Document:

EX-10.1

 

Exhibit 10.1

 

 

AMERICAN GREETINGS CORPORATION

SECOND AMENDED AND RESTATED

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Effective October 31, 2007)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE I
	 	INTRODUCTION	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE II
	 	DEFINITIONS	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE III
	 	PLAN PARTICIPATION	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE IV
	 	CALCULATION, FORM OF A PARTICIPANT’S ACCRUED BENEFIT	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE V
	 	FORMS OF RETIREMENT; ELIGIBILITY CONDITIONS	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE VI
	 	DISTRIBUTION OF BENEFITS; LIMITATIONS	 	 	21	 
	 
	 	 	 	 	 	 
	ARTICLE VII
	 	DEATH BENEFIT	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE VIII
	 	ADMINISTRATION; PLAN MODIFICATION	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE IX
	 	GENERAL PROVISIONS	 	 	33	 

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ARTICLE I

INTRODUCTION

     WHEREAS, American Greetings Corporation currently maintains the American Greetings Corporation
Supplemental Executive Retirement Plan (the “Plan”), which was originally adopted effective March
1, 1986, and that has subsequently been amended and restated effective March 1, 2004 (the “First
Amended and Restated Plan”), and further amended effective January 1, 2005 by Amendment No. 1
thereto (“Amendment No. 1”); and

     WHEREAS, American Greetings Corporation desires to amend and restate the First Amended and
Restated Plan to incorporate the provisions of Amendment No. 1 and further amend the Plan; and

     WHEREAS, Section 8.4 of the Plan permits the Company to amend the Plan at any time, by action
taken by its Board of Directors, and acting in its sole discretion;

	1.1	 	Name Of Plan. This Plan shall be known as the American Greetings Corporation Second
Amended and Restated Supplemental Executive Retirement Plan (Effective October 31, 2007). It
constitutes a full and complete amendment and restatement of, and continuation of, the
American Greetings Corporation Supplemental Executive Retirement Plan, effective as of March
1, 1986, as amended and restated effective March 1, 2004 by the First Amended and Restated
Plan, and as further amended by Amendment No. 1 thereto effective January 1, 2005.
	 
	1.2	 	Purpose. The purpose of the Plan is to provide any Executive designated to
participate in the Plan with a retirement benefit that supplements those benefits provided
under any other pension, retirement or profit-sharing plan maintained by American Greetings
Corporation. The Plan is being maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees of the Company
(as defined herein) on an unfunded basis, within the meaning of section 201(2) of the Employee
Retirement Income Security Act, as amended (“ERISA”).

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	1.3	 	Rights of Former Employees. Except as otherwise specifically provided herein the terms
of the Plan, as in effect immediately prior to March 1, 2004 (as amended by Amendment No. 1), shall
control and be used exclusively to determine the rights and duties of any Executive or former
Executive who separated from employment by the Company prior to the March 1, 2004, the effective
date of the First Amended and Restated Plan. The terms of the Plan as in effect as of October 31,
2007, the effective date of this amendment and restatement, shall control and be used exclusively
to determine the rights and duties of any Executive or former Executive who separated from
employment by the Company on or after March 1, 2004 but prior to October 31, 2007.

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ARTICLE II

DEFINITIONS

     The following words and phrases, where used in the Plan, shall have the following meanings,
unless a different meaning is plainly required by the context.

	2.1	 	Accrued Benefit shall have the meaning set forth in Article IV hereof.
	 
	2.2	 	Affiliate means any limited liability company, general partnership, limited
partnership, business trust, or other non-corporate organization with respect to which
American Greetings Corporation directly or indirectly owns at least fifty percent (50%) of
either the capital or profits interest therein, and directly or indirectly has the power and
authority to select and appoint, and where applicable remove, such organization’s managers,
general partner(s) and/or trustees (as applicable).
	 
	2.3	 	Assumed Bonus Percentage shall mean, for any Fiscal Year, 50% of the Participant’s
target bonus under the Company’s key management incentive plan, for which the Participant is
eligible during any Fiscal Year, based on the Participant’s job classification. For this
purpose, the schedule set forth by the Company’s Board for the various levels of job
classifications covered by the Company’s key management incentive plan shall be used to
calculate such awards.
	 
	2.4	 	Beneficiary shall mean any person or persons designated by the Executive to receive
payments hereunder in the event of such Executive’s death and shall include any person
designated by such person or persons designated by such beneficiary (or subsequent
beneficiary, as applicable) to receive payments hereunder in the event of such beneficiary’s
(or such subsequent beneficiary’s) death. If an Executive or, as applicable, any Beneficiary
of the Executive or of a Beneficiary fails to designate one or more persons as his
Beneficiary, or no such “beneficiary” designation is held to be lawful and in effect, any Plan
benefit becoming due and payable to a Beneficiary hereunder shall be paid over to the estate
of such Participant, or, the estate of such Beneficiary, as the case may be. If the
Beneficiary designated by an individual is, at the time of such designation, the individual’s
lawful spouse, and the individual and such spouse subsequently become

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divorced or legally separated, such designation shall be deemed invalid as of the effective
date of such divorce or legal separation, unless (i) the individual thereafter files a new
beneficiary designation again naming the spouse or former spouse as Beneficiary or (ii)
continued designation of the spouse or former spouse as the individual’s death beneficiary
under this Plan is expressly provided for in the terms of a QDRO (as defined in Section
9.3(b)).

	2.5	 	Board shall mean the board of directors of AGCo (as defined herein) or the Committee;
provided, that if the Board designates a person or other committee to act specifically on
matters relevant to this Plan, such person or committee shall act (and have the power and
authority to act) as the Board with respect to such matters.
	 
	2.6	 	Change in Control shall mean the occurrence of any of the following events,
individually or in combination:

	 	(a)	 	AGCo is merged or consolidated or reorganized into or with another corporation
or other legal person, and as a result of such merger, consolidation or reorganization
less than a majority of the combined voting power of the then-outstanding securities of
such corporation or person immediately after such transition is held in the aggregate
by the holders of AGCo’s common shares immediately prior to such transaction;
	 
	 	(b)	 	AGCo sells or otherwise transfers all or substantially all of its assets to any
other corporation or other legal person, and less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the aggregate by the holders of
AGCo’s common shares immediately prior to such sale or transfer;
	 
	 	(c)	 	There is a report filed on Schedule 13D or Schedule TO (or any successor
schedule, form or report), each as promulgated pursuant to the Securities Exchange Act
of 1934 (the “Exchange Act”), disclosing that any person (as the term “person” is used
in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule
or regulation promulgated under the 

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	 		 	Exchange Act) of securities representing 20% or more of the voting power of AGCo’s
common shares;
	 
	 	(d)	 	AGCo files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule
14A (or any successor schedule, form or report or item therein) that a change in
control of AGCo has or may have occurred or will or may occur in the future pursuant to
any then-existing contract or transaction; or
	 
	 	(e)	 	If during any period of two consecutive years, individuals who at the beginning
of any such period constitute the directors of AGCo cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination for election by
AGCo’s shareholders, of each director of AGCo first elected during such period was
approved by a vote of at least two-thirds of the directors of AGCo then still in office
who were directors of AGCo at the beginning of any such period.

Notwithstanding the foregoing provisions of Section 12c and (d) above, a “Change in Control”
shall not be deemed to have occurred for purposes of this Plan (i) solely because (A) AGCo;
(B) a Subsidiary; (C) any AGCo-sponsored employee stock ownership plan or other employee
benefit plan of AGCo; or (D) any family member of Jacob Sapirstein (including lineal
descendants, spouses of such descendants, the lineal descendants of any such spouses, the
spouse of any such spouses’ lineal descendants and trusts (including voting trusts) either
files or becomes obligated to file a report or proxy statement under or in responses to
Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares, whether in excess of 20% of the voting power of AGCo’s common shares or otherwise,
or because AGCo reports that a Change in Control of AGCo has or may have occurred or will or
may occur in the future by reason of such beneficial ownership or (ii) solely because of a
Change in Control of any Subsidiary.

	2.7	 	Committee shall mean the Compensation & Management Development Committee of the
Board.

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	2.8	 	Company shall mean American Greetings Corporation, an Ohio corporation (“AGCo”) and
its controlled Subsidiaries and Affiliates; provided , that for Plan Years commencing
after December 31, 2004, such term shall also include (to the extent not previously included
in the preceding definition) any corporation, limited liability company, partnership, or other
business organization which is part of a “controlled group of corporations” that includes AGCo
(within the meaning of Code Section 414(b) and related regulations), or is “under common
control” with AGCo (within the meaning of Code Section 414(c) and related regulations).
	 
	2.9	 	Compensation shall mean, for any calendar year preceding the calendar year in which
an Executive who is a Participant attains Normal Retirement Date (or Late Retirement Date,
where applicable), the annual base pay received by such Participant from the Company while a
Participant. In the event an Executive who is also a Participant becomes disabled and is
eligible for and receiving benefits under the Long Term Disability Plan, such Participant’s
participation in the Plan shall be deemed to continue and, for Plan purposes, the
“Compensation” attributable to such Participant shall be deemed to continue until the close of
the calendar year coincident with or next preceding the date such Participant no longer
receives such disability income benefits.
	 
	2.10	 	Effective Date shall mean October 31, 2007. The effective date of the Plan, in
effect prior to this amendment and restatement, was March 1, 1986 and, with respect to the
First Amended and Restated Plan, March 1, 2004.
	 
	2.11	 	Executive shall mean an employee of AGCo, or of a Subsidiary, or of an Affiliate, who
is either a named executive officer, a senior vice president, or a vice president, of such
Company; provided , that such term shall specifically exclude any individual who is
(or, is classified as) a non-resident alien of the United States during any period(s) such
individual performs services outside of the United States.
	 
	2.12	 	Final Average Compensation shall mean an amount, expressed in dollars and cents,
determined by the sum of (a) and (b), where: (a) is the average of a Participant’s two (2)
calendar years of Compensation that provide the highest average, and (b) is the product
derived from multiplying (i) that amount determined in part
(a) hereof, by (ii) that

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		 	average of such Participant’s two (2) Fiscal Year Assumed Bonus Percentages which provide
the highest average; provided , that for this purpose, if a Participant has only one
Assumed Bonus Percentage, such Percentage will be considered to be the average.
	 
	2.13	 	Fiscal Year shall mean that period which begins on March 1 of each year and ends on
the last day of February of the ensuing year.
	 
	2.14	 	Long Term Disability Plan shall mean the American Greetings Corporation Long Term
Disability Plan, an employee welfare benefit plan sponsored and maintained by the Company to
provide long-term disability income benefits to plan-covered employees.
	 
	2.15	 	Participant shall mean any Executive who is, or becomes, eligible to participate in
the Plan in accordance with the provisions of Sections 3.1 or 3.2 hereof; provided ,
that such Executive shall continue as a Participant hereunder only so long as such Executive
remains eligible to participate in the Plan and has not had such participation terminated or
suspended in accordance with Section 3.3 hereof. An Executive, or other individual, who was a
Participant shall remain a Participant so long as such Executive or individual has a vested
interest in the Plan, without regard to whether such Executive or individual is then employed
by the Company.
	 
	2.16	 	Plan shall mean the American Greetings Corporation Second Amended and Restated
Supplemental Executive Retirement Plan (Effective October 31, 2007), as set forth in this
instrument and as further amended from time to time.
	 
	2.17	 	Plan Administrator shall mean that person identified in Section 8.1 hereof.
	 
	2.18	 	Plan Benefit shall mean the monthly benefit amount a Participant is eligible to
receive pursuant to Article IV, calculated in accordance with Article V, and payable in the
form of a monthly annuity for life (with 180 months, guaranteed) in accordance with (and
limited by) Article VI and the remaining provisions of the Plan.
	 
