CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION

* * * * *

LIGHTPATH TECHNOLOGIES, INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Company"), DOES
HEREBY CERTIFY:

FIRST: That pursuant to authority conferred upon the Board of Directors of the Company by the Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and pursuant to the provisions of Section 141 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company, at a meeting held September 11, 1997, duly resolved to adopt certain amendments to the Certificate of Incorporation of the Company declaring said amendments to be advisable and directed said amendments be presented at the 1997 annual meeting of the stockholders of the Company for consideration thereof. The resolutions setting forth the proposed amendments were as follows:

RESOLVED, That the Company's Certificate of Designations of Class A Common Stock and Class E-1 Common Stock, Class E-2 Common Stock, and Class E-3 Common Stock, dated November 9, 1995 ("Certificate of Designations"), be amended by deleting Sections 3.E(2), 3.E(3) and 4 of the Certificate of Designations in their entirety and replacing them with the following amended Sections 3.E(2), 3.E(3) and 4, respectively.

3.E(2) Each share of Class E-2 Common Stock will be automatically converted into one share of Class A Common Stock, and the holder thereof will receive a certificate representing the number of shares of Class A Common Stock into which such class was converted, if, and only if, one or more of the following conditions is/are met:

(a) the Minimum Pretax Income is at least $10.9 million during any of the fiscal years ending on June 30, 1997, 1998 or 1999: or

(b) the Class E-1 Common Stock has been previously converted into Class A Common Stock pursuant to paragraph (1) above, and the Minimum Pretax Income is at least $10.9 million during the fiscal year ending June 30, 2000; or

(c) the Minimum Pretax Income is at least $14.0 million during the fiscal year ending on June 30, 2000;

(d) the Class E-1 Common Stock has been previously converted into Class A Common Stock pursuant to paragraph (1) above, and the Minimum Pretax Income is at least $14.0 million during the fiscal year ending June 30, 2001; or

(e) the Company is acquired by or merged with or into another entity during either of the periods referred to below and as a result thereof holders of the Class A Common Stock of the Company (after giving consideration to the conversion of the Class E-1 Common Stock and Class E-2 Common Stock) receive per share consideration equal to or greater than: (i) $18.00 (subject to adjustment in the event of any stock splits, reverse stock splits, or other similar events) during the 18-month period commencing February 22, 1996; or, (ii) $23.00 (subject to adjustment in the event of any stock splits, reverse stock splits, or similar events) during the 18-month period commencing August 22, 1997; or

(f) the Class E-1 Common Stock has been previously converted into Class A Common Stock pursuant to paragraph (1) above and the Company is acquired by or merged with or into another entity during either of the periods referred to below and as a result thereof holders of Class A Common Stock of the Company receive per share consideration (after giving effect to the conversion of the Class E-1 Common Stock and Class E-2 Common Stock) equal to or greater than: (i) $18.00 (subject to adjustment in the event of any stock splits, reverse stock splits, or other similar events) during the 30-month period commencing February 22, 1996; or (ii) $23.00 (subject to adjustment in the event of any stock splits, reverse stock splits, or similar events) the 30-month period commencing August 22, 1998.

3.E(3) Each share of Class E-3 Common Stock will be automatically converted into one share of Class A Common Stock, and the holder thereof will receive a certificate representing the number of shares of Class A Common Stock into which such class was converted, if, and only if, one or more of the following conditions is/are met:

(a) the Minimum Pretax Income is at least $28 during any of the fiscal years ending June 30, 1997, 1998, 1999 and 2000; or

(b) the Class E-2 Common Stock has been previously converted into Class A Common Stock pursuant to paragraph (2) above and the Minimum Pretax

Income amounts to at least $28.00 million during the fiscal year ending June 30, 2001; or

(c) the Company is acquired by or merged with or into another entity during either of the periods referred to below and as a result thereof holders of Class A Common Stock of the Company receive per share consideration (after giving effect to the conversion of the Class E-1, Class E-2 and Class E-3 Common Stock) equal to or greater-than: (i) $30.00 (subject to adjustment in the event of any stock splits, reverse stock splits or similar events) during the 18-month period commencing on February 22, 1996; or (ii) $40.00 (subject to adjustment in the event of any stock splits, reverse splits or similar events) during the 18-month period commencing August 22, 1997; or

(d) the Class E-2 Common Stock has been previously converted into Class A Common Stock pursuant to paragraph (2) above and the Company is acquired by or merged with or into another entity during the periods referred to below and as a result thereof holders of Class A Common Stock of the Company receive per share consideration (after giving effect to the conversion of the Class E-1, Class E-2 and Class E-3 Common Stock) equal to or greater than: (i) $30.00 (subject to adjustment in the event of any stock splits, reverse stock splits or similar events) during the 30-month period commencing February 22, 1996; or (ii) $40.00 (subject to adjustment in the event of any stock splits, reverse splits or similar events) during the 30-month period commencing August 22, 1998.

4. Redemption.

(a) If on September 30, 2001, none of the conditions to conversion of the Class E-1 Common Stock, the Class E-2 Common Stock or the Class E-3 Common Stock, as applicable, shall have been satisfied, then such class or classes of Common Stock shall be redeemed by the Company at a price per share of $.0001 and cancelled without further obligation to the holder thereof. From and after September 30, 2001, in the event that none of the conditions to conversion of the Class E-1 Common Stock, the Class E-2 Common Stock or the Class E-3 Common Stock, as applicable, were satisfied at the respective applicable dates, there shall exist no further right with respect to Class E Common Stock, which is thereby cancelled, or with respect to any other cash, property or securities previously issued with respect thereto.

(b) Solely for the purpose of issuance upon conversion of the Class E-1, E-2 or E-3 Common Stock as herein provided, the Company shall, at all times, reserve and keep available out of its authorized but unissued shares of Class A Common Stock, such number of shares of Class A Common Stock as are then issuable upon the conversion of all outstanding shares of Class E Common Stock.

FURTHER RESOLVED, That all other rights and restrictions set forth in the Certificate of Designations shall remain unchanged and in full force and effect.

SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held, at which meeting the necessary number of shares as required by the General Corporation Law of the State of Delaware and the Certificate of Incorporation and Bylaws of the Corporation were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said LIGHTPATH TECHNOLOGIES, INC. has caused this certificate to be signed by Donald Lawson, its vice President and Treasurer, this 12th day of November, 1997.

LIGHTPATH TECHNOLOGIES, INC.

