[Form Of] DESIGNATIONS OF PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF SERIES a CONVERTIBLE PREFERRED STOCK OF MILLENNIUM CELL INC.

Exhibit4.1
[Formof]

DESIGNATIONS OF PREFERENCES,

LIMITATIONS,AND RELATIVE RIGHTS OF SERIES A
CONVERTIBLEPREFERRED STOCK OF
MILLENNIUMCELL INC.
Pursuantto authority granted in the certificate of incorporation, as amended (the“Certificateof Incorporation”),of MillenniumCell Inc. (the“Corporation”) andSection 102 of the Delaware General Corporation Law (the “DGCL”),the Corporation has been authorized to issue in series [____________] sharesof preferred stock of the Corporation, par value $0.001 per share (the“PreferredStock”), and to designate the terms, preferences, limitations andrelative rights of each series established. By resolution of the required voteof the Board of Directors of the Corporation, the Corporation has establishedand fixed the preferences, powers, limitations and relative rightsof[_______]sharesof Preferred Stock designated as “Series A-0 Convertible Preferred Stock,” parvalue $0.001 per share (the “SeriesA-0 Preferred Stock”),[__________] sharesof Preferred Stock designated as “Series A-1 Convertible Preferred Stock,” parvalue $0.001 per share (the “SeriesA-1 Preferred Stock”),[__________] sharesof Preferred Stock designated as “Series A-2 Convertible Preferred Stock,” parvalue $0.001 per share (the “SeriesA-2 Preferred Stock”),[__________] sharesof Preferred Stock designated as “Series A-3 Convertible Preferred Stock,” parvalue $0.001 per share (the “SeriesA-3 Preferred Stock”),and [__________] sharesof Preferred Stock designated as “Series A-4 Convertible Preferred Stock,” parvalue $0.001 per share, (the “SeriesA-4 Preferred Stock,”and together with the Series A-0 Series Preferred Stock, the Series A-1Preferred Stock, the Series A-2 Preferred Stock and the Series A-3 PreferredStock, the “SeriesA Preferred Stock”).
 
Forthe purposes of these Designations (as defined below), the following terms shallhave the meanings specified:
 
ApplicableConversion Price”shall mean the Series A-0 Conversion Price, the Series A-1 Conversion Price, theSeries A-2 Conversion Price, the Series A-3 Conversion Price or the Series A-4Conversion Price, as applicable.
 
ApplicableConversion Value”shall mean the Series A-0 Conversion Value, the Series A-1 Conversion Value, theSeries A-2 Conversion Value, the Series A-3 Conversion Value or the Series A-4Conversion Value, as applicable.
 
ApplicableIssue Date”shall mean the Series A-0 Issue Date, Series A-1 Issue Date, the Series A-2Issue Date, the Series A-3 Issue Date or the Series A-4 Issue Date, asapplicable.
 
ApplicableLiquidation Value”shall mean the Series A-0 Liquidation Value, the Series A-1 Liquidation Value,the Series A-2 Liquidation Value, the Series A-3 Liquidation Value or the SeriesA-4 Liquidation Value, as applicable.
 
Boardof Directors”shall mean the board of directors of the Corporation.
 

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CommonStock”shall mean the common stock of the Corporation, par value $0.001 pershare.
 
Designations”shall mean the terms, preferences, limitations and relative rights of the SeriesA Preferred Stock established hereby and set forth herein.
 
FullyDiluted Basis”shall mean, as of any date, on a fully diluted basis, as if (i) all shares ofPreferred Stock, evidences of indebtedness, shares or other securitiesconvertible into or exchangeable for Common Stock had been fully converted intoor exchanged for shares of Common Stock and (ii) any outstanding warrants,options or other rights to acquire shares of capital stock or convertiblesecurities (the securities described in clauses (i) and (ii) being hereinafterreferred to as “CommonStock Equivalents”)had been fully exercised (and the resulting securities fully converted intoshares of Common Stock), but excluding any Common Stock Equivalents having anexercise, strike or conversion price in excess of the VWAP of the Common Stockfor the thirty (30)-trading day period immediately preceding the date of suchdetermination.
 
JointDevelopment Agreement”shall mean that certain Joint Development Agreement to be dated on or about thedate hereof, by and among the Corporation and TDCC.
 
Liquidation”shall have the meaning provided in Section (b).
 
Milestone4”shall have the meaning provided in the Joint Development Agreement.
 
MinimumTrading Volume”shall mean the product of the (x) average daily trading volume for Common Stockduring calendar years 2003 and 2004 multiplied by (y) fifteen (15).
 
Person”means any individual, firm, corporation, partnership, trust, limited liabilitycompany, incorporated or unincorporated association, joint venture, joint stockcompany, or other entity of any kind, and shall include any successor (by mergeror otherwise) of any such entity.
 
PurchaseAgreement”shall mean that certain Stock Purchase Agreement to be dated on or aboutFebruary 24, 2005, by and among the Corporation and TDCC, pursuant to which theissuances of shares of Series A Preferred Stock is to occur.
 
Saleor Merger”shall have the meaning specified in Section (b).
 
SecuritiesAct”shall mean the Securities Act of 1933, as amended.
 
SeriesA-0 Conversion Price”shall mean the Series A-0 Liquidation Value subject to adjustment as provided inSection(d).
 
SeriesA-0 Conversion Value”shall mean the product of (A) the Series A-0 Liquidation Value multiplied by (B)ten (10).
 
SeriesA-0 Issue Date”shall mean the date on which the shares of Series A-0 Preferred Stock areactually issued pursuant to the Purchase Agreement.
 

