Document:

Exhibit 4.1

 

ATTACHMENT

TO

ARTICLES OF
AMENDMENT

OF

SPORTS
ENTERTAINMENT ENTERPRISES, INC.

 

Pursuant to Section 7-106-102 of the Colorado Business Corporation
Act (the “Act”), the Board
of Directors of Sports Entertainment Enterprises, Inc., a Colorado corporation
(the “Corporation”), duly
adopted the resolution set forth herein by unanimous written consent on February 7,
2005 in accordance with Section 7-108-202 of the Act.

 

RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Articles of Incorporation and pursuant to Section 7-106-102 of the
Business Corporation Act of the State of Colorado, the Board of Directors does
hereby designate, create, authorize and provide for the issuance by the
Corporation, out of the 5,000,000 authorized but unissued shares of Preferred
Stock, no par value, 2,172,400 shares of Series A Convertible Redeemable
Preferred Stock (the “Series A Convertible
Preferred Stock”) with a stated value of $20.00 per share (the “Stated Value”).  The Series A Convertible Preferred Stock
shall have the powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions that
are set forth in the Articles of Incorporation and in this resolution as
follows:

 

1.                                       Certain
Definitions.

 

Unless the context otherwise requires, each of the terms defined in
this Section 1 shall have, for all purposes of these Articles of
Amendment, the meaning herein specified (with terms defined in the singular
having comparable meanings when used in the plural):

 

“Affiliate”, as applied to any
Person, means any other Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, such Person. For purposes
of this definition, “control” (including, with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise, and, in addition
to the foregoing, a Person shall be deemed to control another Person if the controlling
Person owns 15% or more of any class of voting securities (or other ownership
interest) of the controlled Person.  In
the case of the Corporation, “Affiliate” shall include the Primary Sponsor (as
defined in the Investor Stock Purchase Agreement) and any of his Affiliates.

 

“Articles of Amendment” has the
meaning set forth above.

 

“Articles of Incorporation” has
the meaning set forth above.

 

 

“Average Closing Price” means,
for any specified date, the average of the Market Price of the Common Stock
over a period of thirty (30) consecutive trading days ending on such specified
date.

 

“Board of Directors” means the
Board of Directors of the Corporation.

 

“Business Day” means any day
other than a Saturday, a Sunday or any day on which banking institutions in New
York, New York, are required or authorized by law or other governmental action
to be closed.

 

“Capital Stock” means any and
all shares, interests, participations or other equivalents in the equity
interest (however designated) in the Corporation and any rights, warrants or
options to acquire an equity interest in the Corporation.

 

“Commission” means the
Securities and Exchange Commission.

 

“Common Share Equivalents”
means securities, options, warrants, derivatives, debt instruments or other rights
convertible into, or exercisable or exchangeable for, or entitling the holder
thereof to receive directly or indirectly, Common Stock.

 

“Common Stock” means the Common
Stock, no par value, of the Corporation.

 

“Conversion Price” has the
meaning set forth in Section 5(a) below.

 

“Conversion Rights” has the
meaning set forth in Section 5 below.

 

“Converted Shares” has the
meaning set forth in Section 5(c) below.

 

“Converting Shares” has the
meaning set forth in Section 5(c) below.

 

“Corporation” has the meaning
set forth above.

 

“CBCA” shall mean the Colorado
Business Corporation Act, as amended.

 

“Designated Common Share Equivalents”
means Common Share Equivalents issued after the Issue Date with an exercise,
conversion, exchange or strike price per share at exercise, conversion or
exchange of less than $10.00 and any Common Stock Equivalents which, as a
result of any adjustment after issuance, have an exercise, conversion, exchange
or strike price per share at exercise, conversion or exchange of less than
$10.00 (after adjusting for stock splits, stock dividends, recapitalizations,
mergers, consolidations or similar events occurring after the Issue Date that
effect a change in the capitalization of the Company and regardless of whether
such Common Share Equivalents have been exercised, have expired or are
outstanding), provided that Designated Common Share Equivalents shall only
include the first 10,000,000 shares of Common Stock (after adjusting for stock
splits, stock dividends, recapitalizations, mergers, consolidations or similar
events occurring after the Issue Date that effect a change in the
capitalization of the Company) into which the foregoing are exercisable,
convertible or exchangeable, and provided further that Designated Common Share
Equivalents shall not include the Purchaser Warrants, Holder Warrants and
Excluded Stock Options.

 

2

 

“Equity Offering” means any
issuance and sale of Capital Stock (or any equity securities of the Corporation
convertible into Capital Stock) to any investor or other financing source in an
offering registered under the Securities Act or in a “PIPES” or similar
transaction.

 

“Excess Common Share Equivalents”
means any Common Share Equivalents with an exercise, conversion, exchange or
strike price per share at exercise, conversion or exchange of less than $10.00
and any Common Stock Equivalents which, as a result of any adjustment after
issuance have an exercise, conversion, exchange or strike price per share at
exercise, conversion or exchange of less than $10.00 (regardless of whether
such Common Share Equivalents have been exercised, have expired or are
outstanding), which are not Designated Common Share Equivalents, the Purchaser
Warrants, Holder Warrants or Excluded Stock Options.

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

“Excluded Stock Options” means
any incentive stock options issued by the Corporation and its Subsidiaries
pursuant to an incentive stock option plan qualified under Section 422 of
the Internal Revenue Code of 1986, as amended.

 

“First Tranche of Purchaser Warrants”
means the Purchaser Warrants in respect of 5,000,000 shares of Common Stock
(with an exercise price of $1.00) to be exercised by the Purchaser (as defined
in the Investor Stock Purchase Agreement”) on the Closing Date (as defined in
the Investor Stock Purchase Agreement).

 

“Holder” means the record
holder of one or more shares of Series A Convertible Preferred Stock, as shown
on the books and records of the Transfer Agent.

 

“Holder Warrants” means the
warrants to purchase shares of Common Stock issued to the initial Holders on
the Issue Date.

 

“Investor Stock Purchase Agreement”
means the Stock Purchase Agreement, dated as of February 7, 2005, among
the Corporation and the Investors party thereto, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.

 

“Issue Date” means the date of
initial issuance of the Series A Convertible Preferred Stock.

 

“Liquidation Event” means
(i) any voluntary or involuntary liquidation, dissolution or winding-up of
the Corporation, (ii) the consummation of a merger or consolidation in
which the shareholders of the Corporation prior to such transaction own less
than a majority of the voting securities of the entity surviving such
transaction, or (iii) the sale, distribution or other disposition of all
or substantially all of the Corporation’s assets.

 

“Liquidation Preference” has
the meaning set forth in Section 4(a) below.

 

“Market Price” means the last
reported sale price of the Common Stock on any national securities exchange or
U.S. inter-dealer quotation system of a registered national securities
association on which the Common Stock is then listed or quoted.

 

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“NASDAQ” means the National
Association of Securities Dealers Automated Quotations system.

 

“Notice of Optional Repurchase”
has the meaning set forth in Section 8(d)(i) below.

 

“Notice of Intent to Repurchase”
has the meaning set forth in Section 8(b) below.

 

“Optional Repurchase Date” has
the meaning set forth in Section 8(a) below.

 

“Optional Repurchase Price”
means, from the Issue Date to and including the first anniversary thereof,
$23.10 per share of Series A Convertible Preferred Stock, and after the first
anniversary of the Issue Date, a price equal to the product of (X) the
Stated Value of such share of Series A Convertible Preferred Stock multiplied
by (Y) the result of an exponential equation with the base number equal to
1.155 and the exponent equal to the number of full and partial years commencing
on the Issue Date and ending on such Optional Repurchase Date.

 

“Parity Stock” has the meaning
set forth in Section 2 below.

 

“Permitted Transferee” means,
with respect to any Investor, any controlled Affiliate of such Investor that
has as its primary business and purpose to acquire, hold, maintain, finance,
manage or dispose of investments in other entities.

 

“Person” means any individual,
partnership, limited liability company, corporation, joint venture,
association, trust, unincorporated organization, government or agency or
political subdivision thereof or any other entity of whatever nature.

 

“Preferred Stock” means Capital
Stock of the Corporation of any class or classes (however designated) that
ranks prior, as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, to shares of Capital
Stock of any other class of the Corporation.

 

“Purchaser Warrants” has the
meaning ascribed to such term in the Investor Stock Purchase Agreement.

 

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

 

“Senior Stock” has the meaning
set forth in Section 2 below.

 

“Series A Convertible Preferred Stock”
has the meaning set forth above.

 

“Series B Convertible Preferred Stock”
means the Series B Convertible Preferred Stock, no par value, of the
Corporation.

 

“Series C Convertible Preferred Stock”
means the Series C Convertible Preferred Stock, no par value, of the
Corporation.

 

“Stated Value” has the meaning
set forth above.

 

4

 

“Total Return Shortfall” has
the meaning ascribed to such term in the Investor Stock Purchase Agreement.

 

“Transfer Agent” means the
entity designated from time to time by the Corporation to act as the registrar
and transfer agent for the Series A Convertible Preferred Stock.

 

2.                                       Ranking.  The Series A Convertible Preferred Stock
shall, with respect to dividend rights and rights on the liquidation,
winding-up and dissolution of the Corporation (as provided in Section 4
below), rank (a) senior to all classes of Common Stock (subject to Section 3(a))
and to each other class of Capital Stock or series of Preferred Stock
established hereafter by the Board of Directors other than the Series B
Convertible Preferred Stock (such Capital Stock or series, other than the
Series B Convertible Preferred Stock, collectively referred to as the “Junior Stock”), (b) on a parity
with the Series B Convertible Preferred Stock and each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors with the consent of the Holders of a majority of the outstanding
shares of Series A Convertible Preferred Stock, the terms of which expressly
provide that such class or series ranks on a parity with the Series A
Convertible Preferred Stock as to dividend rights and rights on the liquidation,
winding-up and dissolution of the Corporation (collectively referred to as “Parity Stock”) and (c) junior to
any future class of Preferred Stock established hereafter by the Board of
Directors with the consent of the Holders of a majority of the outstanding
shares of Series A Convertible Preferred Stock, the terms of which expressly
provide that such class ranks senior to the Series A Convertible Preferred
Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to as the “Senior Stock”).

 

3.                                       Dividends.

 

(a)                                  The
Holders of Series A Convertible Preferred Stock shall participate pro rata in
the payment of any dividend or distribution to the holders of the Common Stock
as would be declared and payable on the largest number of whole shares of
Common Stock into which the shares of Series A Convertible Preferred Stock held
by such Holder could be converted, on the record date fixed for such dividend
or distribution, pursuant to the provisions of Section 5 below.  Other than as provided in the immediately
preceding sentence or in respect of the Total Return Shortfall to be paid
pursuant to Section 4(a) hereof, the Holders of Series A Convertible
Preferred Stock shall not be entitled to receive any payment of any dividend or
distribution by the Corporation.

 

(b)                                 The
Corporation shall take all actions required or permitted under the CBCA to
permit the payment of dividends on the Series A Convertible Preferred Stock, if
applicable, including, without limitation, through the revaluation of its
assets in accordance with the CBCA, to make or keep funds legally available for
the payment of dividends.

 

(c)                                  Without
limiting the provisions of Sections 4 and 5 below, nothing herein contained
shall in any way or under any circumstances be construed or deemed to require
the Board of Directors to declare, or the Corporation to pay or set apart for
payment, any dividends on shares of the Common Stock or the Series A
Convertible Preferred Stock at any time.

 

5

 

(d)                                 Without
limiting the provisions of Sections 4 and 5 below, no dividend whatsoever shall
be declared or paid upon, or any sum set apart for the payment of dividends
upon, any outstanding share of the Series A Convertible Preferred Stock (other
than the Total Return Shortfall) unless all dividends on all outstanding shares
of Senior Stock for all preceding dividend periods in respect of such Senior
Stock have been declared and paid, or declared and a sufficient sum set apart
for the payment thereof.