	2.19	 	Service shall mean that period of time an Executive is in the employ of the Company,
commencing with such Executive’s date of hire and ending with the date such Executive

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		 	separates from Company employment, as further determined in accordance with the following
rules:

	 	(a)	 	Service shall specifically include any period(s) when an Executive is on a
medical, military, family or personal leave of absence that either has been approved by
the Company or is required by law to be recognized as employment service for seniority
and benefit plan purposes.
	 
	 	(b)	 	Service shall specifically include any period(s) of time an Executive (who is
also a Plan Participant) is disabled and receiving benefits under the Long Term
Disability Plan, even though no longer classified as a Company employee.
	 
	 	(c)	 	Periods of employment by a predecessor-in-interest to the Company or by a
predecessor-in-interest to a Subsidiary or an Affiliate, shall be recognized as Service
only where (and, to the extent) recognized by the Board by written action.

	2.20	 	Subsidiary shall mean any corporation at least eighty percent (80%) of whose equity
securities (determined either by voting power or by interest in profits) are directly or
indirectly owned by American Greetings Corporation.
	 
	2.21	 	Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Any
reference to a Code section shall include any regulations, notices, or rulings promulgated
thereunder.
	 
	2.22	 	409A Disability shall mean a Participant’s absence from employment with the Company
which: (i) is due to his or her inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less than twelve
(12) months; or (ii) results from a medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, and causes such Participant to receive income replacement
benefits for a period of not less than three (3) months under an accident and health plan
covering the Company’s employees.

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	 	 	Notwithstanding the foregoing, if the Company’s Long Term Disability Plan defines a
Participant’s disability in accordance with the foregoing or, in the alternative, as
determined by the Social Security Administration, then the definition of ‘409A Disability’
shall have the same meaning as the definition of ‘disability’ provided for under the
Company’s Long Term Disability Plan.
	 
	2.23	 	Specified Employee shall mean any Participant for whom the following conditions, (a)
and (b), are satisfied:

	 	(a)	 	at any time during the twelve (12) month period ending on the December 31st preceding
the calendar year in which a given distribution is to occur, such Participant:

	 	(i)	 	is one of the top fifty (50) compensated officers of AGCo and has annual
“W-2” compensation of at least One Hundred Thirty Thousand Dollars
($130,000); or
	 
	 	(ii)	 	owns more than five percent (5%) of AGCo’s stock; or
	 
	 	(iii)	 	owns more than one percent (1%) of AGCo’s stock and has annual “W-2”
compensation in excess of One Hundred Fifty Thousand Dollars ($150,000); and

	 	(b)	 	AGCo’s stock is publicly traded on the date such Participant Separates from Service.

In applying the above rules, the following shall apply: the foregoing compensation amounts
shall be adjusted from time to time in accordance with the cost-of-living adjustments under
Code Section 416(i); and an individual who qualifies as a Specified Employee under this
Section 2.23 shall be treated as a Specified Employee for the twelve (12) month period
beginning on the April 1st next following the date he or she so qualifies.

	2.24	 	Separation from Service or “Separates from Service” shall mean a Participant’s
termination from employment with the Company on account of such Participant’s death, permanent
and total disability, retirement, or other such termination of employment. A Participant will
not be deemed to have experienced a Separation from Service if such 

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		 	Participant is on military leave, sick leave, or other bona fide leave of absence, to the
extent such leave does not exceed a period of six (6) months or, if longer, such longer
period of time as is protected by either statute or contract. A Participant will not be
deemed to have experienced a Separation from Service, if such Participant continues to
provide “significant services” to the Company. For purposes of the preceding sentence, a
Participant will be considered to provide “significant services” if such Participant
provides continuing services that average more than twenty percent (20%) of the services
provided by such Participant to the Company during the immediately preceding three (3) full
calendar year of employment.

In this document, unless the context clearly requires otherwise, the singular shall include
the plural and the masculine gender shall include the feminine.

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ARTICLE III

PLAN PARTICIPATION

	3.1	 	Automatic Participation, As Of The Effective Date. Each Executive who was a
Participant in the Plan on the day before the Effective Date of this amendment and restatement
shall automatically continue as a Participant, as of the Effective Date.
	 
	3.2	 	Participation After The Effective Date; New Entrants. Any Executive who does not
automatically become a Participant as of the Effective Date shall become a Participant on any
date, subsequent to the Effective Date, that such Executive is designated as eligible to
participate in an action taken by the Board. Where a Board action designates an Executive as
eligible to participate in the Plan without also specifying a date for commencing such
participation, the date such Board action was taken shall constitute the commencement date.
	 
	3.3	 	Termination Or Suspension Of Participation; Renewed Participation. A Participant’s
continued participation in the Plan may be discontinued at any time by action of the Board, in
accordance with and subject to the following rules:

	 	(a)	 	In the event a Participant’s participation herein is discontinued, the terms of
such discontinuation shall be set forth in writing and a copy of such terms shall be
provided to such Participant, the Plan Administrator, and the Committee.
	 
	 	(b)	 	Subject to the provisions of Article VI hereof, if at the time a Participant
discontinues participation hereunder such Participant has a right to a Plan benefit
based on the terms of the Plan then in effect, said right shall not be forfeitable and
such Participant shall be entitled to receive such Plan benefit, based on and in
accordance with the terms of the Plan in effect at the time of such discontinuation.
	 
	 	(c)	 	In the event a Participant whose Plan participation has been discontinued is
again designated for participation in the Plan in accordance with Section 3.2 hereof,
the Board may specify the terms and conditions under which such Participant’s
Compensation and Service (and previously-determined Plan Benefit, if any) are to be
taken into account when determining such Participant’s Plan rights hereunder.

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In the absence of any direction from the Board, such Participant shall be considered
a newly-eligible Participant for all Plan purposes (other than with respect to any
Plan Benefit such Participant already has qualified to receive); provided, that such
Participant’s Service shall only be used once.

	 	(d)	 	Notwithstanding the foregoing, in the event that a Participant commences
employment with a Subsidiary or Affiliate that has its principal place of business
located outside of the United States, but otherwise does not Separate from Service,
such Participant will cease being an active Participant and stop accruing any benefit
in the Plan until and unless such Participant (i) again performs services as an
employee for AGCo, a Subsidiary or an Affiliate located within the United States, and
(ii) is designated as an Executive eligible to participate in the Plan.

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ARTICLE IV

CALCULATION, FORM OF PARTICIPANT’S ACCRUED BENEFIT

	4.1	 	Form of Accrued Benefit. A Participant’s accrued benefit hereunder shall consist of
a monthly benefit. Where paid as a Normal Retirement Benefit, such monthly benefit shall
commence payment on the first day of the calendar month coincident with or next following the
date such Participant attains his or her Normal Retirement Age, and shall be paid to such
Participant as an annuity for life (with 180 monthly payments, guaranteed) (the “Accrued
Benefit”). Where paid as a Late Retirement Benefit, such monthly benefit shall commence
payment on the first day of the calendar month coincident with or next following the date such
Participant Separates from Service, and shall be paid to such Participant as an annuity for
life (with 180 monthly payments, guaranteed). Notwithstanding the foregoing, in the event the
Participant is a Specified Employee, such Participant’s Normal Retirement Benefit or Late
Retirement Benefit, as applicable, shall not commence payment until six (6) months after such
Participant’s Separation from Service.
	 
	4.2	 	Calculation of Accrued Benefit. A Participant’s Accrued Benefit, when payable in its
normal form and commencing as provided in Section 4.1 hereof, is equal in amount to
one-twelfth (1/12th) of the product of (a) times (b), where:

	 	(a)	 	is equal to one percent (1%) of such Participant’s Final Average Compensation;
and
	 
	 	(b)	 	consists of such Participant’s years of Service, calculated to the nearest
attained calendar month, but in any event subject to a maximum of twenty (20) years of
Service.

	4.3	 	Certain Compensation, Service To Be Disregarded. Notwithstanding any contrary Plan
provision, when calculating a Participant’s Accrued Benefit there shall be disregarded (a) any
Compensation received by such Participant that is attributable to any period prior to the date
such Participant first commences participation hereunder as a Participant, and (b) any
Compensation paid to such Participant and any Service rendered by such Participant for any
Fiscal Year (or, fraction thereof) in which such Participant is

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	 	 	determined by the Committee (acting in its reasonable discretion, following consultation
with legal counsel) to have violated Section 304 or Section 306 of the Sarbanes-Oxley Act
(15 U.S.C. §§7243, 7244), or other applicable law (including, without limitation, any
otherwise-applicable faithless servant doctrine).

	4.4	 	Payments to Specified Employees. Notwithstanding anything herein to the contrary, in
the event the commencement of the Normal Retirement Benefit, Late Retirement Benefit, or Early
Retirement Benefit to a Participant is delayed until six (6) months after such Participant’s
Separation from Service because the Participant is a Specified Employee, for purpose of
calculating the amount of the first payment due to the Participant, such amount shall include
a total of seven (7) monthly payments calculated in accordance with the Plan (i.e., the normal
payment scheduled to occur in the seventh month after commencement of the benefit, plus the
aggregate of the first six (6) months of payments that were delayed), and shall be considered
payment of the first seven (7) of the one hundred eighty (180) monthly guaranteed payments
contemplated herein.
	 
	4.5	 	Special Right to Elect to Receive Lump Sum

	 	(a)	 	Eligibility: Those Participants who as of October 31, 2007 (i) are
retired and in pay status; regardless of whether due to Normal, Late or Early
Retirement as provided for in Article V; or (ii) have a right to receive a Deferred
Vested Benefit under Section 5.3, shall have the right to make the special election
described in this Section 4.5. A Participant who meets the eligibility criteria set
forth in this Section 4.5(a) shall be referred to herein as an “Eligible Participant”.
	 
	 	(b)	 	Benefit To Be Received If The Election Is Made: Any Eligible
Participant who makes the election provided in this Section 4.5 shall receive a lump
sum amount that is the actuarial equivalent of his or her Plan Benefit calculated by
using the RP 2000 Mortality Table for males projected to 2010 and an interest rate of
9%. The lump sum actuarial equivalence shall be calculated as of March 1, 2008 as
follows: (i) the lump sum for any retired Eligible Participant who has been receiving
payment of his or her Plan Benefit shall be based on the projected remaining payments;
or (ii) the lump sum for a deferred vested Eligible

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Participant shall be based on the Plan Benefit assuming the Participant would have
elected to commence his or her Plan Benefit at the later of March 1, 2008 and the
first of the month following his or her 55th birthday. In all cases, any Eligible
Participant who makes the election provided by this Section 4.5 shall receive any
monthly payments that would be due under the Plan during 2007, but shall not receive
any monthly payments that would be due under the Plan during 2008.

Any lump sum payment due under this Section 4.5 shall be made on a date selected by
the Plan Administrator between February 15, 2008 and March 15, 2008; however, in all
events payment will be made no later than March 15, 2008. Any such payment made
during this period, regardless of whether on February 15, 2008 or March 15, 2008,
shall not be further adjusted or recalculated.

	 	(c)	 	The Election: Any Eligible Participant who elects this lump sum
benefit is electing to receive the lump sum in lieu of receiving his or her Plan
Benefit in the normal annuity form of payment and is waiving any and all other rights
that the Participant may have under the Plan. The Company is not waiving the
protections provided to it under Section 6.3 and the Participant who elects the lump
sum benefit shall be subject to those same restrictions provided in Section 6.3. If
the Committee as provided in the last paragraph of Section 6.3 determines that there
are any violations of those restrictions of Section 6.3 subsequent to payment of the
lump sum, the Company may demand repayment to the Company of the lump sum benefit
received.

An Eligible Participant shall make the election on such forms and in such manner as
the established by the Plan Administrator. Any election under this special program
must be made by such time as established by the Plan Administrator, but in no event
shall the election be made after December 31, 2007 and such election shall be
irrevocable as specified by the Plan Administrator.