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SeriesA-0 Liquidation Value”shall mean the value equal to the VWAP of the Common Stock for the thirty(30)-trading day period immediately preceding the Series A-0 Issue Date (asadjusted for any stock dividends, combinations, stock splits or similarrecapitalization events).
 
SeriesA-1 Conversion Price”shall mean the Series A-1 Liquidation Value subject to adjustment as provided inSection(d).
 
SeriesA-1 Conversion Value”shall mean the product of (A) the Series A-1 Liquidation Value multiplied by (B)ten (10).
 
SeriesA-1 Issue Date”shall mean the date on which the shares of Series A-1 Preferred Stock areactually issued pursuant to the Purchase Agreement.
 
SeriesA-1 Liquidation Value”shall mean the value equal to the VWAP of the Common Stock for the thirty(30)-trading day period immediately preceding the Series A-1 Issue Date (asadjusted for any stock dividends, combinations, stock splits or similarrecapitalization events).
 
SeriesA-2 Conversion Price”shall mean the Series A-2 Liquidation Value subject to adjustment as provided inSection(d).
 
SeriesA-2 Conversion Value”shall mean the product of (A) the Series A-2 Liquidation Value multiplied by (B)ten (10).
 
SeriesA-2 Issue Date”shall mean the date on which the shares of Series A-2 Preferred Stock areactually issued pursuant to the Purchase Agreement.
 
SeriesA-2 Liquidation Value”shall mean the value equal to the VWAP of the Common Stock for the thirty(30)-trading day period immediately preceding the Series A-2 Issue Date (asadjusted for any stock dividends, combinations, stock splits or similarrecapitalization events).
 
SeriesA-3 Conversion Price”shall mean the Series A-3 Liquidation Value subject to adjustment as provided inSection(d).
 
SeriesA-3 Conversion Value”shall mean the product of (A) the Series A-3 Liquidation Value multiplied by (B)ten (10).
 
SeriesA-3 Issue Date”shall mean the date on which the shares of Series A-3 Preferred Stock areactually issued pursuant to the Purchase Agreement.
 
SeriesA-3 Liquidation Value”shall mean the value equal to the VWAP of the Common Stock for the thirty(30)-trading day period immediately preceding the Series A-3 Issue Date (asadjusted for any stock dividends, combinations, stock splits or similarrecapitalization events).
 

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SeriesA-4 Conversion Price”shall mean the Series A-4 Liquidation Value subject to adjustment as provided inSection(d).
 
SeriesA-4 Conversion Value”shall mean the product of (A) the Series A-4 Liquidation Value multiplied by (B)ten (10).
 
SeriesA-4 Issue Date”shall mean the date on which the shares of Series A-4 Preferred Stock areactually issued pursuant to the Purchase Agreement.
 
SeriesA-4 Liquidation Value”shall mean the value equal to the VWAP of the Common Stock for the thirty(30)-trading day period immediately preceding the Series A-4 Issue Date (asadjusted for any stock dividends, combinations, stock splits or similarrecapitalization events).
 
SeriesB Designations”shall mean the terms, preferences, limitations and relative rights of the SeriesB Preferred Stock established thereby and set forth therein.
 
SeriesB Preferred Stock”shall mean the Series B Convertible Preferred Stock of the Corporation, parvalue $0.001 per share.
 
TDCC”shall mean The Dow Chemical Company, a Delaware corporation.
 
TradingMarket”shall mean any of the New York Stock Exchange, the American Stock Exchange, theNasdaq National Market or the Nasdaq Smallcap Market.
 
VWAP”shall mean, with respect to any date on which a determination is required, (i)if the security is listed for trading on any Trading Market, a price, rounded tothe nearest cent, equal to (A) the sum of the following product determined foreach trading day in the specified number of consecutive trading days: (1) thelast sale price of the security during normal business hours on a specifictrading day as finally reported by the Trading Market, multiplied by (2) thenumber of shares of the security that were traded on such trading day on theTrading Market, divided by (B) the aggregate number of shares of the securitythat were traded on such trading days, and (ii) if the security is not listedfor trading on any Trading Market on the date of such calculation (or on anytrading day during the relevant number of trading days immediately preceding thedate of such determination), the fair market value of the security determinedpursuant to an appraisal process mutually satisfactory to the Corporation andTDCC.
 
TheDesignations granted to and imposed upon the Series A Preferred Stock are asfollows:
 
(a)  DividendRights.The holders of shares of Series A Preferred Stock shall not be entitled to anydividends.
 
(b)  LiquidationRights.
 
(1)  Inthe event of:
 

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(A)  the liquidation, dissolution or winding up of the Corporation, or such of theCorporation’s subsidiaries the assets of which constitute all or substantiallyall the assets of the business of the Corporation and its subsidiaries taken asa whole, in a single transaction or series of related transactions (a“Liquidation”),or
 