 

4.                                       Liquidation
Preference.

 

(a)                                  Upon
any Liquidation Event, each Holder of shares of the Series A Convertible
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders, (i) prior to the
holders of any other class or series of the Corporation’s Common Stock and to
each class of Junior Stock, (ii) pro rata with the holders of the Series B
Convertible Preferred Stock and any other Parity Stock and (iii) after the
holders of any Senior Stock, an amount (such amount, the “Liquidation
Preference”) equal to the greater of (x) a cash amount per share
equal to the sum of (A) the Stated Value and (B) any accrued and unpaid
dividends and (C) the Total Return Shortfall applicable to such shares of
Series A Convertible Preferred Stock to the extent not already realized by the
holders thereof prior to such Liquidation Event or (y) the liquidation value
attributable to the shares of Common Stock into which such shares of Series A
Convertible Preferred Stock would then be convertible under the provisions of Section 5
below.

 

(b)                                 In the event of a Liquidation Event involving a
consolidation or merger of the Corporation or a sale of all or substantially
all of the assets of the Corporation, each Holder of Series A Convertible
Preferred Stock shall have the right, in its sole discretion, to elect the
benefits of the provisions of Section 5(g) hereof in lieu of receiving
payment upon a Liquidation Event pursuant to this Section 4.

 

(c)                                  If,
upon any Liquidation Event, the assets of the Corporation available for
distribution to its shareholders are not sufficient to pay in full all amounts
payable to the Holders of outstanding shares of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock, the Holders of
the Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock shall share equally and ratably in any distribution of assets
of the Corporation in proportion to the full Liquidation Preference to which such
Holders are entitled.

 

5.                                       Conversion.  Subject to the restrictions described in Section 8
hereof, the Holders of the Series A Convertible Preferred Stock shall have the
conversion rights as follows (the “Conversion Rights”):

 

(a)                                  Each
share of Series A Convertible Preferred Stock shall be convertible, at the
option of the Holder thereof at any time after the Issue Date of such share, in
each case at the office of the Corporation or any Transfer Agent for the Series
A Convertible Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Stated Value (plus any
accrued and unpaid dividends, if any) by the Conversion Price at the time in
effect for such shares and multiplying such number by the total number of
shares of Series A Convertible Preferred Stock being converted.  The initial “Conversion
Price” per share for shares of Series A Convertible Preferred
Stock shall be $10.00; provided, however,

 

6

 

 

that the
Conversion Price in effect from time to time for the Series A Convertible
Preferred Stock shall be subject to adjustment as provided hereinafter.

 

(b)                                 (i)                                     Subject
to Section 5(b)(iii), from and after the third (3rd) anniversary of the
Issue Date, in the event that the Average Closing Price at any time equals or
exceeds $15 per share (subject to adjustment in accordance with paragraphs (d),
(e), (f) and (g) of Section 5 but not in accordance with Section 6(a)),
the Corporation shall thereafter have the right, in its sole discretion, upon
the delivery of a written notice to each Holder of Series A Convertible
Preferred Stock (which such notice shall be delivered within ten (10) Business
Days after the thirtieth (30th) trading day utilized in the calculation of such
Average Closing Price, if any, and which conversion shall occur within five (5)
Business Days after such notice, if at all), to convert such shares of Series A
Convertible Preferred Stock into shares of Common Stock and the Holders thereof
shall be deemed to have complied with the provisions set forth in Section 5(c)
and the shares so converted shall be deemed to be Converted Shares; provided, however, that
until such Holder surrenders the certificate evidencing the Converting Shares
the Corporation shall not be required to deliver to such Holder the certificate
evidencing the Converted Shares.

 

(ii)                                  Subject
to Section 5(b)(iii), at any time after the Issue Date, in the event that
(A) the Average Closing Price at any time equals or exceeds $15 per share
(subject to adjustment in accordance with paragraphs (d), (e), (f) and (g) of Section 5
but not in accordance with Section 6(a)), and (B) the Market Price
multiplied by the total number of outstanding shares of Common Stock of the
Corporation equals or exceeds five hundred million dollars ($500,000,000), the
Corporation shall thereafter have the right, in its sole discretion, upon the
delivery of a written notice to each Holder of Series A Convertible Preferred
Stock (which such notice shall be delivered within five (5) Business Days after
the thirtieth (30th) trading day utilized in the calculation of such Average
Closing Price, if at all), to convert, into shares of Common Stock, up to the
number of shares of Series A Convertible Preferred Stock with an aggregate
Stated Value equal to 25% of the product of the Average Closing Price
multiplied by the total number of outstanding shares of Common Stock of the
Corporation that are publicly tradable (without transfer or other restrictions)
and with respect to which all restrictive legends and stop transfer
restrictions have been removed and that are not held by Affiliates of the
Corporation, and the Holders thereof shall be deemed to have complied with the
provisions set forth in Section 5(c); provided, however, that no subsequent conversion right under this Section 5(b)(ii)
may be exercised by the Corporation unless and until the Holders shall have had
the opportunity to sell all shares of Common Stock received upon such preceding
conversion under an effective registration statement under the Securities Act
or on NASDAQ or another public trading market where the Corporation’s Common
Stock is then principally traded pursuant an exemption from registration under
the Securities Act (without being restrained by any volume or other transfer
restrictions, pursuant to applicable law or contract).  Until such Holder surrenders the certificate
evidencing the Converting Shares the Corporation shall not be required to
deliver to such Holder the certificate evidencing the Converted Shares.

 

(iii)                               The
Corporation shall not be entitled to exercise its right to convert any shares
of Series A Convertible Preferred Stock (the “Corporation
Conversion Right”) during any period with respect to which such
shares of Series A Convertible Preferred Stock or the shares of Common Stock
issuable upon the conversion thereof are contractually prohibited

 

7

 

from being
sold (such restriction, a “Lock Up”); provided, however, that
the Corporation may exercise the Corporation Conversion Right with respect to
such shares, provided that the Corporation irrevocably waives the Lock Up, on
not less than ten (10) Business Days’ prior written notice, with respect to both
the shares of Series A Convertible Preferred Stock to be so converted and the
Common Stock to be issued upon conversion of such Series A Convertible
Preferred Stock.

 

(c)                                  (i)                                     Each
conversion of shares of Series A Convertible Preferred Stock into shares of
Common Stock shall be effected by the surrender of the certificate(s)
evidencing the shares of Series A Convertible Preferred Stock to be converted
(the “Converting Shares”) at the
principal office of the Corporation (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the
Holders of the Series A Convertible Preferred Stock) at any time during its
usual business hours, together with written notice by the holder of such
Converting Shares, (A) stating that the Holder desires to convert the
Converting Shares, or a specified number of such Converting Shares, evidenced
by such certificate(s) into shares of Common Stock (the “Converted
Shares”), and (B) giving the name(s) (with addresses) and
denominations in which the certificate(s) evidencing the Converted Shares shall
be issued, and instructions for the delivery thereof.  Upon receipt of the notice described in the
first sentence of this subsection 5(c)(i), together with the
certificate(s) evidencing the Converting Shares, the Corporation shall be
obligated to, and shall, issue and deliver in accordance with such instructions
the certificate(s) evidencing the Converted Shares issuable upon such
conversion and a certificate (which shall contain such applicable legends, if
any, as were set forth on the surrendered certificate(s)) representing any
shares which were represented by the certificate(s) surrendered to the
Corporation in connection with such conversion but which were not Converting
Shares and, therefore, were not converted. 
Such conversion, to the extent permitted by law, shall be deemed to have
been effected as of the close of business on the date on which such
certificate(s) shall have been surrendered and such written notice shall have
been received by the Corporation unless a later date has been specified by such
holder, and at such time the rights of the holder of such Converting Shares as
such holder shall cease, and the Person(s) in whose name or names any
certificate(s) evidencing the Converted Shares are to be issued upon such
conversion shall be deemed to have become the holder(s) of record of the
Converted Shares.

 

(ii)                                  Upon
the issuance of the Converted Shares in accordance with Section 5, such
shares shall be deemed to be duly authorized, validly issued, fully paid and
non-assessable.

 

(d)                                 Adjustments for Common Stock Dividends and Distributions.  If the Corporation at any time or from time
to time after the Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, in each such
event the Conversion Price that is then in effect shall be decreased as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying each Conversion Price
then in effect by a fraction (i) the numerator of which is 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 (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such

 

8

 

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 to the extent an
adjustment is made in respect of the foregoing pursuant to Section 5(e) or
the holder actually receives the dividend to which any such adjustment relates,
an adjustment shall not be made pursuant to this Section 5(d).

 

(e)                                  Conversion Price Adjustments for Subdivisions, Combinations or
Consolidations of Common Stock.

 

(i)                                     In
the event the Corporation should at any time or from time to time after the
Issue Date hereof fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in additional Common Share Equivalents, without payment of
any consideration by such holder for additional Common Share Equivalents
(including the additional Common Stock issuable upon conversion, exchange or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Convertible Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of each share of such Series A Convertible Preferred Stock shall be increased
in proportion to such increase of outstanding shares of Common Stock and shares
issuable with respect to Common Share Equivalents.

 

(ii)                                  If
the number of shares of Common Stock outstanding at any time after the date
hereof is decreased by a combination, consolidation, reclassification or
reverse stock split of the outstanding shares of Common Stock or other similar
event, then, following the record date of such combination, the Conversion
Price of the Series A Convertible Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion
of each share of such Series A Convertible Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares of Common Stock.

 

(f)                                    Recapitalizations.  If
at any time or from time to time there shall be a recapitalization of the
Common Stock (other than a subdivision, combination, merger or sale of assets
transaction provided for elsewhere in this Section 5), provision shall be
made so that the Holders of the Series A Convertible Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series A Convertible
Preferred Stock the number of shares of Capital Stock or other securities or
property of the Corporation to which a holder of Common Stock would have been
entitled on recapitalization.  In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the Holders of
the Series A Convertible Preferred Stock after the recapitalization to the end
that the provisions of this Section 5 (including adjustment of the
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Convertible Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.

 

(g)                                 Mergers and Other Reorganizations.  If at any time or from time to time there
shall be a reclassification of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 5) or a merger or consolidation of the Corporation with or
into another corporation or the sale of all or substantially all of the
Corporation’s properties and assets to any other person, then, as a part of

 

9

 

and as a
condition to the effectiveness of such reclassification, merger, consolidation
or sale, lawful and adequate provision shall be made so that the Holders of the
Series A Convertible Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Convertible Preferred Stock the number of
shares of Capital Stock or other securities or property, if any, of the
Corporation or of the successor corporation resulting from such
reclassification, merger or consolidation or sale, to which a holder of Common
Stock deliverable upon conversion would have been entitled in connection with
such reclassification, merger, consolidation or sale.  In any such case, appropriate provision shall
be made with respect to the rights of the holders of the Series A Convertible
Preferred Stock after the reclassification, merger, consolidation or sale to
the end that the provisions of this Section 5 (including, without
limitation, provisions for adjustment of the Conversion Price and the number of
shares purchasable upon conversion of the Series A Convertible Preferred Stock)
shall thereafter be applicable, as nearly as may be, with respect to any shares
of Capital Stock, securities or property to be deliverable thereafter upon the
conversion of the Series A Convertible Preferred Stock.

 

Each Holder of Series A Convertible Preferred
Stock, upon the occurrence of a reclassification, merger or consolidation of
the Corporation or the sale of all or substantially all its assets and
properties, as such events are more fully set forth in the first paragraph of
this Section 5(g), shall have the option of electing treatment of his
shares of Series A Convertible Preferred Stock under either this Section 5(g)
or Section 4 hereof, notice of which election shall be submitted in
writing to the Corporation at its principal offices no later than ten (10) days
before the effective date of such event, provided that any such notice of
election shall be effective if given not later than fifteen (15) days after the
date of the Corporation’s notice pursuant to Section 5(h) hereof with
respect to such event, and, provided, further, that if any Holder fails to give
the Corporation such notice of election, the provisions of this Section 5(g)
shall govern the treatment of such Holder’s shares of Series A Convertible
Preferred Stock upon the occurrence of such event.

 

(h)                                 Notices of Record Date.  In
the event (i) the Corporation fixes a record date to determine the holders of
Common Stock who are entitled to receive any dividend or other distribution, or
(ii) there occurs any capital reorganization of the Corporation, any
reclassification or recapitalization of the Common Stock of the Corporation,
any merger or consolidation of the Corporation, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation
shall mail to each holder of Series A Convertible Preferred Stock at least
twenty (20) days prior to the record date specified therein, a notice
specifying (a) the date of such record date for the purpose of such dividend or
distribution and a description of such dividend or distribution, (b) the date
on which any such reorganization, reclassification, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective, and (c)
the time, if any, that is to be fixed, as to when the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of
Common Stock or other securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, dissolution,
liquidation or winding up.