By:  /s/ Donald Lawson
     -----------------------------------
     Donald Lawson
     Vice President and Treasurer

Exhibit 3.2

CERTIFICATE OF DESIGNATION OF SERIES B PREFERRED STOCK
OF LIGHTPATH TECHNOLOGIES, INC. FILED OCTOBER 2, 1997

It is hereby certified that:

1. The name of the Company (hereinafter called the "Company") is LightPath Technologies, Inc., a Delaware corporation.

2. The certificate of incorporation of the Company authorizes the issuance of five million (5,000,000) shares of preferred stock, $.01 par value per share, and expressly vests in the Board of Directors of the Company the authority provided therein to issue any or all of said shares in one (1) or more Series B and by resolution or resolutions to establish the designation and number and to fix the relative rights and preferences of each series to be issued.

3. The Board of Directors of the Company, pursuant to the authority expressly vested in it as aforesaid, has adopted the following resolutions creating a Series B issue of Preferred Stock:

RESOLVED, that three hundred (300) of the five million (5,000,000) authorized shares of Preferred Stock of the Company shall be designated Series B Preferred Stock, $.01 par value per share, and shall possess the rights and preferences set forth below:

Section 1. Designation and Amount. The shares of such series shall have a par value of $.01 per share and shall be designated as Series B Preferred Stock (the "Series B Preferred Stock") and the number of shares constituting the Series B Preferred Stock shall be three hundred (300). The Series B Preferred Stock shall be offered at a purchase price of Ten Thousand Dollars ($10,000) per share (the "Original Series B Issue Price"), with an eight percent (8%) per annum accretion rate as set forth herein.

Section 2. Rank. The Series B Preferred Stock shall rank: (i) junior to any other class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to the Series B Preferred Stock (collectively, the "Senior Securities"); (ii) prior to all of the Company's Class A, Class E-1, Class E-2, and Class E-3 Common Stock, all at a $.01 par value per share ("Common Stock"); (iii) prior to any class or series of capital stock of the Company hereafter created not specifically ranking by its terms senior to or on parity with any Series B Preferred Stock of whatever subdivision (collectively, with the Common Stock, "Junior Securities"); and (iv) on parity with the Series A Preferred Stock and with any class or series of capital stock of the Company hereafter created specifically ranking by its terms on parity with the Series B Preferred Stock ("Parity Securities") in each case as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (all such distributions being referred to collectively as "Distributions").

Section 3. Dividends. The Series B Preferred Stock will bear no dividends, and the holders of the Series B Preferred Stock ("Holders") shall not be entitled to receive dividends on the Series B Preferred Stock.

Section 4. Liquidation Preference.

(a) In the event of any liquidation, dissolution or winding up of the Company ("Liquidation Event"), either voluntary or involuntary, the then Holders of shares of Series B Preferred Stock shall be entitled to receive, immediately after any distributions to Senior Securities required by the Company's Certificate of

Incorporation or any certificate of designation, and prior in preference to any distribution to Junior Securities but in parity with any distribution to Parity Securities, an amount per share equal to the sum of (i) the Original Series B Issue Price for each outstanding share of Series B Preferred Stock and (ii) an amount equal to eight percent (8%) of the Original Series B Issue Price, per annum, accruing daily, for the period that has passed since the date that, in connection with the consummation of the purchase by Holder of shares of Series B Preferred Stock from the Company, the escrow agent first had in its possession funds representing full payment for the shares of Series B Preferred Stock (such amount being referred to herein as the "Premium"). If upon the occurrence of such event, and after payment in full of the preferential amounts with respect to the Senior Securities, the assets and funds available to be distributed among the Holders of the Series B Preferred Stock and Parity Securities shall be insufficient to permit the payment to such Holders of the full preferential amounts due to the Holders of the Series B Preferred Stock and the Parity Securities, respectively, then the entire assets and funds of the Company legally available for distribution shall be distributed among the Holders of the Series B Preferred Stock and the Parity Securities, pro rata, based on the respective liquidation amounts to which each such series of stock is entitled by the Company's Certificate of Incorporation and any certificate(s) of designation relating thereto.

(b) Upon the completion of the distribution required by subsection 4(a), if assets remain in this Company, they shall be distributed to holders of Junior Securities in accordance with the Company's Certificate of Incorporation including any duly adopted certificate(s) of designation.

(c) At each Holder's option, a sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of shall be deemed to be a Liquidation Event as defined in Section 4(a); provided further that (i) a consolidation, merger, acquisition, or other business combination of the Company with or into any other publicly traded company or companies shall not be treated as a Liquidation Event as defined in Section 4(a) but instead shall be treated pursuant to Section 5(d) hereof, and (ii) a consolidation, merger, acquisition, or other business combination of the Company with or into any other non-publicly traded company or companies shall be treated as a Liquidation Event as defined in Section 4(a). The Company shall not effect any transaction described in subsection 4(c)(ii) unless it first gives thirty (30) business days prior notice of such transaction during which time the Holder shall be entitled to immediately convert any or all of its shares of Series B Preferred Stock into Class A Common Stock at the Conversion Price, as defined below, then in effect, which conversion shall not be subject to the conversion restrictions set forth in Section 5(a).

(d) In the event that, immediately prior to the closing of a transaction described in Section 4(c) which would constitute a Liquidation Event, the cash distributions required by Section 4(a) or Section 6 have not been made, the Company shall either: (i) cause such closing to be reasonably postponed until such cash distributions have been made, (ii) cancel such transaction, in which event the rights of the Holders of Series B Preferred Stock shall be the same as existing immediately prior to such proposed transaction or (iii) agree, and shall require that any successor company resulting from a Liquidation Event agrees, to make such distributions as quickly after the closing of such Liquidation Event as reasonably practicable, upon the same terms and in the same amounts as the Company would have made if such distribution was made immediately prior to the closing of such transaction.