(B)  aSale or Merger (as defined below),
 
eachholder of Series A Preferred Stock then outstanding shall be entitled to receiveon a pari passu basis with the holders of Series B Preferred Stock, out of theassets of the Corporation available for distribution to its stockholders, beforeany payment shall be made in respect of all other classes of capital stockranking junior on liquidation to the Series A Preferred Stock and Series BPreferred Stock, an amount equal to the sum of: (i) the number of outstandingshares of Series A-0 Preferred Stock held by such holder of Series A PreferredStock multiplied by the Series A-0 Liquidation Value, (ii) the number ofoutstanding shares of Series A-1 Preferred Stock, if any, held by such holder ofSeries A Preferred Stock multiplied by the Series A-1 Liquidation Value, (iii)the number of outstanding shares of Series A-2 Preferred Stock, if any, held bysuch holder of Series A Preferred Stock multiplied by the Series A-2 LiquidationValue, (iv) the number of outstanding shares of Series A-3 Preferred Stock, ifany, held by such holder of Series A Preferred Stock multiplied by the SeriesA-3 Liquidation Value and (v) the number of outstanding shares of Series A-4Preferred Stock, if any, held by such holder of Series A Preferred Stockmultiplied by the Series A-4 Liquidation Value (the “SeriesA Liquidation Preference”). Afterpayment of (i) the Series A Liquidation Preference to each holder of Series APreferred Stock and (ii) the Series B Liquidation Preference (as defined in theSeries B Designations) to each holder of Series B Preferred Stock, any remainingassets and property of the Corporation available for distribution tostockholders shall be distributed pro rata among the holders of Common Stock,other classes of capital stock ranking junior in Liquidation to the Series APreferred Stock and the Series B Preferred Stock, Series A Preferred Stock andSeries B Preferred Stock, treating for purposes of such distribution each shareof Series A Preferred Stock or Series B Preferred Stock as such number of sharesof Common Stock into which such share of Series A Preferred Stock or Series BPreferred Stock, as the case may be, would be convertible into under thecircumstances described in Section (d) of these Designations or the Series B Designations, as applicable,on the record date for any such distribution.
 
(2)  Tothe extent necessary, the Corporation shall cause such actions to be taken byany of its subsidiaries so as to enable, to the maximum extent permitted by law,the proceeds of a Liquidation or a Sale or Merger to be distributed to theholders of shares of Series A Preferred Stock in accordance with thisSection (b).All the preferential amounts to be paid to the holders of the Series A PreferredStock under this Section (b) shallbe paid or set apart for payment before the payment or setting apart for paymentof any amount for, or the distribution of any assets of the Corporation to, theholders of all other classes of capital stock ranking junior on liquidation tothe Series A Preferred Stock and Series B Preferred Stock in connection with aLiquidation or a Sale or Merger as to which this Section (b) applies.If the assets or surplus funds to be distributed to the holders of the Series APreferred Stock and the Series B Preferred Stock are insufficient to permit thepayment to such holders of the full amounts payable to such holders, the assetsand surplus funds legally available for distribution shall be distributedratably among the holders of the Series A Preferred Stock and Series B PreferredStock in proportion to the full amount each such holder is otherwise entitled toreceive.
 

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(3)  Forpurposes of these Designations, a “Saleor Merger”shall mean any of the following:
 
(A)  themerger, reorganization or consolidation of the Corporation or such subsidiary orsubsidiaries of the Corporation the assets of which constitute all orsubstantially all the assets of the business of the Corporation and itssubsidiaries taken as a whole intoor withanother corporation,partnership, joint venture, limited liability company, or otherentity,in which the Corporation’s stockholders holding the right to vote generally inthe election of directors, general partners, managing members or individualsholding similar positions (the “Corporation’sVoting Power”) immediatelypreceding such merger, reorganization or consolidation (solely by virtue oftheir shares or other securities of the Corporation or suchsubsidiaries) shall own less than fifty percent (50%) of thesecurities of the surviving corporation,partnership, joint venture, limited liability company, or other entity entitledto vote generally in the election of directors, general partners,managing members or individuals holding similar positions;
 
(B)  thesale, transfer or lease (but not including a transfer or lease by pledge ormortgage to a bonafidelender), of all or substantially all the assets of the Corporation, whetherpursuant to a single transaction or a series of related transactions or plan(which assets shall include for these purposes the assets of the Corporation’ssubsidiaries); or
 
(C)  thesale or transfer, whether in a single transaction or a series of relatedtransactions, of securities of the Corporation such that the Corporation’sstockholders holding the Corporation’s Voting Power immediately prior to suchsale or transfer or series of transfers cease to hold a majority of theCorporation’s Voting Power after such sale or transfer or series oftransfers.
 
(4)  Anysecurities to be delivered to the holders of the Series A Preferred Stockpursuant to this Section (b) asa consequence of a Sale or Merger shall be valued as follows:
 
(i)  Securitiesnot subject to an investment letter or other similar restriction on freemarketability covered by (ii) below:
 
(A)  iflisted for trading on any Trading Market, the average closing sale price of thesecurity for the thirty (30)-trading day period ending three (3) days priorto the closing of such Sale or Merger;
 

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(B)  ifactively traded over-the-counter, by averaging the closing bid or sale prices(whichever are applicable) over the thirty (30)-day period ending three(3) days prior to the closing of such Sale or Merger; and
 
(C)  ifthere is no active public market, at the fair market value thereof, asdetermined in accordance with Section(b)(4)(iii).
 
(ii)  Themethod of valuation of securities subject to an investment letter or otherrestrictions on free marketability (other than restrictions arising solely byvirtue of a stockholder’s status as an affiliate or former affiliate) shallbe to make an appropriate discount from the market value determined as above inSection(b)(4)(i) toreflect the approximate fair market value thereof, as determined in accordancewith Section (b)(4)(iii).
 
(iii)  Thefair market value of securities delivered pursuant to Section(b)shall be established by the vote of a majority of the members of the Board ofDirectors, in good faith following the delivery of the notice required underSection(b)(6);provided howeverthat prior to the consummation of a Sale or Merger in which the securitiesdescribed in Section (b)(4)(i)(C)are delivered to the holders of the Series A Preferred Stock as a consequence ofa Sale or Merger, (m) the majority of the independent members of the Board ofDirectors of the Corporation shall concur in such vote and (n) theCorporation shall obtain a favorable opinion with respect to the fairness of theconsideration to be received by all stockholders of the Corporation in the Saleor Merger from a financial point of view, with such “fairness” opinion beingprovided by a financial advisory firm of national or New York metropolitan arearecognized standing.
 