 

(i)                                     No Impairment.  The
Corporation will not, by amendment of its Articles of Incorporation or through
any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to

 

10

 

avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, 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 actions as may be necessary or appropriate in order to protect the
Conversion Rights of the Holders of the Series A Convertible Preferred Stock
against impairment.  Before taking any action
which would cause an adjustment reducing any Conversion Price below the then
par value (if any) of the shares of Common Stock deliverable upon conversion of
Preferred Stock, the Corporation will use its best efforts to take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may legally and validly issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.

 

(j)                                     Fractional Shares and Certificate as to Adjustments.

 

In lieu of any
fractional shares to which a Holder of Series A Convertible Preferred Stock
would otherwise be entitled upon conversion, the Corporation shall pay cash
equal to such fraction multiplied by the Market Price of one share of Common
Stock, as determined in good faith by the Board of Directors, except that,
without the consent of the Holders of a majority of the outstanding shares of
Series A Convertible Preferred Stock, the Corporation shall not be entitled to
pay cash in lieu of fractional shares if such payment to any one Holder would
exceed $1,000 (which such amount shall be proportionately adjusted for any
reverse stock split).  Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series A Convertible Preferred Stock of
each Holder at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.

 

Upon the
occurrence of each adjustment or readjustment of the Conversion Price of any
Series A Convertible Preferred Stock pursuant to this Section 5, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each Holder of such Series A Convertible Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. 
The Corporation shall, upon the written request at any time of any Holder
of Series A Convertible Preferred Stock, furnish or cause to be furnished to
such Holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price of the Series A Convertible Preferred
Stock at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such Holder’s shares of Series A Convertible Preferred
Stock.  The provisions of Section 5(d),
(e), (f) and (g) shall apply to any transaction and successively to any series
of transactions that would require any adjustment pursuant thereto.

 

(k)                                  Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve
and keep available out of its authorized but unissued Common Stock, solely for
the purpose of effecting the conversion of the shares of the Series A
Convertible Preferred Stock (taking into account the adjustments required by
this Section 5), such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares
of the Series A Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then

 

11

 

outstanding
shares of the Series A Convertible Preferred Stock, in addition to such other
remedies as shall be available to the Holders of such Series A Convertible
Preferred Stock, the Corporation will, as soon as is reasonably practicable,
take all such action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.

 

6.                                       Special
Anti-Dilution Protection.

 

(a)                                  Upon
the issuance of the Purchaser Warrants and in the event of (1) any issuance by
the Corporation of shares of Common Stock at a price per share of less than
$10.00, (2) the exercise, conversion, or exchange into Common Stock of
Designated Common Share Equivalents, or (3) the issuance of Excess Common Share
Equivalents, then the Conversion Price of all outstanding shares of Series A
Convertible Preferred Stock shall be adjusted so that, after giving effect
thereto, the number of shares of Common Stock into which all of the
shares of Series A Convertible Preferred Stock issued to the initial
Holders on the Issue Date would be convertible (regardless of whether, in
calculating the number of shares, such Series A Convertible Preferred Stock is
still outstanding or still held by the initial Holders), shall
represent 10% of the Fully Diluted Common Stock (as defined below).  For purposes of this Section 6(a), “Fully Diluted Common Stock” shall
mean and include the sum of (i) the number of all outstanding shares of Common
Stock, plus (ii) the number of shares of Common Stock into which the
outstanding Series A Convertible Preferred Stock are convertible, plus
(iii) the number of shares of Common Stock into which the outstanding Purchaser
Warrants (other than the First Tranche of Purchaser Warrants) are convertible,
plus (iv) upon exercise of the Designated Common Stock Equivalents, the number
of outstanding shares of Common Stock into which the Designated Common Share
Equivalents are exercisable, convertible or exchangeable, plus (v) the number
of outstanding shares of Common Stock into which all Excess Common Share
Equivalents are exercisable, convertible or exchangeable and, there shall be excluded from the definition of Fully Diluted Common Stock,
to the extent otherwise included, (A) the number of shares of Common Stock
issued or issuable in respect of the exercise of the First Tranche of Purchaser
Warrants and the Holder Warrants, (B) the number of shares of Common Stock
issued after the Issue Date at a price per share equal to or greater than
$10.00, (C) the number of shares of Common Stock issuable or issued after
the Issue Date in respect of the exercise, conversion or exchange of Common
Share Equivalents that were issued with an exercise, conversion, exchange or
strike price per share equal to or greater than $10.00, and (D) the number
of shares of Common Stock issuable or issued after the Issue Date in respect of
the exercise of Excluded Stock Options. 
No adjustment shall be made to the Conversion Price for any exercise,
conversion or exchange of (x) the First Tranche of Purchaser Warrants and the
Holder Warrants, (y) Common Stock Equivalents that were issued with an
exercise, conversion, exchange or strike price per share equal to or greater
than $10.00, and (z) Excluded Stock Options, and no adjustment shall be made
for any issuance or exercise for which an adjustment shall have been made
pursuant to Section 5 hereof.  In
addition, in the event that any shares of Series A Convertible Preferred Stock
shall have been converted, the Holders of such shares shall no longer be
entitled to receive any adjustment provided in this Section 6(a) with
respect to such converted Series A Convertible Preferred Stock.

 

(b)                                 The
anti-dilution protection provided for in Section 6(a) shall terminate in
the event that the Average Closing Price at any time equals or exceeds $15 per
share (subject to

 

12

 

adjustment in
accordance with paragraphs (d), (e), (f) and (g) of Section 5 but not in
accordance with Section 6(a)) during the thirty (30) consecutive
trading day period used to determine the Average Closing Price, and the Holders
of outstanding shares of Series A Convertible Preferred Stock had the
opportunity to convert their Series A Convertible Preferred Stock and dispose
of all Converted Shares issuable upon such conversion pursuant to an effective
registration statement under the Securities Act, Rule 144(k) promulgated under
the Securities Act (if available to the Holder) or on NASDAQ or another public
trading market where the Corporation’s Common Stock is then principally traded
pursuant to an exemption from registration under the Securities Act (in each
case, without being restrained by any volume or other transfer restrictions
pursuant to applicable law or contract) and provided that such Converted Shares
are not subject to any Lock Up which has not been waived.

 

(c)                                  To
the extent necessary, each class and series of Capital Stock, including the
Series A Convertible Preferred Stock and the Series B Convertible Preferred
Stock, shall constitute a separate series of Capital Stock pursuant to
applicable securities laws and the terms hereof.

 

(d)                                 If,
at any time after the third (3rd) anniversary of the issuance of the
Series A Convertible Preferred Stock, the Corporation elects to exercise the
Corporation Conversion Right to effect the conversion of any shares of Series A
Convertible Preferred Stock in accordance with the provisions of Section 5(b)(ii),
then concurrent with such conversion, the Corporation shall issue and deliver
to the Holder of such shares of Series A Convertible Preferred Stock being
converted pursuant to the Corporation Conversion Right warrants to purchase
additional shares of Common Stock (a “Penny Warrant”).  Each such Penny Warrant shall provide for an
exercise price of not more than $.01 per share of Common Stock and which in
total shall provide for the issuance of a number of shares of Common Stock
equal to the Converted Protection Amount (as defined below) in respect of each
outstanding Common Share Equivalent which, if converted or exercised prior to
the effectiveness of such conversion would have necessitated an adjustment
pursuant to Section 6(a) hereof.  Such
Penny Warrants shall terminate ten (10) Business Days after the expiration or
termination of the related Common Share Equivalents unless such related Common
Share Equivalents are replaced with other Common Share Equivalents, on
substantially the same or more favorable terms to the holders thereof (other
than the expiration date), and shall be exercisable only upon the exercise or
conversion of the related Common Share Equivalents or any such replacement
thereof.  The Corporation shall provide
notice to the holder of such Penny Warrants no later than five (5) Business
Days after the conversion or exercise of the related Common Share
Equivalents.  For purposes of this Section 6(d),
“Converted Protection Amount” means
a number of shares equal to 50% of the difference between (a) the number of
shares of Common Stock into which the shares of Series A Convertible Preferred
Stock being converted pursuant to the Corporation Conversion Right would be
converted if all Designated Common Share Equivalents were converted or
exercised immediately prior to the conversion of such shares of Series A
Convertible Preferred Stock and (b) the number of shares of Common Stock into
which such shares of Series A Convertible Preferred Stock actually convert upon
such conversion.

 

13

 

7.                                       Mandatory
Redemption.

 

(a)                                  In
the event that any Holder of Series A Convertible Preferred Stock has not
converted its Series A Convertible Preferred Stock into Common Stock as of the
eighth (8th) anniversary of the Issue Date (the “Redemption
Date”), the Corporation shall be required to redeem 100% of the
outstanding shares of Series A Convertible Preferred Stock for an aggregate
price (the “Mandatory Redemption Price”)
equal to (a) the Stated Value plus (b) any accrued and unpaid
dividends thereon, if any, plus (c) the Total Return Shortfall to the
extent not realized prior to such redemption date, multiplied by the number of
shares of Series A Convertible Preferred Stock then being redeemed.

 

(b)                                 Prior
to the Redemption Date, the Corporation may segregate and hold in trust an
amount of money sufficient to pay the Mandatory Redemption Price of all the
Series A Convertible Preferred Stock to be redeemed on the Redemption Date
other than shares of Series A Convertible Preferred Stock that have already
been called for redemption. 
Notwithstanding the foregoing, until the Mandatory Redemption Price is
paid to the Holders, the Corporation shall not be released from its obligations
under Section 7(a) hereof.

 

8.                                       Optional
Repurchase Upon Equity Offering.

 

(a)                                  Option
to Repurchase.

 

(i)                                     In
the event the Corporation completes an Equity Offering, the Corporation, at its
option, may use up to 25% of the net cash proceeds received by the Corporation
from any such Equity Offering to repurchase outstanding shares of Series A
Convertible Preferred Stock (an “Optional Repurchase”)
upon notice to the holders thereof as set forth in Section 8(b) or 8(d)
hereof, as applicable, at a Repurchase Price equal to 100% of the Optional
Repurchase Price.

 

(ii)                                  The
Corporation shall pay any distributions on the shares of Series A Convertible
Preferred Stock called for repurchase pursuant to this Section 8(a)
accrued but not paid to, but excluding, the date such shares of Series A Convertible
Preferred Stock are repurchased (the “Optional Repurchase Date”).  Such dividends shall be paid to the Holder
entitled to the Optional Repurchase Price.

 

(iii)                               With
respect to the first Optional Repurchase that the Corporation exercises after
the Issue Date (the “First Optional Repurchase”),
after delivery of the notice required by Section 8(d) to the holders of
the shares of Series A Convertible Preferred Stock, the holders of the shares
of Series A Convertible Preferred Stock so called for repurchase (such shares,
the “Called Preferred Stock”) shall not
have the right to convert such Called Preferred Stock for a period not to
exceed seventy-five (75) days after the date the Notice of Optional Repurchase
is given.  With respect to the second
Optional Repurchase that the Corporation exercises after the Issue Date (the “Second Optional Repurchase”), after
delivery of a Notice of Intent to Repurchase (as defined below) pursuant to Section 8(b)
to the holders of the shares of Series A Convertible Preferred Stock, a holder
of Called Preferred Stock shall be permitted to convert such shares of Series A
Convertible Preferred Stock, in whole or in part, prior to the Optional
Repurchase Date, if such Holder provides notice of its election to convert
within ten

 

14

 

(10) days
after the Corporation’s delivery of the Notice of Intent to Repurchase.  In the event that the Holders do not so elect
to convert all or part of the Series A Convertible Preferred Stock called for
repurchase pursuant to a Second Optional Repurchase into Common Stock within
the ten (10) day period following receipt of a Notice of Intent to Repurchase,
the Holders shall not be permitted to convert such Series A Convertible
Preferred Stock which the Holders did not so elect to convert unless the
Optional Repurchase Date fails to occur within seventy-five (75) days after the
date the Notice of Intent to Repurchase is given.  In the event that the Corporation determines
it will not consummate any Optional Repurchase for which it has given a Notice
of Option Repurchase or Notice of Intent to Repurchase, the Corporation shall
promptly notify the Holders of such determination, and any restrictions on
converting such Called Preferred Stock pursuant to this Section 8(a)(iii)
shall terminate.

