CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE

SERIES A CONVERTIBLE PREFERRED STOCK OF

BBOOTH, INC.

 

I, Rory J. Cutaia, hereby certify that I am the Chief Executive Officer of
bBooth, Inc. (the “Company”), a corporation organized and existing under the
Nevada Revised Statutes (the “NRS”), and further do hereby certify:

 

That, pursuant to the authority expressly conferred upon the Board of Directors
of the Company (the “Board”) by the Company’s Articles of Incorporation, as
amended (the “Articles of Incorporation”), the Board on February 10, 2017,
adopted the following resolutions creating a series of shares of preferred stock
designated as Series A Convertible Preferred Stock, none of which shares has
been issued:

 

RESOLVED, that the Board hereby designates the Series A Convertible Preferred
Stock and the number of shares constituting such series, and fixes the rights,
powers, preferences, privileges and restrictions relating to such series in
addition to any set forth in the Articles of Incorporation as follows:

 

TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK

 

1.       Designation and Number of Shares. There shall hereby be created and
established a series of preferred stock of the Company designated as “Series A
Convertible Preferred Stock” (the “Preferred Shares”). The authorized number of
Preferred Shares shall be 1,050,000 shares. Each Preferred Share shall have a
par value of $0.0001. Capitalized terms not defined herein shall have the
meanings as set forth in Section 23 below.

 

2.       Ranking. Except with respect any other future series of preferred stock
of senior rank to the Preferred Shares in respect of the preferences as to
dividends, distributions and payments upon the liquidation, dissolution and
winding-up of the Company (collectively, the “Senior Preferred Stock”) or any
future series of preferred stock of pari passu rank to the Preferred Shares in
respect of the preferences as to dividends, distributions and payments upon the
liquidation, dissolution and winding-up of the Company (collectively, the
“Parity Stock”), all shares of capital stock of the Company shall be junior in
rank to all Preferred Shares with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and winding-up of
the Company (collectively, the “Junior Stock”). The rights of all such shares of
capital stock of the Company shall be subject to the rights, powers, preferences
and privileges of the Preferred Shares. In the event of the merger or
consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative rights, powers, preferences, privileges,
and designations provided for herein and no such merger or consolidation shall
result inconsistent therewith.

 

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3.       Dividends.

 

(a)       From and after April 5, 2017 (the “Initial Issuance Date”), each
holder of a Preferred Share (each, a “Holder” and collectively, the “Holders”)
shall be entitled to receive dividends (the “Dividends”), which Dividends shall
be paid by the Company out of funds legally available therefor, payable, subject
to the conditions and other terms hereof, in shares of Common Stock or cash on
the Stated Value (as defined below) of such Preferred Share at the Dividend Rate
(as defined below), which shall be cumulative and shall continue to accrue
whether or not declared and whether or not in any fiscal year there shall be net
profits or surplus available for the payment of dividends in such fiscal year.
Dividends on the Preferred Shares shall commence accumulating on the Initial
Issuance Date and shall be computed on the basis of a 365-day year and actual
days elapsed. Dividends shall be payable on the following dates (each, a
“Dividend Date”): (1) the first (1st) Dividend Date being April 5, 2017; (ii)
the second (2nd) Dividend Date being July 5, 2017; and (iii) and each subsequent
Dividend Date shall be solely in connection with and concurrently with
Installment Redemption Payments. Notwithstanding anything to the contrary
contained herein, unless otherwise agreed to by the Company and the Holders, the
Company shall pay Cash Dividends (as defined below) to the Holders on each of
the first (1st) two (2) Dividend Dates.

 

(b)       Dividends shall be payable on each Dividend Date, to the Holders of
record of the Preferred Shares on the applicable Dividend Date, in shares of
Common Stock (the “Dividend Shares”) so long as there has been no Equity
Conditions Failure and so long as the delivery of Dividend Shares would not
violate the provisions of Section 4; provided, however, that the Company may, at
its option, pay Dividends on any Dividend Date in cash (the “Cash Dividends”) or
in a combination of Cash Dividends and, so long as there has been no Equity
Conditions Failure, Dividend Shares. The Company shall deliver a written notice
(each, a “Dividend Election Notice”) to each Holder two (2) Trading Days prior
to each Dividend Date (the date such notice is delivered to all of the Holders,
the “Dividend Notice Date”), which notice (1) notifies the then-record Holders
that the Company has elected to pay the accrued Dividends as Cash Dividends,
Dividend Shares, or as a combination of Dividend Shares and Cash Dividends and,
in any event, specifies the amount of the to-be-paid Dividends, if any, as Cash
Dividends and the amount of the to-be-paid Dividends, if any, as Dividend Shares
and (2) certifies that there has been no Equity Conditions Failure as of such
time, if the Company has elected to pay any portion of the to-be-paid Dividends
as Dividend Shares. Notwithstanding anything herein to the contrary, if no
Equity Conditions Failure has occurred as of the Dividend Notice Date but an
Equity Conditions Failure occurs at any time prior to the date on which a
to-be-paid Dividend Shares are to be issued, (A) the Company shall provide each
Holder with a subsequent notice to that effect and (B) unless such Holder waives
the Equity Conditions Failure, such to-be-paid Dividends shall be paid as Cash
Dividends. Dividends that are to be paid to each Holder in Dividend Shares shall
be paid in a number of fully paid and non-assessable shares (rounded to the
nearest whole share, with 0.50 or more of a share being rounded up to the
nearest whole share and 0.49 or less of a share being rounded down to the
nearest whole share) of Common Stock equal to the quotient of (1) the amount of
Dividends payable to such Holder on such Dividend Date less any Cash Dividends
paid and (2) the lesser of (i) the Redemption Price in effect on the applicable
Dividend Date, and (ii) the VWAP on the Trading Day immediately preceding the
Dividend Date.

 

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(c)       When any Dividend Shares are to be paid to any Holder, the Company
shall (i) (A) provided that (x) the Company’s transfer agent (the “Transfer
Agent”) is participating in the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program and (y) either a Registration Statement for the
resale by the applicable Holder of the Dividend Shares or such Dividend Shares
to be so issued are otherwise eligible for resale pursuant to Rule 144 (as
defined in the Securities Purchase Agreement), credit such aggregate number of
Dividend Shares to which such Holder shall be entitled to such Holder’s or its
designee’s balance account with DTC through its Deposit and Withdrawal at
Custodian system, or (B) if either of the immediately preceding clauses (x) or
(y) is not satisfied, issue and deliver on the applicable Dividend Date, to the
address set forth in the register maintained by the Company for such purpose
pursuant to the Securities Purchase Agreement or to such address as specified by
such Holder in writing to the Company at least two (2) Business Days prior to
the applicable Dividend Date, a certificate, registered in the name of such
Holder or its designee, for the number of Dividend Shares to which such Holder
shall be entitled and (ii) with respect to each such payment of a Dividend, pay
to such Holder, in cash by wire transfer of immediately available funds, the
amount of any Cash Dividend. The Company shall pay any and all taxes that may be
payable with respect to the issuance and delivery of Dividend Shares.

 

4.       Beneficial Ownership Limitation. Notwithstanding anything to the
contrary contained in this Certificate of Designations, the Company shall not
tender an Installment Redemption Payment (including any Installment Redemption
Price Make-Whole Shares (as defined below)), any Dividend payment, or any other
payment due to Holder, in shares of Common Stock to the extent (but only to the
extent) that such Holder or any of its affiliates would beneficially own in
excess of 4.99% (the “Maximum Percentage”) of the then-issued and outstanding
shares of Common Stock. For purposes of this Section 4, beneficial ownership and
all determinations and calculations (including, without limitation, with respect
to calculations of percentage ownership) shall be determined in accordance with
Section 13(d) of the 1934 Act and the rules and regulations promulgated
thereunder. The provisions of this Section 4 shall be implemented in a manner
otherwise in strict conformity with the terms of this Section 4 to correct this
Section 4 (or any portion hereof) which may be defective or inconsistent with
the intended Maximum Percentage beneficial ownership limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such Maximum Percentage limitation. The limitations contained in this Section
4 shall apply to a successor holder of Preferred Shares. For any reason at any
time, upon the written or oral request of a Holder, the Company shall within one
(1) Business Day confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding, including by virtue of any prior
redemption or exercise of convertible or exercisable securities into Common
Stock, including, without limitation, pursuant to this Certificate of
Designations or securities issued pursuant to the other Transaction Documents.
By written notice to the Company, any Holder may increase or decrease the
Maximum Percentage to any other percentage not in excess of 9.99% specified in
such notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company and (ii)
any such increase or decrease will apply only to such Holder sending such notice
and not to any other Holder.

 

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5.       Mandatory Installment Redemptions; Triggering Events.

 

(a)        Reserved.

 

(b)        Mandatory Installment Redemption.

