EXHIBIT 10.17

FORM OF CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
THE SERIES D-1 CONVERTIBLE PREFERRED STOCK OF
RLJ ENTERTAINMENT, INC.

The undersigned, Miguel Penella and Dawn Martens, hereby certify that we are the
President and Secretary of RLJ Entertainment, Inc., a Nevada corporation (the
“Company”), a corporation organized and existing under the Section 78 of the
Nevada Revised Statute (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 August [__], 2016
adopted the following resolutions creating a series of shares of preferred stock
designated as Series D-1 Convertible Preferred Stock, none of which shares have
been issued:

RESOLVED, that the Board designates the Series D-1 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 D-1 CONVERTIBLE PREFERRED STOCK

1.Designation and Number of Shares; the Exchange. There shall hereby be created
and established a series of preferred stock of the Company designated as “Series
D-1 Convertible Preferred Stock” (the “Preferred Shares”). The authorized number
of Preferred Shares shall be 8,600 shares. Each Preferred Share shall have a par
value of $0.001. Capitalized terms not defined herein shall have the meaning as
set forth in Section 31 below. The Preferred Shares will be issued, on a one
share for one share basis, in exchange (the “Exchange”) for shares of that
certain Series B-1 Convertible Preferred Stock, $0.001 par value (the “Series
B-1 Preferred Shares,” and the certificate of designations with respect thereto,
the “Series B-1 Certificate of Designations”), initially issued on May [__],
2015 (the “Initial Issuance Date”), pursuant to those certain Amendment and
Exchange Agreements, dated August [__], 2016, each by and between the Company
and a holder of Series B-1 Preferred Shares (the “Exchange Agreements,” and the
date of the Exchange, the “Exchange Date”).

2.Ranking. Except to the extent approved in accordance with Section 16 (other
than the Company’s Series C-1 Convertible Preferred Stock (“Series C-1 Preferred
Stock”), the Company’s Series C-2 Convertible Preferred Stock (“Series C-2
Preferred Stock”) and the Company’s Series D-2 Convertible Preferred Stock
(“Series D-2 Preferred Stock”), which shall be Parity Stock for all purposes
hereunder), 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 (such junior stock is referred to herein collectively as “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.  Without limiting any other provision of this Certificate of
Designations, except to the extent approved in accordance with Section 16, the
Company shall not hereafter authorize or issue any additional or other shares of
capital stock that is (i) of senior rank to the

 

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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”), (ii) 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”) or (iii) any Junior Stock having a maturity
date (or any other date requiring redemption or repayment of such shares of
Junior Stock) that is prior to the date no Preferred Shares remain
outstanding.  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, designations, privileges and preferences provided for herein and
no such merger or consolidation shall result inconsistent therewith. 

3.Dividends.

(a)General.  From and after the Exchange Date, each holder of a Preferred Share
(each, a “Holder” and collectively, the “Holders”) shall be entitled to receive
dividends (and including any accrued and unpaid Dividends (as defined in the
Series B-1 Certificate of Designations), “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 and
compound monthly 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.  Accrued and unpaid dividends from the Initial
Issuance Date through and including April 1, 2017 shall increase the Stated
Value hereunder on a daily basis (and including any Capitalized Dividends (as
defined in the Series B-1 Certificate of Designations), the “Capitalized
Dividends”). Dividends shall be payable quarterly in arrears on the first day of
the applicable quarter (each, a “Dividend Date”) with the first Dividend Date
being July 1, 2017, except that any dividend not paid in Common Stock due to an
Equity Conditions Failure or the provisions of Section 4(d) shall, at the
Company’s election, be paid in cash (except as limited  by a requirement of the
Senior Loan Agreement) or shall accrue and  increase the Stated Value.  If a
Dividend Date is not a Business Day (as defined below), then the Dividend shall
be due and payable on the Business Day immediately following such Dividend Date.
For the avoidance of doubt, on the Exchange Date, (x) all accrued and unpaid
Dividends (as defined in the Series B-1 Certificate of Designations) on each
Series B-1 Preferred Share shall automatically be deemed accrued and unpaid
Dividends (as defined herein) for each corresponding Preferred Share hereunder
and (y) all Capitalized Dividends (as defined in the Series B-1 Certificate of
Designations) with respect to each Series B-1 Preferred Share shall
automatically be deemed Capitalized Dividends (as defined herein) for each
corresponding Preferred Share hereunder.