	 	(d)	 	Beneficiary Death Benefit: If an Eligible Participant who makes the
election provided by this Amendment dies prior to payment of the lump sum amount as contemplated herein, this election will be null and void and any death benefit will
be determined under Article VII.

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	 	(e)	 	Administration: Except as specifically provided for in this Section
4.5, the administration and general provisions of Articles VIII and IX shall apply to
this Amendment. As provided in Section 9.7, any lump sum payment shall be subject to
applicable tax withholding and as provided in Section 9.9, there are no tax guarantees,
representations or warranties regarding the tax consequences of this Plan, or the
offering of the election option or payment pursuant to an election under this Section
4.5.

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ARTICLE V

FORMS OF RETIREMENT; ELIGIBILITY CONDITIONS

	5.1	 	Normal/Late Retirement Benefit. A Participant shall receive either a Normal
Retirement Benefit or a Late Retirement Benefit, as applicable, commencing as of the first of
the month next following the Participant’s Separation from Service upon attaining his or her
Normal Retirement Age (“Normal Retirement”) or next following his or her Separation from
Service in any month subsequent to the month in which he or she attains Normal Retirement Age
(“Late Retirement”). For purposes of this Plan, Normal Retirement Age shall mean a
Participant’s attainment of age sixty-five (65). The Participant’s Normal Retirement Benefit
or Late Retirement Benefit, as applicable, shall consist of his or her Accrued Benefit,
determined as of the date of his Separation from Service.

Notwithstanding the foregoing, in the event the Participant is a Specified Employee, such
Participant’s Normal Retirement Benefit or Late Retirement Benefit, as applicable, shall not
commence payment until six (6) months after such Participant’s Separation from Service.

	5.2	 	Early Retirement Benefit. A Participant who has not attained age 65 shall receive an
Early Retirement Benefit under the Plan, if such Participant Separates from Service and
satisfies the criteria for obtaining an Early Retirement Benefit, as set forth below.

	 	(a)	 	A Participant shall be eligible to receive an Early Retirement Benefit as
follows:

	 	(i)	 	if such Participant has attained age 55 on or
before the Participant Separates from Service and as of the date that
the Participant Separates from Service, such Participant has completed
at least ten (10) years of Service (at least five (5) of which must be
completed while a Participant), then such Participant will receive an
Early Retirement Benefit on or after the first day of the month
coinciding with or next following

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	 	(1)	 	such Separation from Service; or
	 
	 	(2)	 	any date certain, designated by
the Board in writing by agreement with such Participant within
thirty (30) days of such Participant first becoming eligible to
participate in the Plan.

	 	(ii)	 	if such Participant has not attained the age of
fifty five (55) but has attained the age of forty-five (45), then if
such Participant Separates from Service and has vested in his or her
Accrued Benefit in accordance with Section 5.3, then such Participant
will receive an Early Retirement Benefit on the first day of the month
coinciding with or next following:

	 	(1)	 	the date such Participant attains
age fifty-five (55) and has completed at least ten (10) years of
Service (at least five (5) of which must be completed while a
Participant); or
	 
	 	(2)	 	any date certain, designated by
the Board in writing by agreement with such Participant within
thirty (30) days of such Participant first becoming eligible to
participate in the Plan.

Notwithstanding the foregoing, in the event a Participant is a Specified Employee and he or
she is eligible for an Early Retirement Benefit due to his or her Separation from Service,
such Participant’s Early Retirement Benefit shall not commence payment until six (6) months
after such Participant’s Separation from Service.

The Early Retirement Benefit payable to a Participant who retires under this Section 5.2
shall be in an amount equal to such Participant’s Accrued Benefit, determined as of the date
such Benefit commences payment hereunder (or if the Participant is a Specified Employee, the
date such Benefit would have commenced hereunder disregarding the requirement that payment
shall not commence until six (6) months after such Participant’s Separation from Service),
but reduced by the appropriate reduction factor specified in Schedule A (attached hereto).

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	5.3	 	Deferred Vested Benefit.

     A Participant who has completed not less than ten (10) years of Service (at least five
(5) of which is completed while a Participant) and who has attained the age of forty-five
(45) will be eligible for and deemed vested in an Accrued Benefit under Section 5.2 (even if
such Participant Separates from Service with the Company prior to the attainment of age
fifty-five (55)), so long as one (1) or more of the following events occurs after such
Participant’s forty-fifth (45th) birthday:

	 	(a)	 	Such Participant’s Separation from Service results from unilateral action taken
by the Company;
	 
	 	(b)	 	Such Participant is a member of a class of Executives declared by Board action
to be ineligible to participate further in the Plan;
	 
	 	(c)	 	Such Participant is demoted to non-Executive status by the Company; or
	 
	 	(d)	 	A Change in Control occurs. 

     Any Participant who vests hereunder (as provided above), but Separates from Service
from the Company prior to attaining age fifty-five (55) nevertheless shall commence
receiving a Plan Benefit on the first day of the month coinciding with or next following the
date such Participant attains age fifty-five (55). The Accrued Benefit of a Participant who
Separates from Service with the Company prior to attaining age fifty-five (55) shall be
computed and frozen as of the date such Participant Separates from Service with the Company.
Notwithstanding the foregoing, in the event the Participant is a Specified Employee, such
Deferred Vested Benefit shall not commence payment until the later of the date specified
above or six (6) months after such Participant’s Separation from Service.

     The Plan Benefit actually payable to a Participant whose Accrued Benefit vests
hereunder shall be determined in accordance with Section 5.2 hereof; provided, however, that
such Plan Benefit shall be based on the above determination of the Participant’s Accrued
Benefit.

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	5.4	 	Disability Retirement Benefit.

     A Participant who becomes disabled for purposes of the Long Term Disability Plan and,
as a result, is eligible for and receiving benefits under the Long Term Disability Plan,
will commence receiving a Disability Retirement Benefit on the later of the first
day of the month coinciding with or next following:

	 	(a)	 	The date such Participant ceases to receive benefit payments under the Long
Term Disability Plan; and
	 
	 	(b)	 	The date such Participant attains age sixty-five (65).

     The Plan Benefit so payable to a Participant shall consist of such Participant’s
Accrued Benefit, determined as of the date such Participant commenced receiving benefits
under the Long Term Disability Plan, if any. In the event such Participant is not eligible
to receive benefits under the Long Term Disability Plan, such Participant’s Accrued Benefit
shall be determined as of the date such Participant is found to have qualified for a 409A
Disability. Notwithstanding any contrary Plan provision, if a Participant is found to have
qualified for a 409A Disability on or after attaining age fifty-five (55), but ceases to be
so disabled before such Participant’s Disability Plan Benefit would have otherwise
commenced, such Participant shall be eligible to receive an Early Retirement Benefit as
provided under Section 5.2 herein.

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ARTICLE VI

DISTRIBUTION OF BENEFITS; LIMITATIONS

	6.1	 	Commencing Payment. A Participant’s Plan Benefit shall commence automatically on the
relevant commencement date specified in Article V. The Participant shall, in advance of such
date, complete and return to the Plan Administrator such form or forms as may be required by
the Plan Administrator. If a Participant believes that he or she is entitled to have his or
her Plan Benefit commence on a particular specified commencement date, but the benefit has not
commenced, the Participant may file an application for such benefit in a writing dated and
signed by such Participant and mailed or otherwise delivered to the Plan Administrator. Such
application, when made, shall thereupon be treated as a claim for benefits made in accordance
with Section 8.2 hereof.

	6.2	 	Delay of Distribution To Preserve Allowable Deduction. In the event the Plan
Administrator, after consultation with the Committee but otherwise acting in its sole and
absolute discretion, determines that one (1) or more of the payments to be made to a
Participant hereunder cannot be claimed by the Company as an allowable federal income tax
deduction (whether on account of the limitations imposed by Section 162(m) or Section 280G of
the Code, or otherwise), the Plan Administrator shall cause such payment(s) to be suspended
and deferred, and paid as such time and in such manner so as to permit the Company to claim
such payment(s) as an allowable deduction for federal income tax purposes. In the event any
such payment is suspended or deferred hereunder to avoid the limitations imposed by Section
162(m) of the Code, and such period of suspension or deferment exceeds thirty-six (36) months,
interest shall accrue on such payment at the rate of one percent (1%) per month, simple
interest, for each month or fraction thereof; such interest shall accrue from the date of
initial suspension or deferment and shall be paid with such payment, when made to or in
respect of such Participant.

	6.3	 	Protection of Company Interests. A Participant’s right to receive a Plan Benefit
hereunder is conditioned upon such Participant engaging in conduct (or where applicable,
refraining from conduct) so as to protect, and not impair, the Company’s interests while

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	 	 	covered by and benefiting from the Plan. Each Participant accordingly shall observe and
comply with the following rules, covenants and restrictions, commencing with the date such
Participant first commences participation hereunder and ending with the second
(2nd) anniversary of the date such Participant separates from employment with the
Company and all Subsidiaries and Affiliates (the “Restricted Period”):

	 	(a)	 	Disclosure of Confidential Information. A Participant shall keep in strict
confidence and not directly or indirectly make known, divulge, reveal, furnish, make
available or use (except for use in the regular course of such Participant’s duties on
behalf of the Company) any “Confidential Information,” as herein defined, and shall
return to the Company any Company property or documents and any other documents or
property containing or constituting Confidential Information in such Participant’s
possession, custody or control as and when such Participant separates from Company
employment or ceases to perform any personal services therefor. For this purpose, the
term “Confidential Information” shall mean that non-public data and other information
(regardless of the form such Information takes) which the Company determines to be a
strategic asset of the Company (specifically including, without limitation, customer
and personnel lists, licensing agreements, materials sources and costs, and delivery
and distribution sources, methods and costs) the disclosure or release of which would
financially harm or impair the Company.

	 	(b)	 	Solicitation of Workforce. A Participant will not directly or indirectly
solicit, encourage, or otherwise attempt to influence, any employee or representative
of the Company or consultant to the Company, to terminate his or her relationship,
employment or other association with the Company (whether or not the purpose of such
solicitation, encouragement or attempt at influence is to become an employee,
representative or consultant of such Participant or any organization employing, owned
by or associated with such Participant).
	 
	 	(c)	 	Solicitation of Customers. A Participant will not directly or indirectly, on
his or her own behalf or on the behalf of any other person, firm or entity, solicit or

-22-

 

	 	 	 	attempt to solicit, or attempt to divert the patronage or business of, any current
customer of the Company, any customer that has engaged in business with the Company
during the Restricted Period, or any prospective customer to whom (or, to which) the
Company has presented a proposal to provide goods or services during the Restricted
Period, or any party or entity related to any such customer or prospective customer
(including but not limited to any employees or agents of any such customer or
prospective customer).
	 
	 	(d)	 	Disparagement of Company, Officers and Directors. Other than with the prior
consent of the Company, a Participant will not communicate any false, critical,
disparaging or otherwise negative comment(s), statement(s) or information of and
concerning the Company, or any of its directors, officers, employees or shareholders,
or which could reasonably be perceived or construed as critical, disparaging or
otherwise negative, other than comments, statements and information made and published
to an individual who is (at the time of such communication) then a Company director,
officer, employee or shareholder; provided, that this provision shall not preclude a
Participant from testifying under oath in a legal or comparable administrative
proceeding.
	 
	 	(e)	 	Appropriation of Business Opportunities. A Participant will promptly disclose
and report to Company superiors (and where applicable, the Board) any and all business
opportunities brought to such Participant (whether internal to the Company, or from
persons or parties not associated or affiliated with the Company) or of which such
Participant is made or becomes aware, which directly or indirectly relate to or have
any commercial, artistic, or conceptual connection to any of the Company’s current or
contemplated businesses (as discussed or described in any of the Company’s strategic or
business plans).
	 
