whose shares are being redeemed, at the
address last shown on the records of the Corporation for such holder, stating
the applicable Series C Redemption Date, Series C Redemption Price and Series C
Conversion Price for such shares and the date of termination of the right to
convert (which date shall not be earlier than 30 days after the written notice
by the Corporation has been given), and the Corporation shall call upon such
holder to surrender to the Corporation on such Series C Redemption Date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On or after the Series C Redemption Date
stated in such notice, the holder of each share of Series C Preferred Stock
called for redemption shall surrender the certificate evidencing such shares to
the Corporation at the place designated in such notice and shall thereupon be

                                       26
<PAGE>

entitled to receive payment of the Series C Redemption Price for the shares
surrendered. If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If such notice of redemption shall have been duly given, and
if on such Series C Redemption Date funds necessary for the redemption shall be
available therefor, then, as to any certificates evidencing any Series C
Preferred Stock so called for redemption and not surrendered, all rights of the
holders of such shares so called for redemption and not surrendered shall cease
with respect to such shares, except only the right of the holders to receive the
Series C Redemption Price for Series C Preferred Stock called for redemption
which they hold, without interest, upon surrender of their certificates
therefor.

          (d) Notwithstanding anything herein to the contrary, if, on or prior
to any Series C Redemption Date (and after a redemption election has been made
pursuant to this Section C.6), the Corporation deposits, with any bank or trust
company in the State of California having aggregate capital and surplus in
excess of $100,000,000, as a trust fund, a sum sufficient to redeem on such
Series C Redemption Date the shares called for redemption, with irrevocable
instructions and authority to the bank or trust company to give the notice of
redemption thereof (or to complete the giving of such notice if theretofore
commenced) and to pay, on or after the Series C Redemption Date or prior
thereto, the Series C Redemption Price of the shares to their respective holders
upon the surrender of their share certificates, then from and after the date of
the deposit (although prior to such Series C Redemption Date), the shares so
called for redemption on such Series C Redemption Date (but not any subsequent
Series C Redemption Date) shall be redeemed. The deposit of such sum shall
constitute full payment of such shares to their holders and from and after the
date of the deposit such shares shall no longer be outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares and shall
have no rights with respect thereto except the right to receive from the bank or
trust company payment of the Series C Redemption Price for Series C Preferred
Stock called for redemption on such Series C Redemption Date, without interest,
upon the surrender of their certificates therefor and the right to convert said
shares as provided herein at any time up to but not after the close of business
on the fifth day prior to the Series C Redemption Date of such shares (which
conversion date shall not be earlier than 30 days after the written notice of
redemption has been given). Any monies so deposited on account of the Series C
Redemption Price of Series C Preferred Stock converted into Common Stock
subsequent to the making of such deposit shall be repaid to the Corporation
forthwith upon the conversion of such Series C Preferred Stock. Any interest
accrued on any funds so deposited shall be the property of, and paid to, the
Corporation. If the holders of Series C Preferred Stock so called for redemption
shall not, at the end of two years after the applicable Series C Redemption
Date, have claimed any funds so deposited, such bank or trust company shall
thereupon pay over to the Corporation such unclaimed funds, and such bank or
trust company shall thereafter be relieved of all responsibility in respect
thereof to such holders and such holders shall look only to the Corporation for
payment of the Series C Redemption Price for Series C Preferred Stock called for
redemption which they hold.

                                       27
<PAGE>

     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 for Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock in accordance with the foregoing resolution and the provisions
of Nevada law.

     We declare, under penalty of perjury, that the matters set forth in this
certificate are true and correct of our own knowledge.

     Date: April ___, 2007

     ------------------------------------
     JUSTIN F. BECKETT,
     President

     ------------------------------------
     MICHAEL D. RAEFORD, Jr.,
     Secretary

                                       28

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