 

(iv)                              With
respect to the third, fifth and every odd numbered Optional Repurchase after
the Second Optional Repurchase, the right of the holders of shares of Series A
Convertible Preferred Stock called for repurchase to convert such shares of
Series A Convertible Preferred Stock shall be the same as the right of the
holders of shares of Series A Convertible Preferred Stock in the First Optional
Repurchase.  With respect to the fourth,
sixth and every even numbered Optional Repurchase after the Second Optional
Repurchase, the right of the holders of shares of Series A Convertible
Preferred Stock called for repurchase to convert such shares of Series A
Convertible Preferred Stock shall be the same as the right of the holders of
shares of Series A Convertible Preferred Stock in the Second Optional
Repurchase.

 

(b)                                 Notice
of Intent to Repurchase.  The
Corporation shall give the Holders thirty (30) days prior written notice of the
Corporation’s intent to exercise a Second Optional Repurchase (and every even
numbered Optional Repurchase after the Second Optional Repurchase) (a “Notice of Intent to Repurchase”).  The Notice of Intent to Repurchase shall
specify the Optional Repurchase Date, which shall not be more than seventy-five
(75) days after the Notice of Intent to Repurchase is given, and the
information set forth in clauses (2) through (7) of Section 8(d)(ii).  Any Notice of Intent to Repurchase shall be
given in the manner provided in Section 8(d) with respect to a Notice of
Optional Repurchase.

 

(c)                                  Selection
of Shares of Series A Convertible Preferred Stock to be Repurchased.

 

(i)                                     If
fewer than all the shares of Series A Convertible Preferred Stock are to be
repurchased pursuant to an Optional Repurchase, the shares of Series A
Convertible Preferred Stock shall be repurchased from the Holders on a pro rata
basis.  Series A Convertible Preferred
Stock that the Corporation selects shall be in amounts equal to the minimum
authorized denominations for certificated shares of Series A Convertible
Preferred Stock to be repurchased or any integral multiple thereof.

 

(ii)                                  If
a Holder converts any Called Preferred Stock as permitted pursuant to Sections
8(a)(iii) and 8(a)(iv) hereof, the Called Preferred Stock so converted shall be
deemed to comprise a portion of the shares of Series A Convertible Preferred
Stock of such Holder selected for repurchase and the number of shares of Called
Preferred Stock which the Company shall be required to repurchase shall be
correspondingly reduced (provided, however, that the Holder of such Called Preferred Stock so
converted and deemed repurchased shall not be

 

15

 

entitled to
any additional dividend payment as a result of such deemed repurchase than such
Holder would have otherwise been entitled to receive upon conversion of such
Called Preferred Stock).

 

(d)                                 Notice
of Repurchase.

 

(i)                                     Notice
of an Optional Repurchase (a “Notice of Optional
Repurchase”) shall be given in writing and shall be deemed properly
served or given if: (A) mailed by registered or certified mail, return
receipt requested, (B) delivered by a recognized overnight courier
service, (C) delivered personally, or (D) sent by facsimile
transmission.  Such notice shall be
deemed to have been received: (A) five (5) days after the date of
mailing if sent by certified or registered mail, (B) one (1) Business
Day after delivered to an overnight courier for next Business Day delivery,
(iii) the date of delivery if personally delivered, or (iv) the next
succeeding Business Day after transmission by facsimile with electronic
confirmation of receipt.

 

(ii)                                  A
Notice of Optional Repurchase shall be given by the Corporation to Holders of
shares of Series A Convertible Preferred Stock to be repurchased.  A Notice shall be given not less than ten (10)
Business Days prior to the Optional Repurchase Date.  Each Notice of Optional Repurchase shall
state:

 

(1)                                  the
Optional Repurchase Date which may not be more than seventy-five (75) days
after the date the Notice of Optional Repurchase is given;

 

(2)                                  the
Optional Repurchase Price and dividends accrued and unpaid to the Optional
Repurchase Date, if any;

 

(3)                                  if
fewer than all the outstanding shares of Series A Convertible Preferred Stock
are to be repurchased, the aggregate number of shares of Series A Convertible
Preferred Stock to be repurchased and the aggregate number of shares of Series
A Convertible Preferred Stock which will be outstanding after such partial
repurchase (without giving effect to any subsequent conversions, redemptions or
repurchases);

 

(4)                                  that
on the Optional Repurchase Date the Optional Repurchase Price and, as provided
in Section 8(a), dividends accrued and unpaid to, but excluding, the
Optional Repurchase Date shall be paid, and that dividends with respect thereto
shall cease to accrue on and after such date;

 

(5)                                  the
date on which the right to convert the shares of Series A Convertible Preferred
Stock to be repurchased will terminate and the places (within The City of New
York) where such shares of Series A Convertible Preferred Stock may be
surrendered for conversion;

 

(6)                                  the
place or places (within The City of New York) where such shares of Series A
Convertible Preferred Stock are to be surrendered for payment of the Optional
Repurchase Price and accrued and unpaid dividends, if any; and

 

 

16

 

(7)                                  the
CUSIP number, if any, of the Series A Convertible Preferred Stock.

 

(iii)                               The
Corporation’s election to repurchase shares of Series A Convertible Preferred
Stock pursuant to an Optional Repurchase shall be evidenced by a resolution of
the Corporation’s Board of Directors.

 

(e)                                  Effect
of Notices of Repurchase.

 

(i)                                     If
a Notice of Optional Repurchase shall have been given as provided in Section 8(d)
hereof or if a Notice of Intent to Repurchase shall have been given as provided
in Section 8(b) and the Holders have not elected to convert all of the
shares of Series A Convertible Preferred Stock proposed to be repurchased, the
shares of Series A Convertible Preferred Stock to be so repurchased shall, on
the Optional Repurchase Date, become due and payable at the Optional Repurchase
Price therein specified (and, as provided in Section 8(a), accrued
dividends, if any, to, but excluding, the Optional Repurchase Date) and from
and after such date (unless the Corporation shall default in the payment of the
Optional Repurchase Price and accrued and unpaid dividends) such shares of
Series A Convertible Preferred Stock shall cease to accrue dividends; provided
that the Corporation may specify in such notice customary conditions to the
repurchase of the shares of Series A Convertible Preferred Stock that must be
met on or prior to the Optional Repurchase Date, including the receipt of
proceeds from such related Equity Offering to occur on or prior to the Optional
Repurchase Date, in which case the Optional Repurchase Date shall not occur,
and the shares of Series A Convertible Preferred Stock to be repurchased shall
not be due and payable at the Optional Repurchase Price, if such conditions are
not satisfied.  The Corporation shall
give notice to the Holders of any failure to satisfy such conditions prior to
the Optional Repurchase Date.  Upon
surrender of any such shares of Series A Convertible Preferred Stock for
repurchase in accordance with such notice (including the satisfaction of all
applicable conditions), such shares of Series A Convertible Preferred Stock
shall be purchased by the Corporation at the Optional Repurchase Price (and, as
provided, in Section 8(a), accrued dividends, if any, to but excluding the
Optional Repurchase Date).

 

(ii)                                  If
any shares of Series A Convertible Preferred Stock called for repurchase shall
not be so paid when due upon surrender thereof for repurchase, the Optional
Repurchase Price shall, until paid, accrue any applicable dividends from the
Optional Repurchase Date.

 

(f)                                    Deposit
of Optional Repurchase Price.

 

(i)                                     Prior
to or on any Optional Repurchase Date, the Corporation shall segregate and hold
in trust an amount of money sufficient to pay the Optional Repurchase Price of,
and accrued and unpaid dividends, if any, on, all the shares of Series A
Convertible Preferred Stock to be repurchased on that Optional Repurchase Date
other than any shares of Series A Convertible Preferred Stock called for
repurchase on that date which have been converted prior to the date of such
deposit.

 

17

 

(ii)                                  If
any shares of Series A Convertible Preferred Stock called for repurchase is
converted prior to the Optional Repurchase Date, any money so segregated and
held in trust for the repurchase of such shares of Series A Convertible
Preferred Stock shall be discharged from such trust.

 

(g)                                 Certificated
Shares of Series A Convertible Preferred Stock Repurchased in Part.  Any certificate representing shares of Series
A Convertible Preferred Stock which are to be repurchased only in part shall be
surrendered at an office or agency of the Corporation designated for that
purpose pursuant hereto (with, if the Corporation so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Corporation
duly executed by, the Holder thereof or the Holder’s attorney duly authorized
in writing), and the Corporation shall execute and deliver to the Holder of
such shares of Series A Convertible Preferred Stock without service charge, a
new certificate or certificates representing such shares of Series A
Convertible Preferred Stock of any authorized denomination as requested by such
Holder in an aggregate principal amount equal to the number of shares of Series
A Convertible Preferred Stock not repurchased, in exchange for the certificate
representing the number of shares of Series A Convertible Preferred Stock so
surrendered.

 

9.                                       Voting
Rights; Amendment; Waiver.

 

(a)                                  Each
Holder of record of shares of the Series A Convertible Preferred Stock, except
as otherwise required under Colorado law or as set forth in these Articles of
Amendment (including without limitation in Sections 9(e) and 10 below), shall
be entitled or permitted to vote on all matters required or permitted to be
voted on by the holders of Common Stock of the Corporation and shall be
entitled to that number of votes equal to the largest number of whole shares of
Common Stock into which such Holder’s shares of the Series A Convertible
Preferred Stock could be converted, pursuant to the provisions of Section 5
hereof, at the record date for the determination of shareholders entitled to
vote on such matter or, if no such record date is established, at the date such
vote is taken or any written consent of shareholders is solicited.  Except as otherwise expressly provided herein
or in any agreement of the shareholders or as otherwise required by law, the
Holders of shares of the Series A Convertible Preferred Stock, the holders of
shares of the Series B Convertible Preferred Stock and the holders of shares of
Common Stock shall vote together (or render written consents in lieu of a vote)
as a single class on all matters submitted to the holders of Common Stock of
the Corporation.

 

(b)                                 The
Corporation shall not grant any voting rights to holders of Parity Stock or
Junior Stock other than the Series B Convertible Preferred Stock and the Series
C Convertible Preferred Stock without the consent of a majority of the
outstanding shares of Series A Convertible Preferred Stock unless such voting
rights are also granted to the holders of Series A Convertible Preferred Stock.

 

(c)                                  Holders
of a majority of the outstanding shares of Series A Convertible Preferred Stock
may waive compliance by the Corporation with any provision of these Articles of
Amendment; provided that no such waiver may be granted without the consent of
each Holder of the then outstanding shares of Series A Convertible Preferred Stock
affected thereby if such waiver adversely affects (i) any provision of Section 5
hereof; (ii) the Liquidation Preference; (iii) the form, timing or amount of
the payment of dividends hereunder for the Series A

 

18

 

Convertible
Preferred Stock; or (iv) the voting rights of the Series A Convertible
Preferred Stock under this Section 9(c).

 

(d)                                 In
any case in which the Holders of Series A Convertible Preferred Stock shall be
entitled to vote, give a consent, make a determination or take any similar
action under these Articles of Amendment or pursuant to Colorado law, each
Holder of Series A Convertible Preferred Stock entitled to vote with respect to
each such matter shall be entitled to one vote for each share of Series A
Convertible Preferred Stock held. For all purposes of voting, giving a consent,
making a determination or taking any similar actions as aforesaid, shares of
Series A Convertible Preferred Stock held by the Corporation or any of its
Subsidiaries shall not be deemed outstanding or entitled to vote.