Section 5. Conversion. Subject to Section 4(c) herein, the record Holders of this Series B Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert. The record Holder of the Series B Preferred Stock shall be entitled to convert, subject to the Company's right of redemption set forth in Section 6(a) and the conversion restrictions herein below, any or all the aggregate principal amount of the Series B Preferred Stock on or after the date that is four (4) months after the Last Closing Date, as defined below, at the office of the Company or its designated

transfer agent (the "Transfer Agent"), into that number of fully-paid and non-assessable shares of Class A Common Stock calculated in accordance with the following formula (the "Conversion Rate"):

Number of shares of Class A Common Stock issued upon conversion of one
(1) share of Series B Preferred Stock =

where,

o N= the number of days between (i) the date that, in connection with the consummation of the initial purchase by Holder of shares of Series B Preferred Stock from the Company, the escrow agent first had in its possession funds representing full payment for the shares of Series B Preferred Stock for which conversion is being elected, and (ii) the applicable Date of Conversion (as defined in Section 5(b)(iv) below) for the shares of Series B Preferred Stock for which conversion is being elected, and

o Conversion Price = the lesser of (x) 100% of the average Closing Bid Price, as that term is defined below, of the Company's Class A Common Stock for the five (5) trading days ending on September 24, 1997, which is $7.2375 (the "Fixed Conversion Price"), or (y) 85% of the average Closing Bid Price, as that term is defined below, of the Company's Class A Common Stock for the five (5) trading days immediately preceding the Date of Conversion, as defined below (the "Variable Conversion Price"),

provided, however, that, unless otherwise indicated herein, beginning on the date that is four (4) months following the Last Closing Date, as defined below, the right of the Holder to convert into Class A Common Stock using the Variable Conversion Price initially shall be limited to a maximum of twenty percent (20%) of the aggregate principal amount of the Series B Preferred Stock issued to such Holder, and for each one (1) month period which expires thereafter, the Holder shall accrue the right to convert into Class A Common Stock an additional twenty percent (20%) of the aggregate principal amount of the Series B Preferred Stock issued to such Holder, (the number of shares that may be converted at any given time using the Variable Conversion Price, in the aggregate, is referred to hereinafter as the "Conversion Quota"); and provided, further, in the event that the Holder elects not to convert its full Conversion Quota during any one (1) month period, the unconverted amount shall be carried forward and added to the Conversion Quota, and thereafter the Holder may, from time to time, convert any portion of the Conversion Quota at the Variable Conversion Price; and provided, further, that subsequent to the date that is nine (9) months following the Last Closing Date, there shall be no restrictions on the number of shares of Series B Preferred Stock that may be converted into Class A Common Stock using the Variable Conversion Price; and provided, further, that a Holder can convert one hundred percent (100%) of the Series B Preferred Stock, or any portion thereof, into Class A Common Stock using the Fixed Conversion Price on or after the date that is four (4) months after the Last Closing Date whether or not the Fixed Conversion Price is less than the Variable Conversion Price.

As used herein, "Last Closing Date" shall mean the date of the last closing of a purchase and sale of the Series B Preferred Stock that occurs pursuant to the offering of the Series B Preferred Stock by the Company.

For purposes hereof, any Holder which acquires shares of Series B Preferred Stock from another Holder (the "Transferor") and not upon original issuance from the Company shall be entitled to exercise its conversion right as to the percentages of such shares specified under Section 5(a) in such amounts and at such times such that the number of shares eligible for conversion by such Holder at any time shall be in the same proportion that

the number of shares of Series B Preferred Stock acquired by such Holder from its Transferor bears to the total number of shares of Series B Preferred Stock originally issued by the Company to such Transferor (or its predecessor Transferor).

For purposes hereof, the term "Closing Bid Price" shall mean the closing bid price of the Company's Class A Common Stock on the Nasdaq Small Cap Market, or if no longer traded on the Nasdaq Small Cap Market, the closing bid price on the principal national securities exchange or the over-the-counter on which the Class A Common Stock is so traded and if not available, the mean of the high and low prices on the principal national securities exchange or the over-the-counter system on which the Class A Common Stock is so traded.

(b) Mechanics of Conversion. In order to convert Series B Preferred Stock into full shares of Class A Common Stock, the Holder shall (i) send via facsimile, on or prior to 11:59 p.m., New York City time (the "Conversion Notice Deadline") on the Date of Conversion, a copy of the fully executed notice of conversion ("Notice of Conversion") to the Company at the office of the Company and to its designated transfer agent (the "Transfer Agent") for the Series B Preferred Stock stating that the Holder elects to convert, which notice shall specify the Date of Conversion, the number of shares of Series B Preferred Stock to be converted, the applicable Conversion Price and a calculation of the number of shares of Class A Common Stock issuable upon such conversion (together with a copy of the front page of each certificate to be converted) and (ii) surrender to a common courier for delivery to the office of the Company or the Transfer Agent, the original certificates representing the Series B Preferred Stock being converted (the "Preferred Stock Certificates"), duly endorsed for transfer; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Class A Common Stock issuable upon such conversion unless either the Preferred Stock Certificates are delivered to the Company or its Transfer Agent as provided above, or the Holder notifies the Company or its Transfer Agent that such certificates have been lost, stolen or destroyed (subject to the requirements of subparagraph (i) below). Upon receipt by the Company of a facsimile copy of a Notice of Conversion, the Company shall immediately send, via facsimile, a confirmation of receipt of the Notice of Conversion to Holder which shall specify that the Notice of Conversion has been received and the name and telephone number of a contact person at the Company whom the Holder should contact regarding information related to the Conversion. In the case of a dispute as to the calculation of the Conversion Rate, the Company shall promptly issue to the Holder the number of Shares that are not disputed and shall submit the disputed calculations to its outside accountant via facsimile within three (3) days of receipt of Holder's Notice of Conversion. The Company shall cause the accountant to perform the calculations and notify the Company and Holder of the results no later than two business days from the time it receives the disputed calculations. Accountant's calculation shall be deemed conclusive absent manifest error.

(i) Lost or Stolen Certificates. Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificates representing shares of Series B Preferred Stock, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Preferred Stock Certificate(s), if mutilated, the Company shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date. However, the Company shall not be obligated to re-issue such lost or stolen Preferred Stock Certificates if Holder contemporaneously requests the Company to convert such Series B Preferred Stock into Class A Common Stock.

(ii) Delivery of Common Stock Upon Conversion. The Company shall or shall cause the Transfer Agent to, no later than the close of business on the second (2nd) business day (the "Deadline") after receipt by the Company or the Transfer Agent of a facsimile copy of a Notice of Conversion and receipt by Company or the Transfer Agent of all necessary documentation duly executed and in proper form required for conversion, including the original Preferred Stock Certificates to be converted (or after provision for security or indemnification in the case of lost or destroyed certificates, if required), issue and surrender to a common courier for either overnight or (if delivery is outside the United States) two (2) day delivery to the Holder at the address of

the Holder as shown on the stock records of the Company a certificate for the number of shares of Class A Common Stock to which the Holder shall be entitled as aforesaid.

