{"id":41594,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/certificate-of-incorporation-cyberian-outpost-inc.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"certificate-of-incorporation-cyberian-outpost-inc","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/formation\/certificate-of-incorporation-cyberian-outpost-inc.html","title":{"rendered":"Certificate of Incorporation &#8211; Cyberian Outpost Inc."},"content":{"rendered":"<pre>\n               AMENDED AND RESTATED CERTIFICATE OF INCORPORATION\n               -------------------------------------------------\n\n                                      OF\n\n                            CYBERIAN OUTPOST, INC.\n\n                                    _______\n\n\n\n     The undersigned, for the purpose of restating the Amended and Restated\nCertificate of Incorporation of Cyberian Outpost, Inc. (which was filed with the\nConnecticut Secretary of the State on October 30, 1997), under the provisions of\nthe Connecticut Business Corporation Act, does hereby certify that:\n\n     FIRST: The name of the corporation is Cyberian Outpost, Inc.\n     -----                                                       \n\n     SECOND: The nature of the business to be transacted, or the purposes to be\n     ------                                                                    \npromoted or carried out by the corporation, which shall be in addition to the\nauthority of the corporation to engage in any lawful act or activity for which\ncorporations may be formed under the Connecticut Business Corporation Act, are\nas follows:\n\n     To carry on a general mercantile, industrial, investing, and trading\nbusiness in all its branches; to devise, invent, manufacture, fabricate,\nassemble, install, service, maintain, alter, buy, sell, import, export, license\nas licensor or licensee, lease as lessor or lessee, distribute, job, enter into,\nnegotiate, execute, acquire, and assign contracts in respect of, acquire,\nreceive, grant, and assign licensing arrangements, options, franchises, and\nother rights in respect of, and generally deal in and with, at wholesale and\nretail, as principal, and as sales, business, special, or general agent,\nrepresentative, broker, factor, merchant, distributor, jobber, advisor, and in\nany other lawful capacity, goods, wares, merchandise, commodities, and\nunimproved, improved, finished, processed, and other real, personal, and mixed\nproperty of any and all kinds, together with the components, resultants, and by-\nproducts thereof; to acquire by purchase or otherwise own, hold, lease,\nmortgage, sell, or otherwise dispose of, erect, construct, make, alter, enlarge,\nimprove, and to aid or subscribe toward the construction, acquisition or\nimprovement or any factories, shops, storehouse, buildings, and commercial and\nretail establishments of every character, including all equipment, fixtures,\nmachinery, implements, and supplies necessary, or incidental to, or connected\nwith, any of the purposes or business of the corporation; and generally to\nperform any and all acts connected therewith or arising therefrom or incidental\nthereto, and all acts proper or necessary for the purpose of the business.\n\n     To manufacture, develop, sell, and distribute computer software, computer\nhardware, and related products and services.\n\n     To apply for, register, obtain, purchase, lease, take licenses in respect\nof or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to\naccount, grant licenses and \n\n \nimmunities in respect of, manufacture under and to introduce, sell, assign,\nmortgage, pledge, or otherwise dispose of, and, in any manner deal with and\ncontract with reference to:\n\n \n          (a) inventions, devices, formulae, processes, and any improvements and\nmodifications thereof;\n\n          (b) letters patent, patent rights, patented processes, copyrights,\ndesigns, and similar rights, trade-marks, trade symbols and other indications of\norigin and ownership granted by or recognized under the laws of the United\nStates of America or of any state or subdivision thereof, or of any foreign\ncountry or subdivision thereof, and all rights connected therewith or\nappertaining thereunto;\n\n          (c) franchises, licenses, grants, and concessions.\n\n     To have and to exercise all powers granted by law and by the Connecticut\nBusiness Corporation Act and all legal powers necessary or convenient to effect\nany or all of the purposes stated in this Certificate of Incorporation or to\ntransact the stated business of the Corporation.\n\n     THIRD:  The authorized number of shares of the corporation is 15,000,000,\n     -----                                                                    \nof which:\n\n          1. 10,000,000 shares are designated as shares of common stock, without\nnominal or par value.\n\n          2. 5,000,000 shares are designated as shares of preferred stock,\nwithout nominal or par value.  There is hereby established a series of preferred\nstock designated \"Series A Convertible Preferred Stock\", consisting of 700,000\nshares of preferred stock, without nominal or par value, and having the relative\nrights, designations, preferences, qualifications, privileges, limitations, and\nrestrictions applicable thereto as set forth on Exhibit A attached hereto and\n                                                ---------                    \nmade a part hereof. There is hereby established a series of preferred stock\ndesignated \"Series B Convertible Preferred Stock\", consisting of 500,000 shares\nof preferred stock, without nominal or par value, and having the relative\nrights, designations, preferences, qualifications, privileges, limitations, and\nrestrictions applicable thereto as set forth on Exhibit B attached hereto and\n                                                ---------                    \nmade a part hereof.  There is hereby established a series of preferred stock\ndesignated \"Series C Convertible Preferred Stock\", consisting of 3,000,000\nshares of preferred stock, without nominal or par value, and having the relative\nrights, designations, preferences, qualifications, privileges, limitations, and\nrestrictions applicable thereto as set forth on Exhibit C attached hereto and\n                                                ---------                    \nmade a part hereof.\n\n          3.  The remaining 800,000 authorized shares of preferred stock are\nhereby deemed to be shares of an undesignated series of preferred stock until\ndesignated by the Board of Directors of Cyberian Outpost, Inc. as being part of\na series previously established or a new series then being established by the\nBoard of Directors of Cyberian Outpost, Inc. The Board of Directors of  Cyberian\nOutpost, Inc. is hereby authorized to establish one or more additional series of\npreferred stock, and to the extent now or hereafter permitted by the Connecticut\nBusiness Corporation Act the Board of Directors of Cyberian Outpost, Inc. is\nauthorized to fix and determine the preferences, voting powers, qualifications\nand special or relative rights or \n\n \nprivileges of each such series including, but not limited to:\n\n          (a) the number of shares to constitute such series and the\ndistinguishing designation thereof;\n\n          (b) the dividend rate on the shares of such series and the\npreferences, if any, and the special and relative rights of such shares of such\nseries as to dividends;\n\n          (c) whether or not the shares of such series shall be redeemable, and,\nif redeemable, the price, terms, and manner of redemption;\n\n          (d) the preferences, if any, and the special and relative rights of\nthe shares of such series upon liquidation of the corporation;\n\n          (e) whether or not the shares of such series shall be subject to the\noperation of a sinking or purchase fund and, if so, the terms and provisions of\nsuch fund;\n\n          (f) whether or not the shares of such series shall be convertible into\nshares of any other class or of any other series of the same or any other class\nof stock of the corporation and, if so, the conversion price or ratio and other\nconversion rights;\n\n          (g) the conditions under which the shares of such series shall have\nseparate voting rights or no voting rights; and\n\n          (h) such other designations, preferences and relative, participating,\noptional or other special rights and qualifications, limitations or restrictions\nof such series to the full extent now or hereafter permitted by the laws of the\nState of Connecticut.\n\n          Notwithstanding the fixing of the number of shares constituting a\nparticular series, the Board of Directors of Cyberian Outpost, Inc. may at any\ntime authorize the issuance of additional shares of the same series.\n\n     FOURTH: Except as may be otherwise set forth in this Certificate of\n     ------                                                             \nIncorporation, no holder of any of the shares of the corporation shall be\nentitled as of right to purchase or subscribe for any unissued shares of any\nclass or any additional shares of any class to be issued by reason of any\nincrease of the authorized shares of the corporation, or bonds, certificates of\nindebtedness, debentures, or other securities convertible into shares of the\ncorporation or carrying any right to purchase shares of any class, but any such\nunissued shares or such additional authorized issue of any shares or of other\nsecurities convertible into shares, or carrying any right to purchase shares,\nmay be issued and disposed of pursuant to resolution of the Board of Directors\nto such persons, firms, corporations, or associations and upon such terms as may\nbe deemed advisable by the Board of Directors in the exercise of its discretion.\n\n     FIFTH: The minimum amount of stated capital with which the corporation\n     -----                                                                 \nshall \n\n \ncommence business is one thousand dollars.\n\n     SIXTH: For the regulation and management of the affairs of the corporation,\n     -----                                                                      \nit is further provided:\n\n     1.  Whenever any provision of the Connecticut Business Corporation Act\nshall otherwise require for the approval of any specified corporate action the\nauthorization of at least two-thirds of the voting power of shareholders\nentitled to vote, any such corporate action shall be approved by the\nauthorization of at least a majority of the voting power of the shareholders\nentitled to vote; and whenever the corporation shall have one or more classes or\nseries of shares which are denied voting power under the Certificate of\nIncorporation but the authorization of at least two-thirds of the voting power\nof said class or series is otherwise required for the approval of any specified\ncorporate action under the Connecticut Business Corporation Act, any such\ncorporate action shall be approved by said class or series by the authorization\nof at least a majority of the voting power of each such class and of each such\nseries.\n\n     2.  To the extent permitted by the Connecticut Business Corporation Act,\nand in conformity with the provisions thereof, any corporate action permitted to\nbe taken at a meeting of shareholders entitled to vote may be taken without a\nmeeting by a consent in writing signed by the holders of at least a majority of\nthe voting power of each class entitled to vote.\n\n     3.  Whenever the corporation shall be engaged in the business of exploiting\nnatural resources, dividends may be declared and paid in cash or property and\ncharged against depletion reserves.\n\n     4.  To the extent permitted by the Connecticut Business Corporation Act,\nand in conformity with the provisions thereof, distributions in cash or property\nmay be made out of capital surplus available therefor without the authorization\nof the shareholders of any class of the corporation, except as otherwise\nprovided herein.\n\n     5.  To the extent permitted by the Connecticut Business Corporation Act,\nand in conformity with the provisions thereof, acquisitions of its own shares\nout of unreserved and unrestricted capital surplus may be made by the\ncorporation without the authorization of the shareholders of any class of the\ncorporation, except as otherwise provided herein.\n\n     6.  One or more or all of the directors of the corporation may be removed\nfor cause or without cause by the shareholders entitled to vote for their\nelection.  The Board of Directors shall have power to remove any director for\ncause and to suspend any director pending a final determination that cause\nexists, except as otherwise provided herein.\n\n     7.  The personal liability of the directors of the corporation is limited\nto the fullest extent permitted by the provisions of the Connecticut Business\nCorporation Act, as the same may be amended and supplemented.\n\n \n     8.  The Corporation shall, to the fullest extent permitted by Section 33-\n776(4) of the Connecticut Business Corporation Act, as the same may be amended\nand supplemented, indemnify any and all persons whom it shall have power to\nindemnify under said section from and against any and all of the expenses,\nliabilities, or other matters referred to in or covered by said section.\n\n     I, the undersigned, do hereby declare under the penalties of false\nstatement that the statements contained in the foregoing document are true and\ndo hereby sign this document at Kent, Connecticut, on February 27, 1998.\n\n\n                                    \/s\/ Darryl Peck\n                                    _______________________________\n                                    Darryl Peck, President\n\n \n                                   EXHIBIT A\n\n                 TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK\n                                      OF\n                            CYBERIAN OUTPOST, INC.\n\n\n\n     Designation of Series A Convertible Preferred Stock. There is hereby\n     ----------------------------------------------------                \nestablished a series of Preferred Stock designated \"Series A Convertible\nPreferred Stock\" (the \"Series A Preferred\"), consisting of 700,000 shares,\n                       ------------------                                 \nwithout nominal or par value, and having the relative rights, designations,\npreferences, qualifications, privileges, limitations, and restrictions\napplicable thereto as follows:\n\n     1.  Dividend Provisions. Except as may be otherwise approved in writing by\n         -------------------                                                   \nthe holders of a majority of the outstanding shares of Series A Preferred:\n\n         (a)  The holders of the shares of Series A Preferred shall be entitled\nto receive dividends, out of any assets legally available therefor, in an amount\nper share of Series A Preferred which is equal to the product of (i) the number\nof shares of common stock, no par value (\"Common Stock\") of Cyberian Outpost,\n                                          ------------                       \nInc. (the \"Corporation\") into which one share of Series A Preferred is\n           -----------                                                \nconvertible at the time of declaration of such dividend, multiplied by (ii) the\naggregate amount per share of Common Stock of all cash dividends and the\naggregate amount per share (payable, at the option of the holder, in kind or in\ncash, based upon the fair market value at the time the non-cash dividend or\nother distribution is declared or paid as determined in good faith by the Board\nof Directors of the Corporation) of all non-cash dividends or other\ndistributions on the Common Stock, when, as and if a dividend is declared on the\nshares of Common Stock.  Such dividends shall accumulate and be declared and\npaid contemporaneously with the declaration and payment of the related dividend\non the Common Stock, so that the Series A Preferred participates equally with\nthe Common Stock in such dividend or distribution with respect to the number of\nshares of Common Stock into which the Series A Preferred is then convertible\npursuant to Section 3 hereof.\n\n \n         (b)  So long as any Series A Preferred shall remain outstanding, no\ndeposit, payment, dividend or other distribution shall be paid or made on any\nother class of stock of the Corporation and no shares of any other class of\nstock of the Corporation shall be purchased or otherwise acquired by the\nCorporation or any subsidiary of the Corporation other than, (i) except as may\nbe otherwise provided in the Certificate of Incorporation, including in any\nclass or series designation concerning any capital stock of the Corporation (as\nsuch may be amended from time to time), or (ii) upon exercise of the\nCorporation's rights or a stockholder's rights under any restricted stock\npurchase agreement (or any similar agreement pursuant to which the Corporation\nis obligated to redeem its stock) in effect as of the Original Issuance Date (as\ndefined below in Section 3(k)) or otherwise pursuant to incentive stock plans of\nthe Corporation in effect as of the Original Issuance Date, or as may be\napproved from time to time by the Corporation and the holders of the Series A\nPreferred in accordance with Section 6(c) hereof, or (iii) upon the exercise of\na stockholder's put rights in effect as of the Original Issuance Date, or as may\nbe approved from time to time by the Corporation and the holders of the Series A\nPreferred in accordance with Section 6(c) hereof, or (iv) by exchange therefor\nof shares of the stock of the Corporation.\n\n         Subject to the above limitations and to the provisions of Section 6,\ndividends may be paid on any class of stock of the Corporation out of any funds\nlegally available for such purpose when and as declared by the Board of\nDirectors.\n\n     2.  Liquidation Preference.  Except as may be otherwise approved in writing\n         ----------------------                                                 \nby the holders of a majority of the outstanding shares of Series A Preferred:\n\n         (a)  In the event of any liquidation, dissolution or winding up of the\nCorporation, either voluntary or involuntary, the holders of shares of Series A\nPreferred shall be entitled to receive out of the assets of the Corporation\navailable for distribution to shareholders, (i) before any distribution or\npayment shall be made in respect of the holders of shares of Common Stock but\npari passu with holders of Series B Convertible Preferred Stock of the\nCorporation (the \"Series B Preferred\") and Series C Convertible Preferred Stock\n                  ------------------                                           \nof the Corporation (the \"Series C Preferred\"), a liquidation distribution in an\n                         ------------------                                    \namount equal to the Original Issuance Price (as defined below in Section 3(k))\nper share, plus an amount equal to all declared dividends thereon to the date\nfixed for such distribution or payment, and then (ii) to share with the holders\nof shares of Common Stock, Series B Preferred and Series C Preferred as if the\nshares of Series A Preferred, Series B Preferred and Series C Preferred were\nthen converted into shares of Common Stock.  If, upon any such liquidation,\ndissolution or winding up of the affairs of the Corporation, the assets of the\nCorporation available for distribution to shareholders shall be insufficient to\npermit the payment in full to the holders of Series A Preferred, Series B\nPreferred and Series C Preferred of the amounts to which they are each entitled\nin preference to holders of shares of Common Stock, then all of such available\nassets shall be distributed to the holders of shares of Series A Preferred,\nSeries B Preferred and Series C Preferred ratably in proportion to the\nliquidation payment otherwise due pursuant to clause (i) above to each such\nholder.