 

(e)                                  Notwithstanding
the foregoing, from the Issue Date until the first day on which the number of
shares of Series A Convertible Preferred Stock deemed held by the Initial
Holders and their Permitted Transferees is less than 50% of the total number of
shares of Series A Convertible Preferred Stock originally issued on the Issue
Date, the Holders of the Series A Convertible Preferred Stock, voting together
as a separate class, shall be entitled to elect one (1) representative of the
Holders of the Series A Convertible Preferred Stock to the Board of Directors
at each meeting or pursuant to each consent of the Corporation’s shareholders
for the election of directors, and to remove from office such director and to
fill any vacancy caused by the resignation, death or removal of such
director.  For purposes of the preceding
sentence, the number of shares of Series A Convertible Preferred Stock deemed
held shall include (i) the actual number of shares of Series A Convertible
Preferred Stock then held plus (ii) the number of shares of Series A
Convertible Preferred Stock redeemed or repurchased by the Corporation pursuant
to Section 8 hereof plus (iii) the number of shares of Series A
Convertible Preferred Stock which were converted pursuant to the Corporation’s
exercise of its rights to convert in Section 5(b) hereof.  Notwithstanding
the foregoing, the right of the Holders to elect a representative to the Board
of Directors of the Corporation shall terminate when the initial Holders of
Series A Convertible Preferred Stock no longer hold at least 500,000 shares of Series A Convertible Preferred Stock
(after adjusting for stock
splits, stock dividends, recapitalizations, mergers, consolidations or similar
events occurring after the Issue Date that effect a change in the
capitalization of the Company), provided that in calculating whether 500,000
shares of Series A Convertible Preferred Stock are held by the initial Holders,
there shall be included (I) the number of shares of Series A Convertible
Preferred Stock held by the initial Holders plus (II) the number of shares of
Series A Convertible Preferred Stock issued to the initial Holders that were
converted into Common Stock and are still held by the initial Holders, and provided, further, that all sales of Common
Stock by the initial Holders after any such conversion shall be deducted from
the number of shares comprising this clause (II).  At the option of the Holders of the Series A
Convertible Preferred Stock, to the extent permitted by law and by the rules of
any securities exchange on which the securities of the Corporation are then
listed, such representative shall also be a member of each committee of the
Board of Directors.  Such representative
shall be compensated for service on the Board of Directors and reimbursed for
out-of-pocket expenses in respect thereof only if and to the extent that any
non-independent director that serves on the Board of Directors is compensated
for service in respect thereof or reimbursed for out-of-pocket expenses in
respect thereof.

 

19

 

(f)                                    In
addition, from the Issue Date until the first day on which the number of shares
of Common Stock held by the initial Holders and their Permitted Transferees
plus the number of shares of Common Stock into which the Series A Convertible
Preferred Stock and the Holder Warrants held by the initial Holders and their
Permitted Transferees would have been convertible on the Issue Date is less
than 16.67% of the number of shares of Common Stock initially held by such
initial Holders on the Issue Date plus the number of shares of Common Stock
into which the shares of Series A Convertible Preferred Stock and the Holder
Warrants initially held by such initial Holders would have been convertible or
exercisable on the Issue Date, the Holders of the Series A Convertible
Preferred Stock shall have the right to appoint a representative who shall have
the right to attend all meetings of the Board of Directors in a non-voting
observer capacity, to receive notice of such meetings and to receive the
information provided by the Corporation to the Board of Directors and to
receive copies of all written consents of the Board of Directors or any
committees thereof; provided, however, that the Corporation may require that as
a condition precedent that each person proposing to attend any meeting of the
Board of Directors and each person to have access to any of the information
provided by the Corporation to the Board of Directors shall agree to hold in
confidence all information so received during such meeting or otherwise; and,
provided further, that the Corporation reserves the right not to provide
information and to exclude the Series A Convertible Preferred Stock representative
from any meeting or portion thereof if delivery of such information or
attendance at such meeting by such Series A Convertible Preferred Stock
representative would result in disclosure of trade secrets to the Series A
Convertible Preferred Stock representative or would adversely affect the
attorney-client privilege between the Corporation and its counsel, provided
that the representative is given notice of the occurrence of such meeting and
the withholding of such information, it being required that the Corporation act
in good faith and take all legal measures reasonably necessary to permit
attendance thereof by the representative.

 

10.                                 Protective
Provisions.  In addition to any other
rights provided by law or set forth herein, so long as any shares of Series A
Convertible Preferred Stock are outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law)
of the Holders of at least a majority of the outstanding shares of Series A
Convertible Preferred Stock:

 

(a)                                  create,
authorize, designate or issue any shares of any class or series of Senior Stock
or Parity Stock or any Capital Stock convertible, exercisable or exchangeable
into any class or series of Senior Stock or Parity Stock, other than the
Series B Convertible Preferred Stock as in effect on the Issue Date;

 

(b)                                 alter,
change or amend the terms, designations, power privileges, preferences, rights
or restrictions provided for the benefit of the Series A Convertible Preferred
Stock or of any class or series of Senior Stock or Parity Stock or alter or
amend the voting rights with respect to the Series B Convertible Preferred
Stock or Series C Convertible Preferred Stock in effect on the Issue Date;

 

(c)                                  create,
authorize, designate or issue any shares of the Series A Convertible Preferred
Stock which are in addition to the number of shares initially authorized
hereunder;

 

20

 

(d)                                 amend
the Articles of Incorporation as amended and in effect on the Issue Date (other
than the Articles of Amendment to establish the Series B Convertible Preferred
Stock and the Series C Convertible Preferred Stock, respectively), or the
Corporation’s By-Laws in a manner that is adverse to the Series A Convertible
Preferred Stock;

 

(e)                                  purchase,
redeem (other than pursuant to equity incentive agreements with employees
giving the Corporation the right or obligation to repurchase shares upon the
termination of services) or set aside any sums for the purchase or redemption
of, or declare or pay any dividend (including a dividend payable in Capital
Stock of the Corporation) or make any other distribution with respect to, any
shares of Capital Stock or any other securities that are convertible into or
exercisable or exchangeable for such Capital Stock, other than purchases,
redemptions, dividends or distributions not in violation of clause (f)(ii) of
this Section 9 with respect to the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock, as permitted under their
respective Articles of Amendment as in effect on the Issue Date;

 

(f)                                    (i)  create, authorize, designate or issue any
shares of Parity Stock or Junior Stock having a mandatory redemption date or
purchase, put or similar rights, which require the Corporation to purchase,
redeem or otherwise acquire any shares of Parity Stock or Junior Stock prior to
the redemption date for, and the actual redemption of, the Series A Convertible
Preferred Stock pursuant hereto or (ii) exercise any optional redemption,
purchase or other right to acquire shares of Parity Stock (including any
Series B Convertible Preferred Stock) or Junior Stock prior to the
repurchase or redemption date for, and the actual redemption of, the Series A
Convertible Preferred Stock pursuant hereto;

 

(g)                                 effect
any amendment, modification or change to Sections 9(e) or 9(f); and

 

(h)                                 during
the period commencing on the Issue Date and ending on the first day on which
the number of shares of Series A Convertible Preferred Stock held by the
initial Holders and their Permitted Transferees is less than 50% of the total
number of shares of Series A Convertible Preferred Stock initially held by such
initial Holders, change the number of members of the Board of Directors without
concurrently amending Section 9(e) hereof to provide the Holders of the
Series A Convertible Preferred Stock the right to elect a number of the members
of the Board of Directors that is proportionate to the number established under
Section 9(e) as of the Issue Date, with fractional numbers of members
rounded to the nearest whole number in order to determine compliance with this
provision.

 

11.                                 Certain
Restrictions.  Notwithstanding
anything herein to the contrary, the Corporation’s right to exercise any right
to convert the Series A Convertible Preferred Stock pursuant to Section 5(b)
hereof or to exercise its Optional Repurchase right pursuant to Section 8
hereof is subject to the restrictions and limitations set forth in Section 11.4
of the Investor Stock Purchase Agreement.

 

12.                                 Payment.

 

(a)                                  All
amounts payable in cash with respect to the Series A Convertible Preferred
Stock shall be payable in United States dollars at the office or agency of the
Corporation maintained for such purpose within the Borough of Manhattan, the
City and State of

 

21

 

New York or,
at the option of the Corporation, payment of dividends (if any) may be made by
check mailed to the Holders of the Series A Convertible Preferred Stock at
their respective addresses set forth in the register of Holders of Series A
Convertible Preferred Stock maintained by the Transfer Agent.

 

(b)                                 Any
payment on the Series A Convertible Preferred Stock due on any day that is not
a Business Day need not be made on such day, but may be made on the next
succeeding Business Day with the same force and effect as if made on such due
date, provided that dividends shall continue to accrue until such next
succeeding Business Day.

 

(c)                                  The
Corporation will initially act as the “Transfer Agent” and the “Paying Agent.”
The Corporation may at any time terminate the appointment of any Paying Agent
and appoint additional or other Paying Agents; provided that until the Series A
Convertible Preferred Stock has been delivered to the Corporation for
cancellation, or moneys sufficient to pay the Liquidation Preference of the
Series A Convertible Preferred Stock shall have been made available for payment
and either paid or returned to the Corporation as provided in these Articles of
Amendment, the Corporation shall maintain an office or agency in the Borough of
Manhattan, The City of New York for surrender of shares of Series A Convertible
Preferred Stock for payment and exchange.

 

(d)                                 All
moneys and shares of Series A Convertible Preferred Stock deposited by the
Corporation with any Paying Agent or held by the Corporation in trust for the
payment of the Liquidation Preference on the Series A Convertible Preferred
Stock, which moneys and shares remain unclaimed at the end of two years after
such payment has become due and payable shall be repaid to the Corporation, and
the Holder of the shares of Series A Convertible Preferred Stock in respect of
which such moneys and shares were so deposited or held in trust shall
thereafter look only to the Corporation for payment thereof.

 

13.                                 Reissuance
of Shares of Series A Convertible Preferred Stock.  Shares of Series A Convertible Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased, redeemed, converted or exchanged, shall (upon compliance with any
applicable provisions of the laws of Colorado) be permanently retired or
cancelled and shall not under any circumstances be reissued.  The Corporation shall from time to time take
such appropriate action as may be required by applicable law to reduce the
authorized number of shares of Series A Convertible Preferred Stock by the
number of shares that have been so reacquired.

 

14.                                 Notices.  The Corporation will provide to the holders
of the Series A Convertible Preferred Stock all communications sent by the
Corporation to the holders of the Common Stock and any other class of Preferred
Stock.

 

15.                                 Headings
of Subdivisions.  The headings of the
various subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions hereof.

 

16.                                 Severability
of Provisions.  If any powers,
preferences and relative, participating, optional and other special rights of
the Series A Convertible Preferred Stock and the

 

22

 

qualifications, limitations and
restrictions thereof set forth in these Articles of Amendment (as it may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule or law or public policy, all other powers, preferences
and relative, participating, optional and other special rights of the Series A
Convertible Preferred Stock and the qualifications, limitations and
restrictions thereof set forth in these Articles of Amendment (as so amended) which
can be given effect without the invalid, unlawful or unenforceable powers,
preferences and relative, participating, optional and other special rights of
the Series A Convertible Preferred Stock and the qualifications, limitations
and restrictions thereof shall, nevertheless, remain in full force and effect,
and no powers, preferences and relative, participating, optional or other
special rights of the Series A Convertible Preferred Stock and the
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such powers, preferences and relative,
participating, optional or other special rights of Series A Convertible
Preferred Stock and qualifications, limitations and restrictions thereof unless
so expressed herein.

 

23Exhibit 4.2

 

ATTACHMENT

TO

ARTICLES OF
AMENDMENT

OF

SPORTS
ENTERTAINMENT ENTERPRISES, INC.

 

Pursuant to Section 7-106-102
of the Colorado Business Corporation Act (the “Act”), the Board of Directors of Sports Entertainment
Enterprises, Inc., a Colorado corporation (the “Corporation”), duly adopted the resolution set forth
herein by unanimous written consent on February 7, 2005 in accordance with
Section 7-108-202 of the Act.