(iii) No Fractional Shares. If any conversion of the Series B Preferred Stock would create a fractional share of Class A Common Stock or a right to acquire a fractional share of Class A Common Stock, such fractional share shall be disregarded and the number of shares of Class A Common Stock issuable upon conversion, in the aggregate, shall be the next higher number of shares.

(iv) Date of Conversion. The date on which conversion occurs (the "Date of Conversion") shall be deemed to be the date set forth in such Notice of Conversion, provided (i) that the advance copy of the Notice of Conversion is sent via facsimile to the Company before 11:59 p.m., New York City time, on the Date of Conversion, and (ii) that the original Preferred Stock Certificates representing the shares of Series B Preferred Stock to be converted are surrendered by depositing such certificates with a common courier, for delivery to the Company or the Transfer Agent as provided above, as soon as practicable after the Date of Conversion. The person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record Holder or Holders of such shares of Class A Common Stock on the Date of Conversion.

(c) Automatic Conversion or Redemption. Each share of Series B Preferred Stock outstanding on the date which is three (3) years after the Last Closing Date or, if not a business day, the first business day thereafter ("Termination Date") automatically shall, at the option of the Company, either
(i) be converted ("Automatic Conversion") into Class A Common Stock on such date at the Conversion Rate then in effect (calculated in accordance with the formula in Section 5(a) above), and the Termination Date shall be deemed the Date of Conversion with respect to such conversion for purposes of this Certificate of Designation, or (ii) be redeemed ("Automatic Redemption") by the Company for cash in an amount equal to the Stated Value (as defined in Section 6(b)(i) below) of the shares of Series B Preferred Stock being redeemed. If the Company elects to redeem, on the Termination Date, the Company shall send to the Holders of outstanding Series B Preferred Stock notice (the "Automatic Redemption Notice") via facsimile of its intent to effect an Automatic Redemption of the outstanding Series B Preferred Stock. If the Company does not send such notice to Holder on such date, an Automatic Conversion shall be deemed to have occurred. If an Automatic Conversion occurs, the Company and the Holders shall follow the applicable conversion procedures set forth in this Certificate of Designation; provided, however, that the Holders are not required to send the Notice of Conversion contemplated by Section 5(b). If the Company elects to redeem, each Holder of outstanding Series B Preferred Stock shall send their certificates representing the Series B Preferred Stock to the Company within five (5) days of the date of receipt of the Automatic Redemption Notice from the Company, and the Company shall pay the applicable redemption price to each respective Holder within five (5) days of the receipt of such certificates. The Company shall not be obligated to deliver the redemption price unless the certificates representing the Series B Preferred Stock are delivered to the Company, or, in the event one or more certificates have been lost, stolen, mutilated or destroyed, unless the Holder has complied with Section 5(b)(i). If the Company elects to redeem under this Section 5(c) and the Company fails to pay the Holders the redemption price within five (5) days of its receipt of the certificates representing the shares of Series B Preferred Stock to be redeemed as required by this Section 5(c), then an Automatic Conversion shall be deemed to have occurred and, upon receipt of the Preferred Stock certificates, the Company shall immediately deliver to the Holders the certificates representing the number of shares of Class A Common Stock to which the Holders would have been entitled upon Automatic Conversion.

(d) Adjustment to Conversion Rate.

(i) Adjustment to Fixed Conversion Price Due to Stock Split, Stock Dividend, Etc. If, prior to the conversion of all of the Series B Preferred Stock, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, or other similar event, the Fixed Conversion Price shall be

proportionately reduced, or if the number of outstanding shares of Common Stock is decreased by a combination or reclassification of shares, or other similar event, the Fixed Conversion Price shall be proportionately increased.

(ii) Adjustment to Variable Conversion Price. If, at any time when any shares of the Series B Preferred Stock are issued and outstanding, the number of outstanding shares of Common Stock is increased or decreased by a stock split, stock dividend, or other similar event, which event shall have taken place during the reference period for determination of the Conversion Price for any conversion of the Series B Preferred Stock, then the Variable Conversion Price shall be calculated giving appropriate effect to the stock split, stock dividend, combination, reclassification or other similar event for all five (5) trading days immediately preceding the Date of Conversion.

(iii) Adjustment Due to Merger, Consolidation, Etc. If, prior to the conversion of all Series B Preferred Stock, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Class A Common Stock of the Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Company or another entity or there is a sale of all or substantially all the Company's assets or there is a change of control transaction not deemed to be a liquidation pursuant to Section 4(c), then the Holders of Series B Preferred Stock shall thereafter have the right to receive upon conversion of Series B Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Class A Common Stock immediately theretofore issuable upon conversion, such stock, securities and/or other assets which the Holder would have been entitled to receive in such transaction had the Series B Preferred Stock been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holders of the Series B Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Series B Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the exercise hereof. The Company shall not effect any transaction described in this subsection 5(d)(iii) unless (a) it first gives at least thirty (30) days prior notice of such merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event (during which time the Holder shall be entitled to convert its shares of Series B Preferred Stock into Class A Common Stock) and (b) the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligations of the Company under this Certificate of Designation including this subsection 5(d)(iii).

(iv) No Fractional Shares. If any adjustment under this Section 5(d) would create a fractional share of Class A Common Stock or a right to acquire a fractional share of Class A Common Stock, such fractional share shall be disregarded and the number of shares of Class A Common Stock issuable upon conversion shall be the next higher number of shares.

Section 6. Redemption by Company.

(a) Company's Right to Redeem Upon Receipt of Notice of Conversion. If the Variable Conversion Price of the Company's Class A Common Stock is less than the Fixed Conversion Price (as defined in Section 5(a)), at the time of receipt of a Notice of Conversion pursuant to Section 5(b), the Company shall have the right, in its sole discretion, to redeem in whole or in part any Series B Preferred Stock submitted for conversion at the Redemption Rate (as defined below), immediately prior to and in lieu of conversion ("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to redeem some, but not all, of the Series B Preferred Stock submitted for conversion, the Company shall redeem from among the Series B Preferred Stock submitted by the various shareholders for conversion on the applicable date, a pro-rata amount from each such Holder so submitting Series B Preferred Stock for conversion.

(i) Redemption Price Upon Receipt of a Notice of Conversion. The redemption price of Series B Preferred Stock under this Section 6(a) shall be calculated as follows ("Redemption Rate"): 120% of the Stated Value, where Stated Value shall have the same meaning as defined in Section 6(b)(i) below.