\n\n \n         (b)  A consolidation or merger of the Corporation with or into any\nother corporation or corporations, or the consolidation or merger of any other\ncorporation or corporations into the Corporation, or the sale or transfer by the\nCorporation of all or substantially all of its assets or the effectuation by the\nCorporation or any holders of its capital stock of a transaction or series of\nrelated transactions in which more than fifty percent (50%) of the voting power\nof the Corporation is sold, transferred or otherwise disposed of, shall be\ndeemed to be a liquidation, dissolution or winding up within the meaning of this\nSection 2.\n\n     3.  Conversion. The holders of the shares of Series A Preferred shall have\n         ----------                                                            \nconversion rights as follows:\n\n         (a)  Optional Conversion.  The holder of any shares of Series A\n              -------------------                                       \nPreferred shall have the right, at such holder's option, at any time or from\ntime to time by the giving of written notice thereof to the Corporation (the\n                                                                            \n\"Conversion Date\") to convert all or any of such shares of Series A Preferred\n----------------                                                             \ninto such number of fully paid and nonassessable shares of Common Stock as\nobtained by multiplying the Original Issuance Price by the number of shares of\nSeries A Preferred being converted, and dividing the product thereof by the\nSeries A Conversion Price (as hereinafter defined) (as last adjusted and then in\neffect) for the shares of Series A Preferred then being converted. The\nconversion price per share (the \"Series A Conversion Price\") at which shares of\n                                 -------------------------                     \nCommon Stock shall be issuable shall be Three Dollars and Forty Cents ($3.40)\nper share; provided, however, that the Series A Conversion Price shall be\n           --------                                                      \nsubject to adjustment as set forth in Section 3(e) hereof. The holder of any\nshares of Series A Preferred converted into shares of Common Stock pursuant to\nthis Section 3(a) shall be entitled to payment of all declared but unpaid\ndividends, if any, payable with respect to such shares being converted up to and\nincluding the Conversion Date.\n\n         (b)  Mandatory Conversion.  Upon the consummation of a public offering\n              --------------------                                             \nof shares of Common Stock of the Corporation registered pursuant to the\nSecurities Act of 1933, as amended, in which the gross proceeds to the\nCorporation exceed Ten Million Dollars ($10,000,000) as the result of which\nshares of Common Stock are traded on either the New York Stock Exchange, the\nAmerican Stock Exchange or the NASDAQ National Market System (an \"Event of\n                                                                  --------\nConversion\"), all shares of Series A Preferred then outstanding shall, by virtue\n----------                                                                      \nof and simultaneously with the occurrence of the Event of Conversion and without\nany action on the part of the holder thereof, be deemed automatically converted\ninto such whole number of fully paid and nonassessable shares of Common Stock as\nobtained by multiplying the Original Issuance Price by the number of shares of\nSeries A Preferred being converted, and dividing the product thereof by the\nSeries A Conversion Price (as last adjusted and then in effect) for the shares\nof Series A Preferred being converted (such Series A Conversion Price being\nsubject to adjustment as set forth in Section 3(e) hereof).  The holder of any\nshares of Series A Preferred converted into shares of Common Stock pursuant to\nthis Section 3(b) shall be entitled to payment of all declared but unpaid\ndividends, if any, payable with respect to such shares of Series A Preferred up\nto and including the Conversion Date.\n\n \n         (c)  Procedure for Conversion.  Upon conversion of the shares of Series\n              ------------------------                                          \nA Preferred pursuant to Section 3(a) hereof, the holder of any shares of Series\nA Preferred shall deliver to the Corporation during regular business hours, at\nthe office of any transfer agent of the Corporation for the Series A Preferred,\nor at such other place as may be designated by the Corporation, the certificate\nor certificates for the shares to be converted, duly endorsed or assigned in\nblank or to the Corporation (if required by it), accompanied by written notice\nstating the name or names (with address) in which the certificate or\ncertificates for the shares of Common Stock are to be issued.  As promptly as\npracticable thereafter, the Corporation shall issue and deliver to or upon the\nwritten order of such holder, to the place designated by such holder, a\ncertificate or certificates for the number of full shares of Common Stock to\nwhich such holder is entitled, a check or cash in respect of any fractional\ninterest in a share of Common Stock as provided in Section 3(d) hereof and a\ncheck or cash in payment of all declared but unpaid dividends, if any (to the\nextent permissible under law), payable with respect to the shares of Series A\nPreferred so converted up to and including the Conversion Date.  The person in\nwhose names the certificate or certificates for Common Stock are to be issued\nshall be deemed to have become a shareholder of record on the applicable\nConversion Date unless the transfer books of the Corporation are closed on that\ndate, in which event he shall be deemed to have become a shareholder of record\non the next succeeding date on which the transfer books are open, but the Series\nA Conversion Price for the Series A Preferred shall be that in effect on the\nConversion Date.\n\n         (d)  Additional Conversion Provisions.  The following additional terms\n              --------------------------------                                 \nshall apply upon any conversion of the Series A Preferred:\n\n              (i)   No fractional shares of Common Stock or scrip shall be\nissued upon conversion of shares of Series A Preferred. If more than one share\nof Series A Preferred shall be surrendered for conversion at any one time by the\nsame holder, the number of full shares of Common Stock issuable upon conversion\nthereof shall be computed on the basis of the aggregate number of shares of\nSeries A Preferred so surrendered. In lieu of any fractional shares of Common\nStock which would otherwise be issuable upon conversion of any shares of Series\nA Preferred the Corporation shall pay a cash adjustment in respect of such\nfractional interest in an amount equal to the then Current Market Price (as\ndefined below) of a share of Common Stock as of the date of conversion,\nmultiplied by such fractional interest. Fractional interests shall not be\nentitled to dividends, and the holders of fractional interests shall not be\nentitled to any rights as shareholders of the Corporation in respect of such\nfractional interest.\n\n              (ii)  For the purpose of any computation pursuant to this Section\n3(d), the Current Market Price at any date of one share of Common Stock shall be\ndeemed to be the closing price as of the day before the day in question. If the\nCommon Stock is not traded in such manner that the closing price is readily\navailable, the Current Market Price shall be determined in good faith by the\nDirectors of the Corporation.\n\n \n         (e)  Adjustments to Series A Conversion Price.  The Series A Conversion\n              ----------------------------------------                          \nPrice for the Series A Preferred shall be subject to adjustment from time to\ntime as follows:\n\n              (i)   Stock Dividends, Split-Ups, Etc.  If, at any time after the\n                    -------------------------------                            \nOriginal Issuance Date, the number of shares of Common Stock outstanding is\nincreased by a stock dividend payable in shares of Common Stock or by a\nsubdivision or split-up of shares of Common Stock, then, following the record\ndate fixed for the determination of holders of Common Stock entitled to receive\nsuch stock dividend, subdivision or split-up, the Series A Conversion Price of\nthe Series A Preferred shall be appropriately decreased so that the number of\nshares of Common Stock issuable on conversion of each share of Series A\nPreferred shall be increased in proportion to such increase in outstanding\nshares.\n\n              (ii)  Combinations.  If, at any time after the Original Issuance \n                    ------------\nDate, the number of shares of Common Stock outstanding is decreased by a\ncombination of the outstanding shares of Common Stock, then, following the\nrecord date for such combination, the Series A Conversion Price shall be\nappropriately increased so that the number of shares of Common Stock issuable on\nconversion of each share of Series A Preferred shall be decreased in proportion\nto such decrease in outstanding shares.\n\n              (iii) Reorganizations, Reclassifications, Etc.  In case, at any \n                    ---------------------------------------\ntime after the Original Issuance Date, of any Capital Events (as defined below\nin Section 3(k)) each share of Series A Preferred shall after such Capital Event\nbe (unless, in the case of a consolidation, merger, sale or other disposition,\npayment shall have been made to the holders of all shares of Series A Preferred\nof the full amount to which they respectively shall have been entitled pursuant\nto Section 2 hereof) convertible into the kind and number of shares of stock or\nother securities or property of the Corporation or of the corporation resulting\nfrom such consolidation or surviving such merger or to which such properties and\nasset shall have been sold or otherwise disposed to which the holder of the\nnumber of shares of Common Stock deliverable (immediately prior to the time of\nsuch Capital Event) upon conversion of such shares would have been entitled upon\nsuch Capital Event. The provisions of this Section 3(e)(iii) shall similarly\napply to successive Capital Events.\n\n              (iv)  Dilutive Issuances.\n                    ------------------ \n\n                    (1)  If the Corporation shall at any time or from time to\ntime after the Original Issuance Date issue any shares of Common Stock other\nthan Excluded Stock (as defined below in Section 3(k)) without consideration or\nfor a consideration per share less than the Series A Conversion Price then in\neffect (such issuance being referred to in this clause (iv) as a \"Dilutive\n                                                                  --------\nIssuance\"), the Series A Conversion Price in effect immediately prior to such\n--------\nDilutive Issuance shall be reduced with effect from the first to occur of (A)\nthe record date for the issuance of the securities or (B) the date of original\nissuance (as the case may be the \"Issue Date\"), so that it shall equal the price\n                                  ----------\ndetermined by multiplying the Series A Conversion Price by a fraction (i) the\nnumerator of which shall be (X) the number of shares of Common Stock outstanding\nat the close of business on the day next preceding the Issue Date, plus (Y) the\n\n \nnumber of shares of Common Stock which the aggregate consideration received by\nthe Corporation for the Dilutive Issuance would purchase at the Series A\nConversion Price, and (ii) the denominator of which shall be the number of\nshares of Common Stock outstanding at the close of business on the Issue Date\nafter giving effect to such Dilutive Issuance.\n\n              (2)   For the purposes of any adjustment of the Series A\nConversion Price pursuant to this clause (iv), the following provisions shall\napply:\n                    \n                    (A)  In the case of the issuance of Common Stock for cash,\nthe consideration shall be deemed to be the amount of cash paid therefor after\ndeducting therefrom any discounts or commissions allowed or paid by the\nCorporation for any underwriting or otherwise in connection with the issuance\nand sale thereof.\n\n                    (B)  In the case of the issuance of Common Stock for a\nconsideration in whole or in part other than cash, the consideration other than\ncash shall be deemed to be the fair market value thereof to the Corporation as\ndetermined in good faith by the Board of Directors, irrespective of any\naccounting treatment.\n\n                    (C)  In the case of the issuance of (i) options to purchase\nor rights to subscribe for Common Stock, (ii) securities by their terms\nconvertible into or exchangeable for Common Stock, or (iii) options to purchase\nor rights to subscribe for such convertible or exchangeable securities:\n\n                         (I)   the shares of Common Stock deliverable upon\nexercise of such options to purchase or rights to subscribe for Common Stock\nshall be deemed to have been issued at the time such options or rights were\nissued and for a consideration equal to the consideration (determined in the\nmanner provided in subclauses (A) and (B), above), if any, received by the\nCorporation upon the issuance of such options or rights plus the minimum\npurchase price provided in such options or rights for the Common Stock covered\nthereby;\n\n                         (II)  the shares of Common Stock deliverable upon\nconversion of or in exchange for any such convertible or exchangeable securities\nor upon the exercise of options to purchase or rights to subscribe for such\nconvertible or exchangeable securities and subsequent conversion or exchange\nthereof shall be deemed to have been issued at the time such securities were\nissued or such options or rights were issued and for a consideration equal to\nthe consideration received by the Corporation for any such securities and\nrelated options or rights (excluding any cash received on account of accrued\ninterest or accrued dividends), plus the additional consideration, if any, to be\nreceived by the Corporation upon the conversion or exchange of such securities\nor the exercise of any related options or rights (the consideration in each case\nto be determined in the manner provided in subclauses (A) and (B), above);\n\n                         (III) on any change in the number of shares or exercise\nprice of Common Stock deliverable upon exercise of any such options or rights or\nupon \n\n \nconversion of or in exchange for such convertible or exchangeable securities,\nother than a change resulting from the antidilution provisions thereof, the\nSeries A Conversion Price shall forthwith be readjusted to such Series A\nConversion Price as would have obtained had the adjustment made upon the\nissuance of such options, rights or securities not converted prior to such\nchange or options or rights related to such securities not converted prior to\nsuch change been made upon the basis of such change; and\n\n                         (IV)  on the expiration of any such options or rights,\nthe termination of any such rights to convert or exchange or the expiration of\nany options or rights related to such convertible or exchangeable securities,\nthe Series A Conversion Price shall forthwith be readjusted to such Series A\nConversion Price as would have obtained had such options, rights, securities or\noptions or rights related to such securities not been issued.\n\n              (v)   All calculations under this paragraph (e) shall be made to\nthe nearest one-tenth (1\/10) of a share or to the nearest one tenth (1\/10) of a\ncent, as the case may be.\n\n              (vi)  In any case in which the provisions of this Section 3(e)\nshall require that an adjustment shall become effective immediately after a\nrecord date for an event the Corporation may defer until the occurrence of such\nevent (1) issuing to the holder of any share of Series A Preferred converted\nafter such record date and before the occurrence of such event the additional\nshares of capital stock issuable upon such conversion by reason of the\nadjustment required by such event over and above the shares of capital stock\nissuable upon such conversion before giving effect to such adjustment and (2)\npaying to such holder any amount in cash in lieu of a fractional share of\ncapital stock pursuant to Section 3(d) hereof; provided, however, that the\n                                               --------  -------\nCorporation shall deliver to such holder a due bill or other appropriate\ninstrument evidencing such holder's right to receive such additional shares, and\nsuch cash, immediately upon the occurrence of the event requiring such\nadjustment.\n\n              (vii) The Corporation will not voluntarily, by amendment of its\nCertificate of Incorporation, as amended, or through any reorganization,\ntransfer of assets, merger, dissolution, issuance or sale or securities or any\nother voluntary action, avoid or seek to avoid the observance or performance of\nany of the terms to be observed or performed hereunder by the Corporation, but\nwill at all times in good faith assist in the carrying out of all of the\nprovisions of this Section 3 and in the taking of all such action as may be\nnecessary or appropriate in order to protect the conversion rights of the\nholders of the Series A Preferred against impairment.\n\n         (f)  Whenever the Series A Conversion Price of the Series A Preferred\nshall be adjusted as provided in Section 3(e), the Corporation shall forthwith\nfile, at the office of the transfer agent for the Series A Preferred or at such\nother place as may be designated by the Corporation, a statement showing in\ndetail the facts requiring such adjustment and the Series A Conversion Price of\nthe Series A Preferred that shall be in effect after such adjustment.  The\nCorporation shall also cause a copy of such statement to be sent by mail, first-\nclass certified mail, \n\n \nreturn receipt requested, postage prepaid, to each holder of shares of any\nseries of preferred stock in respect of which an adjustment to the Series A\nConversion Price was required to be made at his address appearing on the\nCorporation's records. Where appropriate, such copy may be given in advance and\nmay be included as part of a notice required to be mailed under the provisions\nof Section 4(g) hereof.\n\n         (g)  If the Corporation shall propose to take any action of the types\ndescribed in clauses (i), (ii), (iii) or (iv) of Section 3(e), the Corporation\nshall give notice to each holder of shares of Series A Preferred in the manner\nset forth in Section 3(f) hereof, which notice shall specify the record date, if\nany, with respect to any such action and the date on which such action is to\ntake place.  Such notice shall also set forth such facts with respect thereto as\nshall be reasonably necessary to indicate the effect of such action (to the\nextent such effect may be known at the date of such notice) on the Series A\nConversion Price and the number, kind or series of shares or other securities or\nproperty which shall be deliverable or purchasable upon the occurrence of such\naction or deliverable upon conversion of shares of each such series of Series A\nPreferred.  In the case of any action which would require the fixing of a record\ndate, such notice shall be given at least twenty (20) days prior to the date so\nfixed, and in case of all other actions, such notice shall be given at least\nthirty (30) days prior to the taking of such proposed action.  Failure to give\nsuch notice, or any defect therein, shall not affect the legality or validity of\nany such action.\n\n         (h)  The Corporation shall pay all documentary, stamp or other\ntransaction taxes attributable to the issuance or delivery of shares of capital\nstock of the Corporation upon conversion of shares of Series A Preferred;\n                                                                         \nprovided, however, that the Corporation shall not be required to pay any taxes\n-----------------                                                             \nwhich may be payable in respect of any transfer involved in the issuance of\ndelivery of any certificate for such shares in a name other than that of the\nholder of the shares of Series A Preferred in respect of which such shares are\nbeing issued.