	 	(f)	 	Sanctioned Personal Conduct. A Participant will refrain from committing, or
attempting to commit, any felony; and refrain from taking any other action or engaging
in any other conduct that results in the forfeiture of property or a

-23-

 

	 	 	 	property interest (regardless whether imposed upon such Participant, or the Company,
or both).

In the event the Committee, in its sole and absolute discretion, determines that a
Participant has violated one (1) or more of the covenants and restrictions set forth in this
Section 6.3, then except as provided in Section 6.6 herein, such Participant shall
immediately forfeit any and all right to any Plan Benefit for which such Participant
otherwise would qualify hereunder; provided , that no Participant shall forfeit a
Plan Benefit hereunder, or any part thereof, on account of having engaged in (or, agreed to
engage in) conduct protected by Section 806 of the Sarbanes-Oxley Act (18 U.S.C. §1541A, et
seq.) and related rulings and regulations.

	6.4	 	Post-Employment Prohibitions. In addition to the restrictions set forth in Section
6.3 hereof and the obligations imposed under Section 6.5 hereof, a Participant’s right to
receive a Plan Benefit hereunder is conditioned upon such Participant refraining from any of
the following conduct, following the termination of such Participant’s employment by the
Company (and all Subsidiaries and Affiliates) and for period of ten (10) years thereafter:

	 	(a)	 	Acquires five percent (5%) or more of the voting stock in a corporation (or a
comparable capital and profits interest in an organization that is not a corporation)
that competes with the Company, or, without the written consent of the Company,
provides personal services to such corporation or other organization as a director,
officer, employee, consultant, advisor, agent, member, partner or owner thereof;
provided , that for purposes of this provision, a corporation or other
organization will be considered to “compete” with the Company if, at the time of such
Participant’s retirement or separation from Company employment and as determined by the
Committee, such corporation or other organization is substantially engaged in any one
(1) or more of the production, merchandising, marketing, e-commerce or other business
activities in which the Company is then engaged; and

-24-

 

	 	(b)	 	Fails or refuses to provide personal services, as a compensated consultant to
the Company upon the Company’s reasonable written request; and
	 
	 	(c)	 	Commences, or threatens to commence, an action seeking recovery of a Plan
Benefit that has been completely or partially denied hereunder or to enforce the terms
of the Plan, without first signing a binding confidentiality and nondisclosure
agreement that commits such Participant to not disclose, publish or otherwise reveal
(other than pursuant to court order, or under oath) any financial, business or
personnel information of and regarding the Company, or any of their respective
directors, officers, agents and employees, or the fact of any dispute involving such
Participant’s claim to a Plan Benefit.

		 	In the event the Committee, in its sole and absolute discretion, determines that the
Participant has violated any or all of the above conditions, then except as specifically
provided in Section 6.6 hereof, the Company shall be relieved of any and all obligation to
pay, or continue payment of, any Plan Benefits to or on behalf of such Participant.

	 

	6.5	 	Ownership of Intellectual Property; Assignment of Certain Rights. So long as an
Executive remains a Participant in the Plan and remains employed by the Company, such
Participant shall assign and transfer to the Company any and all discoveries, inventions and
improvements, whether or not patentable, which such Participant at any time during such
Participant’s employment by the Company has made or has conceived, or may make, conceive,
acquire or suggest, whether solely or jointly with others, and which (i) relates to any
subject matter within the field in which such Participant provided personal services to the
Company, and involved the use of resources belonging to the Company. Such Participant also
shall promptly disclose to the Company any and all such discoveries, inventions and
improvements; and, without charge to the Company but at its expense, shall execute,
acknowledge and deliver all documents and information (including applications for patents)
necessary to obtain patents for such inventions in any and all countries, and to vest title
thereto in the Company.
	 
	 	 	In the event a Participant is determined by the Committee, in its sole and absolute
discretion, to have violated any of the above conditions, then except as specifically

-25-

 

	 	 	provided in Section 6.6 hereof, the Company shall be relieved of any and all obligation to
pay, or continue payment of, any Plan Benefits to or on behalf of such Participant.

	6.6	 	Construing Forfeiture Provisions; Discretion To Impose Lesser Sanction. The
Committee, acting in its sole and absolute discretion (but otherwise in accordance with the
provisions of this Section 6.6), shall determine whether (and, to what extent) a Participant
has violated any or all of the provisions of Section 6.3, Section 6.4 and/or Section 6.5
hereof, and if so, whether such conduct warrants imposition of a limited monetary sanction,
equal in amount to the lesser of (a) one-half (1/2) of the present value of the Participant’s
Plan Benefit (determined as of the date of the violation(s)), or (b) one hundred thousand
dollars ($100,000), as a set off against the Plan Benefit otherwise payable and in lieu of the
complete forfeiture of such Participant’s interest (as otherwise prescribed in Sections 6.3,
6.4 and 6.5 herein, as applicable). Notwithstanding the generality of the preceding sentence,
the Committee shall be entitled to impose the limited monetary sanction described herein only
if the Committee, acting in consultation with counsel, determines that the financial impact on
the Company from such violation(s) can be expected to be less than two hundred fifty thousand
dollars ($250,000) in the aggregate.

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ARTICLE VII

DEATH BENEFIT

	7.1	 	Eligibility For Death Benefit. A death benefit shall be paid to the Beneficiary of
any Participant who dies under the following circumstances:

	 	(a)	 	A Participant who is not receiving benefits under the Long Term Disability Plan
but is eligible to elect to retire and receive an Early or Normal/Late Retirement
Benefit; or
	 
	 	(b)	 	A Participant who is receiving benefits under the Long Term Disability Plan who
had attained age 55 on or prior to the date of his or her disability;
	 
	 	(c)	 	A Participant who has retired with an Early Retirement Benefit but has not yet
commenced receiving a Plan Benefit; or
	 
	 	(d)	 	A former Executive with a vested interest in the Plan (determined in accordance
with Section 5.3 hereof), who dies on or after attaining age 55; or
	 
	 	(e)	 	A Participant who has retired and commenced receiving a Plan Benefit, but dies
before a total of one hundred eighty (180) monthly payments have been made.

		 	            Where a Participant dies before payment of such Participant’s Plan Benefit
has commenced, payment of a death benefit (as prescribed in this Section) shall commence as
of the first day of the calendar month coincident with or next following the date such
Participant dies.

	7.2	 	Amount Of Death Benefit. Subject to Section 7.3, the death benefit payable to the
Beneficiary of a deceased Participant shall consist of one hundred eighty (180) monthly
payments, commencing promptly following the date application is made for a death benefit
hereunder, less any payments made to such deceased Participant (pursuant to Section 7.1(e),
above). For death benefits not payable under the circumstances described in Section 7.1(e)
hereof, the monthly amount payable shall be calculated as of the date payment of such death
benefit commences, as if the deceased Participant had retired (or,

-27-

 

	 	 	commenced receiving his Plan Benefit) on such date and had then died, based on whichever
benefit described in Article V would have then applied.
	 
	7.3	 	Acceleration. When a Participant who is eligible for a Death Benefit under Section
7.1 dies before payment of such Participant’s Plan Benefit has commenced, the Plan
Administrator shall pay a Death Benefit in a single lump representing the present value of
such Death Benefit, less applicable withholding. When determining the present value of a
Participant’s Death benefit for this purpose, the Plan Administrator shall use the interest
rate in effect for United States Treasury Department debt securities having a maturity of ten
(10) years, based on the auction of Treasury securities held on the date coincident with or
next preceding the date of such Participant’s death.

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ARTICLE VIII

ADMINISTRATION; PLAN MODIFICATION

	8.1	 	Plan Administrator.

	 	(a)	 	The Company’s Senior Vice President — Human Resources shall act as the Plan
Administrator; provided, that if no individual holds such position within the Company,
or in the absence of such a position within the Company, the Plan Administrator shall
be such other Company officer as the Committee shall direct.
	 
	 	(b)	 	The Plan Administrator shall be responsible for the Plan’s general
administration and for carrying out the provisions hereof. The Plan Administrator
shall have all needed discretionary power, authority and control to carry out the
Plan’s provisions, including the power and authority to (i) determine all questions
relating to whether an individual qualifies as a Participant hereunder, and whether any
person found to be a Participant or a Beneficiary hereunder qualifies for or is
otherwise entitled to a benefit hereunder (including, without limitation, deciding any
and all questions pertaining to claims for benefits made in accordance with Section 8.2
hereof), (ii) resolve any and all questions arising under the Plan, including any
questions of construction, and (iii) take such further action as the Plan Administrator
deems advisable in the administration of the Plan. Except as specifically provided in
Section 8.2 hereof (relating to the appeal of adverse benefit determinations),
decisions by the Plan Administrator, made in good faith, shall be final, conclusive and
binding upon all parties.
	 
	 	(c)	 	In the event the Plan Administrator qualifies as a Participant hereunder, the
Plan Administrator shall not make or participate in any decision affecting the
Administrator as a Participant; rather, the Committee shall make all determinations
with regard to such Participant, as though the Committee were the Plan Administrator,
and any appeal of the Committee’s decisions shall be reviewed (if at all) by the Board.

-29-

 

	 	(d)	 	The Plan Administrator from time to time may allocate or delegate to any other
persons or organizations any or all of its rights, powers, duties and responsibilities
with respect to the operation and administration of the Plan. Any such allocation or
delegation shall be made in writing and shall be terminable upon such notice as the
Plan Administrator deems reasonable and proper under the circumstances.

	8.2	 	Claims Procedures. Any application for benefits made under the Plan (whether by or
on behalf of a Participant or by a Beneficiary) shall strictly comply with the following
procedures:

	 	(a)	 	Making A Claim. Any application for benefits made by a claimant shall be made
in writing to the Plan Administrator by first-class mail, identifying the benefit(s)
being sought, the terms of the Plan that entitle the claimant to apply for such
benefit(s), and such other information as may be reasonably needed to confirm the
identity of the claimant and such claimant’s eligibility for said benefit. Within
ninety (90) days following receipt, the Plan Administrator shall respond to such
application either (i) by complying with the terms set forth in the application, in
their entirety, or (ii) by requesting in writing a sixty (60)-day extension to further
consider such application, or (iii) by denying in writing some or all of the
application, in the manner described in subparagraph (b) hereof. Any claimant whose
application has been wholly or partly denied, or believes that such application has
been wholly or partly denied, may file an appeal in the manner described in
subparagraph (c) hereof.
	 
	 	(b)	 	Denying A Claim. Unless an application for benefits is allowed in total by the
Plan Administrator, the Plan Administrator shall, within ninety (90) days after such
claim is filed (plus an additional period of sixty (60) days, if required for due
consideration, so long as notice of such extension is provided within the initial
ninety (90)-day period), notify the claimant in writing totally or partially denying
such application. Such notice shall be written in a manner calculated to be understood
by the claimant and shall include (i) the specific reasons for denying the application,
(ii) specific reference to the Plan provisions upon which the

-30-

 

	 	 	 	denial of the application is based, (iii) a description of any additional materials
or information needed to perfect the application and an explanation why such
material or information is necessary, and (iv) an explanation of the review
procedure specified in subparagraph (c) hereof. A claimant who does not receive any
such notice from the Plan Administrator within one hundred (100) days after the date
of such written application is entitled to conclude that such application has been
denied.
	 