 

(i)        Beginning on the earlier of the effectiveness of a Registration
Statement and August 13, 2017, and so long as any Preferred Shares are
outstanding, with respect to any Holder, the Company shall redeem Sixty-three
Thousand Dollars ($63,000) of the outstanding amount of Preferred Shares and any
accrued but unpaid Dividends thereon on the first (1st) Business Day of each
week (each, an “Installment Redemption Payment”) for five (5) consecutive weeks.
Each Installment Redemption Payment shall be made, at the Company’s option
(subject to the Company’s compliance with the Equity Conditions (i.e., there is
no Equity Conditions Failure)) in (i) cash at a price equal to the product of
(A) the applicable Installment Redemption Payment multiplied by (B) the
Redemption Premium or (ii) in shares of Common Stock (the “Installment
Redemption Shares”) at a price equal to the product of (A) the applicable
Installment Redemption Payment multiplied by (B) the Redemption Premium divided
by the lesser of (x) the Redemption Price (subject to adjustment for any share
dividend, share split, share combination, reclassification or similar
transaction that proportionately decreases or increases the Common Stock) or (y)
the VWAP during the period commencing five (5) Trading Days prior to the
Installment Redemption Payment (the “Installment Redemption Price”).
Notwithstanding the foregoing, the Holder shall have the option to demand
payment of one (1) Installment Redemption Payment in shares of Common Stock at
price equal to the Installment Redemption Price, in lieu of the receipt of cash;
provided, that the Holder shall give the Company at least one (1) week’s notice
prior to the applicable Installment Redemption Payment. In the event that the
Company elects to not pay an Installment Redemption Payment in cash and the
Equity Conditions are not met (i.e., there is an Equity Conditions Failure),
then each Holder shall be entitled to the redemption of the applicable
Installment Redemption Payment at a price equal to the Triggering Event
Redemption Price until such time that the Equity Conditions Failure is cured.
For the avoidance of doubt, if Holder defers the receipt of Installment
Redemption Shares due to the limitations set forth in Section 4, Holder shall
remain entitled to such shares as originally calculated, i.e., any weekly VWAP
increase subsequent to the original Installment Redemption Payment shall not
decrease the amount of shares due to the Holder. However, if Holder defers the
receipt of Installment Redemption Shares due to the limitations set forth in
Section 4 and any VWAP for the five (5) consecutive Trading Days subsequent to
the original Installment Redemption Date decreases (the “Subsequent Installment
Redemption Payment”), then Holder shall receive the Installment Redemption
Shares at a price equal to the VWAP during any Subsequent Installment Redemption
Payment. Additionally, if Holder defers only a portion of the Installment
Redemption Shares due to the limitations set forth in Section 4, then such
portion shall be subject to the pricing period of the Subsequent Installment
Redemption Payment.

 

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In the event that the Installment Redemption Price from the immediately prior
Installment Redemption Payment is greater than the VWAP for the five (5)
consecutive Trading Days following such Installment Redemption Payment (the
“Make-Whole VWAP Period”), which shall be calculated in the same manner as the
VWAP and which precedes the current Installment Redemption Payment, then the
Company shall make one make-whole payment to such Holder in additional shares of
Common Stock (“Installment Redemption Price Make-Whole Shares”) to compensate
the Holder for the loss of value for the immediately previous Installment
Redemption Payment. The number of Installment Redemption Price Make-Whole Shares
shall be determined by the quotient of (A) the Installment Redemption Payment
(including the Redemption Premium) divided by (B) the VWAP calculated during the
Make-Whole VWAP Period (the “Make-Whole VWAP Price”); and then subtracting from
such result the number of shares of Common Stock issued in connection with the
Installment Redemption Payment. Such Installment Redemption Price Make-Whole
Shares shall be delivered to Holder by no later than the next Installment
Redemption Payment or, if such Installment Redemption Price Make-Whole Shares
relates to the final Installment Redemption Payment, then Installment Redemption
Price Make-Whole Shares shall be delivered to Holder by no later than three
Trading Days following the last Trading Day of the relevant Make-Whole VWAP
Period. For the avoidance of doubt, the Make-Whole VWAP Period for the final
Installment Redemption Payment shall be the five (5) consecutive Trading Days
following such final Installment Redemption Payment.

 

The Company’s obligations to deliver the Installment Redemption Price Make-Whole
Shares shall continue even though a Triggering Event has occurred (for the
avoidance of doubt, in such event the Redemption Price that is utilized shall be
the Triggering Event Redemption Price in lieu of the Installment Redemption
Price). For an example of the issuance of Installment Redemption Price
Make-Whole Shares, see Exhibit I attached hereto. For the avoidance of doubt, if
Holder defers the receipt of Installment Redemption Price Make-Whole Shares due
to the limitations set forth in Section 4, Holder shall remain entitled to the
amount of the Installment Redemption Price Make-Whole Shares as originally
calculated, i.e., any weekly VWAP increase subsequent to the Make-Whole VWAP
Period shall not decrease the amount of Installment Redemption Price Make-Whole
Shares due to the Holder. However, if Holder defers the receipt of Installment
Redemption Price Make-Whole Shares due to the limitations set forth in Section 4
and any VWAP for the five (5) consecutive Trading Days subsequent to the
Make-Whole VWAP Period decreases (the “Subsequent Make-Whole VWAP Period”), then
Holder shall receive the Installment Redemption Price Make-Whole Shares at a
price equal to the VWAP during any Subsequent Make-Whole Period. Additionally,
if Holder defers only a portion of the Installment Redemption Price Make-Whole
Shares due to the limitations set forth in Section 4, then such portion shall be
subject to the pricing period of the Subsequent Make-Whole VWAP Period. Further,
the Holder may demand the receipt of any portion of the Installment Redemption
Price Make-Whole Shares prior to the receipt of the next Installment Redemption
Payment. In such event, the Company shall deliver a separate Redemption Notice
to the Holder with respect to the next Installment Redemption Payment.

 

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(ii)        On the Business Day immediately prior to each Installment Redemption
Payment, the Company shall deliver to each Holder a written notice of each
Installment Redemption Payment by facsimile or electronic mail in the form
attached hereto as Exhibit II, which shall (A) certify that there has been no
Equity Conditions Failure and (B) state the aggregate amount of the Preferred
Shares which is being redeemed in such Installment Redemption Payment from such
Holder and all of the other Holders of the Preferred Shares pursuant to this
Section 5(b). Redemptions made pursuant to this Section 5(b) shall be made in
accordance with Section 5(d).

 

(iii)       Pursuant to the limitations set forth in Section 4, each Holder may
defer all or any portion of any Installment Redemption Payment (including
without limitation, any Installment Redemption Price Make-Whole Shares) and have
it be paid simultaneously with any future Installment Redemption Payment(s) or
on any other date. For the avoidance of doubt, if a Holder defers all or any
portion of any Installment Redemption Payment (including without limitation, any
Installment Redemption Price Make-Whole Shares) due to the limitations set forth
in Section 4, such deferral alone shall not be deemed a Triggering Event.

 

(c)       Triggering Event Redemptions.

 

(i)       Triggering Event. Each of the following events shall constitute a
“Triggering Event” and each of the events in clauses (I), (J) and (K) shall
constitute a “Bankruptcy Triggering Event”:

 

A.       reserved;

 

B.       the suspension from trading or failure of the Common Stock to be traded
or listed (as applicable) on an Eligible Market for a period of five (5)
consecutive Trading Days;

 

C.       the Company’s written notice to any holder of the Preferred Shares,
including, without limitation, by way of public announcement or through any of
its agents, at any time, of its intention not to comply, as required, with a
request for redemption of any Preferred Shares into shares of Common Stock that
is requested in accordance with the provisions of this Certificate of
Designations, other than pursuant to Section 4 hereof;

 

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D.       at any time following the fifth (5th) consecutive day that a Holder’s
pro-rata authorized share allocation (as defined in Section 9 below) is less
than 300% of the number of shares of Common Stock that such Holder would be
entitled to receive upon a redemption in full of the Preferred Shares held by
such Holder (without regard to any 4.99% limitations or restrictions set forth
in this Certificate of Designations);

 

E.       the Company’s Board of Directors fails to declare any Dividend to be
paid on the applicable Dividend Date in accordance with Section 3 which remains
uncured for a period of three (3) Trading Days;

 

F.       the Company’s failure to pay to any Holder any Dividend (whether or not
declared by the Board of Directors) or any other amount when and as due under
this Certificate of Designations (including, without limitation, the Company’s
failure to pay any redemption payments or amounts hereunder) or any other
Transaction Document or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated hereby (in
each case, as permitted pursuant to the NRS), except, in the case of a failure
to pay Dividends and Late Charges (as defined in Section 5(c)(iv)) when and as
due, in each such case only if such failure remains uncured for a period of at
least three (3) Trading Days;

 

G.       the Company, either (A) fails to deliver the required number of shares
of Common Stock within five (5) Trading Days after the applicable Installment
Redemption Payment; (B) fails to deliver the required number of Installment
Redemption Price Make-Whole Shares within five (5) Trading Days of the payment
date provided in Section 5(b)(i), or (C) fails to remove any restrictive legend
on any certificate for any shares of Common Stock issued to such Holder upon
redemption of any Preferred Shares acquired by such Holder as and when required
with respect to such securities in accordance with applicable federal securities
laws, and any such failure remains uncured for at least five (5) Trading Days;

 

H.       the occurrence of any default under, redemption of or acceleration
prior to maturity of at least an aggregate of $250,000 of Indebtedness of the
Company or any Subsidiaries;

 

I.       bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for the relief of debtors shall be instituted by or against
the Company or any Subsidiary and, if instituted against the Company or any
Subsidiary by a third party, shall not be dismissed within forty-five (45) days
of their initiation;

 

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J.       the commencement by the Company or any Subsidiary of a voluntary case
or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any subsidiary in an involuntary case or proceeding under any
applicable federal, state or foreign bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or the
occurrence of any other similar federal, state or foreign proceeding, or the
admission by it in writing of its inability to pay its debts generally as they
become due, the taking of corporate action by the Company or any Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a Uniform Commercial Code foreclosure sale or any other similar action
under federal, state or foreign law;

 

K.       the entry by a court of (A) a decree, order, judgment or other similar
document in respect of the Company or any Subsidiary of a voluntary or
involuntary case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or (B) a decree,
order, judgment or other similar document adjudging the Company or any
Subsidiary as bankrupt or insolvent, or approving as properly filed a petition
seeking liquidation, reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Subsidiary under any applicable federal,
state or foreign law or (C) a decree, order, judgment or other similar document
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Subsidiary or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree, order, judgment or other similar
document or any such other decree, order, judgment or other similar document
unstayed and in effect for a period of thirty (30) consecutive days;