\n\n         (i)  The Corporation shall reserve and at all times from and after such\ndate keep reserved, free from preemptive rights, out of its authorized but\nunissued shares of Common Stock, solely for the purpose of effecting the\nconversion of the shares of Series A Preferred and shall take all action as may\nbe necessary to enable the Corporation lawfully to issue such Common Stock upon\nthe conversion of shares of Series A Preferred.\n\n         (j)  All shares of Common Stock which may be issued in connection with\nthe conversion provisions set forth herein will, upon issuance by the\nCorporation, be validly issued, fully paid and nonassessable with no personal\nliability attaching to the ownership thereof and free from all taxes, liens or\ncharges with respect thereto.\n\n         (k)  Definitions.  As used herein, the following terms have the\n              -----------                                               \nfollowing meanings:\n\n              (i)   \"Capital Events\" means any capital reorganization,\n                     --------------                                   \nrecapitalization, \n\n \nor any reclassification of the stock of the Corporation (other than a change in\npar value, or from par value to no par value, or from no par value to par value,\nor as a result of a stock dividend or subdivision, split-up or combination of\nshares), or the consolidation or merger of the Corporation with or into another\nperson (other than a consolidation or merger in which the Corporation is the\ncontinuing corporation and which does not result in any change in the Common\nStock), or the sale or other disposition of all or substantially all of the\nproperties and assets of the Corporation to any person or third party.\n\n              (ii)  \"Excluded Stock\" means shares of Common Stock issued by the\n                     --------------                                            \nCorporation: (A) as a stock dividend payable in shares of Common Stock or upon\nany subdivision or split-up of the outstanding shares of Common Stock, (B) upon\nconversion of the shares of Series A Preferred, Series B Preferred or Series C\nPreferred at any time outstanding, (C) to officers, employees or directors of,\nor consultants to, the Corporation (whether as an issuance of Common Stock,\noptions to purchase or rights to subscribe for such Common Stock, or options to\npurchase or rights to subscribe for such convertible or exchangeable\nsecurities), in each case approved by the  Board of Directors of the\nCorporation; provided, however, that the maximum number of shares of Common\n             -----------------                                             \nStock issued or issuable to officers, employees or directors of, or consultants\nto, the Corporation to which this clause (C) shall apply shall not exceed the\nnumber of shares issuable under the incentive stock option plans of the\nCorporation presently in effect or as may be approved from time to time by the\nCorporation and the holders of the Series A Preferred in accordance with Section\n6(c)(ix) hereof (including any Common Stock issued pursuant to the exercise of\nany such options), and (D) pursuant to any options (other than those described\nin (C), above), warrants or other rights outstanding on the Original Issuance\nDate.\n\n              (iii) \"Original Issuance Date\" means the date of original issuance\n                     ----------------------                                     \nby the Corporation of the first share of Series A Preferred.\n\n              (iv)  \"Original Issuance Price\" means Three Dollars and Forty \n                     -----------------------\nCents ($3.40), the price of the first share of Series A Preferred issued by the\nCorporation.\n\n              (v)   \"Person\" means any corporation, general or limited partner-\n                     ------\nship, limited liability partnership, limited liability company, joint venture,\nestate, trust, association, organization, labor union, or other entity.\n\n              (vi)  \"Subsidiary\" means with respect to any Person (the \"Owner\"),\n                     ----------\nany corporation or other Person of which securities or other interests having\nthe power to elect a majority of that corporation's or other Person's board of\ndirectors or similar governing body, or otherwise having the power to direct the\nbusiness and policies of that corporation or other Person (other than securities\nor other interests having such power only upon the happening of a contingency\nthat has not occurred), are held by the Owner or one or more of its\nSubsidiaries; when used without reference to a particular Person, \"Subsidiary\"\nmeans a Subsidiary of the Corporation.\n\n \n     4.  Status of Converted Stock.  If any shares of Series A Preferred shall\n         -------------------------                                            \nbe converted pursuant to Section 3 hereof, the shares so converted shall be\ncanceled and shall not be reissuable by the Corporation.\n\n     5.  Redemption.  Shares of Series A Preferred are not redeemable.\n         ----------                                                   \n\n     6.  Voting Rights.\n         ------------- \n\n         (a)  General.  Except as otherwise provided below, on all matters\n              -------                                                     \nsubmitted to a vote of the holders of shares of Common Stock, the holder of each\nshare of Series A Preferred shall have the right to one vote for each Common\nShare into which such Series A Preferred could then be converted (with any\nfractional share determined on an aggregate conversion basis being rounded to\nthe nearest whole share), and with respect to such vote, such holder shall have\nfull voting rights and powers equal to the voting rights and powers of the\nholders of such shares of Common Stock, and shall be entitled, notwithstanding\nany provision hereof, to notice of any shareholders' meeting in accordance with\nthe by-laws of the Corporation and shall be entitled to vote, together with\nholders of shares of Common Stock with respect to any question upon which\nholders of shares of Common Stock have the right to vote.\n\n         (b)  Election of Directors.  Except as may be otherwise approved by\n              ---------------------                                         \nvote or by the written consent of the holders of a majority of the shares of\nSeries A Preferred then outstanding, the Board of Directors shall consist of up\nto 7 members. The holders of the Series A Preferred, voting as a separate class,\nshall have the right to elect one (1) director.  Except as may otherwise be\nprovided by law or in the Certificate of Incorporation of the Corporation\n(including the Certificate of Designation for the Series C Preferred), the\nholders of the Common Stock shall have the right to elect the remaining members\nof the Board of Directors and the Series A Preferred shall not be entitled to\nvote in the election of the remaining members of the Board of Directors.  Each\ndirector shall be elected at the annual meeting of shareholders and shall serve\nuntil his successor is elected and qualified or until his earlier resignation or\nremoval. Any director who shall have been elected by the holders of Series A\nPreferred may be removed during his term of office, either for or without cause,\nby and only by, the affirmative vote of the holders of a majority of the shares\nof Series A Preferred then outstanding, given at a special meeting of such\nshareholders duly called for that purpose, and any vacancy thereby created may\nbe filled by the holders of the Series A Preferred represented at that meeting.\n\n         (c)  Protective Provisions.  So long as twenty-five percent (25%) or\n              ---------------------                                          \nmore of the  shares of Series A Preferred are outstanding, the Corporation shall\nnot, and shall not attempt to, without first obtaining the approval (by vote or\nwritten consent) of the holders of at least a majority of the then outstanding\nshares of Series A Preferred, voting as a separate class:\n\n              (i)   authorize any additional shares of  Series A Preferred, or\nauthorize and issue any shares of, (a) any class or series of equity security\nhaving superior rights to the \n\n \nSeries A Preferred as to dividends (except for the Series C Preferred),\nredemptions, or as to payment upon liquidation, dissolution or a winding up of\nthe Corporation, or otherwise, or (b) any notes or debt securities convertible\ninto or exchangeable for any equity securities or containing profit\nparticipation features;\n\n              (ii)   redeem or repurchase outstanding Common Stock in excess of\nan aggregate of 75,000 shares, provided that the Corporation may redeem shares\nof Common Stock from persons having been granted and exercised stock options\npursuant to the Corporation's incentive stock plans as in effect as of the\nOriginal Issuance Date, or as may be approved from time to time by the\nCorporation and by the holders of the Series A Preferred pursuant to Section\n6(c)(ix) below;\n\n              (iii)  enter into any agreement that would restrict the\nCorporation's ability to perform its obligations under any agreement to which\nthe Corporation is a party concerning the Corporation's original issuance of any\nshares of the Series A Preferred (including the Certificate of Incorporation and\nthis Certificate of Designation);\n\n              (iv)   amend the Certificate of Incorporation (including any\nexisting or new Certificate of Designation) or By-Laws of the Corporation in any\nmanner that adversely affects the powers, rights, privileges or restrictions or\nrelative preferences of the Series A Preferred or the holders thereof as a\nclass, or increase the powers, preferences, rights, privileges or restrictions\nof any other class or series of preferred stock unless the Series A Preferred is\ntreated in the same manner;\n\n              (v)    sell, transfer, convey or lease greater than twenty-five\npercent (25%) of the assets of the Corporation in one or more of a series of\nrelated transactions, except for the sale of inventory in the ordinary course of\nthe Corporation's business;\n\n              (vi)   issue additional equity securities of any class or series\nto the employees, officers or directors of the Corporation, except for such\nequity securities as may be issuable upon the exercise of options or warrants\noutstanding as of the Original Issuance Date (or as may be approved from time to\ntime by the Corporation and the holders of the Series A Preferred in accordance\nwith this Section 6(c)(vi)); provided that any such equity securities, including\nany options or warrants for equity securities of the Corporation, shall be\ngranted at no less than the fair market value for such equity securities, as\ndetermined in good faith by a majority of the independent directors residing on\nthe Board of Directors of the Corporation;\n\n              (vii)  issue any equity securities of any class or series for a\nprice less than fair market value, as determined in good faith by the Board of\nDirectors of the Corporation, except as may be required pursuant to contractual\ncommitments of the Corporation existing as of the Original Issuance Date;\n\n               (viii) enter into any transaction or series of transactions or\nany agreement\n\n \nor other arrangement, including, without limitation, any loan, with or to any\nofficer or director (or any family member or person affiliated with any officer\nor director) or other affiliate (excluding any Subsidiary of the Corporation) of\nthe Corporation in excess of $100,000, individually, or $250,000, in the\naggregate, during any calendar year, except as may be required pursuant to\ncontractual commitments of the Corporation existing as of February 27, 1998\n(except that such limitations shall not be applicable to any employment or other\ncompensatory arrangements on reasonable arms' length terms (including, without\nlimitation, the granting of stock options under any stock option plan in effect\nas of the Original Issuance Date, or as may be approved from time to time by the\nCorporation and the holders of the Series A Preferred in accordance with Section\n6(c)(ix) below), as may be approved by the Board of Directors of the\nCorporation);\n\n              (ix)   adopt any stock option plans or increase the number of\nshares available or reserved for issuance under any stock option plan or related\nplan in effect as of the Original Issuance Date, or as may be approved from time\nto time by the Corporation and by the holders of the Series A Preferred pursuant\nto Section 6(c)(ix);\n\n              (x)    engage in any transaction which would impair or reduce the\nrights of the holders of shares of the Series A Preferred as a class (except\nthat the Corporation may effect a reverse-split of its Common Stock without the\nconsent of the holders of shares of the Series A Preferred);\n\n              (xi)   merge or consolidate with any Person or permit any\nSubsidiary to merge or consolidate with any Person (other than a Subsidiary that\nis wholly-owned by the Corporation, directly or indirectly);\n\n              (xii)  liquidate, dissolve or effect a recapitalization or\nreorganization in any form of transaction (including, without limitation, any\nreorganization into a limited liability company, a partnership or any other non-\ncorporate entity which is treated as a partnership for federal income tax\npurposes); or\n\n              (xiii) issue any dividends on any class or series of capital stock\nof the Corporation (other than the Series A Preferred and the Series C Preferred\n(as provided in the Certificate of Designation therefor)).\n\n     7.  Preemptive Rights.  Shares of Series A Preferred have no preemptive\n         -----------------                                                  \nrights.\n\n \n                                   EXHIBIT B\n\n                 TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK\n                                      OF\n                            CYBERIAN OUTPOST, INC.\n                                        \n\n\n     Designation of Series B Convertible Preferred Stock.  There is hereby\n     ---------------------------------------------------                  \nestablished a series of Preferred Stock designated \"Series B Convertible\nPreferred Stock\" (the \"Series B Preferred\"), consisting of 500,000 shares,\n                       ------------------                                 \nwithout nominal or par value, and having the relative rights, designations,\npreferences, qualifications, privileges, limitations and restrictions applicable\nthereto as follows:\n\n     1.  Dividend Provisions.  Except as may be otherwise approved in writing by\n         -------------------                                                    \nthe holders of a majority of the outstanding shares of Series B Preferred:\n\n         (a)  The holders of the shares of Series B Preferred shall be entitled\nto receive dividends, out of any assets legally available therefor, in an amount\nper share of Series B Preferred which is equal to the product of (i) the number\nof shares of common stock, no par value (\"Common Stock\") of Cyberian Outpost,\n                                          ------------                       \nInc. (the \"Corporation\") into which one share of Series B Preferred is\n           -----------                                                \nconvertible at the time of declaration of such dividend, multiplied by (ii) the\naggregate amount per share of Common Stock of all cash dividends and the\naggregate amount per share (payable, at the option of the holder, in kind or in\ncash, based upon the fair market value at the time the non-cash dividend or\nother distribution is declared or paid as determined in good faith by the Board\nof Directors of the Corporation) of all non-cash dividends or other\ndistributions on the Common Stock, when, as and if a dividend is declared on the\nshares of Common Stock.  Such dividends shall accumulate and be declared and\npaid contemporaneously with the declaration and payment of the related dividend\non the Common Stock, so that the Series B Preferred participates equally with\nthe  Common Stock in such dividend or distribution with respect to the number of\nshares of Common Stock into which the Series B Preferred is then convertible\npursuant to Section 3 hereof.\n\n         (b)  So long as any Series B Preferred shall remain outstanding, no\ndeposit, payment, dividend or other distribution shall be paid or made on any\nother class of stock of the Corporation and no shares of any other class of\nstock of the Corporation shall be purchased or otherwise acquired by the\nCorporation or any subsidiary of the Corporation other than, (i) except as may\nbe otherwise provided in the Certificate of Incorporation, including in any\nclass or series designation concerning any capital stock of the Corporation (as\nsuch may be amended from time to time), or (ii) upon exercise of the\nCorporation's rights or a stockholder's rights under any restricted stock\npurchase agreement (or any similar agreement pursuant to which the Corporation\nis obligated to redeem its stock) in effect as of the Original Issuance Date (as\ndefined below in Section 3(k)) or otherwise pursuant to incentive stock plans of\nthe Corporation in effect as of the Original Issuance Date, or as may be\napproved from time to time by the Corporation and the holders of the Series B\nPreferred in accordance with Section 6(b) hereof, or (iii) upon the \n\n \nexercise of a stockholder's put rights in effect as of the Original Issuance\nDate, or as may be approved from time to time by the Corporation and the holders\nof the Series B Preferred in accordance with Section 6(b) hereof, or (iv) by\nexchange therefor of shares of the stock of the Corporation.\n\n \n         Subject to the above limitations and to the provisions of Section 6,\ndividends may be paid on any class of stock of the Corporation out of any funds\nlegally available for such purpose when and as declared by the Board of\nDirectors.\n\n     2.  Liquidation Preference.  Except as may be otherwise approved in writing\n         ----------------------                                                 \nby the holders of a majority of the outstanding shares of Series B Preferred:\n\n         (a)  In the event of any liquidation, dissolution or winding up of the\nCorporation, either voluntary or involuntary, the holders of shares of Series B\nPreferred shall be entitled to receive out of the assets of the Corporation\navailable for distribution to shareholders, (i) before any distribution or\npayment shall be made in respect of the holders of shares of Common Stock but\npari passu with holders of Series A Convertible Preferred Stock of the\nCorporation (the \"Series A Preferred\") and Series C Convertible Preferred Stock\n                  ------------------                                           \nof the Corporation (the \"Series C Preferred\"), a liquidation distribution in an\n                         ------------------                                    \namount equal to the Original Issuance Price (as defined below in Section 3(k))\nper share, plus an amount equal to all declared dividends thereon to the date\nfixed for such distribution or payment, and then (ii) to share with the holders\nof shares of Common Stock, Series A Preferred and Series C Preferred as if the\nshares of Series A Preferred, Series B Preferred and Series C Preferred were\nthen converted into shares of Common Stock.  If, upon any such liquidation,\ndissolution or winding up of the affairs of the Corporation, the assets of the\nCorporation available for distribution to shareholders shall be insufficient to\npermit the payment in full to the holders of Series A Preferred, Series B\nPreferred and Series C Preferred of the amounts to which they are each entitled\nin preference to holders of shares of Common Stock, then all of such available\nassets shall be distributed to the holders of shares of Series A Preferred,\nSeries B Preferred and Series C Preferred ratably in proportion to the\nliquidation payment otherwise due pursuant to clause (i) above to each such\nholder.