	 	(c)	 	Appeals. Within sixty (60) days after a claimant’s application is denied, such
claimant may appeal such denial by filing with the Committee (as a whole) a written
request for review of that denial. In the event of such an appeal, such claimant shall
be entitled to submit written comments, documents, records and other information
pertinent to such claimant’s claim(s), and have a reasonable opportunity to examine
(free of charge) all documents, records and other information relied upon by the Plan
Administrator when considering such claim(s). If a claimant files an appeal within
such sixty (60)-day period, the Committee shall conduct a full and fair review of such
appeal and mail or deliver to such claimant a written decision on the matter, based on
the facts and the Plan’s pertinent provisions within sixty (60) days after receiving
the request for review (unless special circumstances require an extension of up to
sixty (60) additional days, in which case the Committee shall provide written notice of
such extension prior to the commencement of such extension). Any adverse decision of
an appeal shall be written in a manner calculated to be understood by the claimant,
shall state the specific reasons for the decision and the specific Plan provisions on
which the decision is based and shall, to the extent permitted by law, be final and
binding on all interested persons. During any such review, an appealing claimant shall
be given the opportunity to review those files and documents pertinent such claimant’s
application, and be entitled to submit comments and argument in writing. If a decision
on review is not furnished within such sixty (60) day or such one hundred-twenty
(120)-day period, as the case may be, such claimant is entitled to conclude that the
decision by the Plan Administrator has been upheld by the Committee, following its
review.

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	8.3	 	Indemnification. The Company shall defend, indemnify and hold harmless the Board and
its constituent members, and the Committee and its constituent members, and the Plan
Administrator (and its delegatee(s), if any) from and against any and all liabilities, claims,
demands, judgments, tax liens, settlement payments, losses, costs, damages, and expenses
whatsoever (including reasonable attorneys’, consultants’ and other professional fees and
disbursements of every kind, nature and description) that such indemnified party may sustain,
suffer, or incur in connection with, or that may result from, the administration of the Plan
(including participation in tax liens and levies, bankruptcy proceedings, garnishment actions,
and foreclosures and other creditor-initiated proceedings), so long as such liability, claim,
demand, judgment, settlement expense, loss, cost, damage or expense does not involve bad faith
or gross neglect of duty on the part of the indemnified party. The Company may, but shall not
be required to, provide such indemnification through the purchase of fiduciary or comparable
errors and omissions insurance.

	8.4	 	Termination, Suspension Or Amendment Of The Plan. The Board may, in its sole
discretion, amend, suspend, modify, discontinue or terminate this Plan at any time. No such
amendment, suspension, modification, discontinuation, or amendment shall adversely affect:

	 	(a)	 	The benefits or rights thereto of any Participant who retired, whether or not
such Participant has commenced to receive a Plan Benefit; or
	 
	 	(b)	 	The right of any Participant to receive the amount, on an immediate or deferred
basis, computed under Article V to which such Participant would be entitled under this
Plan prior to its suspension, termination or amendment taking into account such
person’s age, Service and Final Average Compensation as of the date of such
termination, suspension or amendment:

provided , that subsections (a) and (b) above shall not apply to any such
termination, suspension or amendment if a change has occurred in the law (or in its
interpretation) which would adversely affect the Company or such Participant if this Plan
were to remain in effect and unamended in its form immediately prior to such occurrence.

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ARTICLE IX

GENERAL PROVISIONS

	9.1	 	Plan Is Unfunded; Company Has No Prefunding Obligation. All interests in the Plan
are unfunded. The Company has no obligation to establish any special or separate fund, or
segregate any of its assets in order to assure the payment of any amounts due or becoming due
and payable under the Plan. However, to provide for the discharge of its obligations under
the Plan, the Company in its sole discretion may settle and establish a trust or other fund in
its name, or acquire property or contract rights in its name. The right of a Participant or a
Beneficiary to receive a Plan distribution hereunder shall constitute an unsecured claim
against the Company’s general assets, and no Participant or Beneficiary shall have any right
in or against any specific Company assets.

	9.2	 	Expenses. All costs and expenses incurred in the administration of this Plan shall
be paid by the Company, except as specifically provided in Section 9.3 hereof.
	 
	9.3	 	Non-Alienability of Plan Interests.

	 	(a)	 	In General. Except as specifically provided in this Section 9.3, no
Participant or Beneficiary shall have any right, directly or indirectly, to alienate,
assign, anticipate or encumber any Plan interest or amount that may be payable
hereunder, and no amount or Plan interest shall be subject to voluntary or involuntary
alienation, assignment, encumbrance or garnishment, whether by process of law, in
equity, or otherwise. Any such attempted alienation, assignment, encumbrance, or
garnishment shall be null and void and of no effect. In the event any attempt by a
Participant or Beneficiary is made to alienate, pledge or charge any such interest of
any such benefit for any debt, liabilities in tort or contract, or otherwise, contrary
to the prohibitions of this Section, the Plan Administrator in its discretion may
suspend or forfeit the interest of such person and during the period of such
suspension, or in the case of forfeiture, the Plan Administrator shall hold such
interest for the benefit of, or shall make the benefit payments to which such
Participant would otherwise be entitled to, to the

-33-

 

	 	 	 	Beneficiary or to some member of the Participant’s or Beneficiary’s family, acting
in its sole and exclusive discretion.
	 
	 	(b)	 	Domestic Relations Orders. Notwithstanding the provisions of subsection (a)
hereof, a Participant’s Plan Benefit shall be subject to division and partition in
accordance with the terms of a domestic relations order satisfying the requirements of
a “qualified domestic relations order” (“QDRO”), as defined in Section 414(p) of the
Code and related regulations; provided, that (i) a separate benefit shall be recognized
and maintained for any spouse or former spouse determined to have an interest in the
Plan as a result of a QDRO; and (ii) all costs and expenses incurred by the Company or
the Plan Administrator in connection with such QDRO shall be charged against such
Participant’s Plan Benefit, prior to effecting any such division or partition.

	9.4	 	No Implied Rights. No Participant or any other person shall have any legal or
equitable right or interest in the Plan not expressly provided for hereunder.
	 
	9.5	 	No Contract of Employment. The Plan does not constitute a contract of employment,
nor is it evidence of the existence of any contract of employment, or any contractual or other
right to continued employment, between an individual and the Company. In addition, the Plan
(including specifically and without limitation, any participation agreement that an eligible
Executive signs when commencing participation) shall not be held to have created, or
evidenced, any right on the part of any such Executive (whether or not then a Participant) to
be employed, or to continue to be employed, by the Company. Rather, the Company (or where
relevant, the actual employer of any individual, whether or not then an Executive) has the
right to terminate the employment or personal services of such individual (whether or not then
or at any time an Executive, and whether or not then a Participant) at any time, and for any
reason or no reason, in the absence of a written agreement expressly providing to the
contrary.

	9.6	 	Governing Law. The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Ohio without regard to conflicts of laws, but only to
the extent not preempted by relevant federal law.

-34-

 

	9.7	 	Tax Withholding. Where and to the extent the accrual of Plan Benefits by or for a
Participant, and/or the payment and distribution of Plan rights or interests to a Participant
or Beneficiary, results in employment taxes imposed under the Federal Income Contributions Act
(“FICA”) with respect to such Participant’s Plan interest, or any related federal state or
local income tax withholding obligation(s) to be imposed upon the Company or the Plan
Administrator, or some other party, the Company (or such other party) shall have the right to
withhold such amounts from any Plan Benefit(s) due or becoming due and payable to such
Participant or Beneficiary, and to the extent not unlawful, from any regular remuneration paid
by the Company to a Participant.

	9.8	 	Severability. In the event that any one or more of the Plan provisions is held to be
invalid, illegal, or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Plan provision, and the Plan thereafter shall be construed as if such
invalid, illegal, or unenforceable provisions had never been contained herein. In such event,
the Committee will designate and substitute a lawful provision that most nearly accomplishes
the Company’s intent.
	 
	9.9	 	No Tax Guarantees. While the Plan is designed to provide deferred compensation to
Executives who qualify as Participants hereunder, the Company makes no representation,
warranty or guarantee of any federal, state or local tax consequences of participation in the
Plan to any Participant or designated Beneficiary.

	9.10	 	Code Section 409A Compliance. The Plan is intended to be operated in compliance with
the requirements of Code Section 409A (including any rulings or regulations promulgated
thereunder). In the event that any provision of the Plan fails to satisfy such requirements,
such provision shall be void and shall not apply to a Participant’s Deferred Compensation
Benefit, to the extent practicable. In the event that it is determined not to be feasible to
void a Plan provision as it applies to a Participant’s Deferred Compensation Benefit, such
Plan provision shall be construed in a manner so as to comply with the requirements of Code
Section 409A.

-35-

 

     IN WITNESS WHEREOF, the undersigned, a duly elected officer of American Greetings Corporation,
has executed this Plan as of the thirty-first (31st) day of October, 2007, by the
authority and at the direction of the Committee of American Greetings Corporation.

	 	 	 	 	 
	 	 	 
	 	                                 /s/ Brian T. McGrath
 	 
	 	Name:  	Brian T. McGrath 	 
	 	Title:  	Senior Vice President, Human Resources 	 

-36-

 

	 	 	 	 	 

AMERICAN GREETINGS CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

SCHEDULE A

Reduction Factors for Benefits

Payable Prior to Age 65 

	 	 	 	 	 
	Age* At Which	 	Reduction
	Benefits Begin	 	Factor
	65

	 	 	0.00	%
	64

	 	 	2.88	 
	63

	 	 	5.76	 
	62

	 	 	8.64	 
	61

	 	 	11.52	 
	60

	 	 	14.40	 
	59

	 	 	17.28	 
	58

	 	 	20.16	 
	57

	 	 	23.04	 
	56

	 	 	25.92	 
	55

	 	 	28.80	 

· For completed months of age, straight line interpolation shall be used.EX-4.1

 

Exhibit 4.1

NEOPROBE CORPORATION

CERTIFICATE OF DESIGNATIONS, VOTING POWERS,

PREFERENCES, LIMITATIONS, RESTRICTIONS, AND RELATIVE

RIGHTS OF SERIES A 8% CUMULATIVE CONVERTIBLE

PREFERRED STOCK

     It is hereby certified that:

     I. The name of the corporation is Neoprobe Corp. (the “Corporation”), a Delaware
corporation.

     II. Set forth hereinafter is a statement of the voting powers, preferences, limitations,
restrictions, and relative rights of shares of Series A 8% Cumulative Convertible Preferred Stock
hereinafter designated as contained in a resolution of the Board of Directors of the Corporation
pursuant to a provision of the Certificate of Incorporation of the Corporation permitting the
issuance of said Series A 8% Cumulative Convertible Preferred Stock by resolution of the Board of
Directors:

1. Designation and Rank.

     (a) Designation. The designation of such series of the Preferred Stock shall be the
Series A Convertible Preferred Stock, par value $.001 per share (the “Series A Preferred
Stock”). The maximum number of shares of Series A Preferred Stock shall be Three Thousand
(3,000) Shares.

     (b) Rank. The Series A Preferred Stock shall rank prior to the common stock, par
value $.001 per share (the “Common Stock”), and to all other classes and series of equity
securities of the Company which by their terms do not rank on a parity with or senior to the Series
A Preferred Stock (“Junior Stock”). The Series A Preferred Stock shall be subordinate to
and rank junior to all indebtedness of the Company now or hereafter outstanding.

2. Dividends.

     (a) Quarterly Dividends. The holders of shares of the Series A Preferred Stock shall
be entitled to receive, out of funds legally available therefor, dividends at an annual rate equal
to 8% of the Liquidation Preference Amount, whether or not declared. Accrued and unpaid dividends
shall compound on a quarterly basis, and shall be, except as set forth in Section 2(b) below,
payable in cash. The Board of Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of such dividends, which record date
shall not be more than sixty (60) days prior to the applicable dividend payment date. The first
such dividend payment shall be due and payable on March 31, 2008, with subsequent payments due and
payable on June 30, September 30, December 31 and March 31 of each year. All accrued and unpaid
dividends, if any, shall be mandatorily paid immediately prior to the earlier to occur of (i) a
liquidation, dissolution or winding up (or deemed liquidation, dissolution or winding up under
Section 4(b) hereof) of the Company (a “Liquidation”) or (ii) a Voluntary Conversion
pursuant to Section 5 hereof (the “Mandatory Dividend Payment Date”).