 

L.       a final judgment or judgments for the payment of money aggregating in
excess of $250,000 are rendered against the Company and/or any of its
subsidiaries and which judgments are not, within thirty (30) days after the
entry thereof, bonded, discharged, settled or stayed pending appeal, or are not
discharged within thirty (30) days after the expiration of such stay; provided,
however, any judgment which is covered by insurance or an indemnity from a
credit worthy party shall not be included in calculating the $250,000 amount set
forth above so long as the Company provides each Holder a written statement from
such insurer or indemnity provider (which written statement shall be reasonably
satisfactory to each Holder) to the effect that such judgment is covered by
insurance or an indemnity and the Company or such Subsidiary (as the case may
be) will receive the proceeds of such insurance or indemnity within thirty (30)
days of the issuance of such judgment;

 

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M.       the Company and/or any Subsidiary, individually or in the aggregate
fails to pay, when due, or within any applicable grace period, any payment with
respect to any Indebtedness in excess of $250,000 due to any third party (other
than, with respect to payments contested by the Company and/or such subsidiary
(as the case may be) in good faith by proper proceedings and with respect to
which adequate reserves have been set aside for the payment thereof in
accordance with GAAP) or is otherwise in breach or violation of any agreement
for monies owed or owing in an amount in excess of $250,000, which breach or
violation causes the other party thereto to declare a default or otherwise
accelerate amounts due thereunder;

 

N.       other than as specifically set forth in another clause of this Section
5(c), the Company or any Subsidiary breaches any representation or warranty in
any material respect (other than representations or warranties subject to
material adverse effect or materiality, which may not be breached in any
respect) or any covenant or other term or condition of any Transaction Document,
except, in the case of a breach of a covenant or other term or condition that is
curable, only if such breach remains uncured for a period of five (5)
consecutive Trading Days, unless such breach does not have a Material Adverse
Effect (as defined below);

 

O.       a false or inaccurate certification (including a false or inaccurate
deemed certification) by the Company that either (A) the Equity Conditions are
satisfied (i.e., there is no Equity Conditions Failure), (B) there has been no
Equity Conditions Failure, or (C) as to whether any Triggering Event has
occurred, and such Holder suffers economic damage thereby;

 

P.        any breach or failure in any respect by the Company or any Subsidiary
to comply with any provision or covenants of this Certificate of Designations,
unless such breach does not have a Material Adverse Effect;

 

Q.       occurrence of any Material Adverse Effect;

 

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R.        the occurrence or continuance of an event of default under any
Transaction Document and such event of default has not been cured during the
applicable cure period;

 

S.       any Equity Condition Failure;

 

T.       reserved;

 

U.        the Company fails to remain current on all of its filings under the
1934 Act; or

 

V.       the Company breaches any of the covenants contained in the Transaction
Documents, including, without limitation, the covenants contained in Article IV
of the Purchase Agreement.

 

(ii)       Notice of a Triggering Event; Redemption Right. Upon the occurrence
of a Triggering Event with respect to the Preferred Shares, the Company shall
within one (1) Business Day deliver written notice thereof via facsimile or
electronic mail (a “Triggering Event Notice”) to each Holder. At any time after
the earlier of a Holder’s receipt of a Triggering Event Notice and such Holder
becoming aware of a Triggering Event (such earlier date, the “Triggering Event
Right Commencement Date”) and ending (such ending date, the “Triggering Event
Right Expiration Date”, and each such period, a “Triggering Event Redemption
Right Period”) on the tenth (10th) Trading Day after the earliest of: (w) the
date such Triggering Event is cured (the Company shall only have five (5)
calendar days to cure any Equity Conditions Failure and ten (10) calendar days
to cure any other Triggering Event)); (x) the date such Triggering Event is not
cured by the requisite time provided in the immediately preceding clause (w);
(y) such Holder’s receipt of a Triggering Event Notice that includes (I) a
reasonable description of the applicable Triggering Event, (II) a certification
as to whether, in the opinion of the Company, such Triggering Event is capable
of being cured and, if applicable, a reasonable description of any existing
plans of the Company to cure such Triggering Event and (III) a certification as
to the date the Triggering Event occurred and, if cured on or prior to the date
of such Triggering Event Notice, the applicable Triggering Event Right
Expiration Date; and (z) such Holder becoming aware of a Triggering Event; then,
such Holder may require the Company to redeem (regardless of whether such
Triggering Event has been cured on or prior to the Triggering Event Right
Expiration Date) all or any of the Preferred Shares held by such Holder by
delivering written notice thereof (the “Triggering Event Redemption Notice”) to
the Company, which Triggering Event Redemption Notice shall indicate the number
of the Preferred Shares such Holder is electing to redeem. For the avoidance of
doubt, neither the Company’s failure to timely deliver a Triggering Event Notice
nor a Holder’ failure to become aware of a Triggering Event shall effect the
date of occurrence of the Triggering Event (e.g., if a Triggering Event occurred
on April 15, 2017, and neither the Company provided the relevant Triggering
Event Notice on the next (1) Business Day nor a Holder’s failure to become aware
of such Triggering Event by April 16, 2017, such Triggering Event shall still be
deemed to occur on April 15, 2017). Each of the Preferred Shares subject to
redemption by the Company pursuant to this Section 5(c) shall be redeemed by the
Company, at the Company’s option, for shares of Common Stock or cash at a price
equal to the product of (A) the Redemption Amount to be redeemed multiplied by
(B) one hundred thirty-five percent (135%) (the “Triggering Event Redemption
Premium”; the product of the Redemption Amount and the Triggering Event
Redemption Premium shall be referred to herein as the “Triggering Event
Redemption Amount”)). In the event that the Company elects to pay the Triggering
Event Redemption Amount in shares of Common Stock, the Company shall issue the
shares of Common Stock at a price equal to average of the two (2) lowest VWAP
during the period commencing ten (10) Trading Days prior to the to the date (the
“Triggering Event Payment Date”) of payment of such Trigger Event Redemption
Amount (the “Triggering Event Redemption Price”). Notwithstanding the foregoing,
if the Company fails to cure a Triggering Event by the period prescribed in
clause (w) above and has yet to pay the Triggering Event Redemption Amount in
cash or shares of Common Stock to Holder, then the Holder shall determine
whether such Triggering Event Redemption Amount will be made in cash or in
shares of Common Stock. For the avoidance of doubt, if any Holders are
requesting redemptions of the Triggering Event Redemption Amount at the
Triggering Event Redemption Price but there is an Equity Conditions Failure, the
Company shall pay the Triggering Event Redemption Amount in cash unless, Holder
waives the Equity Conditions Failure and requests the payment of the Triggering
Event Redemption Amount in shares of Common Stock. For the avoidance of doubt,
if Holder defers the receipt of any Triggering Event Redemption Amount in shares
of Common Stock due to the limitations set forth in Section 4, Holder shall
remain entitled to such shares as originally calculated, i.e., any weekly VWAP
increase subsequent to the original Triggering Event Payment Date shall not
decrease the amount of shares due to the Holder. However, if Holder defers the
receipt of any Triggering Event Redemption Amount in shares of Common Stock due
to the limitations set forth in Section 4 and any VWAP for the ten (10)
consecutive Trading Days subsequent to the original Triggering Event Payment
Date decreases (the “Subsequent Triggering Event Payment Date”), then Holder
shall receive the Triggering Event Redemption Amount in shares of Common Stock
at a price equal to the average of the two (2) lowest VWAP during any Subsequent
Triggering Event Payment Date. Additionally, if Holder defers only a portion of
the Triggering Event Redemption Amount in shares of Common Stock due to the
limitations set forth in Section 4, then such portion shall be subject to the
pricing period of the Subsequent Triggering Event Payment Date. In the event the
Triggering Event Redemption Amount is paid in shares of Common Stock and such
issuance would exceed the limitations contained in Section 4, then the Holder,
at its option, may also demand that the balance be paid in cash (subject to the
conditions in this Section 5(c)).

 

 10 

 

 

Triggering Redemptions required by this Section 5(c) shall be made in accordance
with the provisions of Section 5(d). To the extent redemptions required by this
Section 5(c) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Preferred Shares by the Company; such redemptions shall be
deemed to be voluntary prepayments. In the event of the Company’s redemption of
any of the Preferred Shares under this Section 5(c), a Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for such Holder. Accordingly, any redemption
premium (including without limitation, the Triggering Event Redemption Premium)
due under this Section 5(c) is intended by the parties to be, and shall be
deemed, a reasonable estimate of such Holder’s actual loss of its investment
opportunity and not as a penalty. Any redemption upon a Triggering Event shall
not constitute an election of remedies by the applicable Holder or any other
Holder, and all other rights and remedies of each Holder shall be preserved.