\n\n         (b)  A consolidation or merger of the Corporation with or into any\nother corporation or corporations, or the consolidation or merger of any other\ncorporation or corporations into the Corporation, or the sale or transfer by the\nCorporation of all or substantially all of its assets or the effectuation by the\nCorporation or any holders of its capital stock of a transaction or series of\nrelated transactions in which more than fifty percent (50%) of the voting power\nof the Corporation is sold, transferred or otherwise disposed of, shall be\ndeemed to be a liquidation, dissolution or winding up within the meaning of this\nSection 2.\n\n     3.  Conversion.  The holders of the shares of Series B Preferred shall have\n         ----------                                                             \nconversion rights as follows:\n\n         (a)  Optional Conversion.  The holder of any shares of Series B\n              -------------------                                       \nPreferred shall have the right, at such holder's option, at any time or from\ntime to time by the giving of written notice thereof to the Corporation (the\n                                                                            \n\"Conversion Date\") to convert all or any of such shares of Series B Preferred\n----------------                                                             \ninto such number of fully paid and nonassessable shares of Common Stock as\nobtained by multiplying the Original Issuance Price by the number of shares of\nSeries B \n\n \nPreferred being converted, and dividing the product thereof by the Series B\nConversion Price (as hereinafter defined) (as last adjusted and then in effect)\nfor the shares of Series B Preferred then being converted. The conversion price\nper share (the \"Series B Conversion Price\") at which shares of Common Stock \n                -------------------------\nshall be issuable shall be Four Dollars and Sixty Cents ($4.60) per share;\nprovided, however, that the Series B Conversion Price shall be subject to\n-----------------                                                        \nadjustment as set forth in Section 3(e) hereof.  The holder of any shares of\nSeries B Preferred converted into shares of Common Stock pursuant to this\nSection 3(a) shall be entitled to payment of all declared but unpaid dividends,\nif any, payable with respect to such shares being converted up to and including\nthe Conversion Date.\n\n         (b)  Mandatory Conversion.  Upon the consummation of a public offering\n              --------------------                                             \nof shares of Common Stock of the Corporation registered pursuant to the\nSecurities Act of 1933, as amended, in which the gross proceeds to the\nCorporation exceed Ten Million Dollars ($10,000,000) as the result of which\nshares of Common Stock are traded on either the New York Stock Exchange, the\nAmerican Stock Exchange or the NASDAQ National Market System (an \"Event of\n                                                                  --------\nConversion\"), all shares of Series B Preferred then outstanding shall, by virtue\n----------                                                                      \nof and simultaneously with the occurrence of the Event of Conversion and without\nany action on the part of the holder thereof, be deemed automatically converted\ninto such whole number of fully paid and nonassessable shares of Common Stock as\nobtained by multiplying the Original Issuance Price by the number of shares of\nSeries B Preferred being converted, and dividing the product thereof by the\nSeries B Conversion Price (as last adjusted and then in effect) for the shares\nof Series B Preferred being converted (such Series B Conversion Price being\nsubject to adjustment as set forth in Section 3(e) hereof).  The holder of any\nshares of Series B Preferred converted into shares of Common Stock pursuant to\nthis Section 3(b) shall be entitled to payment of all declared but unpaid\ndividends, if any, payable with respect to such shares of Series B Preferred up\nto and including the Conversion Date.\n\n         (c)  Procedure for Conversion.  Upon conversion of the shares of Series\n              ------------------------                                          \nB Preferred pursuant to Section 3(a) hereof, the holder of any shares of Series\nB Preferred shall deliver to the Corporation during regular business hours, at\nthe office of any transfer agent of the Corporation for the Series B Preferred,\nor at such other place as may be designated by the Corporation, the certificate\nor certificates for the shares to be converted, duly endorsed or assigned in\nblank or to the Corporation (if required by it), accompanied by written notice\nstating the name or names (with address) in which the certificate or\ncertificates for the shares of Common Stock are to be issued.  As promptly as\npracticable thereafter, the Corporation shall issue and deliver to or upon the\nwritten order of such holder, to the place designated by such holder, a\ncertificate or certificates for the number of full shares of Common Stock to\nwhich such holder is entitled, a check or cash in respect of any fractional\ninterest in a share of Common Stock as provided in Section 3(d) hereof and a\ncheck or cash in payment of all declared but unpaid dividends, if any (to the\nextent permissible under law), payable with respect to the shares of Series B\nPreferred so converted up to and including the Conversion Date.  The person in\nwhose names the certificate or certificates for Common Stock are to be issued\nshall be deemed to have become a shareholder of record on the applicable\nConversion Date unless the transfer books \n\n \nof the Corporation are closed on that date, in which event he shall be deemed to\nhave become a shareholder of record on the next succeeding date on which the\ntransfer books are open, but the Series B Conversion Price for the Series B\nPreferred shall be that in effect on the Conversion Date.\n\n         (d)  Additional Conversion Provisions.  The following additional terms\n              --------------------------------                                 \nshall apply upon any conversion of the Series B Preferred:\n\n              (i)   No fractional shares of Common Stock or scrip shall be\nissued upon conversion of shares of Series B Preferred. If more than one share\nof Series B Preferred shall be surrendered for conversion at any one time by the\nsame holder, the number of full shares of Common Stock issuable upon conversion\nthereof shall be computed on the basis of the aggregate number of shares of\nSeries B Preferred so surrendered. In lieu of any fractional shares of Common\nStock which would otherwise be issuable upon conversion of any shares of Series\nB Preferred the Corporation shall pay a cash adjustment in respect of such\nfractional interest in an amount equal to the then Current Market Price (as\ndefined below) of a share of Common Stock as of the date of conversion,\nmultiplied by such fractional interest. Fractional interests shall not be\nentitled to dividends, and the holders of fractional interests shall not be\nentitled to any rights as shareholders of the Corporation in respect of such\nfractional interest.\n\n              (ii)  For the purpose of any computation pursuant to this Section\n3(d), the Current Market Price at any date of one share of Common Stock shall be\ndeemed to be the closing price as of the day before the day in question. If the\nCommon Stock is not traded in such manner that the closing price is readily\navailable, the Current Market Price shall be determined in good faith by the\nDirectors of the Corporation.\n\n         (e)  Adjustments to Series B Conversion Price.  The Series B Conversion\n              ----------------------------------------                          \nPrice for the Series B Preferred shall be subject to adjustment from time to\ntime as follows:\n\n              (i)   Stock Dividends, Split-Ups, Etc.  If, at any time after the\n                    -------------------------------                            \nOriginal Issuance Date, the number of shares of Common Stock outstanding is\nincreased by a stock dividend payable in shares of Common Stock or by a\nsubdivision or split-up of shares of Common Stock, then, following the record\ndate fixed for the determination of holders of Common Stock entitled to receive\nsuch stock dividend, subdivision or split-up, the Series B Conversion Price of\nthe Series B Preferred shall be appropriately decreased so that the number of\nshares of Common Stock issuable on conversion of each share of Series B\nPreferred shall be increased in proportion to such increase in outstanding\nshares.\n\n              (ii)  Combinations.  If, at any time after the Original Issuance \n                    ------------\nDate, the number of shares of Common Stock outstanding is decreased by a\ncombination of the outstanding shares of Common Stock, then, following the\nrecord date for such combination, the Series B Conversion Price shall be\nappropriately increased so that the number of shares of Common Stock issuable on\nconversion of each share of Series B Preferred shall be decreased in proportion\nto such decrease in outstanding shares.\n\n \n              (iii) Reorganizations, Reclassifications, Etc.  In case, at any \n                    ---------------------------------------\ntime after the Original Issuance Date, of any Capital Events (as defined below\nin Section 3(k)) each share of Series B Preferred shall after such Capital Event\nbe (unless, in the case of a consolidation, merger, sale or other disposition,\npayment shall have been made to the holders of all shares of Series B Preferred\nof the full amount to which they respectively shall have been entitled pursuant\nto Section 2 hereof) convertible into the kind and number of shares of stock or\nother securities or property of the Corporation or of the corporation resulting\nfrom such consolidation or surviving such merger or to which such properties and\nasset shall have been sold or otherwise disposed to which the holder of the\nnumber of shares of Common Stock deliverable (immediately prior to the time of\nsuch Capital Event) upon conversion of such shares would have been entitled upon\nsuch Capital Event. The provisions of this Section 3(e)(iii) shall similarly\napply to successive Capital Events.\n\n              (iv)  Dilutive Issuances.\n                    ------------------ \n\n                    (1)  If the Corporation shall at any time or from time to\ntime after the Original Issuance Date issue any shares of Common Stock other\nthan Excluded Stock (as defined below in Section 3(k)) without consideration or\nfor a consideration per share less than the Series B Conversion Price then in\neffect (such issuance being referred to in this clause (iv) as a \"Dilutive\n                                                                  --------\nIssuance\"), the Series B Conversion Price in effect immediately prior to such\n--------\nDilutive Issuance shall be reduced with effect from the first to occur of (A)\nthe record date for the issuance of the securities or (B) the date of original\nissuance (as the case may be the \"Issue Date\"), so that it shall equal the price\n                                  ----------\ndetermined by multiplying the Series B Conversion Price by a fraction (i) the\nnumerator of which shall be (X) the number of shares of Common Stock outstanding\nat the close of business on the day next preceding the Issue Date, plus (Y) the\nnumber of shares of Common Stock which the aggregate consideration received by\nthe Corporation for the Dilutive Issuance would purchase at the Series B\nConversion Price, and (ii) the denominator of which shall be the number of\nshares of Common Stock outstanding at the close of business on the Issue Date\nafter giving effect to such Dilutive Issuance.\n\n                    (2)  For the purposes of any adjustment of the Series B\nConversion Price pursuant to this clause (iv), the following provisions shall\napply:\n\n                         (A)   In the case of the issuance of Common Stock for\ncash, the consideration shall be deemed to be the amount of cash paid therefor\nafter deducting therefrom any discounts or commissions allowed or paid by the\nCorporation for any underwriting or otherwise in connection with the issuance\nand sale thereof.\n\n                         (B)   In the case of the issuance of Common Stock for a\nconsideration in whole or in part other than cash, the consideration other than\ncash shall be deemed to be the fair market value thereof to the Corporation as\ndetermined in good faith by the Board of Directors, irrespective of any\naccounting treatment.\n\n \n                         (C)   In the case of the issuance of (i) options to\npurchase or rights to subscribe for Common Stock, (ii) securities by their terms\nconvertible into or exchangeable for Common Stock, or (iii) options to purchase\nor rights to subscribe for such convertible or exchangeable securities:\n\n                               (I)   the shares of Common Stock deliverable upon\nexercise of such options to purchase or rights to subscribe for Common Stock\nshall be deemed to have been issued at the time such options or rights were\nissued and for a consideration equal to the consideration (determined in the\nmanner provided in subclauses (A) and (B), above), if any, received by the\nCorporation upon the issuance of such options or rights plus the minimum\npurchase price provided in such options or rights for the Common Stock covered\nthereby;\n\n                               (II)  the shares of Common Stock deliverable upon\nconversion of or in exchange for any such convertible or exchangeable securities\nor upon the exercise of options to purchase or rights to subscribe for such\nconvertible or exchangeable securities and subsequent conversion or exchange\nthereof shall be deemed to have been issued at the time such securities were\nissued or such options or rights were issued and for a consideration equal to\nthe consideration received by the Corporation for any such securities and\nrelated options or rights (excluding any cash received on account of accrued\ninterest or accrued dividends), plus the additional consideration, if any, to be\nreceived by the Corporation upon the conversion or exchange of such securities\nor the exercise of any related options or rights (the consideration in each case\nto be determined in the manner provided in subclauses (A) and (B), above);\n\n                               (III)  on any change in the number of shares or\nexercise price of Common Stock deliverable upon exercise of any such options or\nrights or upon conversion of or in exchange for such convertible or exchangeable\nsecurities, other than a change resulting from the antidilution provisions\nthereof, the Series B Conversion Price shall forthwith be readjusted to such\nSeries B Conversion Price as would have obtained had the adjustment made upon\nthe issuance of such options, rights or securities not converted prior to such\nchange or options or rights related to such securities not converted prior to\nsuch change been made upon the basis of such change; and\n\n                               (IV)  on the expiration of any such options or\nrights, the termination of any such rights to convert or exchange or the\nexpiration of any options or rights related to such convertible or exchangeable\nsecurities, the Series B Conversion Price shall forthwith be readjusted to such\nSeries B Conversion Price as would have obtained had such options, rights,\nsecurities or options or rights related to such securities not been issued.\n\n              (v)   All calculations under this paragraph (e) shall be made to\nthe nearest one-tenth (1\/10) of a share or to the nearest one tenth (1\/10) of a\ncent, as the case may be.\n\n              (vi)  In any case in which the provisions of this Section 3(e)\nshall require that an adjustment shall become effective immediately after a\nrecord date for an event the\n\n \nCorporation may defer until the occurrence of such event (1) issuing to the\nholder of any share of Series B Preferred converted after such record date and\nbefore the occurrence of such event the additional shares of capital stock\nissuable upon such conversion by reason of the adjustment required by such event\nover and above the shares of capital stock issuable upon such conversion before\ngiving effect to such adjustment and (2) paying to such holder any amount in\ncash in lieu of a fractional share of capital stock pursuant to Section 3(d)\nhereof; provided, however, that the Corporation shall deliver to such holder a\n        --------  -------                            \ndue bill or other appropriate instrument evidencing such holder's right to\nreceive such additional shares, and such cash, immediately upon the occurrence\nof the event requiring such adjustment.\n\n              (vii) The Corporation will not voluntarily, by amendment of its\nCertificate of Incorporation, as amended, or through any reorganization,\ntransfer of assets, merger, dissolution, issuance or sale or securities or any\nother voluntary action, avoid or seek to avoid the observance or performance of\nany of the terms to be observed or performed hereunder by the Corporation, but\nwill at all times in good faith assist in the carrying out of all of the\nprovisions of this Section 3 and in the taking of all such action as may be\nnecessary or appropriate in order to protect the conversion rights of the\nholders of the Series B Preferred against impairment.\n\n         (f)  Whenever the Series B Conversion Price of the Series B Preferred\nshall be adjusted as provided in Section 3(e), the Corporation shall forthwith\nfile, at the office of the transfer agent for the Series B Preferred or at such\nother place as may be designated by the Corporation, a statement showing in\ndetail the facts requiring such adjustment and the Series B Conversion Price of\nthe Series B Preferred that shall be in effect after such adjustment.  The\nCorporation shall also cause a copy of such statement to be sent by mail, first-\nclass certified mail, return receipt requested, postage prepaid, to each holder\nof shares of any series of preferred stock in respect of which an adjustment to\nthe Series B Conversion Price was required to be made at his address appearing\non the Corporation's records.  Where appropriate, such copy may be given in\nadvance and may be included as part of a notice required to be mailed under the\nprovisions of Section 4(g) hereof.\n\n         (g)  If the Corporation shall propose to take any action of the types\ndescribed in clauses (i), (ii), (iii) or (iv) of Section 3(e), the Corporation\nshall give notice to each holder of shares of Series B Preferred in the manner\nset forth in Section 3(f) hereof, which notice shall specify the record date, if\nany, with respect to any such action and the date on which such action is to\ntake place.  Such notice shall also set forth such facts with respect thereto as\nshall be reasonably necessary to indicate the effect of such action (to the\nextent such effect may be known at the date of such notice) on the Series B\nConversion Price and the number, kind or series of shares or other securities or\nproperty which shall be deliverable or purchasable upon the occurrence of such\naction or deliverable upon conversion of shares of each such series of Series B\nPreferred.  In the case of any action which would require the fixing of a record\ndate, such notice shall be given at least twenty (20) days prior to the date so\nfixed, and in case of all other actions, such notice shall be given at least\nthirty (30) days prior to the taking of such proposed \n\n \naction. Failure to give such notice, or any defect therein, shall not affect the\nlegality or validity of any such action.\n\n         (h)  The Corporation shall pay all documentary, stamp or other\ntransaction taxes attributable to the issuance or delivery of shares of capital\nstock of the Corporation upon conversion of shares of Series B Preferred;\nprovided, however, that the Corporation shall not be required to pay any taxes\n-----------------                                                             \nwhich may be payable in respect of any transfer involved in the issuance of\ndelivery of any certificate for such shares in a name other than that of the\nholder of the shares of Series B Preferred in respect of which such shares are\nbeing issued.