     (b) Payment of Dividends. At the option of the Company in compliance with this Section 2(b), the Company
may pay dividends on the Series A Preferred Stock in registered shares of Common Stock, with each
share of Common Stock being valued for this purpose at the average VWAP for the five (5) trading
days immediately preceding the date on which such dividend is due and payable. Notwithstanding the
above, no dividend shall be paid in Common Stock (i) in connection with a

 

 

Liquidation, (ii) if such payment would cause the 4.99% or 9.99% limitations on beneficial
ownership set forth in Section 7 hereof to be exceeded, (iii) unless the shares of Common Stock
received upon such payment shall be freely salable by the recipient pursuant to a then effective
Registration Statement meeting the requirements of the Registration Rights Agreement, dated on or
about the date hereof, by and between the Company and the investors named therein or (vi) if a
default or an Event of Default has occurred and is continuing under the Purchase Agreement (as
defined below) or under the Notes issued pursuant to the Purchase Agreement, or the Company has
failed to comply with any provision of this Certificate of Designations in any material respect.
Any shares of Common Stock delivered as a payment of dividends pursuant to this Section 2(b) shall
be delivered to the holders via DWAC (as defined below) no later than the relevant dividend payment
date. “VWAP” means, for any date, (i) the daily volume weighted average price of the
Common Stock for such date on the OTC Bulletin Board (or national securities exchange, if
applicable) as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern
Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board (or national securities exchange, if applicable) and if prices for the Common Stock
are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (iii) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the holder and
reasonably acceptable to the Company.

     (c) Junior Stock Dividends. The Company shall not declare or pay any cash dividends
on, or make any other distributions with respect to or redeem, purchase or otherwise acquire for
consideration, any shares of Junior Stock unless and until all accrued and unpaid dividends on the
Series A Preferred Stock have been paid in full. In all events, Junior Stock dividends shall be
subject to the restrictions set forth in Section 3(a) below.

3. Voting Rights.

     (a) Class Voting Rights. The Series A Preferred Stock shall have the following class
voting rights (in addition to the voting rights set forth in Section 3(b) hereof). So long as at
least 25% of the shares of the Series A Preferred Stock issued pursuant to the Purchase Agreement
remain outstanding, the Company shall not, and shall not permit any subsidiary to, without the
affirmative vote or consent of the holders of at least a majority of the shares of the Series A
Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a
meeting, in which the holders of the Series A Preferred Stock vote separately as a class: (i)
authorize, create, issue or increase the authorized or issued amount of any class or series of
stock, including but not limited to the issuance of any more shares of previously authorized
Preferred Stock, ranking on a parity with or prior to the Series A Preferred Stock, with respect to
the distribution of assets on liquidation, dissolution or winding up; (ii) amend, alter or repeal
the terms of the Series A Preferred Stock, whether by merger, consolidation or otherwise, so as to
adversely affect any right, preference, privilege or voting power of the Series A Preferred Stock;
(iii) repurchase, redeem or pay dividends on (whether in cash, in kind, or otherwise), shares of
the Company’s Junior Stock; (iv) amend the Certificate of Incorporation or By-Laws of the Company
so as to affect materially and adversely any right, preference, privilege or voting power of the
Series A Preferred Stock; (v) effect any distribution with respect to Junior Stock or parity stock;
or (vi) reclassify the Company’s outstanding securities.

     (b) General Voting Rights. Except as otherwise set forth herein and except as
otherwise required by Delaware law, the Series A Preferred Stock shall have no voting rights. The
Common Stock into which the Series A Preferred Stock is convertible shall, upon issuance, have all
of the same voting rights as other issued and outstanding Common Stock of the Company.

2

 

4. Liquidation Preference.

     (a) In the event of the liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, the holders of shares of the Series A Preferred Stock then
outstanding shall be entitled to receive, out of the assets of the Company, whether such assets are
capital or surplus of any nature, an amount equal to One Thousand Dollars ($1,000.00) per share
(the “Liquidation Preference Amount”) of the Series A Preferred Stock, before any payment
shall be made or any assets distributed to the holders of the Common Stock or any other Junior
Stock. The liquidation payment with respect to each outstanding fractional share of Series A
Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Series A Preferred Stock. All payments for which this Section
4(a) provides shall be in cash, property (valued at its fair market value as determined by an
independent appraiser reasonably acceptable to the holders of a majority of the Series A Preferred
Stock) or a combination thereof; provided, however, that no cash shall be paid to holders of
Junior Stock unless each holder of the outstanding shares of Series A Preferred Stock has been paid
in cash the full Liquidation Preference Amount to which such holder is entitled as provided herein.
After payment of the full Liquidation Preference Amount to which each holder is entitled, such
holders of shares of Series A Preferred Stock will not be entitled to any further participation as
such in any distribution of the assets of the Company.

     (b) A consolidation or merger of the Company with or into any other corporation or
corporations, or a sale of all or substantially all of the assets of the Company, or the
effectuation by the Company of a transaction or series of transactions in which more than 50% of
the voting shares of the Company is disposed of or conveyed, shall be, at the election of the
holders of a majority of the Series A Preferred Stock, deemed to be a liquidation, dissolution, or
winding up within the meaning of this Section 4. In the event of the merger or consolidation of
the Company with or into another corporation that is not treated as a liquidation pursuant to this
Section 4(b), the Series A Preferred Stock shall maintain its relative powers, designations and
preferences provided for herein and no merger shall result inconsistent therewith.

     (c) Written notice of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, stating a payment date and the place where the distributable amounts
shall be payable, shall be given by mail, postage prepaid, no less than forty-five (45) days prior
to the payment date stated therein, to the holders of record of the Series A Preferred Stock at
their respective addresses as the same shall appear on the books of the Company.

5. Conversion. The holder of Series A Preferred Stock shall have the following conversion
rights (the “Conversion Rights”):

     (a) Right to Convert. At any time on or after the date of issuance of the Series A
Preferred Stock (the “Issuance Date”), the holder of any such shares of Series A Preferred
Stock may, at such holder’s option, subject to the limitations set forth in Section 7 herein, elect
to convert (a “Voluntary Conversion”) all or any portion of the shares of Series A
Preferred Stock held by such person into a number of fully paid and nonassessable shares of Common
Stock equal to the quotient of (i) the Liquidation Preference Amount of the shares of Series A
Preferred Stock being converted thereon divided by (ii) the Conversion Price (as defined in Section
5(d) below) then in effect as of the date of the delivery by such holder of its notice of election
to convert. The Company shall keep written records of the conversion of the shares of Series A
Preferred Stock converted by each holder. A holder shall be required to deliver the original
certificates representing the shares of Series A Preferred Stock upon complete conversion of the
Series A Preferred Stock.

3

 

     (b) Mechanics of Voluntary Conversion. The Voluntary Conversion of Series A Preferred
Stock shall be conducted in the following manner:

     (i) Holder’s Delivery Requirements. To convert Series A Preferred Stock into full shares
of Common Stock on any date (the “Voluntary Conversion Date”), the holder thereof
shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m.,
Eastern Time on such date, a copy of a fully executed notice of conversion in the form
attached hereto as Exhibit I (the “Conversion Notice”), to the Company, and (B) with
respect to the final conversion of shares of Series A Preferred Stock held by any holder, such
holder shall surrender to a common carrier for delivery to the Company as soon as practicable
following such Conversion Date but in no event later than six (6) business days after such
date the original certificates representing the shares of Series A Preferred Stock being
converted (or an indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the “Preferred Stock Certificates”).

     (ii) Company’s Response. Not later than three (3) trading days after any Voluntary
Conversion Date, the Company or its designated transfer agent, as applicable, shall issue and
deliver to the Depository Trust Company (“DTC”) account on the holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion Notice, the number
of shares of Common Stock to which the holder shall be entitled upon such conversion,
registered in the name of the holder or its designee. In the alternative, not later than
three (3) trading days after any Voluntary Conversion Date, the Company shall deliver to the
applicable holder by express courier a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those required pursuant to the
Purchase Agreement) representing the number of shares of Common Stock being acquired upon the
conversion of this Note (the “Delivery Date”). Notwithstanding the foregoing to the
contrary, the Company or its designated transfer agent (the “Transfer Agent”), shall
only be obligated to issue and deliver the shares to the DTC on the holder’s behalf via DWAC
(or certificates free of restrictive legends) if such conversion is in connection with a sale
by the holder and the holder has complied with the applicable prospectus delivery requirements
or an exemption from such registration requirements (each as evidenced by documentation
furnished to and reasonably satisfactory to the Company). If in the case of any Conversion
Notice such certificate or certificates are not delivered to or as directed by the applicable
holder by the Delivery Date, the holder shall be entitled by written notice to the Company at
any time on or before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return any Preferred Stock
Certificates tendered for conversion, whereupon the Company and the holder shall each be
restored to their respective positions immediately prior to the delivery of such Conversion
Notice, except that any amounts described in Sections 5(b)(v) shall be payable through the
date notice of rescission is given to the Company.

     (iii) Dispute Resolution. In the case of a dispute as to the arithmetic calculation of
the number of shares of Common Stock to be issued upon conversion, the Company shall promptly
issue to the holder the number of shares of Common Stock that is not disputed and shall submit
the arithmetic calculations to the holder via facsimile as soon as possible, but in no event
later than two (2) business days after receipt of such holder’s Conversion Notice. If such
holder and the Company are unable to agree upon the arithmetic calculation of the number of
shares of Common Stock to be issued upon such conversion within one (1) business day of such
disputed arithmetic calculation being submitted to the holder, then the Company shall within
one (1) business day submit via facsimile the disputed arithmetic calculation of the number of
shares of Common Stock to be issued upon such conversion to the Company’s independent, outside
accountant. The Company shall cause the accountant to perform the calculations and notify the
Company and the holder of the results no later than seventy-two (72) hours from the time it
receives the disputed calculations.

4

 

Such accountant’s calculation shall be binding upon all parties absent manifest error.
The reasonable expenses of such accountant in making such determination shall be paid by the
Company, in the event the holder’s calculation was correct, or by the holder, in the event the
Company’s calculation was correct, or equally by the Company and the holder in the event that
neither the Company’s or the holder’s calculation was correct. The period of time in which
the Company is required to effect conversions or redemptions under this Certificate of
Designation shall be tolled with respect to the subject conversion or redemption pending
resolution of any dispute by the Company made in good faith and in accordance with this
Section 5(b)(iii).

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

     (v) Company’s Failure to Timely Convert. If within five (5) business days of the
Company’s receipt of the Conversion Notice (the “Share Delivery Period”) the Company
shall fail to issue and deliver to a holder the number of shares of Common Stock to which such
holder is entitled upon such holder’s conversion of the Series A Preferred Stock, or failure
to deliver unlegended certificates representing such shares or shares via DWAC if required
pursuant to Section 5(b)(ii) hereof (a “Conversion Failure”), in addition to all other
available remedies which such holder may pursue hereunder and under the Securities Purchase
Agreement among the Company and the purchasers listed therein (the “Purchase
Agreement”) between the Company and the initial holders of the Series A Preferred Stock,
the Company shall pay additional damages to such holder on each business day after such third
(3rd) business day that such conversion is not timely effected in an amount equal 0.5% of the
product of (A) the sum of the number of shares of Common Stock not so issued to the holder on
a timely basis pursuant to Section 5(b)(ii) and to which such holder is entitled and (B) the
Closing Price (as defined in Section 5(d)(ii) hereof) of the Common Stock on the last possible
date which the Company could have issued such Common Stock to such holder without violating
Section 5(b)(ii). If the Company fails to pay the additional damages set forth in this
Section 5(b)(v) within five (5) business days of the date incurred, then such payment shall
bear interest at the rate of 2% per month (pro rated for partial months) until such payments
are made.

     (c) [Reserved]

     (d) Conversion Price.