 

(iii)       Triggering Event Redemption Make-Whole Shares. In the event that the
Triggering Event Redemption Price is greater than the VWAP for the ten (10)
consecutive Trading Days following the Triggering Event Payment Date (the
“Triggering Event Make-Whole VWAP Period”), which shall be calculated in the
same manner as the VWAP, then the Company shall make one make-whole payment to
such Holder in additional shares of Common Stock (“Triggering Event Redemption
Make-Whole Shares”) to compensate the Holder for the loss of value of the shares
of Common Stock issued in connection with a Triggering Event Redemption Amount.
The number of Triggering Event Redemption Make-Whole Shares shall be determined
by the quotient of (A) the Triggering Event Redemption Amount divided by (B) the
VWAP calculated during the Triggering Event Make-Whole VWAP Period (the
“Triggering Event Make-Whole VWAP Price”); and then subtracting from such result
the number of shares of Common Stock issued in connection with the Triggering
Event Redemption Amount. Such Triggering Event Redemption Make-Whole Shares
shall be delivered to Holder by no later than three (3) Trading Days following
the last Trading Day of the relevant Triggering Event Make-Whole VWAP Period

 

The Company’s obligations to deliver shares of Common Stock with respect to a
Triggering Event Redemption Amount, as well as the Triggering Event Redemption
Make-Whole Shares, shall continue even though a Triggering Event continues or
another Triggering Event has occurred. For the avoidance of doubt, if Holder
defers the receipt of any such shares of Common Stock due to the limitations set
forth in Section 4, Holder shall remain entitled to such shares as originally
calculated, i.e., any weekly VWAP increase subsequent to the Make-Whole VWAP
Period shall not decrease the amount of shares due to the Holder. However, if
Holder defers the receipt of Triggering Event Redemption Make-Whole Shares due
to the limitations set forth in Section 4 and any VWAP for the ten (10)
consecutive Trading Days subsequent to the Triggering Event Make-Whole VWAP
Period decreases (the “Subsequent Triggering Event Make-Whole VWAP Period”),
then Holder shall receive the Triggering Event Redemption Make-Whole Shares at a
price equal to the average of the two (2) lowest VWAP during any Subsequent
Triggering Event Make-Whole Period. Additionally, if Holder defers only a
portion of the Triggering Event Redemption Make-Whole Shares due to the
limitations set forth in Section 4, then such portion shall be subject to the
pricing period of the Subsequent Triggering Event Make-Whole VWAP Period. In the
event the issuance of the Triggering Event Redemption Make-Whole Shares would
exceed the limitations contained in Section 4, then (A) the Holder, at its
option, may also demand that the balance be paid in cash (subject to the
conditions in this Section 5(c)), and (B) the Holder may demand the receipt of
the Triggering Event Redemption Make-Whole Shares prior to the receipt of any
shares of Common Stock to be issued in connection with any subsequent Triggering
Event Redemption Amount.

 

 11 

 

 

(iv)       Notwithstanding anything to the contrary contained in this Section
5(c), upon a Triggering Event, each Holder shall have the option to redeem all
of its Preferred Shares in accordance with this Section 5(c). Additionally,
following a Triggering Event (including without limitation an amount due under
this Certificate of Designations which is not paid when due), interest shall
accrue on the amount due to a Holder at a rate of two percent (2%) per month
until such Holder is paid in full (a “Late Charge”). The Holder may also require
the Company to deposit all revenues that due it into an account at a bank or
financial institution that is subject to a deposit account control agreement in
a form reasonably satisfactory to the Holder.

 

(v)       Mandatory Redemption upon Bankruptcy Triggering Event. Notwithstanding
anything to the contrary herein, and notwithstanding any redemption that is then
required or in process, upon any Bankruptcy Triggering Event, the Company shall
immediately redeem, in cash, each of the Preferred Shares then outstanding at
the Triggering Event Redemption Premium, without the requirement for any notice
or demand or other action by any Holder or any other person or entity, provided
that a Holder may, in its sole discretion, waive such right to receive payment
upon a Bankruptcy Triggering Event, in whole or in part, and any such waiver
shall not affect any other rights of such Holder or any other Holder hereunder,
including any other rights in respect of such Bankruptcy Triggering Event, any
right to redemption, and any right to payment of such Triggering Event
Redemption Amount (in cash or in shares of Common Stock) or any other Redemption
Amount (in cash or in shares of Common Stock), as applicable.

 

(vi)       Pursuant to the limitations set forth in Section 4, each Holder may
defer all or any portion of any Triggering Event Redemption Amount (including
without limitation, any Triggering Event Redemption Make-Whole Shares) and have
it be paid simultaneously with any future Installment Redemption Payment(s) or
on any other date. For the avoidance of doubt, if a Holder defers all or any
portion of any Triggering Event Redemption Amount (including without limitation,
any Triggering Event Redemption Make-Whole Shares) due to the limitations set
forth in Section 4, such deferral alone shall not be deemed a new Triggering
Event.

 

 12 

 

 

(d)       Redemptions.

 

(i)       General. If a Holder has submitted a Triggering Event Redemption
Notice in accordance with Section 5(c)(ii), the Company shall deliver the
applicable Triggering Event Redemption Amount to such Holder in cash or Common
Stock within four (4) Trading Days and three (3) Trading Days, respectively,
after the Company’s receipt of such Holder’s Triggering Event Redemption Notice.
In the event of a redemption of less than all of the Preferred Shares held by
such Holder, the Company shall promptly cause to be issued and delivered to such
Holder a new Preferred Certificate (likewise to the procedure set forth in
Section 14) representing the number of Preferred Shares which have not been
redeemed. In the event that the Company does not pay the applicable Redemption
Amount (including the Redemption Premium) or the Triggering Event Redemption
Amount to a Holder within the time period required for any reason (except if
such payment is prohibited pursuant to the NRS), at any time thereafter and
until the Company pays such unpaid Redemption Amount (including the Redemption
Premium) or Triggering Event Redemption Amount in full, such Holder shall have
the option, in lieu of redemption, to require the Company to promptly return to
such Holder all or any of the Preferred Shares that were submitted for
redemption and for which the applicable Redemption Amount (including the
Redemption Premium) or Triggering Event Redemption Amount has not been paid.
Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice
shall be null and void with respect to such Preferred Shares and (y) the Company
shall immediately return the applicable Preferred Share Certificate(s), or issue
a new Preferred Share Certificate(s) (likewise to the procedure set forth in
Section 14), to such Holder. A Holder’s delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company’s obligations to make any other payments which have accrued
prior to the date of such notice with respect to the Preferred Shares subject to
such notice, including without limitation, the payment of Late Charges (as
defined in Section 5(c)(iv)).

 

(ii)       Redemption by Multiple Holders. Upon the Company’s receipt of a
Redemption Notice from any Holder for redemption or repayment as a result of an
event or occurrence substantially similar to the events or occurrences described
in Section 5(c)(ii), the Company shall immediately, but no later than one (1)
Business Day of its receipt thereof, forward to each other Holder by facsimile
or electronic mail a copy of such notice. If the Company receives one or more
Redemption Notices, during the seven (7) Business Day-period beginning on and
including the date which is three (3) Business Days prior to the Company’s
receipt of the initial Redemption Notice and ending on and including the date
which is three (3) Business Days after the Company’s receipt of the initial
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such initial Redemption Notice and such other
Redemption Notices received during such seven (7) Business Day-period, then the
Company shall redeem a pro rata amount from each Holder based on the principal
amount of the Preferred Shares submitted for redemption pursuant to such
Redemption Notices received by the Company during such seven (7) Business
Day-period.

 

 13 

 

 

(iii)       Required Redemptions. Notwithstanding anything to the contrary in
Sections 5(c)(ii) or 5(c)(iv), the Company shall have no obligation to comply
with such Sections 5(c)(ii) or 5(c)(iv) at any time that (x) the Company does
not have surplus as described under the NRS or funds legally available to redeem
that number of outstanding Preferred Shares that is then subject to redemption,
(y) the Company’s capital is impaired as described under the NRS or (z) the
redemption of any Preferred Shares would result in an impairment of the
Company’s capital as described under NRS; provided, however that, in the event
that the Company does not comply with the provisions of Sections 5(c)(ii) or
5(c)(iv) by virtue of the restrictions in this Section 5(d)(iii), the Company
will comply with the provisions of Sections 5(c)(ii) or 5(c)(iv) promptly after
such restrictions are no longer applicable.

 

6.       Rights Upon Fundamental Transactions. The Company shall not enter into
or be party to a Fundamental Transaction unless (i) the Successor Entity assumes
in writing all of the obligations of the Company under this Certificate of
Designations and the other Transaction Documents in accordance with the
provisions of this Section 6 pursuant to written agreements in form and
substance reasonably satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements to
deliver to each holder of Preferred Shares in exchange for such Preferred Shares
a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Certificate of Designations,
including, without limitation, having a stated value and dividend rate equal to
the stated value and dividend rate of the Preferred Shares held by the Holders
and having similar ranking to the Preferred Shares, and reasonably satisfactory
to the Required Holders and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose shares of common stock are quoted
on or listed for trading on an Eligible Market. Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Certificate of Designations and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Certificate of
Designations and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein and therein. In addition
to the foregoing, upon consummation of a Fundamental Transaction, the Successor
Entity shall deliver to each Holder confirmation that there shall be issued upon
redemption of the Preferred Shares at any time after the consummation of such
Fundamental Transaction, in lieu of the shares of Common Stock (or other
securities, cash, assets or other property (except such items still issuable
under Sections 7(a) and 12, which shall continue to be receivable thereafter))
issuable upon the redemption of the Preferred Shares prior to such Fundamental
Transaction, such shares of publicly traded common stock (or their equivalent)
of the Successor Entity (including its Parent Entity) which each Holder would
have been entitled to receive upon the consummation of such Fundamental
Transaction had all the Preferred Shares held by each Holder been converted
immediately prior to such Fundamental Transaction (without regard to any 4.99%
limitations or restrictions set forth in this Certificate of Designations), as
adjusted in accordance with the provisions of this Certificate of Designations.
The provisions of this Section 6 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any 4.99%
limitations or restrictions set forth in this Certificate of Designations.