\n\n         (i)  The Corporation shall reserve and at all times from and after such\ndate keep reserved, free from preemptive rights, out of its authorized but\nunissued shares of Common Stock, solely for the purpose of effecting the\nconversion of the shares of Series B Preferred, sufficient shares to provide for\nthe conversion of all outstanding shares of Series B Preferred and all\noutstanding shares of Series B Preferred issuable upon conversion of the\nDebentures issued with respect to that certain Securities Purchase Agreement of\nthe Corporation entered into with Winfield Capital Corp. (the \"Securities\n                                                               ----------\nPurchase Agreement\"), and shall take all action as may be necessary to enable\n------------------                                                           \nthe Corporation lawfully to issue such Common Stock upon the conversion of\nshares of Series B Preferred.\n\n         (j)  All shares of Common Stock which may be issued in connection with\nthe conversion provisions set forth herein will, upon issuance by the\nCorporation, be validly issued, fully paid and nonassessable with no personal\nliability attaching to the ownership thereof and free from all taxes, liens or\ncharges with respect thereto.\n\n         (k)  Definitions.  As used herein, the following terms have the\n              -----------                                               \nfollowing meanings:\n\n              (i)  \"Capital Events\" means any capital reorganization,\n                    --------------                                   \nrecapitalization, or any reclassification of the stock of the Corporation (other\nthan a change in par value, or from par value to no par value, or from no par\nvalue to par value, or as a result of a stock dividend or subdivision, split-up\nor combination of shares), or the consolidation or merger of the Corporation\nwith or into another person (other than a consolidation or merger in which the\nCorporation is the continuing corporation and which does not result in any\nchange in the Common Stock), or the sale or other disposition of all or\nsubstantially all of the properties and assets of the Corporation to any person\nor third party.\n\n              (ii)  \"Excluded Stock\" means shares of Common Stock issued by the\n                     --------------                                            \nCorporation: (A) as a stock dividend payable in shares of Common Stock or upon\nany subdivision or split-up of the outstanding shares of Common Stock, (B) upon\nconversion of the shares of Series A Preferred, Series B Preferred or Series C\nPreferred at any time outstanding, (C) to officers, employees or directors of,\nor consultants to, the Corporation (whether as an issuance of Common Stock,\noptions to purchase or rights to subscribe for such Common Stock, \n\n \nor options to purchase or rights to subscribe for such convertible or\nexchangeable securities), in each case approved by the Board of Directors of the\nCorporation; provided, however, that the maximum number of shares of Common\n             -----------------                                             \nStock issued or issuable to officers, employees or directors of, or consultants\nto, the Corporation to which this clause (C) shall apply shall not exceed the\nnumber of shares issuable under the incentive stock option plans of the\nCorporation presently in effect or as may be approved from time to time by the\nCorporation and the holders of the Series B Preferred in accordance with Section\n6(b)(ix) hereof (including any Common Stock issued pursuant to the exercise of\nany such options), and (D) pursuant to any options (other than those described\nin (C), above), warrants or other rights outstanding on the Original Issuance\nDate.\n\n              (iii) \"Original Issuance Date\" means the date of original issuance\n                     ----------------------                                     \nby the Corporation of the first share of Series B Preferred.\n\n              (iv)  \"Original Issuance Price\" means Four Dollars and Sixty Cents\n                     -----------------------                                    \n($4.60), the price of the first share of Series B Preferred issued by the\nCorporation.\n\n              (v)   \"Person\" means any corporation, general or limited \n                     ------\npartnership, limited liability partnership, limited liability company, joint\nventure, estate, trust, association, organization, labor union, or other entity.\n\n              (vi)  \"Subsidiary\" means with respect to any Person (the \"Owner\"),\n                     ----------                                         -----\nany corporation or other Person of which securities or other interests having\nthe power to elect a majority of that corporation's or other Person's board of\ndirectors or similar governing body, or otherwise having the power to direct the\nbusiness and policies of that corporation or other Person (other than securities\nor other interests having such power only upon the happening of a contingency\nthat has not occurred), are held by the Owner or one or more of its\nSubsidiaries; when used without reference to a particular Person, \"Subsidiary\"\nmeans a Subsidiary of the Corporation.\n\n     4.  Status of Converted Stock.  If any shares of Series B Preferred shall\n         -------------------------                                            \nbe converted pursuant to Section 3 hereof, the shares so converted shall be\ncanceled and shall not be reissuable by the Corporation.\n\n     5.  Redemption.  Shares of Series B Preferred are not redeemable.\n         ----------                                                   \n\n     6.  Voting Rights.\n         ------------- \n\n         (a)  General.  Except as otherwise provided below, on all matters\n              -------                                                     \nsubmitted to a vote of the holders of shares of Common Stock, the holder of each\nshare of Series B Preferred shall have the right to one vote for each Common\nShare into which such Series B Preferred could then be converted (with any\nfractional share determined on an aggregate conversion basis being rounded to\nthe nearest whole share), and with respect to such vote, such holder shall have\nfull \n\n \nvoting rights and powers equal to the voting rights and powers of the holders of\nsuch shares of Common Stock, and shall be entitled, notwithstanding any\nprovision hereof, to notice of any shareholders' meeting in accordance with the\nby-laws of the Corporation and shall be entitled to vote, together with holders\nof shares of Common Stock with respect to any question upon which holders of\nshares of Common Stock have the right to vote.\n\n         (b)  Protective Provisions.  So long as twenty-five percent (25%) or\n              ---------------------                                          \nmore of the shares of Series B Preferred are outstanding, the Corporation shall\nnot, and shall not attempt to, without first obtaining the approval (by vote or\nwritten consent) of the holders of at least a majority of the then outstanding\nshares of Series B Preferred, voting as a separate class:\n\n              (i)   authorize any additional shares of Series B Preferred, or\nauthorize and issue any shares of, (a) any class or series of equity security\nhaving superior rights to the Series B Preferred as to dividends (except for the\nSeries C Preferred), redemptions, or as to payment upon liquidation, dissolution\nor a winding up of the Corporation, or otherwise, or (b) any notes or debt\nsecurities convertible into or exchangeable for any equity securities or\ncontaining profit participation features;\n\n              (ii)  redeem or repurchase outstanding Common Stock in excess of\nan aggregate of 75,000 shares, provided that the Corporation may redeem shares\nof Common Stock from persons having been granted and exercised stock options\npursuant to the Corporation's incentive stock plans as in effect as of the\nOriginal Issuance Date, or as may be approved from time to time by the\nCorporation and by the holders of the Series B Preferred pursuant to Section\n6(b)(ix) below;\n\n              (iii) enter into any agreement that would restrict the\nCorporation's ability to perform its obligations under any agreement to which\nthe Corporation is a party concerning the Corporation's original issuance of any\nshares of the Series B Preferred (including the Certificate of Incorporation and\nthis Certificate of Designation);\n\n              (iv)  amend the Certificate of Incorporation (including any\nexisting or new Certificate of Designation) or By-Laws of the Corporation in any\nmanner that adversely affects the powers, rights, privileges or restrictions or\nrelative preferences of the Series B Preferred or the holders thereof as a\nclass, or increase the powers, preferences, rights, privileges or restrictions\nof any other class or series of preferred stock unless the Series B Preferred is\ntreated in the same manner;\n\n              (v)   sell, transfer, convey or lease greater than twenty-five\npercent (25%) of the assets of the Corporation in one or more of a series of\nrelated transactions, except for the sale of inventory in the ordinary course of\nthe Corporation's business;\n\n              (vi)  issue additional equity securities of any class or series to\nthe employees, officers or directors of the Corporation, except for such equity\nsecurities as may be \n\n \nissuable upon the exercise of options or warrants outstanding as of the Original\nIssuance Date (or as may be approved from time to time by the Corporation and\nthe holders of the Series B Preferred in accordance with this Section 6(b)(vi));\nprovided that any such equity securities, including any options or warrants for\nequity securities of the Corporation, shall be granted at no less than the fair\nmarket value for such equity securities, as determined in good faith by a\nmajority of the independent directors residing on the Board of Directors of the\nCorporation;\n\n              (vii)  issue any equity securities of any class or series for a\nprice less than fair market value, as determined in good faith by the Board of\nDirectors of the Corporation, except as may be required pursuant to contractual\ncommitments of the Corporation existing as of the Original Issuance Date;\n\n              (viii) enter into any transaction or series of transactions or any\nagreement or other arrangement, including, without limitation, any loan, with or\nto any officer or director (or any family member or person affiliated with any\nofficer or director) or other affiliate (excluding any Subsidiary of the\nCorporation) of the Corporation in excess of $100,000, individually, or\n$250,000, in the aggregate, during any calendar year, except as may be required\npursuant to contractual commitments of the Corporation existing as of February\n27, 1998 (except that such limitations shall not be applicable to any employment\nor other compensatory arrangements on reasonable arms' length terms (including,\nwithout limitation, the granting of stock options under any stock option plan in\neffect as of the Original Issuance Date, or as may be approved from time to time\nby the Corporation and the holders of the Series B Preferred in accordance with\nSection 6(b)(ix) below), as may be approved by the Board of Directors of the\nCorporation);\n\n              (ix)   adopt any stock option plans or increase the number of\nshares available or reserved for issuance under any stock option plan or related\nplan in effect as of the Original Issuance Date, or as may be approved from time\nto time by the Corporation and by the holders of the Series B Preferred pursuant\nto Section 6(b)(ix);\n\n              (x)   engage in any transaction which would impair or reduce the\nrights of the holders of shares of the Series B Preferred as a class (except\nthat the Corporation may effect a reverse-split of its Common Stock without the\nconsent of the holders of shares of the Series B Preferred);\n\n              (xi)  merge or consolidate with any Person or permit any\nSubsidiary to merge or consolidate with any Person (other than a Subsidiary that\nis wholly-owned by the Corporation, directly or indirectly);\n\n              (xii) liquidate, dissolve or effect a  recapitalization or\nreorganization in any form of transaction (including, without limitation, any\nreorganization into a limited liability company, a partnership or any other non-\ncorporate entity which is treated as a partnership for federal income tax\npurposes); or\n\n \n              (xiii) issue any dividends on any class or series of capital stock\nof the Corporation (other than the Series B Preferred and the Series C Preferred\n(as provided in the Certificate of Designation therefor)).\n\n     7.  Preemptive Rights.  Shares of Series B Preferred have no preemptive\n         -----------------                                                  \nrights.\n\n \n                                   EXHIBIT C\n\n                 TERMS OF SERIES C CONVERTIBLE PREFERRED STOCK\n                                      OF\n                            CYBERIAN OUTPOST, INC.\n                                        \n\n\n     Designation of Series C Convertible Preferred Stock.  There is hereby\n     ---------------------------------------------------                  \nestablished a series of Preferred Stock designated \"Series C Convertible\nPreferred Stock\" (the \"Series C Preferred\"), consisting of 3,000,000 shares,\n                       ------------------                                   \nwithout nominal or par value, and having the relative rights, designations,\npreferences, qualifications, privileges, limitations and restrictions applicable\nthereto as follows:\n\n     1.  Dividend Provisions.  Except as may be otherwise approved in writing by\n         -------------------                                                    \nthe holders of at least sixty-six and two-thirds percent (66 2\/3%) of the\noutstanding shares of Series C Preferred:\n\n         (a)  (i)    The holders of the shares of Series C Preferred shall be\nentitled to receive, when and as declared by the Board of Directors of the\nCorporation, cumulative annual dividends, out of any assets of  Cyberian\nOutpost, Inc. (the \"Corporation\") legally available therefor, in an amount per\n                    -----------                                               \nshare of Series C Preferred equal to 7.0% per annum of the Original Issuance\nPrice (as defined below in Section 3(k)) (the \"Cumulative Annual Dividend\")\n                                               --------------------------  \nwhich shall be declared by the Board of Directors of the Corporation (in the\ncase of clause (z) below) and be payable to said holders (in the case of clauses\n(x), (y) and (z) below) upon the first of the following events to occur: (x) the\nliquidation of  the Corporation (including a deemed liquidation of the\nCorporation pursuant to Section 2(b) hereof), (y) the Corporation's redemption\nof any shares of Series C Preferred pursuant to Section 5 hereof, or (z) the\nconversion of any shares of Series C Preferred into shares of common stock, no\npar value, of the Corporation  (\"Common Stock\") pursuant to Section 3(a) or\n                                 ------------                              \nSection 3(b) hereof.   Notwithstanding the foregoing, no holder of shares of\nSeries C Preferred shall be entitled to Cumulative Annual Dividends and no\nCumulative Annual Dividends shall be payable to such holder of shares of Series\nC Preferred upon and after the conversion of any shares of Series C Preferred\nheld by such holder into shares of Common Stock pursuant to Section 3(a) or\nSection 3(b) hereof, if such conversion occurs prior to the third  anniversary\nof the Original Issuance Date.\n\n              (ii)   Cumulative Annual Dividends shall accrue on a daily basis\ncommencing as of the date of issuance of the shares of Series C Preferred to the\nholder of said shares, whether or not earned or declared, and will be cumulative\nso that if at any time the entire amount of such Cumulative Annual Dividend has\nnot been paid, or declared or set apart for payment as required pursuant to this\nSection 1(a), the deficiency shall be fully paid or declared and set apart for\npayment, before any dividend is paid on, declared or set apart for payment on\nany other class or series of stock, including without limitation, Common Stock,\nSeries A Preferred (as defined below) and Series B Preferred (as defined below).\nCumulative Annual Dividends shall be payable in preference and priority to any\npayment of dividends on any other \n\n \nclass or series of capital stock of the Corporation, including, without\nlimitation, the Common Stock, Series A Preferred and Series B Preferred.\nCumulative Annual Dividends shall be subject to proportionate adjustment in the\nevent of any stock dividend, stock split, reverse stock split, combination of\nshares, reorganization, recapitalization, reclassification or other similar\nevent affecting the Series C Preferred which occurs after the Original Issuance\nDate (as defined below in Section 3(k)).\n\n         (b)  The holders of the shares of Series C Preferred shall be entitled\nto receive dividends, out of any assets legally available therefor, in an amount\nper share of Series C Preferred which is equal to the product of (i) the number\nof shares of Common Stock into which one share of Series C Preferred is\nconvertible at the time of declaration of such dividend, multiplied by (ii) the\naggregate amount per share of Common Stock of all cash dividends and the\naggregate amount per share (payable, at the option of the holder, in kind or in\ncash, based upon the fair market value at the time the non-cash dividend or\nother distribution is declared or paid (the fair market value of any in-kind\ndividend shall be deemed to be equal to the amount agreed to by the Corporation\nand the holders of at least sixty-six and two-thirds percent (66 2\/3%) of the\noutstanding shares of Series C Preferred) of all non-cash dividends or other\ndistributions on the Common Stock, when, as and if a dividend is declared on the\nshares of Common Stock.  Such dividends shall accumulate and be declared and\npaid contemporaneously with the declaration and payment of the related dividend\non the Common Stock, so that the Series C Preferred participates equally with\nthe  Common Stock in such dividend or distribution with respect to the number of\nshares of Common Stock into which the Series C Preferred is then convertible\npursuant to Section 3 hereof.  Any dividends declared and paid to the holders of\nSeries C Preferred pursuant to this Section 1(b) shall be in addition to (and\nnot in lieu of) any dividends paid to the holders of Series C Preferred pursuant\nto Section 1(a) hereof.\n\n         (c)  So long as any Series C Preferred shall remain outstanding, no\ndeposit, payment, dividend or other distribution shall be paid or made on any\nother class of stock of the Corporation and no shares of any other class of\nstock of the Corporation shall be purchased or otherwise acquired by the\nCorporation or any subsidiary of the Corporation other than, (i) except as may\nbe otherwise provided in the Certificate of Incorporation, including in any\nclass or series designation concerning any capital stock of the Corporation (as\nsuch may be amended from time to time), or (ii) upon exercise of the\nCorporation's rights or a stockholder's rights under any restricted stock\npurchase agreement (or any similar agreement pursuant to which the Corporation\nis obligated to redeem its stock) in effect as of the Original Issuance Date or\notherwise pursuant to incentive stock plans of the Corporation in effect as of\nthe Original Issuance Date, or as may be approved from time to time by the\nCorporation and the holders of the Series C Preferred in accordance with Section\n6(c) hereof, or (iii) upon the exercise of a stockholder's put rights in effect\nas of the Original Issuance Date, or as may be approved from time to time by the\nCorporation and the holders of the Series C Preferred in accordance with Section\n6(c) hereof, or (iv) by exchange therefor of shares of the stock of the\nCorporation.