(5)  Inthe event the requirements of this Section (b) withrespect to a Sale or Merger are not complied with, the Corporation shallforthwith either:
 
(i) causethe closing of such Sale or Merger to be postponed until such time as therequirements of Section (b)(4)(iii) havebeen complied with, or
 
(ii) cancelsuch transaction, in which event the rights, preferences and privileges of theholders of the Series A Preferred Stock shall revert to and be the same suchrights, preferences and privileges as existed immediately prior to the date ofthe first notice referred to in Section(b)(6).
 
(6)  TheCorporation shall give each holder of record of Series A Preferred Stock writtennotice of any impending Sale or Merger not later than twenty (20) daysprior to the earliest of: (i) the stockholders’ meeting called to approve suchtransaction or (ii) the closing of such transaction, and shall also notify suchholder in writing of the final approval of such transaction. The first of suchnotices shall describe the material terms and conditions of the impending Saleor Merger and the provisions of this Section (b),and the Corporation shall thereafter give such holders prompt notice of anymaterial changes. The transaction shall in no event take place sooner thantwenty (20) days after the Corporation has given the first notice providedfor herein or sooner than five (5) days after the Corporation has givennotice of any material changes provided for herein; provided,however,that such periods may be shortened upon the written consent of the holders of amajority of the then outstanding shares of Series A PreferredStock.
 

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(7)  Theprovisions of this Section (b) arein addition to and not in limitation of the provisions of Section (e).
 
(c)  VotingRights.
 
(1)  Generally.Except as set forth specifically below, each holder of a share of Series APreferred Stock shall be entitled to the whole number of votes equal to thenumber of shares of Common Stock into which such holder’s shares of Series APreferred Stock would be convertible under the circumstances described inSection (d) on the record date for the vote or consent of stockholders, and shall otherwisehave voting rights and powers equal to the voting rights and powers of theCommon Stock. Each holder of a share of Series A Preferred Stock shall beentitled to receive the same prior notice of any stockholders’ meeting as isprovided to the holders of Common Stock in accordance with the bylaws of theCorporation, as well as prior notice of all stockholder actions to be taken bylegally available means in lieu of a meeting, and shall vote with holders of theCommon Stock as if they were a single class of securities upon any mattersubmitted to a vote of stockholders, except those matters required by law or bythe terms hereof to be submitted to a class vote of the holders of Series APreferred Stock, in which case the holders of Series A Preferred Stock onlyshall vote as a separate class.
 
(d)  Conversion.The holders of shares of Series A Preferred Stock shall have conversion rightsas follows (the “SeriesA Conversion Rights”):
 
(1)  ConversionRate.For purposes of this Section (d),the shares of Series A Preferred Stock shall be convertible, at the times andunder the conditions described in this Section (d),at the rate (the “Applicable ConversionRate”) ofone share of Series A Preferred Stock to the number of shares of Common Stockthat equals the quotient obtained by dividing the Applicable Conversion Value bythe corresponding Applicable Conversion Price. Such conversion shall be deemedto have been made immediately prior to the close of business on the date of thesurrender of the shares of Series A Preferred Stock to be converted inaccordance with the procedures described in Section (d)(5).The initial Applicable Conversion Rate shall be ten (10) shares of Common Stockfor each share of Series A Preferred Stock.
 
(2)  OptionalConversion.Each share of Series A Preferred Stock shall be convertible, at the option ofthe holder thereof, at any time after the date of issuance of such share at theoffice of the Corporation or any transfer agent for the Series A PreferredStock, into Common Stock at the then effective Applicable Conversion Rate. Suchconversion shall be deemed to have been made immediately prior to the close ofbusiness on the date of the surrender of the shares of Series A Preferred Stockto be converted in accordance with the procedures described in Section(d)(5).
 

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(3)  RequiredConversion.After the one-year anniversary of the achievement of Milestone 4, as long as theCommon Stock is listed for trading on a Trading Market and the average tradingvolume for the thirty (30)-trading day period immediately preceding the date ofsuch election exceeds the Minimum Trading Volume, the Corporation may elect torequire the holders of shares of Series A Preferred Stock to convert all or anyportion of the shares of Series A Preferred Stock held by such holders, if, atthe time of such election by the Corporation the VWAP of the Common Stock forthe thirty (30)-trading day period immediately preceding the date of suchelection is at least two (2) times greater than the Applicable Conversion Pricefor such shares of Series A Preferred Stock; provided,that in the event the Corporation elects to require the holders of Series APreferred Stock to only convert a portion of their shares of Series A PreferredStock, then such portion shall be allocated pro rata among the holders of SeriesA Preferred Stock based on the number of shares owned by each such holder. Inany conversion pursuant to this Section (d)(3),such conversion shall be automatic upon election by the Corporation, withoutneed for any further action by the holders of shares of Series A Preferred Stockand regardless of whether the certificates representing such shares aresurrendered to the Corporation or its transfer agent; provided,however,that the Corporation shall not be obligated to issue certificates evidencing theshares of Common Stock issuable upon such conversion unless certificatesevidencing such shares of Series A Preferred Stock so converted are surrenderedto the Corporation in accordance with the procedures described in Section (d)(5).Upon the conversion of the Series A Preferred Stock pursuant to thisSection (d)(3),the Corporation shall promptly send written notice thereof, by registered orcertified mail, return receipt requested and postage prepaid, by hand deliveryor by overnight delivery, to each holder of record of Series A Preferred Stockat his, her or its address then shown on the records of the Corporation, whichnotice shall state that certificates evidencing shares of Series A PreferredStock so converted must be surrendered at the office of the Corporation (or ofits transfer agent for the Common Stock, if applicable) in the mannerdescribed in Section (d)(5).
 