(ii) Mechanics of Redemption Upon Receipt of Notice of Conversion. The Company shall effect each such redemption by giving notice of its election to redeem, by facsimile, by 5:00 p.m. New York City time the next business day following receipt of a Notice of Conversion from a Holder, and the Company shall provide a copy of such redemption notice by overnight or two (2) day courier, to (A) the Holder of the Series B Preferred Stock submitted for conversion at the address and facsimile number of such Holder appearing in the Company's register for the Series B Preferred Stock and (B) the Company's Transfer Agent. Such redemption notice shall indicate whether the Company will redeem all or part of the Series B Preferred Stock submitted for conversion and the applicable redemption price.

(iii) Redemption Buy-In. If (i) subsequent to the tender of a Notice of Conversion, but prior to its receipt of a Notice of Redemption Upon Notice of Conversion, the Holder sells shares of Class A Common Stock (the "Redemption Sold Shares") which such Holder anticipated receiving upon such conversion, (ii) the Company effects a Redemption Upon Receipt of Notice of Conversion with respect to such conversion, and (iii) the Holder purchases (in an open market transaction), no later than the close of trading on the trading day following its receipt of the Notice of Redemption Upon Notice of Conversion, shares of Class A Common Stock to make delivery upon the sale of the Redemption Sold Shares (a "Redemption Buy-In"), the Company shall pay such Holder (in addition to the applicable Redemption Rate) the amount by which (x) such Holder's total purchase price (including brokerage commission, if any) for the shares of Class A Common Stock purchased in the Redemption Buy-In exceeds
(y) the net proceeds received by such Holder from the sale of the Redemption Sold Shares. For example, if a Holder purchases shares of Class A Common Stock having a total purchase price of $11,000 to cover a Redemption Buy-In with respect to shares of Class A Common Stock sold for $10,000, the Company will be required to pay such Holder $1,000. A Holder shall provide the Company written notification (and trading records, if reasonably requested by the Company) indicating any amounts payable to Holder pursuant to this Section.

(b) Company's Right to Redeem at its Election. At any time, commencing twelve (12) months and one (1) day after the Last Closing Date, the Company shall have the right, in its sole discretion, to redeem ("Redemption at Company's Election"), from time to time, any or all of the Series B Preferred Stock; provided (i) the Company shall first provide thirty (30) days advance written notice as provided in subparagraph 6(b)(ii) below (which can be given beginning thirty (30) days prior to the date which is twelve (12) months and one
(1) day after the Last Closing Date), and (ii) that the Company shall only be entitled to redeem Series B Preferred Stock having an aggregate Stated Value (as defined below) of at least Three Hundred Seventy-five Thousand Dollars ($375,000). If the Company elects to redeem some, but not all, of the Series B Preferred Stock, the Company shall redeem a pro-rata amount from each Holder of the Series B Preferred Stock.

(i) Redemption Price At Company's Election. The "Redemption Price At Company's Election" shall be calculated as a percentage of Stated Value, as that term is defined below, of the Series B Preferred Stock redeemed pursuant to this Section 6(b), which percentage shall vary depending on the date of Redemption at Company's Election (as defined below), and shall be determined as follows:

Date of Notice of Redemption at Company's Election        % of Stated Value
--------------------------------------------------        -----------------

12 months and 1 day to 18 months following Last Closing Date     130%
18 months and 1 day to 24 months following Last Closing Date     125%
24 months and 1 day to 30 months following Last Closing Date     120%
                                  7

30 months and 1 day to 36 months following Last Closing Date     115%

For purposes hereof, "Stated Value" shall mean the Original Series B Issue Price (as defined in Section 1)) of the shares of Series B Preferred Stock being redeemed pursuant to this Section 6(b), together with the accreted but unpaid Premium (as defined in Section 4(a)).

(ii) Mechanics of Redemption at Company's Election. The Company shall effect each such redemption by giving at least thirty (30) days prior written notice ("Notice of Redemption At Company's Election") to (A) the Holders of the Series B Preferred Stock selected for redemption, at the address and facsimile number of such Holder appearing in the Company's Series B Preferred Stock register and (B) the Transfer Agent, which Notice of Redemption At Company's Election shall be deemed to have been delivered three (3) business days after the Company's mailing (by overnight or two (2) day courier, with a copy by facsimile) of such Notice of Redemption At Company's Election. Such Notice of Redemption At Company's Election shall indicate (i) the number of shares of Series B Preferred Stock that have been selected for redemption, (ii) the date which such redemption is to become effective (the "Date of Redemption At Company's Election") and (iii) the applicable Redemption Price At Company's Election, as defined in subsection (b)(i) above. Notwithstanding the above, Holder may convert into Class A Common Stock pursuant to Section 5, prior to the close of business on the Date of Redemption at Company's Election, any Series B Preferred Stock which it is otherwise entitled to convert, including Series B Preferred Stock that has been selected for redemption at the Company's election pursuant to this subsection 6(b); provided, however, that the Company shall still be entitled to exercise its right to redeem upon receipt of a Notice of Conversion pursuant to Section 6(a).

(c) Company Must Have Immediately Available Funds or Credit Facilities. The Company shall not be entitled to send any Redemption Notice and begin the redemption procedure under Sections 6(a) and 6(b) unless it has:

(i) the full amount of the redemption price in cash, available in a demand or other immediately available account in a bank or similar financial institution; or

(ii) immediately available credit facilities, in the full amount of the redemption price with a bank or similar financial institution; or

(iii) an agreement with a standby underwriter willing to purchase from the Company a sufficient number of shares of stock to provide proceeds necessary to redeem any stock that is not converted prior to redemption; or

(iv) a combination of the items set forth in (i),
(ii) and (iii) above, aggregating the full amount of the redemption price.

If the foregoing conditions of this Section 6(c) are satisfied and the Company complies with Section 6(d) hereof, then any shares of Series B Preferred Stock called for by a Redemption at Company's Election shall cease to be outstanding for all purposes hereunder (including the right to convert or to accrete additional Premium or to exercise any other right or privilege hereunder) on the Date of Redemption at Company's Election and shall instead represent the right to receive the Redemption Price at Company's Election without interest from and after the Date of Redemption at Company's Election.

(d) Payment of Redemption Price.

(i) Each Holder submitting Preferred Stock being redeemed under this Section 6 shall send their Series B Preferred Stock Certificates so redeemed to the Company or its Transfer Agent, and the

Company shall pay the applicable redemption price to that Holder within five (5) business days of the Date of Redemption at Company's Election. The Company shall not be obligated to deliver the redemption price unless the Preferred Stock Certificates so redeemed are delivered to the Company or its Transfer Agent, or, in the event one (1) or more certificates have been lost, stolen, mutilated or destroyed, unless the Holder has complied with Section 5(b)(i).