\n\n                                      -33-\n\n \n          Subject to the above limitations and to the provisions of Section 6,\ndividends may be paid on any class of stock of the Corporation out of any funds\nlegally available for such purpose when and as declared by the Board of\nDirectors.\n\n     2.  Liquidation Preference.  Except as may be otherwise approved in writing\n         ----------------------                                                 \nby the holders of at least sixty-six and two-thirds percent (66 2\/3%) of the\noutstanding shares of Series C Preferred:\n\n         (a)  In the event of any liquidation, dissolution or winding up of the\nCorporation, either voluntary or involuntary, the holders of shares of Series C\nPreferred shall be entitled to receive out of the assets of the Corporation\navailable for distribution to shareholders, (i) before any distribution or\npayment shall be made in respect of the holders of shares of Common Stock but\npari passu with holders of Series A Convertible Preferred Stock of the\nCorporation (the \"Series A Preferred\") and Series B Convertible Preferred Stock\n                  ------------------                                           \nof the Corporation (the \"Series B Preferred\"), a liquidation distribution in an\n                         ------------------                                    \namount equal to the Original Issuance Price per share, plus an amount equal to\nall accrued but unpaid dividends thereon to the date fixed for such distribution\nor payment, and then (ii) to share with the holders of shares of Common Stock,\nSeries A Preferred and Series B Preferred as if the shares of Series A\nPreferred, Series B Preferred and Series C Preferred were then converted into\nshares of Common Stock.  In the case of the distribution of assets other than\ncash, the  value of such assets shall be deemed to be the fair market value\nthereof (which shall be the amount agreed to by the Corporation and the holders\nof at least sixty-six and two-thirds percent (66 2\/3%) of the shares of Series C\nPreferred).  If, upon any such liquidation, dissolution or winding up of the\naffairs of the Corporation, the assets of the Corporation available for\ndistribution to shareholders shall be insufficient to permit the payment in full\nto the holders of Series A Preferred, Series B Preferred and Series C Preferred\nof the amounts to which they are each entitled in preference to holders of\nshares of Common Stock, then all of such available assets shall be distributed\nto the holders of shares of Series A Preferred, Series B Preferred and  Series C\nPreferred ratably in proportion to the liquidation payment otherwise due\npursuant to clause (i) above to each such holder.\n\n         (b)  A consolidation or merger of the Corporation with or into any\nother corporation or corporations, or the consolidation or merger of any other\ncorporation or corporations into the Corporation, or the sale or transfer by the\nCorporation of all or substantially all of its assets or the effectuation by the\nCorporation or any holders of its capital stock of a transaction or series of\nrelated transactions in which more than fifty percent (50%) of the voting power\nof the Corporation is sold, transferred or otherwise disposed of, shall be\ndeemed to be a liquidation, dissolution or winding up within the meaning of this\nSection 2.\n\n     3.  Conversion.  The holders of the shares of Series C Preferred shall have\n         ----------                                                             \nconversion rights as follows:\n\n         (a)  Optional Conversion.  The holder of any shares of Series C\n              -------------------                                       \nPreferred \n\n                                      -34-\n\n \nshall have the right, at such holder's option, at any time or from time to time\nby the giving of written notice thereof to the Corporation (the \"Conversion\n                                                                 ----------\nDate\") to convert all or any of such shares of Series C Preferred into such\n----\nnumber of fully paid and nonassessable shares of Common Stock as obtained by\nmultiplying the Original Issuance Price by the number of shares of Series C\nPreferred being converted, and dividing the product thereof by the Series C\nConversion Price (as hereinafter defined) (as last adjusted and then in effect)\nfor the shares of Series C Preferred then being converted. The conversion price\nper share (the \"Series C Conversion Price\") at which shares of Common Stock\n                -------------------------\nshall be issuable shall be Eight Dollars ($8.00) per share; provided, however,\n                                                            -----------------\nthat the Series C Conversion Price shall be subject to adjustment as set forth\nin Section 3(e) hereof. Subject to the last sentence of Section 1(a)(i), above,\nthe holder of any shares of Series C Preferred converted into shares of Common\nStock pursuant to this Section 3(a) shall be entitled to payment of all accrued\nbut unpaid dividends on such shares being converted up to and including the\nConversion Date.\n\n         (b)  Mandatory Conversion.  Upon (i) the consummation of a public\n              --------------------                                        \noffering of shares of Common Stock of the Corporation registered pursuant to the\nSecurities Act of 1933, as amended, in which the gross proceeds to the\nCorporation exceed Twenty Million Dollars ($20,000,000) and at an offering price\nper share greater than or equal to (x) 200% of the then applicable Series C\nConversion Price if said offering occurs within twelve (12) months of the\nOriginal Issuance Date, or (y) 250% of the then applicable Series C Conversion\nPrice if said offering occurs more than twelve (12) months after the Original\nIssuance Date, and as the result of which shares of Common Stock are traded on\neither the New York Stock Exchange, the American Stock Exchange or the NASDAQ\nNational Market System (a \"Qualified Public Offering\"), or (ii) upon the\n                           -------------------------                    \napproval (by vote or written consent) of holders of at least seventy-five\npercent (75%) of the then outstanding shares of Series C Preferred (each such\nevent referred to in clauses (i) and (ii) is referred to herein as an \"Event of\n                                                                       --------\nConversion\"), all shares of Series C Preferred then outstanding shall, by virtue\n----------                                                                      \nof and simultaneously with the occurrence of the Event of Conversion and without\nany action on the part of the holder thereof, be deemed automatically converted\ninto such whole number of fully paid and nonassessable shares of Common Stock as\nobtained by multiplying the Original Issuance Price by the number of shares of\nSeries C Preferred being converted, and dividing the product thereof by the\nSeries C Conversion Price (as last adjusted and then in effect) for the shares\nof Series C Preferred being converted (such Series C Conversion Price being\nsubject to adjustment as set forth in Section 3(e) hereof).  Subject to the last\nsentence of Section 1(a)(i), above, the holder of any shares of Series C\nPreferred converted into shares of Common Stock pursuant to this Section 3(b)\nshall be entitled to payment of all accrued but unpaid dividends on such shares\nof Series C Preferred up to and including the Conversion Date.\n\n         (c)  Procedure for Conversion.  Upon conversion of the shares of Series\n              ------------------------                                          \nC Preferred pursuant to Section 3(a) hereof, the holder of any shares of Series\nC Preferred shall deliver to the Corporation during regular business hours, at\nthe office of any transfer agent of the Corporation for the Series C Preferred,\nor at such other place as may be designated by the \n\n                                      -35-\n\n \nCorporation, the certificate or certificates for the shares to be converted,\nduly endorsed or assigned in blank or to the Corporation (if required by it),\naccompanied by written notice stating the name or names (with address) in which\nthe certificate or certificates for the shares of Common Stock are to be issued.\nAs promptly as practicable thereafter, the Corporation shall issue and deliver\nto or upon the written order of such holder, to the place designated by such\nholder, a certificate or certificates for the number of full shares of Common\nStock to which such holder is entitled, a check or cash in respect of any\nfractional interest in a share of Common Stock as provided in Section 3(d)\nhereof and a check or cash in payment of all accrued but unpaid dividends, if\nany, payable with respect to the shares of Series C Preferred so converted up to\nand including the Conversion Date. The person in whose names the certificate or\ncertificates for Common Stock are to be issued shall be deemed to have become a\nshareholder of record on the applicable Conversion Date unless the transfer\nbooks of the Corporation are closed on that date, in which event he shall be\ndeemed to have become a shareholder of record on the next succeeding date on\nwhich the transfer books are open, but the Series C Conversion Price for the\nSeries C Preferred shall be that in effect on the Conversion Date.\n\n         (d)  Additional Conversion Provisions.  The following additional terms\n              --------------------------------                                 \nshall apply upon any conversion of the Series C Preferred:\n\n              (i)    No fractional shares of Common Stock or scrip shall be\nissued upon conversion of shares of Series C Preferred. If more than one share\nof Series C Preferred shall be surrendered for conversion at any one time by the\nsame holder, the number of full shares of Common Stock issuable upon conversion\nthereof shall be computed on the basis of the aggregate number of shares of\nSeries C Preferred so surrendered. In lieu of any fractional shares of Common\nStock which would otherwise be issuable upon conversion of any shares of Series\nC Preferred the Corporation shall pay a cash adjustment in respect of such\nfractional interest in an amount equal to the then Current Market Price (as\ndefined below) of a share of Common Stock as of the date of conversion,\nmultiplied by such fractional interest. Fractional interests shall not be\nentitled to dividends, and the holders of fractional interests shall not be\nentitled to any rights as shareholders of the Corporation in respect of such\nfractional interest.\n\n              (ii)   For the purpose of any computation pursuant to this Section\n3(d), the Current Market Price at any date of one share of Common Stock shall be\ndeemed to be the closing price as of the day before the day in question. If the\nCommon Stock is not traded in such manner that the closing price is readily\navailable, the Current Market Price shall be determined in good faith by the\nDirectors of the Corporation.\n\n         (e)  Adjustments to Series C Conversion Price.  The Series C Conversion\n              ----------------------------------------                          \nPrice for the Series C Preferred shall be subject to adjustment from time to\ntime as follows:\n\n              (i)    Stock Dividends, Split-Ups, Etc.  If, at any time after the\n                     -------------------------------                            \nOriginal Issuance Date, the number of shares of Common Stock outstanding is\nincreased by a stock \n\n                                      -36-\n\n \ndividend payable in shares of Common Stock or by a subdivision or split-up of\nshares of Common Stock, then, following the record date fixed for the\ndetermination of holders of Common Stock entitled to receive such stock\ndividend, subdivision or split-up, the Series C Conversion Price of the Series C\nPreferred shall be appropriately decreased so that the number of shares of\nCommon Stock issuable on conversion of each share of Series C Preferred shall be\nincreased in proportion to such increase in outstanding shares.\n\n              (ii)   Combinations.  If, at any time after the Original Issuance \n                     ------------\nDate, the number of shares of Common Stock outstanding is decreased by a\ncombination of the outstanding shares of Common Stock, then, following the\nrecord date for such combination, the Series C Conversion Price shall be\nappropriately increased so that the number of shares of Common Stock issuable on\nconversion of each share of Series C Preferred shall be decreased in proportion\nto such decrease in outstanding shares.\n\n              (iii)  Reorganizations, Reclassifications, Etc.  In case, at any \n                     ---------------------------------------\ntime after the Original Issuance Date, of any Capital Events (as defined below\nin Section 3(k)) each share of Series C Preferred shall after such Capital Event\nbe (unless, in the case of a consolidation, merger, sale or other disposition,\npayment shall have been made to the holders of all shares of Series C Preferred\nof the full amount to which they respectively shall have been entitled pursuant\nto Section 2 hereof) convertible into the kind and number of shares of stock or\nother securities or property of the Corporation or of the corporation resulting\nfrom such consolidation or surviving such merger or to which such properties and\nasset shall have been sold or otherwise disposed to which the holder of the\nnumber of shares of Common Stock deliverable (immediately prior to the time of\nsuch Capital Event) upon conversion of such shares would have been entitled upon\nsuch Capital Event. The provisions of this Section 3(e)(iii) shall similarly\napply to successive Capital Events.\n\n              (iv)   Dilutive Issuances.\n                     ------------------ \n\n                     (1)  If the Corporation shall at any time or from time to\ntime after the Original Issuance Date issue any shares of Common Stock other\nthan Excluded Stock (as defined below in Section 3(k)) without consideration or\nfor a consideration per share less than the Series C Conversion Price then in\neffect (such issuance being referred to in this clause (iv) as a \"Dilutive\n                                                                  --------\nIssuance\"), the Series C Conversion Price in effect immediately prior to such\n--------\nDilutive Issuance shall be reduced with effect from the first to occur of (A)\nthe record date for the issuance of the securities or (B) the date of original\nissuance (as the case may be the \"Issue Date\"), so that it shall equal the price\n                                  ----------\ndetermined by multiplying the Series C Conversion Price by a fraction (i) the\nnumerator of which shall be (X) the number of shares of Common Stock outstanding\nat the close of business on the day next preceding the Issue Date, plus (Y) the\nnumber of shares of Common Stock which the aggregate consideration received by\nthe Corporation for the Dilutive Issuance would purchase at the Series C\nConversion Price, and (ii) the denominator of which shall be the number of\nshares of Common Stock outstanding at the \n\n                                      -37-\n\n \nclose of business on the Issue Date after giving effect to such Dilutive\nIssuance.\n\n                     (2)  For the purposes of any adjustment of the Series C\nConversion Price pursuant to this clause (iv), the following provisions shall\napply:\n\n                          (A)   In the case of the issuance of Common Stock for\ncash, the consideration shall be deemed to be the amount of cash paid therefor\nafter deducting therefrom any discounts or commissions allowed or paid by the\nCorporation for any underwriting or otherwise in connection with the issuance\nand sale thereof.\n\n                          (B)   In the case of the issuance of Common Stock for\na consideration in whole or in part other than cash, the consideration other\nthan cash shall be deemed to be the fair market value thereof (which shall be\nthe amount agreed to by the Corporation and the holders of at least sixty-six\nand two-thirds percent (66 2\/3%) of the shares of Series C Preferred),\nirrespective of any accounting treatment.\n\n                          (C)   In the case of the issuance of (i) options to\npurchase or rights to subscribe for Common Stock, (ii) securities by their terms\nconvertible into or exchangeable for Common Stock, or (iii) options to purchase\nor rights to subscribe for such convertible or exchangeable securities:\n\n                                (I)   the shares of Common Stock deliverable\nupon exercise of such options to purchase or rights to subscribe for Common\nStock shall be deemed to have been issued at the time such options or rights\nwere issued and for a consideration equal to the consideration (determined in\nthe manner provided in subclauses (A) and (B), above), if any, received by the\nCorporation upon the issuance of such options or rights plus the minimum\npurchase price provided in such options or rights for the Common Stock covered\nthereby;\n\n                                (II)  the shares of Common Stock deliverable\nupon conversion of or in exchange for any such convertible or exchangeable\nsecurities or upon the exercise of options to purchase or rights to subscribe\nfor such convertible or exchangeable securities and subsequent conversion or\nexchange thereof shall be deemed to have been issued at the time such securities\nwere issued or such options or rights were issued and for a consideration equal\nto the consideration received by the Corporation for any such securities and\nrelated options or rights (excluding any cash received on account of accrued\ninterest or accrued dividends), plus the additional consideration, if any, to be\nreceived by the Corporation upon the conversion or exchange of such securities\nor the exercise of any related options or rights (the consideration in each case\nto be determined in the manner provided in subclauses (A) and (B), above);\n\n                                (III) on any change in the number of shares or\nexercise price of Common Stock deliverable upon exercise of any such options or\nrights or upon conversion of or in exchange for such convertible or exchangeable\nsecurities, other than a change\n\n                                      -38-\n\n \nresulting from the antidilution provisions thereof, the Series C Conversion\nPrice shall forthwith be readjusted to such Series C Conversion Price as would\nhave obtained had the adjustment made upon the issuance of such options, rights\nor securities not converted prior to such change or options or rights related to\nsuch securities not converted prior to such change been made upon the basis of\nsuch change; and\n\n                                (IV)  on the expiration of any such options or\nrights, the termination of any such rights to convert or exchange or the\nexpiration of any options or rights related to such convertible or exchangeable\nsecurities, the Series C Conversion Price shall forthwith be readjusted to such\nSeries C Conversion Price as would have obtained had such options, rights,\nsecurities or options or rights related to such securities not been issued.\n\n              (v)    Special Adjustment.  If at any time after the Original \n                     ------------------\nIssuance Date, (1) the Corporation is subject to liquidation (including a deemed\nliquidation), dissolution or winding up as contemplated by Section 2 herein, or\n(2) the Corporation completes a public offering of any class or series of\ncapital stock of the Corporation other than a Qualified Public Offering, then\nthe Series C Conversion Price for the Series C Preferred shall be appropriately\ndecreased so that the number of shares of Common Stock issuable upon the\nconversion of each share of Series C Preferred shall be increased such that the\npercentage ownership of the Corporation, on an as-converted basis (and on a\ndiluted basis to the extent of any \"at\" or \"in the money\" options or warrants\nthat are vested at the time of such determination), by the holders of the Series\nC Preferred before giving effect to the Common Stock issued or issuable (A)\npursuant to warrants granted on January 13, 1998 to Winfield Capital Corp. (or\nany successor or replacement warrants issued with respect to said warrant), and\n(B) pursuant to warrants issued to BT Alex. Brown Incorporated (and its\nnominees) and any other broker or investment banker in connection with the\nissuance of shares of Series C Preferred, shall be the same after giving effect\nto the issuance or deemed issuance of such Common Stock.