 

 14 

 

 

7.       Rights Upon Issuance of Purchase Rights and Other Corporate Events.

 

(a)       Purchase Rights. In addition to any adjustments pursuant to Section 8
below, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
“Purchase Rights”), then each Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if such Holder had held the number of shares of
Common Stock acquirable upon complete redemption of all the Preferred Shares
(without taking into account any 4.99% limitations or restrictions set forth in
this Certificate of Designations) held by such Holder immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights (provided, however, to the extent that such Holder’s right to
participate in any such Purchase Right would result in such Holder exceeding the
Maximum Percentage, then such Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for such Holder until
such time, if ever, as its right thereto would not result in such Holder
exceeding the Maximum Percentage).

 

(b)       Other Corporate Events. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate Event”), the Company shall make appropriate provisions to
ensure that each Holder will thereafter have the right to receive upon a
redemption of all the Preferred Shares held by such Holder (i) in addition to
the shares of Common Stock receivable upon such redemption, such securities or
other assets to which such Holder would have been entitled with respect to such
shares of Common Stock had such shares of Common Stock been held by such Holder
upon the consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of the Preferred Shares
contained in this Certificate of Designations) or (ii) in lieu of the shares of
Common Stock otherwise receivable upon such redemption, such securities or other
assets received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as such Holder would have
been entitled to receive had the Preferred Shares held by such Holder initially
been issued with redemption rights for the form of such consideration (as
opposed to shares of Common Stock) at a rate for such consideration commensurate
with the Redemption Rate. The provisions of this Section 7 shall apply similarly
and equally to successive Corporate Events and shall be applied without regard
to any 4.99% limitations or restrictions set forth in this Certificate of
Designations.

 

 15 

 

 

8.       Adjustment of Redemption Price upon Subdivision or Combination of
Common Stock. Without limiting any provision of Section 7 or Section 12, if the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Redemption Price in effect immediately prior to such subdivision will be
proportionately reduced. Without limiting any provision of Section 7 or Section
12, if the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Redemption Price in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section 8 shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this Section 8 occurs
during the period that a Redemption Price is calculated hereunder, then the
calculation of such Redemption Price shall be adjusted appropriately to reflect
such event.

 

9.       Authorized Shares.

 

(a)       Reservation. No later than the fifth (5th) Trading Day after the
Company has filed this Certificate of Designations, the Company shall initially
reserve out of its authorized and unissued Common Stock a number of shares of
Common Stock equal to the sum of (i) 300% of the Redemption Rate with respect to
the Redemption Amount (inclusive of the Redemption Premium) of each Preferred
Share as of the Initial Issuance Date (assuming for purposes hereof, that all
the Preferred Shares then issued pursuant to the Securities Purchase Agreement
have been issued, such Preferred Shares are convertible at the Redemption Price
and without taking into account any 4.99% limitations or restrictions set forth
in this Certificate of Designations); (ii) the maximum number of Dividend Shares
issuable pursuant to the terms of this Certificate of Designations from the
Initial Issuance Date through the third (3rd) anniversary of the Initial
Issuance Date (assuming for purposes hereof, that all the Preferred Shares then
issued pursuant to the Securities Purchase Agreement have been issued and
without taking into account any limitations on the issuance of securities set
forth herein); and (iii) any and all other shares of Common Stock due to each
Holder under this Certificate of Designations (including, without limitation,
the Installment Redemption Price Make-Whole Shares). So long as any of the
Preferred Shares are outstanding, the Company shall take all action necessary to
reserve and keep available out of its authorized and unissued shares of Common
Stock, solely for the purpose of effecting the redemption of the Preferred
Shares, as of any given date, the sum of (i) 300% of the number of shares of
Common Stock as shall from time to time be necessary to effect the redemption of
all of the Preferred Shares then issued pursuant to the Securities Purchase
Agreement and (ii) the maximum number of Dividend Shares then issued pursuant to
the terms of this Certificate of Designations from such date through third (3rd)
anniversary of such given date, assuming for purposes hereof, that all the
Preferred Shares then issued pursuant to the Securities Purchase Agreement have
been issued and without taking into account any limitations on the issuance of
securities set forth herein), provided, that, at no time shall the number of
shares of Common Stock so available be less than the number of shares required
to be reserved by the previous sentence (without regard to any 4.99% limitations
or restrictions set forth in this Certificate of Designations) (the “Required
Amount”). The initial number of shares of Common Stock reserved for redemptions
of the Preferred Shares and for issuance as Dividend Shares and each increase in
the number of shares so reserved shall be allocated pro rata among the Holders
based on the number of Preferred Shares held by each Holder on the Initial
Issuance Date or increase in the number of reserved shares (as the case may be)
(the “Authorized Share Allocation”). In the event a Holder shall sell or
otherwise transfer any of such Holder’s Preferred Shares, each transferee shall
be allocated a pro rata portion of such Holder’s Authorized Share Allocation.
Any shares of Common Stock reserved and allocated to any Person that ceases to
hold any Preferred Shares shall be allocated to the remaining Holders of
Preferred Shares, pro rata based on the number of Preferred Shares then held by
such Holders. Upon the request of any Holder, the Company shall provide to such
Holder an update, in writing, with respect to the reserve described in this
Section 9(a). For the avoidance of doubt, the Company shall cause the reserve
described in this Section 9(a) to be increased accordingly upon the issuance of
any Preferred Shares after the date that the initial reserve described above is
completed. Additionally, upon any Holder’s reasonable request, the Company shall
increase the reserve described in this Section 9(a).

 

 16 

 

 

(b)       Insufficient Authorized Shares. If, notwithstanding Section 9(a) and
not in limitation thereof, at any time while any of the Preferred Shares remain
outstanding, the Company does not have a sufficient number of authorized and
unissued shares of Common Stock to satisfy its obligation to have available for
issuance upon redemption of the Preferred Shares at least a number of shares of
Common Stock equal to the Required Amount (an “Authorized Share Failure”), then
the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve and have available the Required Amount for all of the
Preferred Shares then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting or obtain written consent of its stockholders for the approval of an
increase in the number of authorized shares of Common Stock. In connection with
such meeting, the Company shall provide each stockholder with a proxy statement
or information statement, as applicable, and shall use its best efforts to
solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its Board to recommend to the stockholders that they
approve such proposal. Nothing contained in this Section 9 shall limit any
obligations of the Company under any provision of the Securities Purchase
Agreement.

 

(c)       Redemption of all Preferred Shares. Upon the redemption of all
Preferred Shares issued under this Certificate of Designations and each Holder’s
corresponding receipt of all shares of Common Stock under this Certificate of
Designations (including without limitation, the Dividend Shares, the shares of
Common Stock with respect to Installment Redemption Payments, and the
Installment Redemption Price Make-Whole Shares), each Holder shall release the
Company of its obligations under Section 9(a)-(b).

 

10.       Voting Rights. Holders of Preferred Shares shall have no voting
rights, except as required by law (including without limitation, the NRS) and as
expressly provided in this Certificate of Designations. To the extent that,
under the NRS, the vote of the holders of the Preferred Shares, voting
separately as a class or series, as applicable, is required to authorize a given
action of the Company, the affirmative vote or consent of the holders of all of
the Preferred Shares, voting together in the aggregate and not in separate
series unless required under the NRS, represented at a duly held meeting at
which a quorum is presented or by written consent of all of the Preferred Shares
(except as otherwise may be required under the NRS), voting together in the
aggregate and not in separate series unless required under the NRS, shall
constitute the approval of such action by both the class or the series, as
applicable. Subject to Section 4, to the extent that, under the NRS, holders of
the Preferred Shares are entitled to vote on a matter with holders of shares of
Common Stock, voting together as one class, each Preferred Share shall entitle
the holder thereof to cast that number of votes per share as is equal to the
number of shares of Common Stock into which it is then convertible (subject to
the ownership limitations specified in Section 4 hereof) using the record date
for determining the stockholders of the Company eligible to vote on such matters
as the date as of which the Redemption Price is calculated. Holders of the
Preferred Shares shall be entitled to written notice of all stockholder meetings
or written consents (and copies of proxy materials and other information sent to
stockholders) with respect to which they would be entitled by vote, which notice
would be provided pursuant to the Company’s bylaws and the NRS).

 

11.       Liquidation; Dissolution; Winding-Up. In the event of a Liquidation
Event, the Holders shall be entitled to receive in cash out of the assets of the
Company, whether from capital or from earnings available for distribution to its
stockholders (the “Liquidation Funds”), before any amount shall be paid to the
holders of any of shares of Junior Stock, an amount per Preferred Share equal to
the greater of (A) 110% of the Redemption Amount thereof on the date of such
payment, multiplied by the Redemption Premium and (B) the amount per share such
Holder would receive if such Holder converted such Preferred Shares into Common
Stock immediately prior to the date of such payment, provided that if the
Liquidation Funds are insufficient to pay the full amount due to the Holders and
holders of shares of Parity Stock, then each Holder and each holder of Parity
Stock shall receive a percentage of the Liquidation Funds equal to the full
amount of Liquidation Funds payable to such Holder and such holder of Parity
Stock as a liquidation preference, in accordance with their respective
certificate of designations (or equivalent), as a percentage of the full amount
of Liquidation Funds payable to all holders of Preferred Shares and all holders
of shares of Parity Stock. To the extent necessary, the Company shall cause such
actions to be taken by each of its Subsidiaries so as to enable, to the maximum
extent permitted by law, the proceeds of a Liquidation Event to be distributed
to the Holders in accordance with this Section 11. All the preferential amounts
to be paid to the Holders under this Section 11 shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any Liquidation Funds of the Company to the holders of
shares of Junior Stock in connection with a Liquidation Event as to which this
Section 11 applies.