(4)  NoFractional Shares.No fractional shares of Common Stock shall be issued upon conversion of anyseries of Series A Preferred Stock. In lieu of fractional shares, theCorporation shall pay therefor, at the time of any conversion of Series APreferred Stock as herein provided, an amount in cash equal to such fractionmultiplied by the VWAP of the Common Stock for the thirty (30)-trading dayperiod immediately preceding the date of conversion, payable upon surrender ofthe certificates representing the shares of Series A Preferred Stock beingconverted.
 
(5)  Mechanicsof Conversion.Before any holder of Series A Preferred Stock shall be entitled to receivecertificates representing the shares of Common Stock into which shares of SeriesA Preferred Stock are converted in accordance with Sections(d)(2) or(d)(3),such holder shall surrender the certificate or certificates for such shares ofSeries A Preferred Stock, duly endorsed, at the office of the Corporation or ofany transfer agent for the Series A Preferred Stock, and shall give writtennotice to the Corporation at such office of the name or names in which suchholder wishes the certificate or certificates for shares of Common Stock to beissued, if different from the name shown on the books and records of theCorporation. Said conversion notice shall also contain such representations asmay reasonably be required by the Corporation to the effect that the shares tobe received upon conversion are not being acquired and will not be transferredin any way that might violate the then applicable securities laws. TheCorporation shall, as soon as practicable thereafter and in no event later thanthirty (30) days after the delivery of said certificates, issue and deliverat such office to such holder of Series A Preferred Stock, or to the nominee ornominees of such holder as provided in such notice, a certificate orcertificates for the number of shares of Common Stock to which such holder shallbe entitled. The person or persons entitled to receive the shares of CommonStock issuable upon a conversion pursuant to Sections(d)(2) or(d)(3) shallbe treated for all purposes as the record holder or holders of such shares ofCommon Stock as of the effective date of conversion specified in such section.All certificates issued upon the exercise or occurrence of the conversion shallcontain a legend governing restrictions upon such shares imposed by law oragreement of the holder or his or its predecessors.
 

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(6)  Adjustmentfor Subdivisions or Combinations of Common Stock; StockDividends.In the event the Corporation at any time or from time to time after the SeriesA-1 Issue Date effects a subdivision or split of its Common Stock into a greaternumber of shares of Common Stock or shall issue a stock dividend on theoutstanding Common Stock without an equivalent subdivision or split of, ordividend on, the Series A Preferred Stock, then in such event the ApplicableConversion Price for each of the issued and outstanding series of Series APreferred Stock in effect immediately prior to such subdivision or split or theissuance of such dividend shall be proportionately decreased (and the ApplicableConversion Rate for each of the issued and outstanding series of Series APreferred Stock thus proportionately increased), effective at the close ofbusiness on the date of such subdivision, split or dividend. In the event theCorporation at any time or from time to time after the Series A-0 Issue Dateeffects a combination of the outstanding Common Stock into a lesser number ofshares without an equivalent combination of the outstanding Series A PreferredStock, then in such event the Applicable Conversion Price for each of the issuedand outstanding series of Series A Preferred Stock in effect immediately priorto such combination, shall be proportionately increased (and the ApplicableConversion Rate for each of the issued and outstanding series of Series APreferred Stock thus proportionately decreased), effective at the close ofbusiness on the date of such combination.
 
(7)  Adjustmentof Conversion Price for Diluting Issues.
 
(i)  SeriesA-0 Conversion Price.In the event the Corporation issues any Additional Shares of Common Stock (asdefined below) following the Series A-0 Issue Date, at a per shareconsideration less than the Series A-0 Conversion Price then in effect, then theSeries A-0 Conversion Price shall be reduced, concurrently with such issuance,to a price (calculated to the nearest cent) determined by multiplying suchSeries A-0 Conversion Price by a fraction:
 
(A)  thenumerator of which shall be the number of shares of Common Stock outstandingimmediately prior to such issuance plusthe number of shares of Common Stock issuable upon conversion of all CommonStock Equivalents outstanding immediately prior to such issuance plusthenumber of shares of Common Stock which the aggregate consideration received bythe Corporation for the total number of Additional Shares of Common Stock insuch issuance would purchase at the Series A-0 Conversion Price in effectimmediately prior to such issuance; and
 

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(B)  thedenominator of which shall be the number of shares of Common Stock outstandingimmediately prior to such issuance plusthenumber of shares of Common Stock issuable upon conversion of all Common StockEquivalents outstanding immediately prior to such issuance plusthe number of such Additional Shares of Common Stock so issued.
 