\n\n              (vi)   All calculations under this paragraph (e) shall be made to\nthe nearest one-tenth (1\/10) of a share or to the nearest one tenth (1\/10) of a\ncent, as the case may be.\n\n              (vii)  In any case in which the provisions of this Section 3(e)\nshall require that an adjustment shall become effective immediately after a\nrecord date for an event the Corporation may defer until the occurrence of such\nevent (1) issuing to the holder of any share of Series C Preferred converted\nafter such record date and before the occurrence of such event the additional\nshares of capital stock issuable upon such conversion by reason of the\nadjustment required by such event over and above the shares of capital stock\nissuable upon such conversion before giving effect to such adjustment and (2)\npaying to such holder any amount in cash in lieu of a fractional share of\ncapital stock pursuant to Section 3(d) hereof; provided, however, that the\n                                               --------  -------\nCorporation shall deliver to such holder a due bill or other appropriate\ninstrument evidencing such holder's right to receive such additional shares, and\nsuch cash, immediately upon the occurrence of the event requiring such\nadjustment.\n\n                                      -39-\n\n \n              (viii) The Corporation will not voluntarily, by amendment of its\nCertificate of Incorporation, as amended, or through any reorganization,\ntransfer of assets, merger, dissolution, issuance or sale or securities or any\nother voluntary action, avoid or seek to avoid the observance or performance of\nany of the terms to be observed or performed hereunder by the Corporation, but\nwill at all times in good faith assist in the carrying out of all of the\nprovisions of this Section 3 and in the taking of all such action as may be\nnecessary or appropriate in order to protect the conversion rights of the\nholders of the Series C Preferred against impairment.\n\n         (f)  Whenever the Series C Conversion Price of the Series C Preferred\nshall be adjusted as provided in Section 3(e), the Corporation shall forthwith\nfile, at the office of the transfer agent for the Series C Preferred or at such\nother place as may be designated by the Corporation, a statement showing in\ndetail the facts requiring such adjustment and the Series C Conversion Price of\nthe Series C Preferred that shall be in effect after such adjustment.  The\nCorporation shall also cause a copy of such statement to be sent by mail, first-\nclass certified mail, return receipt requested, postage prepaid, to each holder\nof shares of any series of preferred stock in respect of which an adjustment to\nthe Series C Conversion Price was required to be made at his address appearing\non the Corporation's records.  Where appropriate, such copy may be given in\nadvance and may be included as part of a notice required to be mailed under the\nprovisions of Section 4(g) hereof.\n\n         (g)  If the Corporation shall propose to take any action of the types\ndescribed in clauses (i), (ii), (iii) or (iv) of Section 3(e), the Corporation\nshall give notice to each holder of shares of Series C Preferred in the manner\nset forth in Section 3(f) hereof, which notice shall specify the record date, if\nany, with respect to any such action and the date on which such action is to\ntake place.  Such notice shall also set forth such facts with respect thereto as\nshall be reasonably necessary to indicate the effect of such action (to the\nextent such effect may be known at the date of such notice) on the Series C\nConversion Price and the number, kind or series of shares or other securities or\nproperty which shall be deliverable or purchasable upon the occurrence of such\naction or deliverable upon conversion of shares of each such series of Series C\nPreferred.  In the case of any action which would require the fixing of a record\ndate, such notice shall be given at least twenty (20) days prior to the date so\nfixed, and in case of all other actions, such notice shall be given at least\nthirty (30) days prior to the taking of such proposed action.  Failure to give\nsuch notice, or any defect therein, shall not affect the legality or validity of\nany such action.\n\n         (h)  The Corporation shall pay all documentary, stamp or other\ntransaction taxes attributable to the issuance or delivery of shares of capital\nstock of the Corporation upon conversion of shares of Series C Preferred;\nprovided, however, that the Corporation shall not be required to pay any taxes\n-----------------                                                             \nwhich may be payable in respect of any transfer involved in the issuance of\ndelivery of any certificate for such shares in a name other than that of the\nholder of \n\n                                      -40-\n\n \nthe shares of Series C Preferred in respect of which such shares are being\nissued.\n\n         (i)  The Corporation shall reserve and at all times from and after such\ndate keep reserved, free from preemptive rights, out of its authorized but\nunissued shares of Common Stock, solely for the purpose of effecting the\nconversion of the shares of Series C Preferred, sufficient shares to provide for\nthe conversion of all outstanding shares of Series C Preferred and shall take\nall action as may be necessary to enable the Corporation lawfully to issue such\nCommon Stock upon the conversion of shares of Series C Preferred.\n\n         (j)  All shares of Common Stock which may be issued in connection with\nthe conversion provisions set forth herein will, upon issuance by the\nCorporation, be validly issued, fully paid and nonassessable with no personal\nliability attaching to the ownership thereof and free from all taxes, liens or\ncharges with respect thereto.\n\n         (k)  Definitions.  As used herein, the following terms have the\n              -----------                                               \nfollowing meanings:\n\n              (i)    \"Capital Events\" means any capital reorganization,\n                      --------------                                   \nrecapitalization or any reclassification of the stock of the Corporation (other\nthan a change in par value, or from par value to no par value, or from no par\nvalue to par value, or as a result of a stock dividend or subdivision, split-up\nor combination of shares), or the consolidation or merger of the Corporation\nwith or into another person (other than a consolidation or merger in which the\nCorporation is the continuing corporation and which does not result in any\nchange in the Common Stock), or the sale or other disposition of all or\nsubstantially all of the properties and assets of the Corporation to any person\nor third party.\n\n              (ii)   \"Excluded Stock\" means shares of Common Stock issued by the\n                      --------------                                            \nCorporation: (A) as a stock dividend payable in shares of Common Stock or upon\nany subdivision or split-up of the outstanding shares of Common Stock, (B) upon\nconversion of the shares of Series A Preferred, Series B Preferred or Series C\nPreferred at any time outstanding, (C) to officers, employees or directors of,\nor consultants to, the Corporation (whether as an issuance of Common Stock,\noptions to purchase or rights to subscribe for such Common Stock, or options to\npurchase or rights to subscribe for such convertible or exchangeable\nsecurities), in each case approved by the  Board of Directors of the\nCorporation; provided, however, that the maximum number of shares of Common\n             -----------------                                             \nStock issued or issuable to officers, employees or directors of, or consultants\nto, the Corporation to which this clause (C) shall apply shall not exceed the\nnumber of shares issuable under the incentive stock option plans of the\nCorporation in effect as of the Original Issuance Date or as may be approved\nfrom time to time by the Corporation and the holders of the Series C Preferred\nin accordance with Section 6(c)(ix) hereof (including any Common Stock issued\npursuant to the exercise of any such options), and (D) pursuant to any options\n(other than those described in (C), above), warrants or other rights outstanding\non the Original Issuance Date.\n\n                                      -41-\n\n \n              (iii)  \"Original Issuance Date\" means the date of original \n                      ----------------------  \nissuance by the Corporation of the first share of Series C Preferred.\n\n              (iv)   \"Original Issuance Price\" means Eight Dollars  ($8.00), \n                      -----------------------\nthe price of the first share of Series C Preferred issued by the Corporation.\n\n              (v)    \"Person\" means any corporation, general or limited \n                      ------\npartnership, limited liability partnership, limited liability company, joint\nventure, estate, trust, association, organization, labor union, or other entity.\n\n              (vi)   \"Subsidiary\" means with respect to any Person (the \n                      ---------------       \n\"Owner\"), any corporation or other Person of which securities or other interests\n-------\nhaving the power to elect a majority of that corporation's or other Person's\nboard of directors or similar governing body, or otherwise having the power to\ndirect the business and policies of that corporation or other Person (other than\nsecurities or other interests having such power only upon the happening of a\ncontingency that has not occurred), are held by the Owner or one or more of its\nSubsidiaries; when used without reference to a particular Person, \"Subsidiary\"\nmeans a Subsidiary of the Corporation.\n\n     4.  Status of Converted Stock.  If any shares of Series C Preferred shall\n         -------------------------                                            \nbe converted pursuant to Section 3 hereof or redeemed pursuant to Section 5 or\notherwise acquired by the Corporation, the shares so converted or redeemed or\nacquired shall be canceled and shall not be reissuable by the Corporation.\n\n     5.  Redemption.\n         ---------- \n\n         (a)  Redemption Request.  From time to time on or after July 28, 2002,\n              ------------------                                               \nthe holders of a majority of the shares of Series C Preferred may request\nredemption of all (but not less than all) of the outstanding shares of Series C\nPreferred (the \"Redemption Shares\"), by giving written notice (a \"Redemption\n                -----------------                                 ----------\nNotice\") to the Corporation (the date upon which such notice is given to the\n------                                                                      \nCorporation is referred to herein as a \"Redemption Notice Date\").  Within five\n                                        ----------------------                \n(5) days after the giving of such Redemption Notice, the Corporation shall send\na copy of the Redemption Notice to each holder of shares of Series C Preferred.\nThe Corporation shall redeem all of the issued and outstanding shares of Series\nC Preferred in accordance with this Section 5 and the holders of the Redemption\nShares (the \"Redeeming Stockholders\") shall sell and deliver their Redemption\n            -----------------------                                          \nShares to the Corporation in accordance with this Section 5.  Upon the giving of\nthe Redemption Notice, each Redemption Share shall no longer be subject to\nconversion under Section 3 herein.  Each Redemption Share shall otherwise be\ndeemed to be outstanding for all other purposes of this Certificate of\nDesignation (and shall be entitled to all of the rights and privileges of a\nshare of Series C Preferred) until such time as the Redemption Price is actually\npaid to the holder thereof.\n\n                                      -42-\n\n \n         (b)  Redemption Terms and Price.\n              -------------------------- \n\n              (i)    Subject to Section 5(c) hereof, the Redemption Shares shall\nbe redeemed from the Redeeming Stockholders ratably in proportion to their\nownership of the Redemption Shares, on the following dates:\n\n                     (A)  one-third of the Redemption Shares shall be redeemed\nby the Corporation on a date selected by the Corporation that is not later than\neight (8) months after the Redemption Notice Date (the \"First Redemption Date\");\n                                                        ---------------------\nand\n\n                     (B)  two-thirds of the Redemption Shares shall be redeemed\nby the Corporation on the one (1) year anniversary of the First Redemption Date,\nor if such date is not a business day then on the next business day (the \"Second\n                                                                          ------\nRedemption Date\").\n---------------   \n\nThe First Redemption Date and the Second Redemption Date are at times singularly\nreferred to herein as a \"Redemption Date\" and collectively referred to herein as\n                         ---------------                                        \nthe \"Redemption Dates.\"\n     ----------------- \n\n              (ii)   The redemption price for each of the Redemption Shares (the\n\"Redemption Price\") shall be equal to the greater of the Original Issuance Price\n-----------------                                                               \n(plus all accrued and unpaid dividends), or the fair market value thereof (plus\nall accrued and unpaid dividends), determined as follows:\n\n                     (A)  If as of the Redemption Notice Date any Common Stock\nis registered pursuant to the Securities Act of 1933, as amended, and such\nshares of Common Stock are traded on either the New York Stock Exchange, the\nAmerican Stock Exchange or any NASDAQ National Market System (\"Publicly\n                                                               --------\nTraded\"), then the fair market value for each of the Redemption Shares shall be\n------\nequal to the closing price per share of the Common Stock as reported for the\nbusiness day immediately prior to the Redemption Notice Date, multiplied by the\nnumber of shares of Common Stock that would have been issuable upon the\nconversion of each of the Redemption Shares as of the Redemption Notice Date; or\n\n                     (B)  If as of the Redemption Notice Date no Common Stock is\nPublicly Traded, then the fair market value for each of the Redemption Shares\nshall be equal to a fraction, (x) the numerator of which shall be the fair\nmarket value of the Corporation (determined by appraisal in accordance with this\nSection 5(b)(ii)(B)), and (y) the denominator of which shall be the total number\nof issued and outstanding shares of each class or series of stock of the\nCorporation as of the Redemption Notice Date, determined on an as-converted to\nCommon Stock basis (and on a diluted basis to the extent of any \"at\" or \"in the\nmoney\" options or warrants that are vested at the time of such determination);\nthe quotient of which shall be multiplied by the number of shares of Common\nStock that would have been issuable upon the conversion of each of the\nRedemption Shares as of the Redemption Notice Date.\n\n                                      -43-\n\n \n                     (1)  If it shall be necessary to determine the fair market\nvalue of each of the Redemption Shares by appraisal, then within thirty (30)\ndays after the Redemption Notice Date, the Corporation shall engage, at its sole\ncost and expense, a reputable independent investment banking firm reasonably\nacceptable to the holders of a majority of the Series C Preferred that shall\ndetermine, as of the Redemption Notice Date, the fair market value of the\nCorporation as a whole, on a going-concern basis (and without any minority or\nlack of liquidity discounts), using customary and appropriate valuation methods.\nAs soon as is reasonably practicable (and in any event within thirty (30) days\nafter such engagement), such investment banking firm shall deliver to the\nCorporation a written report as to the fair market value of the Corporation (the\n\"First Report\"). The Corporation shall deliver a copy of the First Report to\n ------------ \neach Redeeming Stockholder within five (5) days after its receipt by the\nCorporation.\n\n                     (2)  The valuation set forth in the First Report shall be\nconclusive and binding on the Corporation and the holders of the Series C\nPreferred unless, within ten (10) days after its receipt by the Redeeming\nStockholders, Redeeming Stockholders representing ownership of at least sixty-\nsix and two-thirds percent (66 2\/3%) of the Redemption Shares notify the\nCorporation in writing that the Redeeming Stockholders contest the valuation set\nforth in the First Report. If the Redeeming Stockholders so notify the\nCorporation, the Redeeming Stockholders shall promptly engage a reputable\ninvestment banking firm, at their sole cost and expense, to render a second\nwritten report as to the fair market value, as of the Redemption Notice Date, of\nthe Corporation as a whole, on a going-concern basis (and without any minority\nor lack of liquidity discounts), using customary and appropriate valuation\nmethods (the \"Second Report\"). The Redeeming Stockholders shall deliver a copy\n              -------------\nof the Second Report to the Corporation within five (5) days after its receipt\nby the Redeeming Stockholders.\n\n                     (3)  The valuation set forth in the Second Report shall be\nconclusive and binding on the Corporation and the holders of the Series C\nPreferred unless, within ten (10) days after its receipt by the Corporation, the\nCorporation shall notify the Redeeming Stockholders in writing that the\nCorporation contests the valuation set forth in the Second Report. If the\nCorporation so notifies the Redeeming Stockholders that it contests the\nvaluation of the Corporation set forth in the Second Report, then (x) if the\nCorporation and Redeeming Stockholders representing ownership of at least sixty-\nsix and two-thirds percent (66 2\/3%) of the Redemption Shares so agree, the fair\nmarket value of the Corporation shall be deemed to be equal to the arithmetic\nmean of the valuations for the Corporation set forth in the First Report and the\nSecond Report, or (y) if the Corporation and the Redeeming Stockholders do not\nso agree, the matter shall be submitted to binding arbitration in accordance\nwith the procedures set forth in Section 9 herein. The arbitrator's discretion\nwith respect to these matters shall be limited to selecting either the valuation\nfor the Corporation set forth in the First Report (in which case the costs of\narbitration shall be borne by the Redeeming Stockholders, in proportion to their\nownership of the Redemption Shares) or the valuation for the Corporation set\nforth in the Second Report (in which case the costs and expenses of arbitration\nshall be borne by\n\n                                      -44-\n\n \nthe Corporation), whichever valuation the arbitrator or arbitrators may\ndetermine is closer to the actual fair market value of the Corporation. The\nresults of such arbitration shall be binding and conclusive on the Corporation,\nthe Redeeming Stockholders, and on all other persons and entities.\n\n                     (4)  If the fair market value of the Corporation is\ndetermined pursuant to this Section 5(b)(ii)(B), then such determination shall\nunder all circumstances occur within one hundred eighty days (180) after the\nRedemption Notice Date.\n\n         (c)  Insufficient Funds.  