 

 17 

 

 

12.       Participation. In addition to any adjustments pursuant to Section 8,
the Holders shall, as holders of Preferred Shares, be entitled to receive such
dividends paid and distributions made to the holders of shares of Common Stock
to the same extent as if such Holders had converted each Preferred Share held by
each of them into shares of Common Stock (without regard to any 4.99%
limitations or restrictions set forth in this Certificate of Designations) and
had held such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of shares of Common Stock
(provided, however, to the extent that a Holder’s right to participate in any
such dividend or distribution would result in such Holder exceeding the Maximum
Percentage, then such Holder shall not be entitled to participate in such
dividend or distribution to such extent (or the beneficial ownership of any such
shares of Common Stock as a result of such dividend or distribution to such
extent) and such dividend or distribution to such extent shall be held in
abeyance for the benefit of such Holder until such time, if ever, as its right
thereto would not result in such Holder exceeding the Maximum Percentage).

 

13.       Vote to Change the Terms of or Issue Preferred Shares. In addition to
any other rights provided by law, except where the vote or written consent of
the holders of a greater number of shares is required by law or by another
provision of the Articles of Incorporation, without first obtaining the
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the Required Holders, voting together as a single
class, the Company shall not amend or repeal any provision of, or add any
provision to, its Articles of Incorporation or bylaws, or file any certificate
of designations or articles of amendment of any series of shares of preferred
stock, if such action would adversely alter or change in any respect the
preferences, rights, privileges or powers, or restrictions provided for the
benefit, of the Preferred Shares, regardless of whether any such action shall be
by means of amendment to the Articles of Incorporation or by merger,
consolidation or otherwise; provided, however, the Company shall be entitled,
without the consent of the Required Holders unless such consent is otherwise
required by the NRS, to (a) amend the Articles of Incorporation to effectuate
one or more reverse stock splits of its issued and outstanding Common Stock for
purposes of maintaining compliance with the rules and regulations of the
Principal Market; (b) purchase, repurchase or redeem any shares of capital stock
of the Company junior in rank to the Preferred Shares (other than pursuant to
equity incentive agreements (that have in good faith been approved by the Board)
with employees giving the Company the right to repurchase shares upon the
termination of services); or (c) issue any preferred stock that is junior in
rank to the Preferred Shares.

 

14.       Lost or Stolen Certificates. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificates representing Preferred Shares (as to which a
written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of an
indemnification undertaking by the applicable Holder to the Company in customary
and reasonable form and, in the case of mutilation, upon surrender and
cancellation of the certificate(s), the Company shall execute and deliver new
certificate(s) of like tenor and date.

 

 18 

 

 

15.       Remedies; Characterizations; Other Obligations; Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations and any of the other Transaction Documents, at law
or in equity (including a decree of specific performance and/or other injunctive
relief), and no remedy contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy. Nothing herein shall limit any
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Certificate of Designations. The
Company covenants to each Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, redemptions and the like
(and the computation thereof) shall be the amounts to be received by a Holder
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Holders and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened
breach, each Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any such breach or any such threatened
breach, without the necessity of showing economic loss and without any bond or
other security being required, to the extent permitted by applicable law. The
Company shall provide all information and documentation to a Holder that is
requested by such Holder to enable such Holder to confirm the Company’s
compliance with the terms and conditions of this Certificate of Designations.

 

16.       Noncircumvention. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Certificate of Designations, and will at all times in good faith carry
out all the provisions of this Certificate of Designations and take all action
as may be required to protect the rights of the Holders. Without limiting the
generality of the foregoing or any other provision of this Certificate of
Designations, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the redemption of any Preferred Shares above the
Redemption Price then in effect, (ii) shall take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock upon the redemption of
Preferred Shares and (iii) shall, so long as any Preferred Shares are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the purpose of
effecting the redemption of the Preferred Shares, the maximum number of shares
of Common Stock as shall from time to time be necessary to effect the redemption
of the Preferred Shares then outstanding (without regard to any 4.99%
limitations or restrictions set forth in this Certificate of Designations).

 

 19 

 

 

17.       Failure or Indulgence Not Waiver. No failure or delay on the part of a
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party. This
Certificate of Designations shall be deemed to be jointly drafted by the Company
and all Holders and shall not be construed against any Person as the drafter
hereof.

 

18.       Notices. The Company shall provide each Holder of Preferred Shares
with prompt written notice of all actions taken pursuant to the terms of this
Certificate of Designations, including in reasonable detail a description of
such action and the reason therefor. Whenever notice is required to be given
under this Certificate of Designations, unless otherwise provided herein, such
notice must be in writing and shall be given in accordance with Section 5.4 of
the Securities Purchase Agreement. Without limiting the generality of the
foregoing, the Company shall give written notice to each Holder (i) promptly
following any adjustment of the Redemption Price, setting forth in reasonable
detail, and certifying, the calculation of such adjustment and (ii) at least
fifteen (15) days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any grant, issuances, or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to all holders of shares of Common Stock as a class or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided, in each case, that such information shall
be made known to the public prior to, or simultaneously with, such notice being
provided to any Holder.

 

19.       Transfer of Preferred Shares. Subject to the restrictions set forth in
the Securities Purchase Agreement, a Holder may transfer some or all of its
Preferred Shares without the consent of the Company.

 

20.       Preferred Shares Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holders), a register for the Preferred Shares, in
which the Company shall record the name, address and facsimile number of the
Persons in whose name the Preferred Shares have been issued, as well as the name
and address of each transferee. The Company may treat the Person in whose name
any Preferred Shares is registered on the register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any properly made transfers.

 

21.       Stockholder Matters; Amendment.

 

(a)       Stockholder Matters. Any stockholder action, approval or consent
required, desired or otherwise sought by the Company pursuant to the NRS, the
Articles of Incorporation, this Certificate of Designations or otherwise with
respect to the issuance of Preferred Shares may be effected by written consent
of the Company’s stockholders or at a duly called meeting of the Company’s
stockholders, all in accordance with the applicable rules and regulations of the
NRS. This provision is intended to comply with the applicable sections of the
NRS permitting stockholder action, approval and consent affected by written
consent in lieu of a meeting.

 

 20 

 

 

(b)       Amendment. This Certificate of Designations or any provision hereof
may be amended by obtaining the affirmative vote at a meeting duly called for
such purpose, or written consent without a meeting in accordance with the NRS,
of the Required Holders, voting separate as a single class, and with such other
stockholder approval, if any, as may then be required pursuant to the NRS and
the Articles of Incorporation.

 

22.       Dispute Resolution.

 

(a)       Submission to Dispute Resolution.

 

(i)       In the case of a dispute relating to a Closing Sale Price, a
Redemption Price, a VWAP or a fair market value or the arithmetic calculation of
a Redemption Rate (as the case may be) (including, without limitation, a dispute
relating to the determination of any of the foregoing), the Company or the
applicable Holder (as the case may be) shall submit the dispute to the other
party via facsimile (A) if by the Company, within two (2) Business Days after
the occurrence of the circumstances giving rise to such dispute or (B) if by
such Holder at any time after such Holder learned of the circumstances giving
rise to such dispute. If such Holder and the Company are unable to resolve such
dispute promptly relating to such Closing Sale Price, such Redemption Price,
such VWAP or such fair market value, or the arithmetic calculation of such
Redemption Rate (as the case may be), at any time after the second (2nd)
Business Day following such initial notice by the Company or such Holder (as the
case may be) of such dispute to the Company or such Holder (as the case may be),
then the Company or such Holder may initiate arbitration through the American
Arbitration Association (the “AAA”), utilizing its Commercial Arbitration Rules
to resolve such dispute.

 

(ii)       Such Holder and the Company shall each deliver to the AAA (A) a copy
of the initial dispute submission so delivered in accordance with the first
sentence of this Section 22 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which such Holder selected the AAA (the “Dispute Submission Deadline”) (the
documents referred to in the immediately preceding clauses (A) and (B) are
collectively referred to herein as the “Required Dispute Documentation”) (it
being understood and agreed that, if either such Holder or the Company fails to
so deliver all of the Required Dispute Documentation by the Dispute Submission
Deadline, then the party who fails to so submit all of the Required Dispute
Documentation shall no longer be entitled to (and hereby waives its right to)
deliver or submit any written documentation or other support to the AAA with
respect to such dispute and the AAA shall resolve such dispute based solely on
the Required Dispute Documentation that was delivered to the AAA prior to the
Dispute Submission Deadline). Unless otherwise agreed in writing by both the
Company and such Holder or otherwise requested by the AAA, neither the Company
nor such Holder shall be entitled to deliver or submit any written documentation
or other support to the AAA in connection with such dispute (other than the
Required Dispute Documentation) .

 

 21 

 

 

(iii)       The Company and such Holder shall cause the AAA to determine the
resolution of such dispute and notify the Company and such Holder of such
resolution no later than ten (10) Business Days immediately following the
Dispute Submission Deadline. The fees and expenses of the AAA shall be borne
solely by the Company, and the AAA’s resolution of such dispute shall be final
and binding upon all parties absent manifest error.

 

(b)       Miscellaneous.

 

(i)       The Company expressly acknowledges and agrees that (i) this Section 22
constitutes an agreement to arbitrate between the Company and each Holder (and
constitutes an arbitration agreement) under §7501, et seq. of the New York Civil
Practice Law and Rules (“CPLR”) and that any Holder is authorized to apply for
an order to compel arbitration pursuant to CPLR §7503(a) in order to compel
compliance with this Section 22, (ii) the terms of this Certificate of
Designations and each other applicable Transaction Document shall serve as the
basis for the AAA’s resolution of the applicable dispute, the AAA shall be
entitled (and is hereby expressly authorized) to make all findings,
determinations and the like that the AAA determines are required to be made by
the AAA in connection with its resolution of such dispute and in resolving such
dispute the AAA shall apply such findings, determinations and the like to the
terms of this Certificate of Designations and any other applicable Transaction
Document, (iii) either the Company or the applicable Holder shall have the right
to submit any dispute described in this Section 22 to any state or federal court
sitting in the City of New York, Borough of Manhattan in lieu of utilizing the
procedures set forth in this Section 22 and (iv) nothing in this Section 22
shall limit either the Company or such Holder from obtaining any injunctive
relief or other equitable remedies (including, without limitation, with respect
to any matters described in this Section 22).