 

RESOLVED, that
pursuant to the authority expressly granted to and vested in the Board of
Directors of the Corporation by the provisions of the Articles of Incorporation
and pursuant to Section 7-106-202 of the Business Corporation Act of the
State of Colorado, the Board of Directors does hereby designate, create,
authorize and provide for the issuance by the Corporation, out of the 5,000,000
authorized but unissued shares of Preferred Stock, no par value, 1,491,817
shares of Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”)
with a stated value of $15.30 per share. 
The Series B Convertible Preferred Stock shall have the powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions that are set forth in the
Articles of Incorporation and in this resolution as follows:

 

1.                                       Certain
Definitions.

 

Unless the
context otherwise requires, each of the terms defined in this Section 1
shall have, for all purposes of these Articles of Amendment, the meaning herein
specified (with terms defined in the singular having comparable meanings when
used in the plural):

 

“Affiliate” as applied to any Person,
means any other Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. For purposes of this
definition, “control” (including, with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise, and in addition
to the foregoing, a Person shall be deemed to control another Person if the
controlling Person owns 15% or more of any class of voting securities (or other
ownership interest) of the controlled Person. 
In the case of the Corporation, “Affiliate” shall include Robert F.X.
Sillerman and any of his Affiliates.

 

“Articles of Amendment” has the meaning
set forth above.

 

“Articles of Incorporation” has the
meaning set forth above.

 

 

“Average Closing Price” means for any
specified date, the average of the Market Price of the Common Stock over a
period of thirty (30) consecutive trading days ending on such specified date.

 

“Board of Directors” means the Board of
Directors of the Corporation.

 

“Business Day” means any day other than
a Saturday, a Sunday or any day on which banking institutions in New York, New
York, are required or authorized by law or other governmental action to be
closed.

 

“Capital Stock” means any and all
shares, interests, participations or other equivalents in the equity interest
(however designated) in the Corporation and any rights, warrants or options to
acquire an equity interest in the Corporation.

 

“Class B Interest” has the meaning set
forth in the Operating Agreement.

 

“Commission” means the Securities and
Exchange Commission.

 

“Common Share Equivalents” means
securities, options, warrants, derivatives, debt instruments or other rights
convertible into, or exercisable or exchangeable for, or entitling the holder
thereof to receive directly or indirectly, Common Stock.

 

“Common Stock” means the Common Stock,
no par value, of the Corporation.

 

“Conversion Price” has the meaning set
forth in Section 5(a) below.

 

“Conversion Rights” has the meaning set
forth in Section 5 below.

 

“Converted Shares” has the meaning set
forth in Section 5(c) below.

 

“Converting Shares” has the meaning set
forth in Section 5(c) below.

 

“Corporation” has the meaning set forth
above.

 

“CBCA” shall mean the Colorado Business
Corporation Act, as amended.

 

“Dividend Payment Date” has the meaning
set forth in Section 3(d).

 

“EPE Preferred Stock” means the Series B
Convertible Preferred Stock par value $1.00 per share, of Elvis Presley
Enterprises, Inc. issued pursuant to the Certificate of Designation of Elvis
Presley Enterprises, Inc.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

 

“Holder” means the record holder of one
or more shares of Series B Convertible Preferred Stock, as shown on the books
and records of the Transfer Agent.

 

2

 

“Immediate Family” shall mean any
relationship by blood, marriage, or adoption, not more remote than first
cousin.

 

“Issue Date” means the date of initial
issuance of the Series B Convertible Preferred Stock.

 

“Late Payment Date” has the meaning set
forth in Section 3(b).

 

“Liquidation Event” means (i) any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, (ii) the consummation of a merger or consolidation in which
the shareholders of the Corporation prior to such transaction own less than a
majority of the voting securities of the entity surviving such transaction, or
(iii) the sale, distribution or other disposition of all or substantially
all of the Corporation’s assets.

 

“Liquidation Preference” has the meaning
set forth in Section 4 below.

 

“Market Price” means the last reported
sale price of the Common Stock on any national securities exchange or U.S.
inter-dealer quotation system of a registered national securities association
on which the Common Stock is then listed or quoted.

 

“Non-Redemption” has the meaning set
forth in Section 6(a) below.

 

“Optional Redemption Period” has the
meaning set forth in Section 6(a).

 

“Operating Agreement” means the Amended
and Restated Operating Agreement of Elvis Presley Enterprises, LLC, dated as of
the Issue Date.

 

“Parity Stock” has the meaning set forth
in Section 2 below.

 

“Permitted Holder” means: (i) the Holder
or the beneficiary as of the date hereof of the Holder; or (ii) any other trust
or other similar entity formed for the direct or indirect benefit of the Holder
or the beneficiary as of the date hereof of the Holder.

 

“Person” means any individual,
partnership, limited liability company, corporation, joint venture,
association, trust, unincorporated organization, government or agency or
political subdivision thereof or any other entity of whatever nature.

 

“Preferred Stock” means Capital Stock of
the Corporation of any class or classes (however designated) that ranks prior
as to the payment of dividends or as to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, to shares of Capital Stock of any other class of the Corporation.

 

“Priority Dividend” has the meaning set
forth in Section 3(a).

 

“Priority Dividend Rate” has the meaning
set forth in Section 3(a).

 

“Proportionate share” has the meaning
set forth in Section 6(b).

 

3

 

“Put Right” has the meaning set forth in
Section 6(b).

 

“Redemption Price” has the meaning set
forth in Section 6(a).

 

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

 

“Senior Stock” has the meaning set forth
in Section 2 below.

 

“Series A Preferred Stock” shall mean
the Series A Convertible Redeemable Preferred Stock of the Corporation.

 

“Series B Convertible Preferred Stock”
has the meaning set forth above.

 

“Stated Value” has the meaning set forth
above.

 

“Transfer Agent” means the entity
designated from time to time by the Corporation to act as the registrar and
transfer agent for the Series B Convertible Preferred Stock.

 

2.                                       Ranking.  The Series B Convertible Preferred Stock
shall, with respect to dividend rights and rights on the liquidation,
winding-up and dissolution of the Corporation (as provided in Section 4
below), rank (i) senior to all classes of Common Stock and to each other class
of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors, other than the Series A Convertible Preferred Stock (such
Capital Stock or series, other than the Series A Convertible Preferred Stock,
collectively referred to as the “Junior
Stock”), (ii) on a parity with the Series A Convertible
Preferred Stock and each other class of Capital Stock or series of Preferred
Stock established hereafter by the Board of Directors with the consent of the
Holders of a majority of the outstanding shares of Series B Convertible
Preferred Stock, the terms of which expressly provide that such class or series
ranks on a parity with the Series B Convertible Preferred Stock as to dividend
rights or rights on the liquidation, winding-up and dissolution of the
Corporation (collectively referred to as “Parity
Stock”) and (iii) junior to any future class of Preferred Stock
established hereafter by the Board of Directors with the consent of the Holders
of a majority of the outstanding shares of Series B Convertible Preferred
Stock, the terms of which expressly provide that such class ranks senior to the
Series B Convertible Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution of the Corporation (collectively
referred to as the “Senior Stock”).

 

3.                                       Dividends.

 

(a)                                  Whether or not earned
or declared by the Corporation, the Holders of Series B Convertible Preferred
Stock shall receive, in cash, a quarterly cumulative dividend on each share of
Series B Convertible Preferred Stock (the “Priority
Dividend”), calculated at a rate of 8% per annum of the Stated
Value, which dividend shall accrue daily from the Issue Date and shall be
compounded quarterly (the “Priority Dividend
Rate”).

 

(b)                                 Priority Dividends
will be payable on the 30th day of January, April, July and
October, each, a “Dividend Payment Date”)
to holders of record as they appear in the shareholder records of the
Corporation at the close of business on the applicable record date,

 

4

 

which shall be the 15th day of January,
April, July and October of each year (the “Record Date”) or on such other date
designated by the Board of Directors for the payment of dividends that is not
more than 30 nor less than 10 days prior to the Dividend Payment Date.  No dividends shall be paid upon, or declared
and set apart for, any shares of Common Stock or any other Parity Stock or
Junior Stock if the Board of Directors of the Corporation shall have failed
duly and lawfully to declare, or the Corporation has failed to pay, in full all
Priority Dividends then payable.  If such
dividends on the Series B Convertible Preferred Stock shall not have been paid
in full for the Series B Convertible Preferred Stock, the aggregate deficiency
shall be cumulative (whether or not earned by the Corporation) and shall be
fully paid prior to the payment of any dividend by the Corporation (other than
a dividend payable solely in Common Stock) with respect to Common Stock or any
other Parity Stock or Junior Stock

 

(c)                                  In the event that the
Corporation fails to make three (3) consecutive quarterly Priority Dividend
payments (regardless of whether or not funds are legally available therefor)
and does not cure such failure to pay within three days after the Dividend
Payment Date for such third Priority Dividend (the “Late Payment Date”), the dividend rate
with respect to all such missed Priority Dividend payments shall immediately
retroactively be increased to 12% per annum and all amounts owed with respect
to such Priority Dividend payments shall be paid by the Corporation within
three (3) Business Days after the Late Payment Date in shares of its Common
Stock valued at the Average Closing Price measured as of the Late Payment
Date.  Upon the payment by the
Corporation of all such accrued and owed Priority Dividends, all future
Priority Dividends shall be calculated a the Priority Dividend Rate which shall
accrue daily from the date such payment is made in accordance with the
preceding sentence.

 

(d)                                 In addition to the
dividends contemplated by paragraphs (a) and (c) above, the Holders shall
participate on a pro rata basis in the payment of any dividend or distribution
to the holders of the Common Stock as would be declared and payable on the
largest number of whole shares of Common Stock into which the shares of Series
B Convertible Preferred Stock held by such Holder could be converted on the
record date fixed  for such dividend or
distribution pursuant to the provisions of Section 5 below. Any such
dividends contemplated by this paragraph (d) will be paid to holder of record
as it appears in the shareholder records of the Corporation at the close of
business on the record date for such dividend on Common Shares, and the
Corporation shall pay each such dividend on the applicable dividend payment
date for such dividend on the Common Shares.

 

(e)                                  Any and all dividends
shall be payable out of any cash legally available therefor, and if there is
not a sufficient amount of cash available, then out of the remaining assets of
the Corporation legally available therefor (valued at the fair market value
thereof on the date of payment, as determined by the Board of Directors). To
the extent funds or assets are not legally available for the payment of any
dividend, such dividend shall nevertheless accrue and cumulate.

 

(f)                                    The Corporation
shall take all actions required or permitted under the CBCA to permit the
payment of dividends on the Series B Convertible Preferred Stock, including,
without limitation, through the revaluation of its assets in accordance with
the CBCA, to make or keep funds legally available for the payment of dividends.

 

5

 

4.                                       Liquidation
Preference.

 

(a)                                  Upon any Liquidation
Event, each Holder of shares of the Series B Convertible Preferred Stock shall
be entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders, (i) prior to the holders of any other class
or series of the Corporation’s Common Stock and to each class of Junior Stock,
(ii) pro rata with the holders of  the
Series A Convertible Preferred Stock and any other Parity Stock and (iii) after
the holders of any Senior Stock, an amount (such amount the “Liquidation Preference”) equal to the
greater of (i) a cash amount per share equal to the Stated Value plus accrued
and unpaid dividends or (ii) the liquidation value attributable to the shares
of Common Stock into which such shares of Series B Preferred Stock would then
be convertible under the provisions of Section 5 below.

 

(b)                                 Following payment of
the distribution required by Section 4(a) and any distribution required to
be paid to the Holders of the Series A Convertible Preferred Stock, if assets
remain in the Corporation, they shall be distributed to holders of Common Stock
up to an amount equal to the distribution to the Holders pursuant to paragraph
(a) above, in accordance with the Corporation’s Articles of Incorporation, as
amended.

 

(c)                                  Following payment of
the distributions required by Sections 3, 4(a) and 4(b), if assets remain in
the Corporation, they shall be distributed to the Holders of Series B
Convertible Preferred Stock and the holders of Common Stock on a pro rata basis
based on the number of shares of Common Stock into which the Holders’ shares of
Series B Convertible Preferred Stock could be converted in accordance with Section 5
hereof on the date of such Liquidation Event.

 

(d)                                 If, upon any
Liquidation Event, the assets of the Corporation available for distribution to
its shareholders are not sufficient to pay in full all amounts payable to the
Holders of outstanding shares of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock, the Holders of the Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock shall share equally
and ratably in any distribution of assets of the Corporation in proportion to
the full Liquidation Preference to which each is entitled.