(ii)  SeriesA-1 Conversion Price.In the event the Corporation issues any Additional Shares of Common Stockfollowing the Series A-1 Issue Date, at a per share consideration less than theSeries A-1 Conversion Price then in effect, then the Series A-1 Conversion Priceshall be reduced, concurrently with such issuance, to a price (calculated to thenearest cent) determined by multiplying such Series A-1 Conversion Price bya fraction:
 
(A)  thenumerator of which shall be the number of shares of Common Stock outstandingimmediately prior to such issuance plusthe number of shares of Common Stock issuable upon conversion of all CommonStock Equivalents outstanding immediately prior to such issuance plusthenumber of shares of Common Stock which the aggregate consideration received bythe Corporation for the total number of Additional Shares of Common Stock insuch issuance would purchase at the Series A-1 Conversion Price in effectimmediately prior to such issuance; and
 
(B)  thedenominator of which shall be the number of shares of Common Stock outstandingimmediately prior to such issuance plusthenumber of shares of Common Stock issuable upon conversion of all Common StockEquivalents outstanding immediately prior to such issuance plusthe number of such Additional Shares of Common Stock so issued.
 
(iii)  SeriesA-2 Conversion Price.In the event the Corporation issues any Additional Shares of CommonStock following the Series A-3 Issue Date, at a per share considerationless than the Series A-2 Conversion Price then in effect, then the Series A-2Conversion Price shall be reduced, concurrently with such issuance, to a price(calculated to the nearest cent) determined to be the per share consideration,if any, received, or deemed to have been received, pursuant to Section (d)(7)(vii),by the Corporation upon such issuance of Additional Shares of CommonStock.
 
(iv)  SeriesA-3 Conversion Price.In the event the Corporation issues any Additional Shares of Common Stockfollowing the Series A-3 Issue Date, at a per share consideration less than theSeries A-3 Conversion Price then in effect, then the Series A-3 Conversion Priceshall be reduced, concurrently with such issuance, to the price (calculated tothe nearest cent) determined to be the per share consideration, if any,received, or deemed to have been received, pursuant to Section (d)(7)(vii),by the Corporation upon such issuance of Additional Shares of CommonStock.
 

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(v)  SeriesA-4 Conversion Price.In the event the Corporation issues any Additional Shares of Common Stockfollowing the Series A-4 Issue Date, at a per share consideration less than theSeries A-4 Conversion Price then in effect, then the Series A-4 Conversion Priceshall be reduced, concurrently with such issuance, to a price (calculated to thenearest cent) which is the sum of:
 
(a)  theproduct of (X) .5 multiplied by (Y) the Series A-4 Conversion Price multipliedby (Z) a fraction:
 
(A)  thenumerator of which shall be the number of shares of Common Stock outstandingimmediately prior to such issuance plusthe number of shares of Common Stock issuable upon conversion of all CommonStock Equivalents outstanding immediately prior to such issuance plusthenumber of shares of Common Stock which the aggregate consideration received bythe Corporation for the total number of Additional Shares of Common Stock insuch issuance would purchase at the Series A-4 Conversion Price in effectimmediately prior to such issuance; and
 
(B)  thedenominator of which shall be the number of shares of Common Stock outstandingimmediately prior to such issuance plusthenumber of shares of Common Stock issuable upon conversion of all Common StockEquivalents outstanding immediately prior to such issuance plusthe number of such Additional Shares of Common Stock so issued; and
 
(b)  theproduct of (X) .5 multiplied by (Y) the price (calculated to the nearest cent)determined to be the per share consideration, if any, received, or deemed tohave been received, pursuant to Section (d)(7)(vii),by the Corporation upon such issuance of Additional Shares of CommonStock.
 
(vi)  Asused herein, “AdditionalShares of Common Stock”shall mean either (x) shares of Common Stock, or (y) the maximumnumber of shares of Common Stock issuable upon conversion, exchange or exerciseof Common Stock Equivalents; provided,however,that Additional Shares of Common Stock shall not include:
 
(A)  anysecurities to be issued to employees, officers or directors of, or consultantsor advisors to, the Corporation pursuant to stock purchase or stock option plansor other arrangements that are for purposes of compensation to such persons intheir capacity as employees, officers, directors, consultants or advisors andare approved by the Board of Directors, subject to an aggregate maximum of thelower of (x) 4,000,000 shares of Common Stock (as adjusted by stock dividends,splits, subdivisions or combinations of shares and on an as-converted basis) and(y) 10% of the outstanding shares of Common Stock (determined on a Fully DilutedBasis);
 

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(B)  anysecurities of any class or series issued or to be issued pursuant to any optionsor warrants (but not convertible debentures) outstanding as of the date of thePurchase Agreement;
 
(C)  anysecurities of any class or series issued or to be issued pursuant to theconversion or exercise of any securities issued in connection with the PurchaseAgreement;
 
(D)  anysecurities of any class or series issued or to be issued pursuant to thePurchase Agreement;
 
(E)  CommonStock for which an adjustment has been made pursuant to Section (d)(6);
 
(F)  anysecurities issued for consideration other than cash pursuant to a merger,consolidation, acquisition or similar business combination, subject to anaggregate maximum of the lower of (x) 2,000,000 shares of Common Stock (asadjusted by stock dividends, splits, subdivisions or combinations of shares andon an as-converted basis) and (y) 5% of the outstanding shares of Common Stock(determined on a Fully Diluted Basis);
 
(G)  anysecurities issued in connection with any stock split, stock dividend,recapitalization or similar transaction by the Corporation;
 
(H)  anysecurities issued as consideration, whether in whole or in part, to any personor entity for providing services or supplying goods to the Corporation, subjectto an aggregate maximum of the lower of (x) 2,000,000 shares of Common Stock (asadjusted by stock dividends, splits, subdivisions or combinations of shares andon an as-converted basis) and (y) 5% of the outstanding shares of Common Stock(determined on a Fully Diluted Basis);
 