(ii) If the Company elects to redeem pursuant to
Section 6(a) hereof, and the Company fails to pay Holder the redemption price within the time frame as required by this Section 6(d), then the Company shall issue shares of Class A Common Stock to any such Holder who has submitted a Notice of Conversion in compliance with Section 5(b) hereof. The shares to be issued to Holder pursuant to this provision shall be the number of shares determined using a Conversion Price (as defined in Section 5 hereof) that equals the lesser of (i) the Conversion Price on the date Holder sends its Notice of Conversion to Company or Transfer Agent via facsimile or (ii) the Conversion Price on the date the Transfer Agent issues Class A Common Stock pursuant to this Section 6(d)(ii).

(e) Blackout Period. Notwithstanding the foregoing, the Company may not either send out a redemption notice or effect a redemption pursuant to Section 6(b) above during a Blackout Period (defined as a period during which the Company's officers or directors would be prohibited from buying or selling stock pursuant to the Securities Exchange Act of 1934, as amended, because of their holding of material non-public information), unless the Company shall first disclose the non-public information that resulted in the Blackout Period; provided, however, that no redemption shall be effected until at least ten (10) days after the Company shall have given the Holder written notice that the Blackout Period has been lifted.

Section 7. Voting Rights. The Holders of the Series B Preferred Stock shall have no voting power whatsoever, except as otherwise provided by the General Corporation Law of the State of Delaware ("Delaware Law"), and no Holder of Series B Preferred Stock shall vote or otherwise participate in any proceeding in which actions shall be taken by the Company or the shareholders thereof or be entitled to notification as to any meeting of the shareholders.

Notwithstanding the above, the Company shall provide Holder with notification of any meeting of the shareholders regarding any major corporate events affecting the Company. In the event of any taking by the Company of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any share of any class or any other securities or property (including by way of merger, consolidation or reorganization), or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Company, or any proposed liquidation, dissolution or winding up of the Company, the Company shall mail a notice to Holder, at least ten (10) days prior to the record date specified therein, of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time.

To the extent that under Delaware Law the vote of the Holders of the Series B Preferred Stock, voting separately as a class, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the shares of the Series B Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of a majority of the shares of Series B Preferred Stock (except as otherwise may be required under Delaware Law) shall constitute the approval of such action by the class. To the extent that under Delaware Law the Holders of the Series B Preferred Stock are entitled to vote on a matter with holders of Class A Common Stock, voting together as one (1) class, each share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Class A Common Stock into which it is then convertible using the record date for the taking of such vote of stockholders as the date as of

which the Conversion Price is calculated. Holders of the Series B Preferred Stock also shall be entitled to notice of all shareholder meetings or written consents with respect to which they would be entitled to vote, which notice would be provided pursuant to the Company's by-laws and applicable statutes.

Section 8. Protective Provision. So long as shares of Series B Preferred Stock are outstanding, the Company shall not without first obtaining the approval (by vote or written consent, as provided by Delaware Law) of the Holders of at least seventy-five percent (75%) of the then outstanding shares of Series B Preferred Stock, and at least seventy-five percent (75%) of the then outstanding Holders:

(a) alter or change the rights, preferences or privileges of the Series B Preferred Stock or any securities so as to affect adversely the Series B Preferred Stock;

(b) create any new class or series of stock having a preference over or on parity with the Series B Preferred Stock with respect to Distributions (as defined in Section 2 above) or increase the size of the authorized number of Series B Preferred; or

(c) do any act or thing not authorized or contemplated by this Designation which would result in taxation of the holders of shares of the Series B Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended (or any comparable provision of the Internal Revenue Code as hereafter from time to time amended).

In the event Holders of at least seventy-five percent (75%) of the then outstanding shares of Series B Preferred Stock and at least seventy-five percent (75%) of the then outstanding Holders agree to allow the Company to alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock, pursuant to subsection (a) above, so as to affect the Series B Preferred Stock, then the Company will deliver notice of such approved change to the Holders of the Series B Preferred Stock that did not agree to such alteration or change (the "Dissenting Holders") and Dissenting Holders shall have the right for a period of thirty (30) business days to convert pursuant to the terms of this Certificate of Designation as they exist prior to such alteration or change (notwithstanding the holding requirements set forth in Section 5(a) hereof), or continue to hold their shares of Series B Preferred Stock, as amended.

Section 9. Status of Converted or Redeemed Stock. In the event any shares of Series B Preferred Stock shall be converted or redeemed pursuant to
Section 5 or Section 6 hereof, the shares so converted or redeemed shall be canceled, shall return to the status of authorized but unissued Preferred Stock of no designated series, and shall not be issuable by the Company as Series B Preferred Stock.

Section 10. Preference Rights. Nothing contained herein shall be construed to prevent the Board of Directors of the Company from issuing one (1) or more series of Preferred Stock with dividend and/or liquidation preferences junior to the dividend and liquidation preferences of the Series B Preferred Stock.

Section 11. Authorization and Reservation of Shares of Common Stock.

(a) Authorized and Reserved Amount. The Company shall have authorized and reserved and keep available for issuance one million five hundred thousand (1,500,000) shares of Class A Common Stock (the "Reserved Amount") solely for the purpose of effecting the conversion of the Series B Preferred Stock, and exercise of the warrants to acquire Class A Common Stock (the "Common Warrants") issued or to be issued to the Holders. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock a sufficient number of shares of Class A Common Stock to provide for the full conversion of all outstanding Series B Preferred Stock, and issuance of the shares of Class A Common Stock in

connection therewith and the full exercise of the Common Warrants and issuance of the shares of Class A Common Stock in connection therewith.

(b) Increases to Reserved Amount. Without limiting any other provision of this Section 11, if the Reserved Amount for any three (3) consecutive trading days (the last of such three (3) trading days being the "Reservation Trigger Date") shall be less than one hundred twenty-five percent (125%) of the number of shares of Class A Common Stock issuable upon conversion of this Series B Preferred Stock, and exercise of the Common Warrants on such trading days (a "Share Authorization Failure"), the Company shall immediately notify all Holders of such occurrence and shall take action as soon as possible, but in any event within sixty (60) days after a Reservation Trigger Date (including, if necessary, seeking shareholder approval to authorize the issuance of additional shares of Class A Common Stock) to increase the Reserved Amount to one hundred fifty percent (150%) of the number of shares of Class A Common Stock then issuable upon conversion of the Series B Preferred Stock, and exercise of the Common Warrants.