 

5.                                       Conversion.  The Holders of the Series B Convertible
Preferred Stock shall have the conversion rights as follows (the “Conversion Rights”):

 

(a)                                  Each share of Series
B Convertible Preferred Stock shall be convertible, at the option of the Holder
thereof at any time after the Issue Date of such share, in each case at the
office of the Corporation or any Transfer Agent for the Series B Convertible
Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Stated Value (plus any accrued and unpaid
dividends, if any) by the Conversion Price at the time in
effect for such shares and multiplying such number by the total number of
shares of Series B Convertible Preferred Stock being converted.  The initial “Conversion Price” per share for shares of Series B
Convertible Preferred Stock shall be the Stated Value; provided, however, that
the Conversion Price in effect from time to time for the Series B Convertible
Preferred Stock shall be subject to adjustment as provided hereinafter.

 

6

 

(b)                                 From and after the
third anniversary of the Issue Date, in the event that the Average Closing
Price at any time equals or exceeds 150% of the Conversion Price, the
Corporation shall thereafter have the right, in its sole discretion, upon the
delivery of a written notice to each Holder of Series B Convertible Preferred
Stock (which notice shall be delivered within ten (10) Business Days after the
thirtieth (30th) trading day utilized in the calculation of such Average
Closing Price, if at all), to convert such shares of Series B Convertible
Preferred Stock into shares of Common Stock and the Holders thereof shall be
deemed to have complied with the provisions set forth in Section 5(c);
provided, however, that until such Holder surrenders the certificate evidencing
the Converting Shares, the Corporation shall not be required to deliver to such
Holder the certificate evidencing the Converted Shares.

 

(c)                                  (i)                                     Each conversion of
shares of Series B Convertible Preferred Stock into shares of Common Stock
shall be effected by the surrender of the certificate(s) evidencing the shares
of  Series B Convertible Preferred Stock
to be converted (the “Converting Shares”)
at the principal office of the Corporation (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
Holders of the Series B Convertible Preferred Stock) at any time during its
usual business hours, together with written notice by the holder of such Converting
Shares, (A) stating that the Holder desires to convert the Converting Shares,
or a specified number of such Converting Shares, evidenced by such
certificate(s) into shares of Common Stock (the “Converted Shares”), and (B) giving the name(s) (with
addresses) and denominations in which the certificate(s) evidencing the
Converted Shares shall be issued, and instructions for the delivery
thereof.  Upon receipt of the notice
described in the first sentence of this subsection 5(c)(i), together with
the certificate(s) evidencing the Converting Shares, the Corporation shall be
obligated to, and shall, issue and deliver in accordance with such instructions
the certificate(s) evidencing the Converted Shares issuable upon such
conversion and a certificate (which shall contain such legends, if any, as were
set forth on the surrendered certificate(s)) representing any shares which were
represented by the certificate(s) surrendered to the Corporation in connection
with such conversion but which were not Converting Shares and, therefore, were
not converted.  Such conversion, to the
extent permitted by law, shall be deemed to have been effected as of the close
of business on the date on which such certificate(s) shall have been
surrendered and such written notice shall have been received by the Corporation
unless a later date has been specified by such holder, and at such time the
rights of the holder of such Converting Shares as such holder shall cease, and
the Person(s) in whose name or names any certificate(s) evidencing the
Converted Shares are to be issued upon such conversion shall be deemed to have
become the holder(s) of record of the Converted Shares.

 

(ii)                                  Upon the issuance of
the Converted Shares in accordance with Section 5, such shares shall be
deemed to be duly authorized, validly issued, fully paid and non-assessable.

 

(d)                                 Adjustments for Common Stock Dividends and
Distributions.  If the
Corporation at any time or from time to time after the Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of
Common Stock, in each such event the Conversion Price that is then in effect
shall be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
each

 

7

 

Conversion Price then in effect by a fraction
(i) the numerator of which is 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 (ii) the denominator of which is 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.  To the extent an
adjustment is made in respect of the foregoing pursuant to Section 5(e) or
the holder actually receives the dividend to which any such adjustment relates,
an adjustment shall not be made pursuant to this Section 5(d).

 

(e)                                  Conversion Price Adjustments for Subdivisions,
Combinations or Consolidations of Common Stock.

 

(i)                                     In the event the
Corporation should at any time or from time to time after the Issue Date fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of shares of Common
Stock entitled to receive a dividend or other distribution payable in
additional Common Stock or Common Share Equivalents, without payment of any
consideration by such holder for the additional Common Stock or the Common
Share Equivalents (including the additional Common Stock issuable upon
conversion, exchange or exercise thereof), then, as of such record date (or the
date of such dividend distribution, split or subdivision if no record date is
fixed), the Conversion Price of the Series B Convertible Preferred Stock shall
be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such Series B Convertible Preferred
Stock shall be increased in proportion to such increase of outstanding shares
of Common Stock and shares issuable with respect to Common Share Equivalents.

 

(ii)                                  If the number of
shares of Common Stock outstanding at any time after the date hereof is
decreased by a combination consolidation, reclassification or reverse stock
split of the outstanding shares of Common Stock or other similar event, then,
following the record date of such combination, the Conversion Price of the
Series B Convertible Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of each share of
such Series B Convertible Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares of Common Stock.

 

(f)                                    Recapitalizations.  If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination, merger or sale of assets transaction provided for elsewhere in
this Section 5 provision shall be made so that the Holders of the Series B
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series B Convertible Preferred Stock the number of shares of
Capital Stock or other securities or property of the Corporation to which a
holder of Common Stock would have been entitled on recapitalization.  In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with
respect to the rights of the Holders of the Series B Convertible Preferred
Stock after the recapitalization to the end that the provisions of this Section 5
and Section 6 (including adjustment of the Conversion Price then in effect
and the number of shares issuable upon conversion of the Series B Convertible
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.

 

8

 

(g)                                 Mergers and Other Reorganizations.  If at any time or from time to time there
shall be a reclassification of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 5) or a merger or consolidation of the Corporation with or
into another corporation or the sale of all or substantially all of the
Corporation’s properties and assets to any other person, then, as a part of and
as a condition to the effectiveness of such reclassification, merger,
consolidation or sale, lawful and adequate provision shall be made so that the
Holders of the Series B Convertible Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series B Convertible Preferred Stock
the number of shares of Capital Stock or other securities or property, if any,
of the Corporation or of the successor corporation resulting from such
reclassification, merger or consolidation or sale, to which a holder of Common Stock
deliverable upon conversion would have been entitled in connection with such
reclassification, merger, consolidation or sale.  In any such case, appropriate provision shall
be made with respect to the rights of the holders of the Series B Convertible
Preferred Stock after the reclassification, merger, consolidation or sale to
the end that the provisions of this Section 5 and Section 6
(including, without limitation, provisions for adjustment of the Conversion
Price and the number of shares purchasable upon conversion of the Series B
Convertible Preferred Stock) shall thereafter be applicable, as nearly as may
be, with respect to any shares of Capital Stock, securities or property to be
deliverable thereafter upon the conversion of the Series B Convertible
Preferred Stock.

 

Each Holder of
Series B Convertible Preferred Stock, upon the occurrence of a
reclassification, merger or consolidation of the Corporation or the sale of all
or substantially all its assets and properties, as such events are more fully
set forth in the first paragraph of this Section 5(g), shall have the
option of electing treatment of his shares of Series B Convertible Preferred
Stock under either this Section 5(g) or Section 4 hereof, notice of
which election shall be submitted in writing to the Corporation at its
principal offices no later than ten (10) days before the effective date of such
event, provided that any such notice of election shall be effective if given
not later than fifteen (15) days after the date of the Corporation’s notice
pursuant to Section 5(h) hereof with respect to such event, and, provided,
further, that if any Holder fails to give the Corporation such notice of
election, the provisions of this Section 5(g) shall govern the treatment
of such Holder’s shares of Series B Convertible Preferred Stock upon the
occurrence of such event.

 

(h)                                 Notices of Record Date.  In the event (i) the Corporation fixes a
record date to determine the holders of Common Stock who are entitled to
receive any dividend or other distribution, or (ii) there occurs any capital
reorganization of the Corporation, any reclassification or recapitalization of
the Common Stock of the Corporation, any merger or consolidation of the
Corporation, or any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the Corporation shall mail to each holder of
Series B Convertible Preferred Stock at least twenty (20) days prior to the
record date specified therein, a notice specifying (a) the date of such record
date for the purpose of such dividend or distribution and a description of such
dividend or distribution, (b) the date on which any such reorganization,
reclassification, consolidation, merger, dissolution, liquidation or winding up
is expected to become effective, and (c) the time, if any, that is to be fixed,
as to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock

 

9

 

or other securities) for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding up.

 

(i)                                     No Impairment.  The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
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
Corporation, 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 actions
as may be necessary or appropriate in order to protect the Conversion Rights of
the Holders of the Series B Convertible Preferred Stock against
impairment.  Before taking any action
which would cause an adjustment reducing any Conversion Price below the then
par value (if any) of the shares of Common Stock deliverable upon conversion of
Preferred Stock, the Corporation will use its best efforts to take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may legally and validly issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.

 

(i)                                     No Fractional Shares and Certificate as to
Adjustments.

 

a.                                       In
lieu of any fractional shares to which a Holder of Series B Convertible
Preferred Stock would otherwise be entitled upon conversion, the Corporation
shall pay cash equal to such fraction multiplied by the Market Price of one
share of Common Stock, as determined in good faith by the Board of Directors,
except that, without the consent of the Holders of a majority of the
outstanding shares of Series B Convertible Preferred Stock, the Corporation
shall not be entitled to pay cash in lieu of fractional shares if such payment
to any one Holder would exceed $1,000 (which such amount shall be
proportionately adjusted for any reverse stock split).  Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Series B Convertible Preferred Stock of each Holder at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.

 

b.                                      Upon
the occurrence of each adjustment or readjustment of the Conversion Price of
any Series B Convertible Preferred Stock pursuant to this Section 5, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each Holder of such Series B Convertible Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. 
The Corporation shall, upon the written request at any time of any
Holder of Series B Convertible Preferred Stock, furnish or cause to be
furnished to such Holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price of the Series B Convertible
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such Holder’s shares of Series B Convertible
Preferred Stock. The provisions of Section 5(d), (e), (f) and (g) shall
apply to any transaction and successively to any series of transactions that
would require any adjustment pursuant thereto.

 

10

 

(j)                                     Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve
and keep available out of its authorized but unissued Common Stock, solely for
the purpose of effecting the conversion of the shares of the Series B Convertible
Preferred Stock (taking into account the adjustments required by this Section 5),
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series B
Convertible Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series B Convertible Preferred
Stock, in addition to such other remedies as shall be available to the Holders
of such Series B Convertible Preferred Stock, the Corporation will, as soon as
reasonably practicable, take all such action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.

 

6.                                       Redemption.

 

(a)                                  During the period
beginning seven (7) years and six (6) months following the Issue Date and
ending eight (8) years and six (6) months following the Issue Date (such
period, the “Optional Redemption Period”),
the Corporation shall have the right to redeem the outstanding shares of Series
B Convertible Preferred Stock, in whole or in part, for an aggregate price
equal to the Redemption Price multiplied by the number of shares of Series B
Convertible Preferred Stock then being redeemed.  The “Redemption
Price” for each share of Series B Convertible Preferred Stock
being redeemed shall be the Stated Value plus accrued but unpaid dividends
thereon through the date of redemption. 
In the event that the Corporation does not exercise this redemption
right during the Optional Redemption Period (a “Non-Redemption”), the Conversion Price with respect to all
remaining shares of Series B Convertible Preferred Stock shall thereafter be
the lower of (i) the Conversion Price then in effect and (ii) the Average
Closing Price measured as of the last day of the Optional Redemption Period.

 

(b)                                 In the event that the
Holders shall exercise any rights to put their Class B Interests and the EPE
Preferred Stock (the “Put Right”),
each in accordance with the documents governing such entities, the Corporation
shall have the option to concurrently redeem a proportionate share of the then
outstanding shares of Series B Convertible Preferred Stock, in whole or in
part, at the Redemption Price.  “Proportionate share” shall mean a
number of shares of Series B Convertible Preferred Stock which represents the
same percentage of the total number of the shares of Series B Convertible Preferred
Stock originally issued pursuant to these Articles of Amendment, as the
percentage represented by the shares of EPE Preferred Stock and Class B
Interests in respect of which the Put Right was exercised represent,
(calculated as a percentage of the aggregate amount of EPE Preferred Stock and
Class B Interests held by the Holders prior to the exercise of the Put
Right).  At the Corporation’s option, the
Redemption Price can be paid in cash or in shares of Common Stock, valued at
the Average Closing Price measured as of the proposed date of redemption.