     (i) The term “Conversion Price” shall mean the Closing Price on the Issuance Date
(but in no event greater than $0.50 per share), subject to adjustment under Section 5(e)
hereof. Notwithstanding any adjustment hereunder, at no time shall the Conversion Price be
greater than the Conversion Price on the Issuance Date other than pursuant to the second
sentence of Section 5(e)(i) in connection with a reverse stock split effected by the Company.

     (ii) The term “Closing Price” shall mean (i) the last trading price per share of
the Common Stock on such date on the OTC Bulletin Board or a registered national stock
exchange on which the Common Stock is then listed, or if there is no such price on such date,
then the last trading price on such exchange or quotation system on the date nearest preceding
such date, or (ii) if the price of the Common Stock is not then reported by the OTC Bulletin
Board or a registered national securities exchange, then the average of the “Pink Sheet”
quotes for the relevant date, as reported by the National Quotation Bureau, Inc., or (iii) if
the Common Stock is not then publicly traded the fair market value of a share of Common Stock
as mutually determined by the Company and the holders of a majority of the outstanding shares
of Series A Preferred Stock.

5

 

     (e) Adjustments of Conversion Price.

     (i) Adjustments for Stock Splits and Combinations. If the Company shall at any time or
from time to time after the Issuance Date, effect a stock split of the outstanding Common
Stock, the Conversion Price shall be proportionately decreased. If the Company shall at any
time or from time to time after the Issuance Date, combine the outstanding shares of Common
Stock, the Conversion Price shall be proportionately increased. Any adjustments under this
Section 5(e)(i) shall be effective at the close of business on the date the stock split or
combination occurs.

     (ii) Adjustments for Certain Dividends and Distributions. If the Company shall at any
time or from time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in shares of Common Stock, then, and in each event, the Conversion Price shall be
decreased as of the time of such issuance or, in the event such record date shall have been
fixed, as of the close of business on such record date, by multiplying, as applicable, the
Conversion Price then in effect by a fraction:

     (A) the numerator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close
of business on such record date; and

     (B) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution.

     (iii) Adjustment for Other Dividends and Distributions. If the Company shall at any time
or from time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, then, and in each
event, an appropriate revision to the applicable Conversion Price shall be made and provision
shall be made (by adjustments of the Conversion Price or otherwise) so that the holders of
Series A Preferred Stock shall receive upon conversions thereof, in addition to the number of
shares of Common Stock receivable thereon, the number of securities of the Company which they
would have received had their Series A Preferred Stock been converted into Common Stock
immediately prior to such event (or the record date for such event, if applicable) (without
giving effect to the limitations set forth in Section 7 hereof) and had thereafter, during the
period from the date of such event to and including the Conversion Date, retained such
securities (together with any distributions payable thereon during such period), giving
application to all adjustments called for during such period under this Section 5(e)(iii) with
respect to the rights of the holders of the Series A Preferred Stock; provided, however, that
if such record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price shall be
adjusted pursuant to this paragraph as of the time of actual payment of such dividends or
distributions.

     (iv) Adjustments for Reclassification, Exchange or Substitution. If the Common Stock
issuable upon conversion of the Series A Preferred Stock at any time or from time to time
after the Issuance Date shall be changed to the same or different number of shares of any
class or classes of stock, whether by reclassification, exchange, substitution or otherwise
(other than by way of a stock split or combination of shares or stock dividends provided for
in Sections 5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate revision to
the Conversion Price shall be made and provisions shall be

6

 

made (by adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series A Preferred Stock shall have the right thereafter to convert such share of
Series A Preferred Stock into the kind and amount of shares of stock and other securities
receivable upon reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock into which such share of Series A Preferred Stock might have
been converted immediately prior to such reclassification, exchange, substitution or other
change (without giving effect to the limitations set forth in Section 7 hereof), all subject
to further adjustment as provided herein.

     (v) Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any
time or from time to time after the Issuance Date there shall be a capital reorganization of
the Company (other than by way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 5(e)(i), (ii) and (iii), or a reclassification, exchange
or substitution of shares provided for in Section 5(e)(iv)), or a merger or consolidation of
the Company with or into another corporation, or the sale of all or substantially all of the
Company’s properties or assets to any other person that is not deemed a liquidation pursuant
to Section 4(b) (an “Organic Change”), then as a part of such Organic Change an
appropriate revision to the Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holder of each share of Series A
Preferred Stock shall have the right thereafter to convert such share of Series A Preferred
Stock into the kind and amount of shares of stock and other securities or property of the
Company or any successor corporation resulting from the Organic Change as the holder would
have received as a result of the Organic Change and if the holder had converted its Series A
Preferred Stock into the Company’s Common Stock prior to the Organic Change (without giving
effect to the limitations set forth in Section 7 hereof). In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5(e)(v) with
respect to the rights of the holders of the Series A Preferred Stock after the Organic Change
to the end that the provisions of this Section 5(e)(v) (including any adjustment in the
Conversion Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of the Series A Preferred Stock) shall be applied after that event
in as nearly an equivalent manner as may be practicable.

     (vi) Adjustments for Issuance of Additional Shares of Common Stock. In the event the
Company, shall, at any time, from time to time, issue or sell any additional shares of Common
Stock (otherwise than as provided in the foregoing subsections (i) through (v) of this Section
5(e) or upon exercise or conversion of Common Stock Equivalents (hereafter defined) granted or
issued prior to the Issuance Date at the conversion price applicable to such Common Stock
Equivalents in effect on the Issuance Date) (the “Additional Shares of Common Stock”),
at a price per share less than the Conversion Price, or without consideration, then the
Conversion Price upon each such issuance shall be reduced to a price determined by multiplying
the Conversion Price then in effect by a fraction (A) the numerator of which is the total
number of shares of Common Stock then outstanding plus the number of shares of Common Stock
which the aggregate consideration received or to be received by the Company for the shares so
issued (or deemed issued) would purchase at such Conversion Price, and (B) the denominator of
which is the total number of shares of Common Stock then outstanding plus the number of shares
of Common Stock so issued (or deemed issued). Notwithstanding the foregoing, there shall be
no adjustment to the Conversion Price upon any issuance or deemed issuance of Common Stock if
the holders of a majority of the outstanding Series A Preferred Stock waive in writing such
adjustment.

     (vii) Issuance of Common Stock Equivalents. If the Company, at any time after the
Issuance Date, shall issue any securities convertible into or exchangeable for, directly or
indirectly, Common Stock (“Convertible Securities”), other than the Series A Preferred
Stock or Notes

7

 

issuable pursuant to the Purchase Agreement, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, other than the Warrants issuable
pursuant to the Purchase Agreement, shall be issued or sold (collectively, the “Common
Stock Equivalents”) and the aggregate of the price per share for which Additional Shares
of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the
consideration received by the Company for issuance of such Common Stock Equivalent, divided by
the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the
“Aggregate Per Common Share Price”), shall be less than the Conversion Price, or if,
after any such issuance of Common Stock Equivalents, the price per share for which Additional
Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so
amended or adjusted shall make the Aggregate Per Common Share Price be less than Conversion
Price in effect at the time of such amendment or such adjustment, then the applicable
Conversion Price upon each such issuance or amendment or adjustment shall be adjusted as
provided Section 5(e)(vi), with the maximum number of shares of Common Stock issuable upon
conversion or exercise of such Common Stock Equivalents being deemed to have be issued or sold
by the Company at the time of issuance or sale of such Common Stock Equivalents. For purposes
of this Section 5(e)(vii), the “price per share for which Additional Shares of Common Stock is
issuable” shall be determined by dividing (X) the total amount received or receivable by the
Company as consideration for the issue or sale of such Common Stock Equivalents, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the
conversion or exercise thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exercise of all such Common Stock Equivalents. No adjustment
of the number of shares of Common Stock shall be made under Section 5(e)(vi) upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights or upon the
issuance of such Common Stock Equivalents (or upon the issuance of any warrant or other rights
therefor) pursuant to this Section 5(e)(vii).

     (viii) Consideration for Stock. In case any shares of Common Stock or Convertible
Securities other than the Series A Preferred Stock, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, shall be issued or sold in
connection with any merger or consolidation in which the Company is the surviving corporation
(other than any consolidation or merger in which the previously outstanding shares of Common
Stock of the Company shall be changed to or exchanged for the stock or other securities of
another corporation), the amount of consideration therefor shall be deemed to be the fair
value, as determined reasonably and in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such Board may
determine to be attributable to such shares of Common Stock, Convertible Securities, rights or
warrants or options, as the case may be.

     (ix) Record Date. In case the Company shall take record of the holders of its Common
Stock or any other Preferred Stock for the purpose of entitling them to subscribe for or
purchase Common Stock or Convertible Securities, then the date of the issue or sale of the
            shares of Common Stock shall be deemed to be such record date.

     (x) Certain Issues Excepted. Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Conversion Price of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock in connection with any
of the following: (a) issuances, pursuant to option plans in effect on the date hereof, of
options to employees, officers, directors or consultants of the Company approved by a majority
of the non-employee members of the Board of Directors of the Company or a majority of the
members of a

8

 

committee of non-employee directors established for such purpose, to the extent such
issuances (i) are at an exercise price of not less than the Closing Price on the date of grant
and (ii) are at a per share exercise price greater than the initial conversion price of the
Series A Note issued pursuant to the Purchase Agreement (as adjusted for splits, combinations,
and the like occurring after the date of the Purchase Agreement), (b) issuance of the Notes,
Preferred Stock or Warrants to the Purchasers pursuant to the terms of the Purchase Agreement;
(iii) issuances of securities upon the exercise or exchange of or conversion of any securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and
outstanding on the Issuance Date, provided that such securities have not been amended since
such date to increase the number of such securities or to decrease the exercise, exchange or
conversion price of any such securities (including the Notes, Preferred Stock and Warrants
issued to the Purchasers pursuant to the Purchase Agreement); (iv) securities issued pursuant
to acquisitions or strategic transactions approved by a majority of the disinterested
directors, but not including a transaction with an entity whose primary business is investing
in securities or a transaction, the primary purpose of which is to raise capital; or (v) the
issuance of shares of Common Stock in payment of interest on the Notes, or as a dividend or
distribution on the Series A Preferred Stock.

     (f) No Impairment. The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or 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 Company,
but will at all times in good faith, assist in the carrying out of all the provisions of this
Section 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 Series A Preferred Stock against impairment.

     (g) Certificates as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock issuable upon conversion
of the Series A Preferred Stock pursuant to this Section 5, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of such Series A Preferred Stock a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon written request of the holder of such affected Series A Preferred Stock, at any
time, furnish or cause to be furnished to such holder a like certificate setting forth such
adjustments and readjustments, the Conversion Price in effect at the time, and the number of shares
of Common Stock and the amount, if any, of other securities or property which at the time would be
received upon the conversion of a share of such Series A Preferred Stock. Notwithstanding the
foregoing, the Company shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent (1%) of such adjusted amount.

     (h) Issue Taxes. The Company shall pay any and all issue and other taxes, excluding
federal, state or local income taxes, that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series A Preferred Stock pursuant thereto;
provided, however, that the Company shall not be obligated to pay any transfer taxes resulting
from any transfer requested by any holder in connection with any such conversion.

     (i) Notices. Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (i) upon hand delivery,
telecopy or facsimile at the address or number designated in the Purchase Agreement (if delivered
on a business day during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (ii) on the second business day following
the date of mailing by express overnight

9

 

courier service, fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The Company will give written notice each holder of Series A
Preferred Stock at least ten (10) days prior to the date on which the Company takes a record (A)
with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution, liquidation or winding-up and in no event shall such
notice be provided to such holder prior to such information being made known to the public. The
Company will also give written notice to each holder of Series A Preferred Stock at least ten (10)
days prior to the date on which any Organic Change or Liquidation will take place and in no event
shall such notice be provided to such holder prior to such information being made known to the
public

     (j) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Company shall at its option either (i) pay cash equal to the
product of such fraction multiplied by the average of the Closing Prices of the Common Stock for
the five (5) consecutive trading days immediately preceding the Voluntary Conversion Date or
Mandatory Conversion Date, as applicable, or (ii) in lieu of issuing such fractional shares issue
one additional whole share to the holder.