(b)Mechanics.  Dividends shall be payable on each Dividend Date, to the record
holders of the Preferred Shares on the applicable Dividend Date, in shares of
Common Stock (“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

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Section 4(d); provided, however, that the Company may, at its option, pay any
Dividends otherwise payable pursuant to the foregoing provision in Dividend
Shares on any Dividend Date in cash (“Cash Dividends”) or in a combination of
Cash Dividends and Dividend Shares.  The Company shall deliver a written notice
(each, a “Dividend Election Notice”) to each Holder on the Dividend Notice Due
Date (the date such notice is delivered to all of the Holders, the “Dividend
Notice Date”) which notice (1) either (A) confirms that Dividends to be paid on
such Dividend Date shall be paid entirely in Dividend Shares or (B) elects to
pay Dividends as Cash Dividends or a combination of Cash Dividends and Dividend
Shares and specifies the amount of Dividends that shall be paid as Cash
Dividends and the amount of Dividends, if any, that shall be paid in Dividend
Shares and (2) certifies that there has been no Equity Conditions Failure as of
such time, if any portion of the Dividends shall be paid in 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 Dividend Date, (A) the
Company shall provide each Holder a subsequent notice to that effect and (B)
unless such Holder waives the Equity Conditions Failure, the Dividend payable to
such Holder on such Dividend Date shall be paid in cash or accrued.  Dividends
to be paid to each Holder on a Dividend Date in Dividend Shares shall be paid in
a number of fully paid and non-assessable shares (rounded 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 Interest paid and (2)
the Dividend Conversion Price in effect on the applicable Dividend Date.  For
the avoidance of doubt, Section 4(c) shall apply to such Dividend Shares as if
each Holder shall have delivered a Conversion Notice with respect to such
Dividend Shares on the third (3rd) Trading Day immediately prior to the
applicable Dividend Date. 

(c)Delivery; Payment.  When any Dividend Shares are to be paid on a Dividend
Date to any Holder, the Company shall (i) (A) provided that the Company’s
transfer agent (the “Transfer Agent”) is participating in the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer Program, 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/Withdrawal at Custodian system, or (B) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, 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 Dividend Date, pay to such Holder, in cash by wire transfer
of immediately available funds, the amount of any Cash Dividend.

4.Conversion. At any time after the Issuance Date, each Preferred Share shall be
convertible into validly issued, fully paid and non-assessable shares of Common
Stock (as defined below), on the terms and conditions set forth in this Section
4.

(a)Holder’s Conversion Right. Subject to the provisions of Section 4(d), at

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any time or times on or after the Issuance Date, each Holder shall be entitled
to convert outstanding Preferred Shares held by such Holder into validly issued,
fully paid and non-assessable shares of Common Stock in accordance with Section
4(c) at the Conversion Rate (as defined below). 

(b)Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Preferred Share pursuant to Section 4(a) shall be determined
by dividing (x) the Conversion Amount of such Preferred Share by (y) the
Conversion Price (the “Conversion Rate”):

(i) “Conversion 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 Amount thereon and any accrued and unpaid Late Charge with
respect to such Stated Value and Additional Amount as of such date of
determination.

(ii) “Conversion Price” means, with respect to each Preferred Share, as of any
Conversion Date or other date of determination, $3.00, subject to adjustment as
provided herein.