(I)  anysecurities issued to any entity which is or will be, itself or through itssubsidiaries or affiliates, an operating company in a business related to orcomplementary with the business of the Corporation and in which the Corporationreceives reasonably material benefits in addition to the investment of funds,subject to an aggregate maximum of the lower of (x) 2,000,000 shares of CommonStock (as adjusted by stock dividends, splits, subdivisions or combinations ofshares and on an as-converted basis) and (y) 5% of the outstanding shares ofCommon Stock (determined on a Fully Diluted Basis);
 
(J)  anysecurities issued pursuant to any equipment leasing arrangement, subject to anaggregate maximum of the lower of (x) 2,000,000 shares of Common Stock (asadjusted by stock dividends, splits, subdivisions or combinations of shares andon an as-converted basis) and (y) 5% of the outstanding shares of Common Stock(determined on a Fully Diluted Basis);
 

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(K)  anysecurities issued to pay all or a portion of any investment banking, finders orsimilar fee or commission, which entitles the holders thereof to acquire sharesof Common Stock at a price not less than the market price of the Common Stock onthe date of such issuance and which is not subject to any adjustments other thanon account of stock splits and reverse stock splits, subject to an aggregatemaximum of the lower of (x) 2,000,000 shares of Common Stock (as adjusted bystock dividends, splits, subdivisions or combinations of shares and on anas-converted basis) and (y) 5% of the outstanding shares of Common Stock(determined on a Fully Diluted Basis); and
 
(L)  othersecurities as may be mutually agreed in writing prior to their issuance by theCorporation and the holders of at least a majority of the outstanding shares ofSeries A Preferred Stock;
 
provided,however,the exemptions from adjustment for the issuance of securities described inclauses (A), (F), (H), (I), (J) and (K), in the aggregate, will be subject to anaggregate maximum of the lower of (x) 5,000,000 shares of Common Stock (asadjusted by stock dividends, splits, subdivisions or combinations of shares andon an as-converted basis) and (y) 12.5% of the outstanding shares of CommonStock (determined on a Fully Diluted Basis).
 
(vii)  Theper share consideration with respect to the sale or issuance of a share ofCommon Stock shall be the price per share received by the Corporation, prior tothe payment of any expenses, commissions, underwriting discounts and otherapplicable costs. With respect to the sale or issuance of Common StockEquivalents that are convertible into or exchangeable for Common Stock withoutfurther consideration, the per share consideration shall be determined bydividing the maximum number of shares (as set forth in the instrument relatingthereto without regard to any provisions contained therein for subsequentadjustment of such number) of Common Stock issuable with respect to suchCommon Stock Equivalents into the aggregate consideration received by theCorporation upon the sale or issuance of such Common Stock Equivalents. Withrespect to the issuance of other Common Stock Equivalents, the per shareconsideration shall be determined by dividing the maximum number of shares (asset forth in the instrument relating thereto without regard to any provisionscontained therein for subsequent adjustment of such number) of Common Stockissuable with respect to such Common Stock Equivalents into the aggregateconsideration received by the Corporation upon the sale or issuance of suchCommon Stock Equivalents plus the total consideration receivable by theCorporation upon the conversion or exercise of such Common Stock Equivalents. Inconnection with the sale or issuance of Common Stock and/or Common StockEquivalents for non-cash consideration, the amount of consideration shall bedetermined by the Board of Directors in good faith.
 
(viii)  Onceany Additional Shares of Common Stock have been treated as having been issuedfor the purpose of this Section (d)(7),they shall be treated as issued and outstanding shares of Common Stock wheneverany subsequent calculations must be made pursuant hereto.
 

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(8)  Recapitalizations,Reorganizations, etc. Inthe event of any recapitalization, reorganization, consolidation or merger ofthe Corporation with or into another Person or the sale, transfer or otherdisposition of all or substantially all of the assets of the Corporation and itssubsidiaries (viewed as a whole) to another Person (other than aconsolidation, merger or sale treated as a Liquidation or Sale or Mergerpursuant to Section (b)),each share of Series A Preferred Stock shall thereafter be convertible into thekind and amount of shares of stock or other securities or property that a holderof the number of shares of Common Stock deliverable upon conversion of Series APreferred Stock would have been entitled to receive upon such recapitalization,reorganization, consolidation, merger or sale; and, in such case, appropriateadjustment (as determined in good faith by the Board of Directors) shall bemade in the application of the provisions set forth in this Section (d) withrespect to the rights and interests thereafter of the holders of Series APreferred Stock, to the end that the provisions set forth in this Section (d) shallthereafter be applicable, as nearly as reasonably may be, in relation to anyshares of stock or other property thereafter deliverable upon conversion ofSeries A Preferred Stock. The Corporation shall not enter into any suchrecapitalization, reorganization, consolidation, merger or sale (other than aconsolidation, merger or sale treated as a Liquidation or Sale or Mergerpursuant to Section (b),for which Section (b) shall control) withoutgiving effect to the conversion provisions contained in this Section(d)or any other governing documents and requiring any successor to the Corporationresulting from such recapitalization, reorganization, consolidation, merger orsale to agree in writing to be bound by such provisions.
 
(9)  DeMinimis Adjustments.No adjustment to the Applicable Conversion Price (and, thereby, the ApplicableConversion Rate) shall be made if such adjustment would result in a changein the Applicable Conversion Price of less than $0.01. Any adjustment of lessthan $0.01 that is not made shall be carried forward and taken into account inany subsequent adjustment to the Applicable Conversion Price and shall be madeat the time of and together with any subsequent adjustment that, on a cumulativebasis, amounts to an adjustment of $0.01 or more in the Applicable ConversionPrice.
 
