Designation of the Series C Preferred Stock

a)

So long as a majority of the shares of Series C Preferred Stock originally issued are outstanding, the Company will not, without the written consent of the holders of at least fifty-one percent (51%) of the Company's then outstanding Series C Preferred Stock, either directly or by amendment, merger, consolidation, or otherwise:

i.

(i) liquidate, dissolve, or wind-up the affairs of the Company, or effect any Liquidation Event¹; (ii) amend, alter, or repeal any provision of the Articles of Incorporation or Bylaws in a manner adverse to the Series C Preferred Stock (iii) create or authorize the creation of, or issue any other security convertible into or exercisable for, any equity security, having rights, preferences or privileges senior to the Series C Preferred Stock, or (iv) purchase or redeem or pay any dividend on any capital stock prior to the Series C Preferred Stock, other than stock repurchased from former employees or consultants in connection with the cessation of their employment/services.

ii.  

In the event of any liquidation, merger, dissolution, winding up, or acquisition of the Company, either voluntary or involuntary, the aggregate issued and outstanding shares of Series C Preferred Stock shall convert into a number of Common Stock equal to fifty-two percent (52%) of the sum of a) all Common Stock issued and outstanding; plus b) all the aggregate of all shares of Common Stock that would be issued upon the exercise of warrants or options, conversion of any convertible promissory notes, conversion of all other preferred shares, and any other instruments having vested rights to convert into Common Stock; plus c) the total of aggregate of all Series C Preferred Stock such that all Holders of Series C Preferred Stock shall hold exactly fifty-two percent (52%) of all issued and outstanding Common Stock, on a pro-rata basis, subject to the liquidation, merger, dissolution, winding up, or acquisition on a fully diluted basis (the “Liquidation Percentage”).

iii.  

In the event that the Holders of Series C Preferred Stock convert any portion of their Series C Preferred Stock pursuant to the rights to voluntary conversion as defined in Section 5 below, the Liquidation Percentage shall be reduced on par with the total reduction of the percentage of total issued and outstanding shares of Series C Preferred after all Voluntary Conversions. For purposes of example only. If the total issued number of Series C Preferred Stock prior to any liquidation, merger, dissolution, winding up, or acquisition was one hundred thousand (100,000) and thereafter, the Holders converted twenty thousand (20,000) shares of Series C Preferred, the Voluntary Conversion Percentage would be reduced by twenty percent (20%) resulting in a Voluntary Conversion Percentage of forty-one and six-tenths percent (41.6%).

b)

A merger or consolidation (other than one in which stockholders of the Company own a majority power of the outstanding shares of the surviving or acquiring corporation) and a sale, lease, transfer, or other disposition of all or substantially all of the assets of the Company will be treated as a liquidation event thereby triggering payment of the liquidation preferences described in subsection 4(b).

a)  

Voluntary Conversion; Mechanics of Conversion. At the sole discretion of the holders of shares of Class C Preferred Stock (each a "Holder" and collectively the "Holders"), each one (1) share of Class C Preferred Stock shall convert into exactly thirty-three thousand three hundred thirty-four (33,334) shares of the Common Stock of the Company. The Holders shall notify the Company that they wish to convert their shares of Class C Preferred Stock by submitting a Conversion Notice, in the form or similar form of Exhibit A, attached hereto (the “Conversion Notice”).

iv.  

Piggyback Rights. If, at any time the Company proposes to file a Registration Statement under the Securities Act with the Securities and Exchange Commission with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of shareholders, other than a Registration Statement (i) filed in connection with any employee share option or other benefit plan, then the Company shall give written notice of such proposed offering to all Holders as soon as practicable but not less than four (4) calendar days before the anticipated filing date of such Registration Statement or, in the case of an Underwritten Offering pursuant to a Shelf Registration, the applicable “red herring” prospectus or prospectus supplement used for marketing such offering, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any and if known, in such offering, and (B) offer to all of the Holders the opportunity to include in such registered offering such number of underlying common shares as such Holders may request in writing within three (3) calendar days after receipt of such written notice (such registered offering, a “Piggyback Registration”)

v.  

Beneficial Ownership Limitation. The Corporation and Holder may not convert an amount of the Obligation on a Conversion Date that would result in the Holder, together with its affiliates, having beneficial ownership of a number of shares of Common Stock which would exceed the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on such Conversion Date, and (ii) the number of additional shares of Common Stock issuable upon conversion of the Obligation with respect to which the determination of this provision is being made on such Conversion Date, if such conversion would result in beneficial ownership by the Holder and its affiliates of more than four and ninety-nine hundredths percent (4.99%) of the outstanding shares of Common Stock of the Corporation. For the purposes of this limitation, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to this provision, the Holder is not limited to successive exercises that would result in the aggregate issuance of more than four and ninety-nine hundredths percent (4.99%). The Holder may revoke this conversion limitation described in this paragraph, in whole or in part, upon sixty-one (61) days prior notice to the Corporation. The Holder may allocate which equity of the Corporation deemed beneficially owned by the Holder shall be included in the four and ninety-nine hundredths percent (4.99%) amount described above and which shall be allocated to the excess above four and ninety-nine hundredths percent (4.99%). The Holder may waive the conversion limitation described in this Section, in whole or in part, upon and effective after sixty-one (61) days prior written notice to the Company to increase such percentage up to nine and ninety-nine hundredths percent (9.99%).