     (k) Reservation of Common Stock. The Company shall, so long as any shares of Series A
Preferred Stock are outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series A Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series A Preferred Stock then outstanding (without regard to the
limitations on conversion set forth in Section 7 hereof). The initial number of shares of Common
Stock reserved for conversions of the Series A Preferred Stock and each increase in the number of
shares so reserved shall be allocated pro rata among the holders of the Series A Preferred Stock
based on the number of shares of Series A Preferred Stock held by each holder at the time of
issuance of the Series A Preferred Stock or increase in the number of reserved shares, as the case
may be. In the event a holder shall sell or otherwise transfer any of such holder’s shares of
Series A Preferred Stock, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of Common Stock reserved
and which remain allocated to any person or entity which does not hold any shares of Series A
Preferred Stock shall be allocated to the remaining holders of Series A Preferred Stock, pro rata
based on the number of shares of Series A Preferred Stock then held by such holder.

     (l) Retirement of Series A Preferred Stock. Conversion of Series A Preferred Stock
shall be deemed to have been effected on the applicable Voluntary Conversion Date. The Company
shall keep written records of the conversion of the shares of Series A Preferred Stock converted by
each holder. A holder shall be required to deliver the original certificates representing the
shares of Series A Preferred Stock upon complete conversion of the Series A Preferred Stock.

     (m) Regulatory Compliance. If any shares of Common Stock to be reserved for the
purpose of conversion of Series A Preferred Stock require registration or listing with or approval
of any governmental authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or delivered upon
conversion, the Company shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case may be.

6. No Preemptive Rights. Except as provided in Section 5 hereof, no holder of the Series A
Preferred Stock shall be entitled to rights to subscribe for, purchase or receive any part of any
new or additional shares of any class, whether now or hereinafter authorized, or of bonds or
debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any
class, but all such new or

10

 

additional shares of any class, or any bond, debentures or other evidences of indebtedness
convertible into or exchangeable for shares, may be issued and disposed of by the Board of
Directors on such terms and for such consideration (to the extent permitted by law), and to such
person or persons as the Board of Directors in their absolute discretion may deem advisable.

7. Conversion Restriction.

     (a) Notwithstanding anything to the contrary set forth in Section 5 of this Certificate of
Designation, at no time may a holder of shares of Series A Preferred Stock convert shares of the
Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such
conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder
at such time, the number of shares of Common Stock which would result in such holder owning more
than 4.99% of all of the Common Stock outstanding at such time; provided, however, that upon a
holder of Series A Preferred Stock providing the Company with sixty-one (61) days notice (pursuant
to Section 5(i) hereof) (the “Waiver Notice”) that such holder would like to waive Section
7(a) of this Certificate of Designation with regard to any or all shares of Common Stock issuable
upon conversion of Series A Preferred Stock, this Section 7(a) shall be of no force or effect with
regard to those shares of Series A Preferred Stock referenced in the Waiver Notice.

     (b) Notwithstanding anything to the contrary set forth in Section 5 of this Certificate of
Designation, at no time may a holder of shares of Series A Preferred Stock convert shares of the
Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such
conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder
at such time, the number of shares of Common Stock which would result in such holder beneficially
owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder) in excess of 9.99% of all of the Common Stock outstanding at
such time; provided, however, that upon a holder of Series A Preferred Stock providing the
Company with sixty-one (61) days notice (pursuant to Section 5(i) hereof) (the “Waiver
Notice”) that such holder would like to waive Section 7 of this Certificate of Designation with
regard to any or all shares of Common Stock issuable upon conversion of Series A Preferred Stock,
this Section 7 shall be of no force or effect with regard to those shares of Series A Preferred
Stock referenced in the Waiver Notice.

8. Inability to Fully Convert.

     (a) Holder’s Option if Company Cannot Fully Convert. If, upon the Company’s receipt
of a Conversion Notice, the Company cannot issue shares of Common Stock registered for resale (to
the extent the Company was obligated to register such shares under the Registration Rights
Agreement) for any reason, including, without limitation, because the Company (i) does not have a
sufficient number of shares of Common Stock authorized and available, (ii) is otherwise prohibited
by applicable law or by the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company or its securities
from issuing all of the Common Stock which is to be issued to a holder of Series A Preferred Stock
pursuant to a Conversion Notice or (iii) fails to have a sufficient number of shares of Common
Stock registered for resale required under the Registration Statement (subject to the limitations
set forth in the Registration Rights Agreement relating to Rule 415 under the Securities Act), then
the Company shall issue as many shares of Common Stock as it is able to issue in accordance with
such holder’s Conversion Notice and pursuant to Section 5(b)(ii) above and, with respect to the
unconverted Series A Preferred Stock, the holder, solely at such holder’s option, can elect to:

     (i) In the case of 8(a)(i) above, require the Company to redeem from such holder those
Series A Preferred Stock for which the Company is unable to issue Common Stock in accordance

11

 

with such holder’s Conversion Notice (“Mandatory Redemption”) at a price per
share equal to 120% of the Liquidation Preference Amount as of such Conversion Date (the
“Mandatory Redemption Price”);

     (ii) if the Company’s inability to fully convert Series A Preferred Stock is pursuant to
Section 8(a)(iii) above, require the Company to issue restricted shares of Common Stock in
accordance with such holder’s Conversion Notice and pursuant to Section 5(b)(ii) above;

     (iii) void its Conversion Notice and retain or have returned, as the case may be, the
shares of Series A Preferred Stock that were to be converted pursuant to such holder’s
Conversion Notice (provided that a holder’s voiding its Conversion Notice shall not effect the
Company’s obligations to make any payments which have accrued prior to the date of such
notice).

     (b) Mechanics of Fulfilling Holder’s Election. The Company shall immediately send via
facsimile to a holder of Series A Preferred Stock, upon receipt of a facsimile copy of a Conversion
Notice from such holder which cannot be fully satisfied as described in Section 8(a) above, a
notice of the Company’s inability to fully satisfy such holder’s Conversion Notice (the
“Inability to Fully Convert Notice”). Such Inability to Fully Convert Notice shall
indicate (i) the reason why the Company is unable to fully satisfy such holder’s Conversion Notice,
(ii) the number of Series A Preferred Stock which cannot be converted and (iii) the applicable
Mandatory Redemption Price. Such holder shall notify the Company of its election pursuant to
Section 8(a) above by delivering written notice via facsimile to the Company (“Notice in
Response to Inability to Convert”).

     (c) Payment of Redemption Price. If such holder shall elect to have its shares
redeemed pursuant to Section 8(a)(i) above, the Company shall pay the Mandatory Redemption Price to
such holder within thirty (30) days of the Company’s receipt of the holder’s Notice in Response to
Inability to Convert, provided that prior to the Company’s receipt of the holder’s Notice in
Response to Inability to Convert the Company has not delivered a notice to such holder stating, to
the satisfaction of the holder, that the event or condition resulting in the Mandatory Redemption
has been cured and all Conversion Shares issuable to such holder can and will be delivered to the
holder in accordance with the terms of Section 2(g). If the Company shall fail to pay the
applicable Mandatory Redemption Price to such holder on a timely basis as described in this Section
8(c) (other than pursuant to a dispute as to the determination of the arithmetic calculation of the
Redemption Price), in addition to any remedy such holder of Series A Preferred Stock may have under
this Certificate of Designation and the Purchase Agreement, such unpaid amount shall bear interest
at the rate of 1.5% per month (prorated for partial months) until paid in full. Until the full
Mandatory Redemption Price is paid in full to such holder, such holder may (i) void the Mandatory
Redemption with respect to those Series A Preferred Stock for which the full Mandatory Redemption
Price has not been paid, (ii) receive back such Series A Preferred Stock, and (iii) require that
the Conversion Price of such returned Series A Preferred Stock be adjusted to the lesser of (A) the
Conversion Price and (B) the lowest Closing Price during the period beginning on the Conversion
Date and ending on the date the holder voided the Mandatory Redemption.

9. Pro-rata Conversion and Redemption. In the event the Company receives a Conversion
Notice from more than one holder of Series A Preferred Stock on the same day and the Company can
convert and redeem some, but not all, of the Series A Preferred Stock pursuant to Section 8, the
Company shall convert and redeem from each holder of Series A Preferred Stock electing to have
Series A Preferred Stock converted and redeemed at such time an amount equal to such holder’s
pro-rata amount (based on the number shares of Series A Preferred Stock held by such holder
relative to the number shares of Series A Preferred Stock outstanding) of all shares of Series A
Preferred Stock being converted and redeemed at such time.

12

 

10. Vote to Change the Terms of or Issue Preferred Stock. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting, of the holders of
not less than a majority of the then outstanding shares of Series A Preferred Stock, shall be
required (a) for any change to this Certificate of Designation or the Company’s Certificate of
Incorporation that would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Series A Preferred Stock or (b) for the issuance of shares of Series
A Preferred Stock other than pursuant to the Purchase Agreement. The provisions hereof may be
waived on behalf of all the Holders if in writing and signed by the Holders of not less than a
majority of the then outstanding shares of Series A Preferred Stock.

11. Lost or Stolen Certificates. Upon receipt by the Company of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any Preferred Stock Certificates
representing the shares of Series A Preferred Stock, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the holder to the Company and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and date.

12. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The
remedies provided in this Certificate of Designation shall be cumulative and in addition to all
other remedies available under this Certificate of Designation, at law or in equity (including a
decree of specific performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder’s right to pursue actual damages for any failure by the Company to comply with
the terms of this Certificate of Designation. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall be the amounts to
be received by the holder thereof and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the holders of the Series
A Preferred Stock and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the holders of the
Series A Preferred Stock shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic loss and without any
bond or other security being required.

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

     IN WITNESS WHEREOF, the undersigned has executed and subscribed this Amended Certificate and
does affirm the foregoing as true this 26 day of December, 2007.

	 	 	 	 	 
	 	NEOPROBE CORPORATION

 	 
	 	By:  	/s/
David C. Bupp
 	 
	 	 	Name:  	                David C. Bupp 	 
	 	 	Title:  	President and CEO 	 
	 

13

 

EXHIBIT I

NEOPROBE CORPORATION

CONVERSION NOTICE

     Reference is made to the Certificate of Designation of the Relative Rights and Preferences of
the Series A Preferred Stock of Neoprobe Corporation (the “Certificate of Designation”).
In accordance with and pursuant to the Certificate of Designation, the undersigned hereby elects to
convert the number of shares of Series A Preferred Stock, par value $.001 per share (the
“Preferred Shares”), of Neoprobe Corporation, a Delaware corporation (the
“Company”), indicated below into shares of Common Stock, par value $.001 per share (the
“Common Stock”), of the Company, by tendering the stock certificate(s) representing the
share(s) of Preferred Shares specified below as of the date specified below.

Date of Conversion:                                                            

Number of Preferred Shares to be converted:                                                            

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

The Common Stock have been sold pursuant to the Registration Statement (as defined in the
Registration Rights Agreement):
YES                      NO                     

Please confirm the following information:

Conversion Price:                                                             

Number of shares of Common Stock to be issued:                                                             

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on
the Date of Conversion determined in accordance with Section 16 of the Securities Exchange Act of
1934, as amended:                                         

Please issue the Common Stock into which the Preferred Shares are being converted and, if
applicable, any check drawn on an account of the Company in the following name and to the following
address:

Issue to:                                                             

Facsimile Number:                                                             

Authorization:

               By:                                                             

               Title:                                                             

Dated:                                                             

14

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