 

(ii)       Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Certificate of Designations, unless otherwise expressly
set forth herein, such payment shall be made in lawful money of the United
States of America by a certified check drawn on the account of the Company or a
bank check (or any other tangible bank document with likewise effect evidencing
good funds) and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing, provided that such
Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out
such request and such Holder’s wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Certificate of Designations is due on
any day which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day.

 

 22 

 

 

23.       Certain Defined Terms. For purposes of this Certificate of
Designations, the following terms shall have the following meanings:

 

(a)       “1934 Act” means the Securities Exchange Act of 1934, as amended.

 

(b)       “AAA” shall have the meaning ascribed to such term in Section
22(a)(i).

 

(c)       “Additional Amount” means, as of the applicable date of determination,
with respect to each Preferred Share, all accrued and unpaid Dividends on such
Preferred Share.

 

(d)       “Bloomberg” means Bloomberg, L.P.

 

(e)       “Business Day” means any day other than Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or required by
law to remain closed.

 

(f)       “Closing Sale Price” means, for any security as of any date, the last
closing trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price (as the case may be) then
the last trade price of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last trade price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last trade price of such security in the over-the-counter market
on the OTC Bulletin Board for such security as reported by Bloomberg, or, if no
last trade price is reported for such security by Bloomberg, the average of the
bid prices, or the ask prices, respectively, of any market makers for such
security as reported by OTC Markets Group Inc. (formerly Pink Sheets LLC). If
the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Sale Price of such security on such
date shall be the fair market value as mutually determined by the Company and
the applicable Holder. If the Company and such Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved in
accordance with the procedures in Section 22. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period.

 

(g)       “Common Stock” means (i) the Company’s shares of common stock, $0.0001
par value per share and (ii) any capital stock into which such common stock
shall have been changed or any share capital resulting from a reclassification
of such common stock.

 

 23 

 

 

(h)      “Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

(i)       “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

 

(j)       “Convertible Securities” means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(k)       Reserved.

 

(l)       “Dividend Rate” means five percent (5%) per annum.

 

(m)        “Eligible Market” means the Nasdaq Capital Market; the Nasdaq Global
Market; the Nasdaq Global Select Market; the New York Stock Exchange; the NYSE
MKT, any level of the OTC Markets operated by OTC Markets Group, Inc. or the OTC
Bulletin Board (or any successors to any of the foregoing) or the Principal
Market.

 

(n)       “Equity Conditions” means: (i) following ninety (90) days with respect
to the applicable date of determination either (x) a Registration Statement is
effective, and the prospectus contained therein is available, for the issuance
by the Company to all of the Holders of all of the shares of Common Stock
issuable upon redemption of all of the Preferred Shares (without regard to any
4.99% limitations or restrictions set forth in this Certificate of Designations)
or (y) all of the shares of Common Stock issuable upon redemption of all of the
Preferred Shares are otherwise freely tradable without the need for registration
under any applicable federal or state securities laws (in each case,
disregarding any 4.99% limitation contained herein); (ii) the Common Stock
(including all of the shares of Common Stock issuable upon redemption of all of
the Preferred Shares) is listed or designated for quotation (as applicable) on
an Eligible Market and shall not have been suspended from trading on an Eligible
Market (other than suspensions of not more than two (2) days and occurring prior
to the applicable date of determination due to business announcements by the
Company); (iii) the Company shall have delivered all shares of Common Stock
issuable upon redemption of Preferred Shares on a timely basis as set forth in
Section 4 hereof, and all other shares of capital stock required to be delivered
by the Company on a timely basis as set forth in the other Transaction
Documents; (iv) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating Section 4
hereof (each Holder acknowledges that the Company shall be entitled to assume
that this condition has been met for all purposes hereunder absent written
notice from such Holder); (v) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating the rules or regulations of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (vi) no public
announcement of a pending, proposed or intended Fundamental Transaction shall
have occurred which has not been abandoned, terminated or consummated; (vii) the
Company shall have no knowledge of any fact that would reasonably be expected to
cause any of the shares of Common Stock issuable upon redemption of any
Preferred Shares to not be freely tradable without the need for registration
under any applicable state securities laws (disregarding any 4.99% limitations
or restrictions set forth in this Certificate of Designations); (viii) no Holder
shall be in possession of any material, non-public information provided to any
of them by the Company, any of its Subsidiaries or any of their respective
affiliates, employees, officers, representatives, agents or the like; (ix) the
Company shall have been in material compliance with each, and shall not have
breached any, provision, covenant, representation or warranty of any Transaction
Document; (x) the average daily dollar volume of the Common Stock for the
previous twenty (20) Trading Days must have been greater than $10,000.00, as
derived from reports of by OTC Markets Group Inc. (formerly Pink Sheets LLC);
(xi) there shall be no Triggering Events; (xii) the Company’s Common Stock must
be DWAC eligible and not subject to “DTC chill”; (xiii) the Company must be
current on all of its filings under the 1934 Act; (xiv) the Preferred Shares
must be able to be delivered via an “Automatic Conversion” of principal and/or
interest; and (xv) the Company’s Common Stock must be listed on the Principal
Market or an Eligible Market.

 

 24 

 

 

(o)       “Equity Conditions Failure” means, with respect to any date of
determination, that on any day during the period commencing twenty (20) Trading
Days immediately prior to such date of determination, the Equity Conditions have
not been satisfied (or waived in writing by the Required Holders).

 

(p)       Reserved.

 

(q)       Reserved.

 

(r)       Reserved.

 

(s)       “Fundamental Transaction” means that (i) the Company or any of its
Subsidiaries shall, directly or indirectly, in one or more related transactions,
(1) consolidate or merge with or into (whether or not the Company or any of its
Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease,
license, assign, transfer, convey or otherwise dispose of all or substantially
all of its respective properties or assets to any other Person, or (3) allow any
other Person to make a purchase, tender or exchange offer that is accepted by
the holders of more than fifty percent (50%) of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock of the Company
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (4) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with any other Person whereby such other
Person acquires more than fifty percent (50%) of the outstanding shares of
Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination), or (5) (I)
reorganize, recapitalize or reclassify the Common Stock, (II) effect or
consummate a stock combination, reverse stock split or other similar transaction
involving the Common Stock or (III) make any public announcement or disclosure
with respect to any stock combination, reverse stock split or other similar
transaction involving the Common Stock (including, without limitation, any
public announcement or disclosure of (x) any potential, possible or actual stock
combination, reverse stock split or other similar transaction involving the
Common Stock or (y) board or stockholder approval thereof, or the intention of
the Company to seek board or stockholder approval of any stock combination,
reverse stock split or other similar transaction involving the Common Stock), or
(ii) any “person” or “group” (as these terms are used for purposes of Sections
13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated
thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of fifty percent (50%) of the
aggregate ordinary voting power represented by issued and outstanding Voting
Stock of the Company.

 

 25 

 

 

(t)       “GAAP” means United States generally accepted accounting principles,
consistently applied.

 

(u)       “Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted
accounting principles) (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement are limited to repossession or sale of such
property), (F) all monetary obligations under any leasing or similar arrangement
which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (G)
all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above.

 

 26 

 

 

(v)       “Liquidation Event” means, whether in a single transaction or series
of transactions, the voluntary or involuntary liquidation, dissolution or
winding-up of the Company or such Subsidiaries the assets of which constitute
all or substantially all of the assets of the business of the Company and its
Subsidiaries, taken as a whole.

 

(w)      “Make-Whole VWAP Period” shall have the meaning ascribed to such term
in Section 5(b)(i).

 

(x)       “Material Adverse Effect” means any material adverse effect on (i) the
business, properties, assets, liabilities, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or any
subsidiary, either individually or taken as a whole, (ii) the transactions
contemplated hereunder or (iii) the authority or ability of the Company to
perform any of its obligations hereunder.

 

(y)       “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

 

(z)       “Parent Entity” of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

 

(aa)       “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity or a government or any department or agency
thereof.

     

(bb)     Reserved.

     

(cc)       “Principal Market” means the OTCQB venture stage marketplace.

     

(dd) “Redemption Amount” means, with respect to each Preferred Share, as of the
applicable date of determination, the sum of (1) the Stated Value thereof, plus
(2) the Additional Amounts thereon as of such date of determination.

 

 27 

 

 

(ee)      “Redemption Notices” means, collectively, the Triggering Event
Redemption Notice and the Redemption Notice, and each of the foregoing,
individually, a “Redemption Notice”.

 

(ff)       “Redemption Premium” means One Hundred Twenty-Five Percent (125%).

 

(gg)      “Redemption Prices” means, collectively, the Triggering Event
Redemption Price, the Installment Redemption Price, the Make-Whole VWAP Price,
and each of the foregoing, individually, a “Redemption Price”.

 

(hh)      “Redemption Rate” means the quotient of the Redemption Amount divided
by the Redemption price, as follows:

 

Redemption Amount

Redemption Price

 

(ii)       “Registration Statement” means any registration statement relating to
an offering for the account of others under the Securities Act of any of the
Company’s equity securities other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any merger with or
acquisition of any entity or business or equity securities issuable in
connection with the Company’s stock option or other employee benefit plans,
filed by the Company with the SEC by the date that is the six (6)-month
anniversary of the last Closing (as defined in the Purchase Agreement) pursuant
to the Purchase Agreement.

 

(jj)       “Required Holders” means the holders of at least two-thirds of the
outstanding Preferred Shares.