(c)Mechanics of Conversion. The conversion of each Preferred Share shall be
conducted in the following manner:

(i) Optional Conversion. To convert a Preferred Share into shares of Common
Stock on any date (a “Conversion Date”), a Holder shall deliver (whether via
facsimile, electronic mail or otherwise), for receipt on or prior to 11:59 p.m.,
New York time, on such date, a copy of an executed notice of conversion of the
share(s) of Preferred Shares subject to such conversion in the form attached
hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by
Section 4(c)(iv), within three (3) Trading Days following a conversion of any
such Preferred Shares as aforesaid, such Holder shall surrender to a nationally
recognized overnight delivery service for delivery to the Company the original
certificates representing the Preferred Shares (the “Preferred Share
Certificates”) so converted as aforesaid (or an indemnification undertaking with
respect to the Preferred Shares in the case of its loss, theft or destruction as
contemplated by Section 17).  On or before the first (1st) Trading Day following
the date of receipt of a Conversion Notice, the Company shall transmit by
facsimile or electronic mail  an acknowledgment of confirmation, in the form
attached hereto as Exhibit II, of receipt of such Conversion Notice to such
Holder and the Transfer Agent, which confirmation shall constitute an
instruction to the Transfer Agent to process such Conversion Notice in
accordance with the terms herein. On or before the third (3rd) Trading Day
following the date of receipt of a Conversion Notice (or such earlier date as
required pursuant to the 1934 Act or other applicable law, rule or regulation
for the settlement of a trade initiated on the applicable Conversion Date of
such shares of Common Stock issuable pursuant to such Conversion Notice) (the
“Share Delivery Date”), the Company shall (1) provided that the Transfer Agent
is participating in the DTC Fast

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Automated Securities Transfer Program, credit such aggregate number of shares of
Common Stock to which such Holder shall be entitled to such Holder’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system, or (2) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via reputable
overnight courier) to the address as specified in such Conversion Notice, a
certificate, registered in the name of such Holder or its designee, for the
number of shares of Common Stock to which such Holder shall be entitled. If the
number of Preferred Shares represented by the Preferred Share Certificate(s)
submitted for conversion pursuant to Section 4(c)(iv) is greater than the number
of Preferred Shares being converted, then the Company shall, as soon as
practicable and in no event later than three (3) Trading Days after receipt of
the Preferred Share Certificate(s) and at its own expense, issue and deliver to
such Holder (or its designee) a new Preferred Share Certificate (in accordance
with Section 18(d)) representing the number of Preferred Shares not
converted.  The Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of Preferred Shares shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on the Conversion
Date. 

(ii) Obligation Absolute; Partial Liquidated Damages.  The Company’s obligation
to issue and deliver the Conversion Shares upon conversion of Preferred Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by a Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by such Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to such Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate as a waiver by
the Company of any such action that the Company may have against such
Holder.  In the event a Holder shall elect to convert any or all of the
Conversion Amount of its Preferred Shares, the Company may not refuse conversion
based on any claim that such Holder or any one associated or affiliated with
such Holder has been engaged in any violation of law, agreement or for any other
reason, unless an injunction from a court, on notice to Holder, restraining
and/or enjoining conversion of all or part of the Preferred Shares of such
Holder shall have been sought and obtained, and the Company posts a surety bond
for the benefit of such Holder in the amount of 150% of the Conversion Amount of
Preferred Shares which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment.  In the absence of such injunction, the Company shall issue
Conversion Shares and, if applicable, cash, upon a properly noticed conversion.
If the Company fails to deliver to a Holder such Conversion Shares on the second
Trading Day after the Share Delivery Date applicable to such conversion, the

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Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $5,000 of Conversion Amount of Preferred Shares being
converted, $50 per Trading Day (increasing to $100 per Trading Day on the third
Trading Day and increasing to $200 per Trading Day on the sixth Trading Day
after such damages begin to accrue) for each Trading Day after such second
Trading Day after the Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion.  Nothing herein shall limit a
Holder’s right to pursue actual damages or declare a Triggering Event for the
Company’s failure to deliver Conversion Shares within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.  The exercise of any such rights
shall not prohibit a Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law. 