 

(c)                                  In order to receive
the Redemption Price per share, each Holder shall surrender to the Corporation
the certificate(s) representing the number of shares of Series B Convertible
Preferred Stock to be redeemed.  Upon
such redemption, such redeemed Series B Convertible Preferred Stock shall no
longer be deemed outstanding and all rights of the Holder

 

11

 

with respect to such shares shall immediately
terminate, except the right to receive the Redemption Price per share.

 

(d)                                 If fewer than all the
shares of Series B Convertible Preferred Stock are to be repurchased pursuant
to this Section 6, the shares of Series B Convertible Preferred Stock
shall be repurchased on a pro rata basis from all Holders, if applicable.  Series B Convertible Preferred Stock that the
Corporation selects shall be in amounts equal to the minimum authorized
denominations for certificated shares of Series B Convertible Preferred Stock
to be repurchased or any integral multiple thereof.

 

(e)                                  Deposit of
Redemption Price.

 

(i)                                     Prior to or on any
redemption date, the Corporation shall segregate and hold in trust an amount of
money sufficient to pay the Redemption Price of, and accrued and unpaid
dividends, if any, on, all the shares of Series B Convertible Preferred Stock
to be redeemed other than any shares of Series B Convertible Preferred Stock
called for repurchase on that date which have been converted prior to the date
of such deposit.

 

(ii)                                  If any shares of
Series B Convertible Preferred Stock called for repurchase is converted prior
to the redemption date, any money so segregated and held in trust for the
repurchase of such shares of Series B Convertible Preferred Stock shall be
discharged from such trust.

 

(f)                                    Any certificate
representing shares of Series B Convertible Preferred Stock which are to be
repurchased only in part shall be surrendered at an office or agency of the
Corporation designated for that purpose pursuant hereto (with, if the
Corporation so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Corporation duly executed by, the Holder
thereof or the Holder’s attorney duly authorized in writing), and the
Corporation shall execute and deliver to the Holder of such shares of Series B
Convertible Preferred Stock without service charge, a new certificate or
certificates representing such shares of Series B Convertible Preferred Stock
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the repurchased number of shares
of Series B Convertible Preferred Stock so surrendered.

 

7.                                       Voting
Rights; Amendment; Waiver.

 

(a)                                  General.  Each Holder of record of shares of the Series
B Convertible Preferred Stock, except as otherwise required under Colorado law
or as set forth in these Articles of Amendment (including without limitation in
Sections 7(b) below), shall be entitled or permitted to vote on all matters
required or permitted to be voted on by the holders of Common Stock of the
Corporation and shall be entitled to that number of votes equal to the largest
number of whole shares of Common Stock into which such Holder’s shares of the
Series B Convertible Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof, at the record date for the determination
of shareholders entitled to vote on such matter or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited.  Except as
otherwise expressly provided herein or in any agreement of the shareholders or
as otherwise required by law, the Holders of shares of the Series B Convertible
Preferred

 

12

 

Stock, the holders of shares of the Series A
Convertible Preferred Stock and the holders of shares of Common Stock shall
vote together (or render written consents in lieu of a vote) as a single class
on all matters submitted to the holders of Common Stock of the Corporation.

 

(b)                                 Voting With Respect
to Certain Matters.  In addition to
any other rights provided by law or set forth herein, so long as any shares of
Series B Convertible Preferred Stock are outstanding, the Corporation shall not
without first obtaining the approval (by vote or written consent, as provided
by law) of the Holders of a majority of the outstanding shares of Series B
Convertible Preferred Stock:

 

(i)                                     create, authorize,
designate or issue any shares of the Series B Convertible Preferred Stock;

 

(ii)                                  create, authorize,
designate or issue any shares of any class or series of Senior Stock or Parity
Stock or any Capital Stock convertible, exercisable or exchangeable into any
class or series of Senior Stock or Parity Stock, other than the Series A Convertible
Preferred Stock as in effect on the Issue Date;

 

(iii)                               alter, change or amend
the terms, designations, power privileges, preferences, rights or restrictions
provided for the benefit of the Series B Convertible Preferred Stock or of any
class or series of Senior Stock or Parity Stock;

 

(iv)                              amend the Articles of
Incorporation, including without limitation, any Articles of Amendment thereto,
or the Corporation’s By-Laws in a manner that is adverse to the Series B
Convertible Preferred Stock;

 

(v)                                 declare or pay
dividends on equity securities ranking on parity with or junior to the Series B
Convertible Preferred Stock; or

 

(vi)                              purchase, redeem (other
than pursuant to equity incentive agreements with employees giving the
Corporation the right  or obligation to
repurchase shares upon the termination of services) or set aside any sums for
the purchase or redemption of, or declare or pay any dividend (including a
dividend payable in Capital Stock of the Corporation) or make any other
distribution with respect to, any shares of Capital Stock or any other
securities that are convertible into or exercisable or exchangeable for such
Capital Stock, other than purchases, redemptions, dividends or distributions
with respect to the Series B Convertible Preferred Stock and the Series A
Convertible Preferred Stock, as permitted under the respective Articles of
Amendment as in effect on the Issue Date;

 

(vii)                           effect a reclassification,
merger, consolidation, recapitalization or similar transaction unless the
surviving corporation shall maintain outstanding these Articles of Amendment or
as a part of and as a condition to the effectiveness of such transaction shall
issue to the Holder a preferred share with terms identical to the terms of the
Series B Convertible Preferred Stock;

 

(c)                                  Holders of shares of
Series B Convertible Preferred Stock representing two-thirds of the outstanding
shares of Series B Convertible Preferred Stock may waive

 

13

 

compliance by the Corporation with any
provisions hereof; provided that no such waiver may be granted without the
consent of each Holder of the then outstanding shares of Series B Convertible
Preferred Stock affected thereby if such waiver adversely affects (i) any
provision of Section 5 hereof; (ii) the Liquidation Preference; (iii) the
form or timing of the payment of dividends hereunder for the Series B
Convertible Preferred Stock; or (iv) the voting rights of the Series B
Convertible Preferred Stock under this Section 7.

 

(d)                                 The Corporation in its
sole discretion may, without the vote or consent of any Holders of the Series B
Convertible Preferred Stock, amend or supplement these Articles of Amendment:

 

(i)                                     to make any change
that would provide any additional rights or benefits to the Holders of the
Series B Convertible Preferred Stock.

 

8.                                       Payment.

 

(a)                                  All amounts payable
in cash with respect to the Series B Convertible Preferred Stock shall be
payable in United States dollars at the office or agency of the Corporation
maintained for such purpose within the Borough of Manhattan, City and State of
New York or, at the option of the Corporation, payment of dividends may be made
by check mailed to the Holders of the Series B Convertible Preferred Stock at
their respective addresses set forth in the register of Holders of Series B
Convertible Preferred Stock maintained by the Transfer Agent.

 

(b)                                 Any payment on the
Series B Convertible Preferred Stock due on any day that is not a Business Day
need not be made on such day, but may be made on the next succeeding Business
Day with the same force and effect as if made on such due date, provided that
dividends shall continue to accrue until such next succeeding Business Day.

 

(c)                                  The Corporation will
initially act as the “Transfer Agent” and the “Paying Agent.” The Corporation
may at any time terminate the appointment of any Paying Agent and appoint
additional or other Paying Agents; provided that until the Series B Convertible
Preferred Stock has been delivered to the Corporation for cancellation, or
moneys sufficient to pay the Liquidation Preference of the Series B Convertible
Preferred Stock shall have been made available for payment and either paid or
returned to the Corporation as provided in these Articles of Amendment, the
Corporation shall maintain an office or agency in the Borough of Manhattan, The
City of New York for surrender of shares of Series B Convertible Preferred
Stock for payment and exchange.

 

(d)                                 All moneys and shares
of Series B Convertible Preferred Stock deposited by the Corporation with any
Paying Agent or held by the Corporation in trust for the payment of the
Liquidation Preference on the Series B Convertible Preferred Stock, which
moneys and shares remain unclaimed at the end of two years after such payment
has become due and payable shall be repaid to the Corporation, and the Holder
of the shares of Series B Convertible Preferred Stock in respect of which such
moneys and shares were so deposited or held in trust shall thereafter look only
to Corporation for payment thereof.

 

14

 

9.                                       Reissuance of
Shares of Series B Convertible Preferred Stock. Shares of Series B
Convertible Preferred Stock that have been issued and reacquired in any manner,
including shares purchased, redeemed, converted or exchanged, shall (upon
compliance with any applicable provisions of the laws of Colorado) be
permanently retired or cancelled and shall not under any circumstances be
reissued.  The Corporation shall from
time to time take such appropriate action as may be required by applicable law
to reduce the authorized number of shares of Series B Convertible Preferred
Stock by the number of shares that have been so reacquired.

 

10.                                 Maintenance of
Existence.  The Corporation will do
or cause to be done all things reasonably necessary to preserve and keep in
full force and effect its corporate existence, rights and franchises and comply
with all laws applicable to the Corporation, except where the failure to comply
would not have a material adverse effect on the Corporation.

 

11.                                 Notices.  Corporation will provide to the holders of
the Series B Convertible Preferred Stock all communications sent by the
Corporation to the holders of the Common Stock.

 

12.                                 Financial
Information. Whether or not the Corporation is subject to Section 13(a)
or 15(d) of the Exchange Act, or any successor provision thereto, the
Corporation shall file with the Commission the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto if the Corporation were subject thereto, such
documents to be filed with the Commission on or prior to the respective dates
(the “Required Filing Dates”)
by which the Corporation would have been required to file them.  The Corporation shall also (whether or not it
is required to file reports with the Commission), within thirty (30) days
of each Required Filing Date, (1) transmit by mail to all Holders of the Series
B Convertible Preferred Stock, as their names and addresses appear on the
records of the Transfer Agent and to any Persons that request such reports in
writing, without cost to such holders or Persons, and (ii) file with the
Transfer Agent copies of the annual reports, quarterly reports and other
documents (without exhibits) which the Corporation has filed or would have
filed with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act, any successor provisions thereto or this covenant. The Corporation
shall not be required to file any report or other information with the
Commission if the Commission does not permit such filing.

 

13.                                 Compliance With
Laws.  The Corporation is not and at
all times covenants to take all reasonably necessary action to not become in
violation of any statute, law, rule or regulation where such violation or
default would have a material adverse effect on the business, assets,
operations, operating results or condition, financial or otherwise, of the
Corporation.

 

14.                                 Tax Matters.  Except as otherwise agreed to by the
Corporation, holders of Series B Convertible Preferred Stock shall provide the
Corporation, in the time and the manner prescribed by applicable law, validly
completed and executed Internal Revenue Service Forms W-9 or W-8BEN or other
applicable W-8 (each an “IRS Form”). 
The Corporation shall not withhold from any payment to such Holder
pursuant to the Series B Convertible Preferred Stock unless required to do so
by applicable law.

 

15

 

15.                                 Headings of
Subdivisions.  The headings of the
various subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions hereof.

 

16.                                 Severability of
Provisions.  If any powers,
preferences and relative, participating, optional and other special rights of
the Series B Convertible Preferred Stock and the qualifications, limitations
and restrictions thereof set forth in these Articles of Amendment (as it may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule or law or public policy, all other powers, preferences
and relative, participating, optional and other special rights of the Series B
Convertible Preferred Stock and the qualifications, limitations and
restrictions thereof set forth in these Articles of Amendment (as so amended)
which can be given effect without the invalid, unlawful or unenforceable
powers, preferences and relative, participating, optional and other special
rights of the Series B Convertible Preferred Stock and the qualifications,
limitations and restrictions thereof shall, nevertheless, remain in full force
and effect, and no powers, preferences and relative, participating, optional or
other special rights of the Series B Convertible Preferred Stock and the
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such powers, preferences and relative,
participating, optional or other special rights of Series B Convertible
Preferred Stock and qualifications, limitations and restrictions thereof unless
so expressed herein.

 

16

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