 

(kk)     “Rule 144” means Rule 144 promulgated by the SEC pursuant to the
Securities Act of 1933, as amended, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the SEC having
substantially the same effect as such Rule.

 

(ll)      “SEC” means the Securities and Exchange Commission or the successor
thereto.

 

(mm)       “Securities” means, collectively, the Preferred Shares and the shares
of Common Stock issuable upon redemption of the Preferred Shares.

 

(nn)       “Securities Purchase Agreement” shall mean that certain Securities
Purchase Agreement, dated February 13, 2017, by and between the Company and the
purchasers thereto.

 

 28 

 

 

(oo)      “Stated Value” shall mean $1.00 per share, subject to adjustment for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassifications, combinations, subdivisions or other similar events occurring
after the Initial Issuance Date with respect to the Preferred Shares.

 

(pp)     Reserved.

 

(qq)       “Subscription Date” means February 13, 2017.

 

(rr)      “Subsidiary” or “Subsidiaries” means any direct or indirect,
controlled subsidiary of the Company, including, without limitation, all
Subsidiaries executing those certain Subsidiary Guarantees executed as of even
date with the Securities Purchase Agreement, shall, where applicable, also
include any direct or indirect subsidiary of the Company formed or acquired
after the date hereof.

 

(ss)      “Successor Entity” means the Person (or, if so elected by the Required
Holders, the Parent Entity) formed by, resulting from or surviving any
Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.

 

(tt)      “Trading Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded, provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise designated
as a Trading Day in writing by the Required Holders.

 

(uu)      “Transaction Documents” means this Certificate of Designations, the
Securities Purchase Agreement, the Securities, and each of the other agreements
and instruments entered into or delivered by the Company or any of the Holders
in connection with the transactions contemplated thereby, all as may be amended
from time to time in accordance with the terms hereof or thereof.

 

(vv)       Reserved.

 

(ww)     “Voting Stock” of a Person means capital stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power to elect, or the general power to appoint, at least a majority of the
board of directors, managers, trustees or other similar governing body of such
Person (irrespective of whether or not at the time capital stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).

 

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(xx)      “VWAP” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market (or, if
the Principal Market is not the principal trading market for such security, then
on the principal securities exchange or securities market on which such security
is then traded) during the five (5)-consecutive-Trading Day period beginning at
9:30:01 a.m., New York time, on the first such Trading Day and ending at 4:00:00
p.m., New York time, on the fifth (5th) such Trading Day as reported by
Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the OTC Bulletin Board for such security during the
same period beginning at 9:30:01 a.m., New York time, on the first such Trading
Day and ending at 4:00:00 p.m., New York time, on the fifth such Trading Day, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the mean
average for such five-Trading Day period of the highest closing bid prices and
the mean average for such five-Trading Day period of the lowest closing ask
prices of any of the market makers for such security as reported by OTC Markets
Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such
security on any of the foregoing bases, the VWAP of such security on such date
shall be the fair market value as mutually determined by the Company and such
Holder. If the Company and such Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved in accordance with
the procedures in Section 22. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

 

24.       Disclosure. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Certificate of Designations, unless the
Company has in good faith determined that the matters relating to such notice do
not constitute material, non-public information relating to the Company or any
of its Subsidiaries, the Company shall, publicly disclose on the next Trading
Day such material, non-public information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains
material, non-public information relating to the Company or any of its
Subsidiaries, the Company so shall indicate to each Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, each
Holder shall be allowed to presume that all matters relating to such notice do
not constitute material, non-public information relating to the Company or its
Subsidiaries. Nothing contained in this Section 24 shall limit any obligations
of the Company, or any rights of any Holder, under Section 4(i) of the
Securities Purchase Agreement.

 

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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations
of Series A Convertible Preferred Stock of BBooth, Inc. to be signed by its
Chief Executive Officer on this 13th day of February, 2017.

 

  BBOOTH, INC.           By:     Name: Rory J. Cutaia   Title: Chief Executive
Officer

 

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EXHIBIT I

 

EXAMPLE OF ISSUANCE OF

INSTALLMENT REDEMPTION PRICE MAKE-WHOLE SHARES*

 

On the Installment Redemption Payment of Monday October 3, Holder is entitled to
receive an installment of $78,750 (i.e., the Installment Redemption Payment
multiplied by the Redemption Premium). The Company will pay Holder in shares of
Common Stock at the five (5) day- VWAP of the immediately prior five (5)
Business Days to such date (i.e., Monday September 26 through Friday September
30), which is $0.15. Holder is issued 525,000 shares of Common Stock on Monday
October 3.

 

The VWAP for the five (5) consecutive Business Days subsequent to September 30
(i.e., Monday October 3 through Friday October 7), is $0.13, which is less than
$0.15. Accordingly, Holder is entitled to receive Installment Redemption Price
Make-Wholes Shares.

 

The amount of shares issued shall be $78,750 divided by $0.13 (the five (5)
day-VWAP during the period of the five (5) consecutive Business Days following
September 30, (i.e., Monday October 3 through Friday October 7)) minus the
original 525,000 shares of Common Stock. The result is that Holder is entitled
to receive 80,770 Installment Redemption Price Make-Whole Shares on Monday
October 10.

 

For the avoidance of doubt, in the event that Holder elects to defer the receipt
of the 80,770 Installment Redemption Price Make-Whole Shares (due to the 4.99%
limitations) to a future Installment Redemption Payment, any weekly VWAP
increase shall not effect Holder’s right to the 80,770 Installment Redemption
Price Make-Whole Shares. For example, Holder elects to receive the 80,770
Installment Redemption Price Make-Whole Shares on October 31 instead of on
October 10; but the average VWAP for the week of October 10 through October 14
is $0.16, the average VWAP for the week of October 17 through October 11 is
$0.17, and the average VWAP for the week of October 24 through October 28 is
$0.18, the Holder shall still be entitled to receive 80,770 Installment
Redemption Price Make-Whole Shares based on the five (5) day- VWAP for the week
of Monday October 3 through Friday October 7 (i.e., $0.13). However, in the
event that Holder elects to defer the receipt of the 80,770 Installment
Redemption Price Make-Whole Shares (due to the 4.99% limitations) to a future
Installment Redemption Payment and any VWAP for the five (5) consecutive Trading
Days subsequent to the Make-Whole VWAP Period decreases (i.e., the Subsequent
Make-Whole VWAP Period), then Holder shall receive the Installment Redemption
Price Make-Whole Shares at a price equal to the VWAP during any Subsequent
Make-Whole Period. For example, Holder elects to receive the 80,770 Installment
Redemption Price Make-Whole Shares on October 31 instead of on October 10; but
the average VWAP for the week of October 10 through October 14 is $0.12, then
Holder shall still be entitled to receive 131,250 Installment Redemption Price
Make-Whole Shares based on the Subsequent Make-Whole VWAP Period (i.e., the five
(5) day-VWAP for the week of Monday October 10 through Friday October 4).

 

 32 

 

 

In the event that the Company must pay the Installment Redemption Price
Make-Whole Shares in cash, such Holder would receive a cash payment equal to
$10,500.10 (i.e., the product of 80,770 Installment Redemption Price Make-Whole
Shares and $0.13). The Holder is entitled to receive $10,500.10 on Monday
October 10.**

 

 

 

* The above example is strictly a hypothetical example and, as such, the stock
prices listed above are not the actual stock prices of the Company on the
applicable dates.

 

**This portion of the example assumes that the Subsequent Make-Whole VWAP Period
is inapplicable.

 

 33 

 

 

EXHIBIT II

 

BBOOTH, INC.

REDEMPTION NOTICE

 

Reference is made to the Certificate of Designations, Preferences and Rights of
the Series A Convertible Preferred Stock of bBooth, Inc. (the “Certificate of
Designations”). In accordance with and pursuant to the Certificate of
Designations, bBooth, Inc., a Nevada corporation (the “Company”) shall redeem
the number of shares of Series A Convertible Preferred Stock, $0.0001 par value
per share (the “Preferred Shares”), of the Company, indicated below, for cash or
into shares of common stock, $0.0001 value per share (the “Common Stock”), of
the Company, as of the date specified below.

 

Date of Redemption: ____________________________________________________________

 

Number of Preferred Shares to be redeemed:
_________________________________________

 

Share certificate no(s). of Preferred Shares to be redeemed:
______________________________

 

Tax ID Number (if applicable):
____________________________________________________

 

Redemption Price: ______________________________________________________________

 

Cash payment amount (if applicable):
$______________________________________________

 

The cash payment amount is (if applicable):

 

Cash Dividends __________

Installment Redemption Payment ________

Triggering Event Redemption Payment __________

 

Equity Conditions Failure: Yes ____ No ____

 

Number of shares of Common Stock to be issued (if applicable):
_________________________

 

The shares of Common Stock to be issued are (if applicable):

 

Dividend Shares ____

Installment Redemption Shares ____

Installment Redemption Make-Whole Shares ____

Shares issued with respect to a Triggering Event Redemption Amount ____

Triggering Event Make-Whole Shares ____

 

[Redemption Notice continues on next page]

 

 34 

 

 

If applicable, please issue the shares of Common Stock into which the Preferred
Shares are being redeemed in the following name and to the following address:

 

Issue to: ______________________________________________________________________

 

Address: ______________________________________________________________________

 

Telephone Number: _____________________________________________________________

 

Facsimile Number: ______________________________________________________________

 

Holder: _______________________________________________________________________

By: __________________________________________________________________________

Title: _________________________________________________________________________

Dated: ________________________________________________________________________

 

Account Number (if electronic book entry-transfer):
___________________________________

 

Transaction Code Number (if electronic book entry-transfer):
____________________________

 

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