(iii) Compensation for Buy-In on Failure to Timely Deliver Conversion Shares
Upon Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to a Holder the applicable Conversion
Shares by the Share Delivery Date (a “Conversion Failure”), and if after such
Share Delivery Date such Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale
by such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to such Holder (in addition to any other
remedies available to or elected by such Holder) the amount, if any, by which
(x) such Holder’s total purchase price (including any brokerage commissions) for
the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of such Holder, either reissue (if
surrendered) the Preferred Shares equal to the number of Preferred Shares
submitted for conversion (in which case, such conversion shall be deemed
rescinded) or deliver to such Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its delivery
requirements under Section 4(c). For example, if a Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of Preferred Shares with respect to which the
actual sale price of the Conversion Shares (including any brokerage commissions)
giving rise to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Company shall be required to pay such
Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to such Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or

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injunctive relief with respect to the Company’s failure to timely deliver the
Conversion Shares upon conversion of the Preferred Shares as required pursuant
to the terms hereof. 

(iv) Registration; Book-Entry. The Company shall maintain a register (the
“Register”) for the recordation of the names and addresses of the Holders of
each Preferred Share and the Stated Value of the Preferred Shares (the
“Registered Preferred Shares”).  The entries in the Register shall be conclusive
and binding for all purposes absent manifest error.  The Company and each Holder
of the Preferred Shares shall treat each Person whose name is recorded in the
Register as the owner of a Preferred Share for all purposes (including, without
limitation, the right to receive payments and Dividends hereunder)
notwithstanding notice to the contrary.  A Registered Preferred Share may be
assigned, transferred or sold only by registration of such assignment or sale on
the Register.  Upon its receipt of a written request to assign, transfer or sell
one or more Registered Preferred Shares by such Holder thereof, the Company
shall record the information contained therein in the Register and issue one or
more new Registered Preferred Shares in the same aggregate Stated Value as the
Stated Value of the surrendered Registered Preferred Shares to the designated
assignee or transferee pursuant to Section 18, provided that if the Company does
not so record an assignment, transfer or sale (as the case may be) of such
Registered Preferred Shares within two (2) Business Days of such a request, then
the Register shall be automatically deemed updated to reflect such assignment,
transfer or sale (as the case may be).  Notwithstanding anything to the contrary
set forth in this Section 4, following conversion of any Preferred Shares in
accordance with the terms hereof, the applicable Holder shall not be required to
physically surrender such Preferred Shares to the Company unless (A) the full or
remaining number of Preferred Shares represented by the applicable Preferred
Share Certificate are being converted (in which event such certificate(s) shall
be delivered to the Company as contemplated by this Section 4(c)(iv)) or (B)
such Holder has provided the Company with prior written notice (which notice may
be included in a Conversion Notice) requesting reissuance of Preferred Shares
upon physical surrender of the applicable Preferred Share Certificate. Each
Holder and the Company shall maintain records showing the Stated Value,
Dividends and Late Charge converted and/or paid (as the case may be) and the
dates of such conversions and/or payments (as the case may be) or shall use such
other method, reasonably satisfactory to such Holder and the Company, so as not
to require physical surrender of a Preferred Share Certificate upon
conversion.  If the Company does not update the Register to record such Stated
Value, Dividends and Late Charge converted and/or paid (as the case may be and
the dates of such conversions and/or payments (as the case may be) within two
(2) Business Days of such occurrence, then the Register shall be automatically
deemed updated to reflect such occurrence.  In the event of any dispute or
discrepancy, such records of such Holder establishing the number of Preferred
Shares to which the record holder is entitled shall be controlling and
determinative in the absence of manifest error.  A Holder and any transferee or
assignee, by acceptance of a certificate, acknowledge and agree that, by reason
of the provisions of this paragraph,

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following conversion of any Preferred Shares, the number of Preferred Shares
represented by such certificate may be less than the number of Preferred Shares
stated on the face thereof.  Each Preferred Share Certificate shall bear the
following legend:  

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS
OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF
SERIES D-1 PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION
4(c)(iv) THEREOF. THE NUMBER OF SHARES OF SERIES D-1 PREFERRED STOCK REPRESENTED
BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES D-1
PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(iv) OF THE
CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES D-1 PREFERRED STOCK
REPRESENTED BY THIS CERTIFICATE.