(10)  NoImpairment.Except as provided in Section (e),the Corporation shall not, by amendment of its Certificate of Incorporation orbylaws or through any reorganization, transfer of assets, consolidation, merger,dissolution, issue or sale of securities or any other voluntary action, avoid orseek to avoid the observance or performance of any of the terms to be observedor performed hereunder by the Corporation, but shall at all times in good faithassist in the carrying out of all the provisions of this Section (d) andin the taking of all such action as may be necessary or appropriate in order toprotect the Series A Conversion Rights of the holders of the Series A PreferredStock against impairment.
 
(11)  Certificateas to Adjustments.Upon the occurrence of each adjustment or readjustment of any ApplicableConversion Price pursuant to this Section (d),the chief financial officer of the Corporation shall promptly compute suchadjustment or readjustment in accordance with the terms hereof; provided,howeverthat upon the reasonable request of The Dow Chemical Company, as holder of theSeries A Preferred Stock, the Corporation shall cause independent publicaccountants selected by the Corporation to verify such computation in a writteninstrument furnished to The Dow Chemical Company, as holder of the Series APreferred Stock. The chief financial officer of the Corporation shall alsoprepare and furnish to each holder of Series A Preferred Stock a certificatesetting forth such adjustment or readjustment and showing in detail the factsupon which such adjustment or readjustment is based. The Corporation shall, uponthe written request at any time of any holder of Series A Preferred Stock,furnish or cause to be furnished to such holder a like certificate setting forth(i) such adjustments and readjustments, (ii) the Applicable ConversionPrice(s) and the Applicable Conversion Rate(s) at that time in effect, and(iii) the number of shares of Common Stock and the amount, if any, of otherproperty that at that time would be received upon the conversion of Series APreferred Stock.
 

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(12)  Noticesof Record Date.In the event of any taking by the Corporation of a record of the holders of anyclass of securities other than Series A Preferred Stock for the purpose ofdetermining the holders thereof who are entitled to receive any dividend orother distribution, any Common Stock Equivalents or any right to subscribe for,purchase or otherwise acquire any shares of stock of any class or any othersecurities or property, or to receive any other right, the Corporation shallmail to each holder of Series A Preferred Stock, at least twenty (20) daysprior to the date specified therein, a notice specifying the date on which anysuch record is to be taken for the purpose of such dividend, distribution orrights, and the amount and character of such dividend, distribution orrights.
 
(13)  Reservationof Stock Issuable Upon Conversion.The Corporation shall at all times reserve and keep available out of itsauthorized but unissued shares of Common Stock solely for the purpose ofeffecting the conversion of the shares of the Series A Preferred Stock suchnumber of its shares of Common Stock as shall from time to time be sufficient toeffect the conversion of all shares of the Series A Preferred Stock; and if atany time the number of authorized but unissued shares of Common Stock would beinsufficient to effect the conversion of all then outstanding shares of theSeries A Preferred Stock, the Corporation shall take such corporate action priorto taking any action that would result in any such insufficiency as may, in theopinion of its counsel, be necessary to increase its authorized but unissuedshares of Common Stock to such number of shares as shall be sufficient for suchpurpose.
 
(e)  ProtectiveProvisions.
 
(1)  ActionsRequiring Majority Approval of Series A Preferred Stock.So long as TDCC holds not less than twenty-five percent (25%) of the shares ofSeries A Preferred Stock that have been issued under the Purchase Agreement asof such time, in addition to any other rights provided by law, except where thevote or written consent of the holders of a greater number of shares is requiredby law or by another provision of the Certificate of Incorporation, withoutfirst obtaining the affirmative vote or written consent of the holders of amajority of the total number of shares of Series A Preferred Stock outstanding,voting together as a single class, the Corporation shall not:
 

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(A)  amendor repeal any provision of, or add any provision to, the Certificate ofIncorporation or bylaws, or file any certificate of designations, preferences,limitations and relative rights of any series of preferred stock, if such actionwould adversely alter or change the preferences, rights, privileges or powersof, or restrictions provided for the benefit of the Series A Preferred Stock,regardless of whether any such action shall be by means of amendment to theCertificate of Incorporation or by merger, consolidation orotherwise;
 
(B)  increaseor decrease (other than by conversion) the authorized number of shares ofthe Series A Preferred Stock;
 
(C)  createor authorize (by reclassification or otherwise) any new class or series ofshares that has a preference over or is on a parity with the Series A PreferredStock with respect to dividends or the distribution of assets on theliquidation, dissolution or winding up of the Corporation;
 
(D)  purchase,repurchase or redeem any shares of Common Stock (other than pursuant to equityincentive agreements with employees giving the Corporation the right torepurchase shares upon the termination of services);
 
(E)  paydividends or make any other distribution on the Common Stock; or
 
(F)  whetheror not prohibited by the terms of the Series A Preferred Stock, circumvent aright of the Series A Preferred.
 
(f)  HoldingPeriod.For any Series A Preferred Stock, the holder of such series of Series APreferred Stock shall hold such shares of Series A Preferred Stock or the sharesof Common Stock underlying such Series A Preferred Stock, for a minimum of six(6) months after the Applicable Issue Date.
 
(g)  Notices.Any notice required by the provisions hereof to be given to the holders ofshares of Series A Preferred Stock shall be deemed given on (i) the thirdbusiness day following (and not including) the date on which such notice isdeposited in the United States mail, first-class, postage prepaid, and addressedto each holder of record at his address appearing on the books of theCorporation or (ii) the business day following the date on which such notice issent via overnight delivery by nationally recognized overnight courier. Noticeby any other means shall not be deemed effective until actuallyreceived.
 

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