(c) Reduction of Reserved Amount Under Certain Circumstances. Prior to complete conversion of all Series B Preferred Stock the Company shall not reduce the number of shares required to be reserved for issuance under this
Section 11 without the written consent of all Holders except for a reduction proportionate to a reverse stock split effected for a business purpose other than affecting the obligations of Holder under this Section 11, which reverse stock split affects all shares of Class A Common Stock equally. Following complete conversion of all the Series B Preferred Stock, the Company may, with fifteen (15) days prior written notice to Holder, reduce the Reserved Amount to one hundred twenty-five percent (125%) of the number of shares of Class A Common Stock issuable upon the full exercise of the Common Warrants; provided, however, that the Reserved Amount shall continue to be subject to increase pursuant to
Section 11 hereof.

(d) Allocation of Reserved Amount. Each increase to the Reserved Amount shall be allocated pro rata among the Holders based on the number of Series B Preferred Stock, and Common Warrants held by each Holder at the time of the establishment of or increase in the Reserved Amount. In the event a Holder shall sell or otherwise transfer any of such Holder's Series B Preferred Stock, or Common Warrants, each transferee shall be allocated a pro rata portion of such transferor's Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any Series B Preferred Stock shall be allocated to the remaining Holders, pro rata based on the number of Series B Preferred Stock, and Common Warrants then held by such Holders.

Section 12. Failure to Satisfy Conversions.

(a) Conversion Failure Payments. If, at any time, (x) a Holder submits a Notice of Conversion (or is deemed to submit such notice pursuant to
Section 5(d) hereof), and the Company fails for any reason to deliver, on or prior to the expiration of the Deadline ("Delivery Period") for such conversion, such number of shares of Class A Common Stock to which such Converting Holder is entitled upon such conversion, or (y) the Company provides notice to Holder at any time of its intention not to issue shares of Class A Common Stock upon exercise by Holder of its conversion rights in accordance with the terms of this Certificate of Designation (each of (x) and (y) being a "Conversion Failure"), then the Company shall pay to such Holder damages in an amount equal to the lower of:

(i) "Damages Amount" X "D" X .005, and
(ii) the highest interest rate permitted by applicable law, where:

"D" means the number of days beginning the date of the Conversion Failure through and including the Cure Date with respect to such Conversion Failure;

"Damages Amount" means the Original Series B Issue Price for each share of Series B Preferred Stock subject to conversion plus all accrued and unpaid interest thereon as of the first day of the Conversion Failure.

"Cure Date" means (i) with respect to a Conversion Failure described in clause (x) of its definition, the date the Company effects the conversion of the shares of Series B Preferred Stock submitted for conversion and (ii) with respect to a Conversion Failure described in clause (y) of its definition, the date the Company undertakes in writing to issue Class A Common Stock in satisfaction of all conversions of Series B Preferred Stock in accordance with the terms of this Certificate of Designation.

The payments to which a Holder shall be entitled pursuant to this
Section are referred to herein as "Conversion Failure Payments." The parties agree that the damages caused by a breach hereof would be difficult or impossible to estimate accurately. A Holder may elect to receive accrued Conversion Failure Payments in cash or to convert all or any portion of such accrued Conversion Failure Payments, at any time, into Class A Common Stock at the lowest Conversion Price in effect during the period beginning on the date of the Conversion Failure through the Cure Date for such Conversion Failure. In the event a Holder elects to receive any Conversion Failure Payments in cash, it shall so notify the Company in writing no later than three (3) business days after the Deadline and failure to so notify the Company, shall entitle the Company, in its sole discretion, to elect to make such Conversion Failure Payments in cash, Class A Common Stock or some combination of the two. In the event a Holder elects to convert all or any portion of the Conversion Failure Payments, such Holder shall indicate on a Notice of Conversion such portion of the Conversion Failure Payments which such Holder elects to so convert in accordance with this Section 12(a) and such conversion shall otherwise be effected in accordance with provisions of Section 5.

(b) Buy-In Cure. Unless a Conversion Failure described in clause (y) of Section 12(a) hereof has occurred with respect to such a Holder, if (i) the Company fails for any reason to deliver during the Delivery Period shares of Class A Common Stock to a Holder upon a conversion of the Series B Preferred Stock and (ii) after the applicable Delivery Period with respect to such conversion, a Holder purchases (in an open market transaction or otherwise) shares of Class A Common Stock to make delivery upon a sale by a Holder of the shares of Class A Common Stock (the "Sold Shares") which such Holder anticipated receiving upon such conversion (a "Buy-In"), the Company shall pay such Holder
(in addition to any other remedies available to Holder) the amount by which (x) such Holder's total purchase price (including brokerage commission, if any) for the shares of Class A Common Stock so purchased exceeds (y) the net proceeds received by such Holder from the sale of the Sold Shares. For example, if a Holder purchases shares of Class A Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to shares of Class A Common Stock sold for $10,000, the Company will be required to pay such Holder $1,000. A Holder shall provide the Company written notification indicating any amounts payable to Holder pursuant to this Section 12.

(c) Adjustment to Conversion Price. If a Holder has not received certificates for all shares of Class A Common Stock within five (5) business days following the expiration of the Delivery Period with respect to a conversion of any portion of any of such Holder's Series B Preferred Stock for any reason, then the Conversion Price for the affected Series B Preferred Stock shall thereafter be the lesser of (i) the Fixed Conversion Price on the Conversion Date specified in the Notice of Conversion which resulted in the Conversion Failure and (ii) the lowest Conversion Price in effect during the period beginning on, and including, such Conversion Date through and including the Cure Date. If there shall occur a Conversion Failure of the type described in clause (y) of Section 12(a), then the Fixed Conversion Price with respect to any conversion thereafter shall be the lowest Conversion Price in effect at any time during the period beginning on, and including, the date of the occurrence of such Conversion Failure through and including the Cure Date. The Conversion Price shall thereafter be subject to further adjustment for any events described in Section 5(d).

Section 13. Events of Default.

(a) Holder's Option to Demand Prepayment. Upon the occurrence of an Event of Default (as herein defined), each Holder shall have the right to elect at any time and from time to time prior to the cure by Borrower of such Event of Default to have all or any portion of such Holder's then outstanding Series B Preferred Stock prepaid by the Company for an amount equal to the Holder Demand Prepayment Amount (as herein defined).