If the Corporation's Board of Directors\n              ------------------                                          \nreasonably determines that on the applicable Redemption Date the Corporation\ndoes not have sufficient funds legally available to redeem all of the Redemption\nShares for which redemption is required pursuant to Section 5(a) herein, then\nthe Corporation shall to the maximum lawful extent redeem Redemption Shares from\nthe Redeeming Stockholders, on a pro rata basis in accordance with their\nownership thereof, and the Corporation shall redeem the remaining Redemption\nShares on the same basis, as soon as sufficient funds become legally available\ntherefor from time to time thereafter.\n\n         (d)  Mechanics of Redemption.  Each Redeeming Stockholder shall\n              -----------------------                                   \nsurrender the certificate or certificates representing his Redemption Shares to\nbe redeemed on each Redemption Date to the Corporation, at the Corporation's\nprincipal executive office, and thereupon the Corporation will pay the\nRedemption Price for such Redemption Shares, as follows:\n\n              (i)    on the First Redemption Date, the entire Redemption Price\nfor the Redemption Shares to be redeemed shall be paid in immediately available\nfunds, by wire transfer to an account designated by the Redeeming Stockholder,\nor by certified or bank check payable to the Redeeming Stockholder (\"Immediately\n                                                                     -----------\nAvailable Funds\");\n---------------   \n\n              (ii)   on the Second Redemption Date, fifty percent (50%) of the\nRedemption Price for the Redemption Shares to be redeemed shall be paid in\nImmediately Available Funds and the remaining fifty percent (50%) of the\nRedemption Price for the Redemption Shares to be redeemed shall be paid by the\nexecution and delivery by the Corporation of a promissory note, in a form\nreasonably satisfactory to the Redeeming Stockholder, the outstanding principal\nbalance of which (together with all accrued and unpaid interest thereon) shall\nbe payable in full (subject to prepayment without penalty and to acceleration on\ncustomary terms, including upon the bankruptcy or insolvency of the Corporation)\non the one (1) year anniversary of the Second Redemption Date, bearing interest\nat the per annum rate equal to the \"Prime Rate\" of interest as published in the\nEastern edition of the Wall Street Journal on the Redemption Notice Date or the\n                       -------------------                                     \nnext date of publication, and with installments of interest to be due and\npayable, in arrears, on the first day of each calendar month.\n\n\nEach stock certificate surrendered for redemption shall be canceled and retired.\nIf the number of \n\n                                      -45-\n\n \nRedemption Shares represented by any certificate surrendered in respect of any\nsuch redemption exceeds the number of Redemption Shares to be redeemed from the\nRedeeming Stockholder thereof, the Corporation shall issue and deliver to such\nRedeeming Stockholder a new certificate representing the unredeemed balance of\nsuch Redemption Shares.\n\n     6.  Voting Rights.\n         ------------- \n\n         (a)  General.  Except as otherwise provided below, on all matters\n              -------                                                     \nsubmitted to a vote of the holders of shares of Common Stock, the holder of each\nshare of Series C Preferred shall have the right to one vote for each Common\nShare into which such Series C Preferred could then be converted (with any\nfractional share determined on an aggregate conversion basis being rounded to\nthe nearest whole share), and with respect to such vote, such holder shall have\nfull voting rights and powers equal to the voting rights and powers of the\nholders of such shares of Common Stock, and shall be entitled, notwithstanding\nany provision hereof, to notice of any shareholders' meeting in accordance with\nthe by-laws of the Corporation, and, except as expressly provided in Section\n6(b) hereof, shall be entitled to vote, together with holders of shares of\nCommon Stock with respect to any question upon which holders of shares of Common\nStock have the right to vote.\n\n         (b)  Election of Directors.  Except as may be otherwise approved by\n              ---------------------                                         \nvote or by the written consent of the holders of at least sixty-six and two-\nthirds percent (66 2\/3%) of the shares of Series C Preferred then outstanding,\nthe Board of Directors shall consist of up to 7 members. The holders of the\nSeries C Preferred, voting as a separate class, shall have the right to elect\ntwo (2) directors.  Except as may otherwise be provided by law or in the\nCertificate of Incorporation of the Corporation (including the Certificate of\nDesignation for the Series A Preferred), the holders of the Common Stock shall\nhave the right to elect the remaining members of the Board of Directors and the\nSeries C Preferred shall not be entitled to vote in the election of the\nremaining members of the Board of Directors.  Each director shall be elected at\nthe annual meeting of shareholders and shall serve until his successor is\nelected and qualified or until his earlier resignation or removal.  Any director\nwho shall have been elected by the holders of Series C Preferred may be removed\nduring his term of office, either for or without cause, by and only by, the\naffirmative vote of the holders of at least sixty-six and two-thirds percent (66\n2\/3%) of the shares of Series C Preferred then outstanding, given at a special\nmeeting of such shareholders duly called for that purpose, and any vacancy\nthereby created may be filled by the holders of the Series C Preferred\nrepresented at that meeting.\n\n         (c)  Protective Provisions. So long as twenty-five percent (25%) or\n              ---------------------                                         \nmore of the shares of  Series C Preferred are outstanding, the Corporation shall\nnot, and shall not attempt to,  without first obtaining the approval (by vote or\nwritten consent) of the holders of at least sixty-six and two-thirds percent (66\n2\/3%) of the then outstanding shares of Series C Preferred, voting as a separate\nclass:\n\n                                      -46-\n\n \n              (i)    authorize any additional shares of Series C Preferred, or\nauthorize and issue any shares of, (a) any class or series of equity security\nhaving superior rights to the Series C Preferred as to dividends, redemptions or\nas to payment upon liquidation, dissolution or a winding up of the Corporation,\nor otherwise, or (b) any notes or debt securities convertible into or\nexchangeable for any equity securities or containing profit participation\nfeatures;\n\n              (ii)   redeem or repurchase outstanding Common Stock in excess of\nan aggregate of 75,000 shares, provided that the Corporation may redeem shares\nof Common Stock from persons having been granted and exercised stock options\npursuant to the Corporation's incentive stock plans as in effect as of the\nOriginal Issuance Date, or as may be approved from time to time by the\nCorporation and by the holders of the Series C Preferred pursuant to Section\n6(c)(ix) below;\n\n              (iii)  enter into any agreement that would restrict the\nCorporation's ability to perform its obligations under any agreement to which\nthe Corporation is a party concerning the Corporation's original issuance of any\nshares of the Series C Preferred (including the Certificate of Incorporation and\nthis Certificate of Designation);\n\n              (iv)   amend the Certificate of Incorporation (including any\nexisting or new Certificate of Designation) or By-Laws of the Corporation in any\nmanner that adversely affects the powers, rights, privileges or restrictions or\nrelative preferences of the Series C Preferred or the holders thereof as a\nclass, or increase the powers, preferences, rights, privileges or restrictions\nof any other class or series of preferred stock unless the Series C Preferred is\ntreated in the same manner;\n\n              (v)    sell, transfer, convey or lease greater than twenty-five\npercent (25%) of the assets of the Corporation in one or more of a series of\nrelated transactions, except for the sale of inventory in the ordinary course of\nthe Corporation's business;\n\n              (vi)   issue additional equity securities of any class or series\nto the employees, officers or directors of the Corporation, except for such\nequity securities as may be issuable upon the exercise of options or warrants\noutstanding as of the Original Issuance Date (or as may be approved from time to\ntime by the Corporation and the holders of the Series C Preferred in accordance\nwith this Section 6(c)); provided that any such equity securities, including any\noptions or warrants for equity securities of the Corporation, shall be granted\nat no less than the fair market value for such equity securities (which shall be\nthe amount agreed to by the Corporation and the holders of at least sixty-six\nand two-thirds percent (66 2\/3%) of the outstanding shares of Series C\nPreferred);\n\n              (vii)  issue any equity securities of any class or series for a\nprice less than fair market value (which shall be the amount agreed to by the\nCorporation and the holders of at least sixty-six and two-thirds percent (66\n2\/3%) of the outstanding shares of Series C\n\n                                      -47-\n\n \nPreferred) of the Corporation, except as may be required pursuant to contractual\ncommitments of the Corporation existing as of the Original Issuance Date;\n\n              (viii) enter into any transaction or series of transactions or any\nagreement or other arrangement, including, without limitation, any loan, with or\nto any officer or director (or any family member or person affiliated with any\nofficer or director) or other affiliate (excluding any Subsidiary of the\nCorporation) of the Corporation in excess of $100,000, individually, or\n$250,000, in the aggregate, during any calendar year, except as may be required\npursuant to contractual commitments of the Corporation existing as of the\nOriginal Issuance Date (except that such limitations shall not be applicable to\nany employment or other compensatory arrangements on reasonable arms' length\nterms (including, without limitation, the granting of stock options under any\nstock option plan in effect as of the Original Issuance Date, or as may be\napproved from time to time by the Corporation and the holders of the Series C\nPreferred in accordance with Section 6(c)(ix) below), as may be approved by the\nBoard of Directors of the Corporation);\n\n              (ix)   adopt any stock option plans or increase the number of\nshares available or reserved for issuance under any stock option plan or related\nplan in effect as of the Original Issuance Date;\n\n              (x)    engage in any transaction which would impair or reduce the\nrights of the holders of shares of the Series C Preferred as a class (except\nthat the Corporation may effect a reverse-split of its Common Stock without the\nconsent of the holders of shares of the Series C Preferred);\n\n              (xi)   merge or consolidate with any Person or permit any\nSubsidiary to merge or consolidate with any Person (other than a Subsidiary that\nis wholly-owned by the Corporation, directly or indirectly);\n\n              (xii)  liquidate, dissolve or effect a  recapitalization or\nreorganization in any form of transaction (including, without limitation, any\nreorganization into a limited liability company, a partnership or any other non-\ncorporate entity which is treated as a partnership for federal income tax\npurposes); or\n\n              (xiii) issue any dividends on any class or series of capital stock\nof the Corporation (other than the Series C Preferred).\n\n     7.  Preemptive Rights.\n         ----------------- \n\n         (a)  Each holder of Series C Preferred shall have a right to purchase\nits aggregate pro rata portion, based on the ratio of the number of shares of\nCommon Stock and Series C Preferred held by such stockholder on an as-converted\nbasis to the total number of \n\n                                      -48-\n\n \nshares of Common Stock, Series A Preferred, Series B Preferred and Series C\nPreferred on an as-converted basis held by all stockholders, of any issuance of\nnew common stock, preferred stock or securities convertible into any class of\ncapital stock of the Corporation (\"New Equity\"). This right shall be\n                                   ----------    \ntransferable and terminate if unexercised within twenty (20) days after receipt\nof the Preemption Notice (as defined below).\n\n         (b)  If the Corporation proposes to undertake an issuance of New\nEquity, it shall give each holder of Series C Preferred written notice (a\n\"Preemption Notice\") of its intention, describing the type of New Equity, and\n------------------                                                           \nthe price and the general terms upon which the Corporation proposes to issue the\nsame.  Each holder of Series C Preferred shall have twenty (20) days after\nreceipt of the Preemption Notice to agree to purchase all or any portion of such\npro rata share of such New Equity for the price and upon the terms specified in\nthe Preemption Notice by giving written notice to the Corporation and stating\ntherein the quantity (including amounts, if any, such holder of Series C\nPreferred would be willing to purchase over and above such holder of Series C\nPreferred's pro rata portion) of New Equity purchased.  If a holder of Series C\nPreferred does not purchase any or all of its pro rata portion of New Equity,\nthe remaining holders of Series C Preferred shall have the right to purchase\nsuch unpurchased New Equity or respective pro rata portion until all of the New\nEquity is purchased or until no other holder of Series C Preferred desires to\npurchase any more New Equity, provided that a written notice to such effect is\ngiven by such holders to the Corporation within such twenty (20) day period.\n\n         (c)  The phrase \"New Equity\" does not include (i) securities issued\nupon conversion of shares of Series A Preferred, Series B Preferred, or Series C\nPreferred into shares of Common Stock, (ii) securities issued by the Corporation\nas consideration pursuant to the acquisition of another corporation by the\nCorporation by merger, purchase of all or substantially all of the assets or\nother reorganization, (iii) shares of Common Stock issued in connection with any\nstock split, stock dividend or recapitalization of the Corporation, (iv) shares\nof Common Stock issued to employees, consultants, or directors of the\nCorporation upon the exercise of stock options  pursuant to incentive stock\nplans of the Corporation as in effect as of the Original Issuance Date, or as\nmay be approved from time to time by the Corporation and by the holders of the\nSeries C Preferred pursuant to Section 6(c)(ix) hereof, (v) shares of Common\nStock issued upon the exercise of any warrants outstanding as of the Original\nIssuance Date, or (vi) securities issued for services in arms' length\ntransactions to parties other than employees, officers and directors of the\nCorporation.\n\n     8.  Notice.  Any notice required or permitted under this Certificate of\n         ------                                                             \nDesignation shall be given in writing and shall be deemed effectively given only\nif (i) delivered personally (effective upon delivery), (ii) mailed by registered\nor certified mail, postage prepaid (effective three (3) days after dispatch), or\n(iii) sent by a reputable, established courier service that guarantees next\nbusiness day delivery (effective the next business day) and addressed as\nfollows: in the case of the Corporation, its principal office, and in the case\nof a holder of shares of Series \n\n                                      -49-\n\n \nC Preferred, the address of the holder as reflected in the stock records of the\nCorporation.\n\n     9.  Arbitration.\n         ----------- \n\n         (a)  In the event that the holders of at least sixty-six and two-thirds\npercent (66 2\/3%) of the outstanding shares of Series C Preferred fail either to\naccept or reject the fair market value of any property as determined by the\nCorporation for purposes of this Certificate of Designation within thirty (30)\ndays after the giving of any notice to the holders of the Series C Preferred by\nthe Corporation setting forth the Corporation's fair market value determination\nwith respect to such property for purposes of this Certificate of Designation,\nthe holders of the Series C Preferred shall be deemed to have accepted the\nCorporation's fair market value determination with respect to such property as\nset forth in such notice.\n\n         (b)  In the event that the Corporation and the holders of at least\nsixty-six and two-thirds percent (66 2\/3%) of the outstanding Series C Preferred\n(the \"Objecting Stockholders\") fail to agree upon the fair market value of any\n      ----------------------                                                  \nproperty as may be required from time to time by this Certificate of\nDesignation, then in each such case such determination shall be made by an\narbitration proceeding before a single independent arbitrator. Such arbitrator\nshall be appointed by the Corporation, subject to the approval of the Objecting\nStockholders.  The Corporation shall give written notice designating the\narbitrator to each of the holders of shares of Series C Preferred.  Upon such\nwritten notice from the Corporation, the Objecting Stockholders shall have ten\n(10) days to deliver written notice of any objection that they may have to the\narbitrator selected by the Corporation and designating an alternative selection\nfor an independent arbitrator, otherwise the Objecting Stockholders shall be\ndeemed to have accepted the arbitrator appointed by the Corporation.  If the\nparties fail to appoint a single arbitrator within ten (10) days after such\nnotice by the Objecting Stockholders, then such fair market value determination\nshall be made by an arbitration proceeding before three (3) arbitrators.  The\narbitrator originally selected by the Corporation shall be appointed the first\nsuch arbitrator.  The arbitrator next selected by the Objecting Stockholders\nshall be appointed the second such arbitrator.   The two arbitrators so\nappointed shall appoint a third independent arbitrator within five (5) days\nafter the expiration of the time period for the appointment of a single\narbitrator by the Corporation and the Objecting Stockholders.  The single\narbitrator or the three arbitrators thus appointed shall resolve the matter in\ndispute within thirty (30) days after the appointment of the final arbitrator.\nAll Arbitration proceedings shall be held in Boston, Massachusetts in accordance\nwith the rules of the American Arbitration Association (\"AAA\").  Any decision or\n                                                         ---                    \naward made by the arbitrator(s) will be binding upon the Corporation and the\nObjecting Stockholders, no appeal may be taken from such decision or award, and\njudgment thereon may be entered in any court of competent jurisdiction.  Except\nas otherwise provided in Section 5(b)(ii)(B)(3), the costs and expenses of any\narbitration proceeding pursuant to this Section 9 shall be borne by the\nCorporation.\n\n\n\n                                      -50-\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7254],"corporate_contracts_industries":[9497],"corporate_contracts_types":[9573,9575],"class_list":["post-41594","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-cyberian-outpost-inc","corporate_contracts_industries-retail__electronics","corporate_contracts_types-formation","corporate_contracts_types-formation__incorporation"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41594","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41594"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41594"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41594"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41594"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}