(i) The right of a Holder to elect prepayment shall be exercisable upon the occurrence of an Event of Default by such Holder in its sole discretion by delivery of a Demand Prepayment Notice (as herein defined) in accordance with the procedures set forth in this Section 13. Notwithstanding the exercise of such right, the Holder shall be entitled to exercise all other rights and remedies available under the provisions of this Certificate of Designation and at law or in equity.

(ii) A Holder shall effect each demand for prepayment under this Section 13 by giving at least two (2) business days prior to written notice (the "Demand Prepayment Notice") of the date which such prepayment is to become effective (the "Effective Date of Demand of Prepayment"), the Series B Preferred Stock selected for prepayment and the Holder Demand Prepayment Amount to the Borrower at the address and facsimile number provided in the stock records of the Company, which Demand Prepayment Notice shall be deemed to have been delivered on the business day after the date of transmission of Holder's facsimile (with a copy sent by overnight courier to the Borrower) of such notice.

(iii) The Holder Demand Prepayment Amount shall be paid to a Holder whose Series B Preferred Stock are being prepaid within one (1) business day following the Effective Date of Demand of Prepayment; provided, however, that the Borrower shall not be obligated to deliver any portion of the Holder Demand Prepayment Amount until one (1) business day following either the date on which the Series B Preferred Stock being prepaid are delivered to the office of the Borrower or the Transfer Agent, or the date on which the Holder notifies the Borrower or the Transfer Agent that such Series B Preferred Stock have been lost, stolen or destroyed and delivers the documentation required in accordance with Section 5(b)(i) hereof.

(b) Holder Demand Prepayment Amount. The "Holder Demand Prepayment Amount" means the greater of: (a) 1.3 times the Stated Value of the Series B Preferred Stock for which demand is being made, plus all accrued and unpaid interest thereon and accrued and unpaid Conversion Failure Payments (if any) through the date of prepayment and (b) the product of (1) the highest price at which the Class A Common Stock is traded on the date of the Event of Default (or the most recent highest closing bid price if the Class A Common Stock is not traded on such date) divided by the Conversion Price in effect as of the date of the Event of Default, and (2) the sum of the Stated Value and all accrued and unpaid Conversion Failure Payments (if any) through the date of prepayment.

(c) Events of Default. An "Event of Default" means any one of the following:

(i) a Conversion Failure described in Section 12(a) hereof;

(ii) a Share Authorization Failure described in
Section 11(b) hereof, if such Share Authorization Failure continues uncured for ninety (90) days after the Reservation Trigger Date;

(iii) the Company fails, and such failure continues uncured for three (3) business days after the Company has been notified thereof in writing by a Holder, to satisfy the share reservation requirements of Section 11 hereof;

(iv) the Company fails to maintain an effective registration statement as required by Section 2, Section 3 and Section 6 of the Registration Rights Agreement, between the Company and the Holder(s) (the "Registration Rights Agreement") except where such failure lasts no longer than three (3) consecutive trading days and is caused solely by failure of the Securities and Exchange Commission to timely review the customary submission of or respond to the customary requests of the Company;

(v) for three (3) consecutive trading days or for an aggregate of ten (10) trading days in any nine (9) month period, the Class A Common Stock (including any of the shares of Class A Common Stock issuable upon conversion of the Series B Preferred Stock, and exercise of the Common Warrants) is (i) suspended from trading on any of NASDAQ SmallCap, NMS, NYSE, AMEX or the OTC Bulletin Board, or (ii) is not qualified for trading on at least one of NASDAQ SmallCap, NMS, NYSE, AMEX or the OTC Bulletin Board;

(vi) the Company fails, and such failure continues uncured for three (3) business days after the Company has been notified thereof in writing by a Holder, to remove any restrictive legend on any certificate for any shares of Class A Common Stock issued to a Holder upon conversion of any Series B Preferred Stock, or exercise of any Common Warrant as and when required by this Certificate of Designation, the Common Warrants, the Subscription Agreement, between the Company and the Holder(s) (the "Subscription Agreement") or the Registration Rights Agreement;

(vii) the Company breaches, and such breach continues uncured for three (3) business days after the Company has been notified thereof in writing by a Holder, any significant covenant or other material term or condition of this Certificate of Designation, the Subscription Agreement, the Common Warrants or the Registration Rights Agreement;

(viii) any representation or warranty of the Company made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Subscription Agreement and Registration Rights Agreement), shall be false or misleading in any material respect when made;

(ix) the Company or any subsidiary of the Company shall make an assignment for the benefit of its creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such receiver or trustee shall otherwise be appointed; or

(x) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company (and such proceedings shall continue unstayed for thirty (30) days).

(d) Failure to Pay Damages Amount. If the Company fails to pay the Holder Demand Prepayment Amount within five (5) business days of its receipt of a Demand Prepayment Notice, then such Holder shall have the right, at any time and from time to time prior to the payment of the Holder Demand Prepayment Amount, to require the Company, upon written notice, to immediately convert (in accordance with the terms of Section 5) all or any portion of the Holder Demand Prepayment Amount, into shares of Class A Common Stock at the then current Conversion Price, provided that if the Company has not delivered the full number of shares of Class A Common Stock issuable upon such conversion within five (5) business days after the Company receives written notice of such conversion, the Conversion Price with respect to such Holder Demand Prepayment Amount shall thereafter be deemed to be the at the lowest Conversion Price in effect during the period beginning on the date of the Event of Default through the date on which the Company delivers to the Holder the full number of freely tradable shares of Class A Common Stock issuable upon such conversion.

In the event the Company is not able to pay all amounts due and payable with respect to all Series B Preferred Stock subject to Holder Demand Prepayment Notices, the Company shall pay the Holders such amounts pro rata, based on the total amounts payable to such Holder relative to the total amounts payable to all Holders.

/s/ Donald E. Lawson
------------------------------------------

Donald E. Lawson, Executive Vice President

                                                        For the Three Months
                                                         Ended September 30
                                                    ----------------------------
                                                       1997            1996
                                                    -----------     -----------
Net loss                                            $  (912,599)    $  (757,129)
Preferred stock 8% premium                              (32,099)           --
Imputed dividend on Series A Preferred Stock           (238,650)           --
                                                    -----------     -----------
Net loss applicable to common shareholders          $(1,183,348)    $  (727,129)

                                                    -----------     -----------
Weighted average common shares outstanding            2,796,866       2,735,287
                                                    ===========     ===========
Net loss per common share                           $      (.42)    $      (.28)
                                                    ===========     ===========



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