(v) Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one Holder for the same Conversion Date and the
Company can convert some, but not all, of such Preferred Shares submitted for
conversion, the Company shall convert from each Holder electing to have
Preferred Shares converted on such date a pro rata amount of such Holder’s
Preferred Shares submitted for conversion on such date based on the number of
Preferred Shares submitted for conversion on such date by such Holder relative
to the aggregate number of Preferred Shares submitted for conversion on such
date. In the event of a dispute as to the number of shares of Common Stock
issuable to a Holder in connection with a conversion of Preferred Shares, the
Company shall issue to such Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 23.

(vi) Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of the Preferred Shares.   As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.

(vii) Transfer Taxes and Expenses.  The issuance of Conversion Shares on
conversion of this Preferred Shares shall be made without charge to any Holder
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such Conversion Shares, provided that the Company shall not

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be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares upon
conversion in a name other than that of the Holders of such Preferred Shares and
the Company shall not be required to issue or deliver such Conversion Shares
unless or until the Person or Persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.  The Company shall pay
all Transfer Agent fees required for same-day processing of any Conversion
Notice and all fees to the Depository Trust Company (or another established
clearing Company performing similar functions) required for same-day electronic
delivery of the Conversion Shares.

(d)Limitation on Conversions. The Company shall not effect any conversion of the
Preferred Shares, and a Holder shall not have the right to convert any portion
of the Preferred Shares, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such Holder
(together with such Holder’s Affiliates, and any Persons acting as a group
together with such Holder or any of such Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below).  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Preferred Shares with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Shares beneficially owned by
such Holder or any of its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company  subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, the Preferred Shares
or the Warrants) beneficially owned by such Holder or any of its Affiliates. 
Except as set forth in the preceding sentence, for purposes of this Section
6(d), beneficial ownership shall be calculated in accordance with Section 13(d)
of the 1934 Act and the rules and regulations promulgated thereunder.  To the
extent that the limitation contained in this Section 4(d) applies, the
determination of whether the Preferred Shares are convertible (in relation to
other securities owned by such Holder together with any Affiliates) and of how
many Preferred Shares are convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder’s determination of whether the Preferred Shares may be converted (in
relation to other securities owned by such Holder together with any Affiliates)
and how many shares of the Preferred Shares are convertible, in each case
subject to the Beneficial Ownership Limitation. To ensure compliance with this
restriction, each Holder will be deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of Conversion has not violated
the restrictions set forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the 1934 Act and the rules and regulations
promulgated thereunder.  For purposes of this Section 4(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of the
following: (i) the

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Company’s most recent periodic or annual report filed with the Commission, as
the case may be, (ii) a more recent public announcement by the Company or (iii)
a more recent written notice by the Company or the Transfer Agent setting forth
the number of shares of Common Stock outstanding.  Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm orally
and in writing to such Holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the Preferred Shares, by such Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99%
or 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
conversion of Preferred Shares held by the applicable Holder, as elected by the
applicable initial Holder on the Closing Date or in the applicable Blocker
Election Notice (as defined below).  The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d)  to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation contained herein or to make changes or supplements
necessary or desirable to properly give effect to such limitation.  The
limitations contained in this paragraph shall apply to a successor holder of
Preferred Shares.  Notwithstanding anything herein to the contrary, unless a
Holder otherwise notifies the Company in writing on or prior to the Closing
Date, this Section 4(d) shall not apply to a Holder who is, or whose Affiliate
is, a director or a director by designation of the Company or any of its
Subsidiaries or who beneficially owns in excess of the Beneficial Ownership
Limitation when such Holder first acquires Preferred Shares, until such time as
such Holder delivers written notice (a “Blocker Election Notice”) to the Company
that this Section 4(d) shall thereafter apply to the Preferred Shares (which
notice may not be waived, withdrawn or modified once given).  

5.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 5 pursuant to written agreements in form and
substance 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 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

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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 conversion or
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 8(a) and 15, which shall continue to be receivable thereafter))
issuable upon the conversion or redemption of the Preferred Shares prior to such
Fundamental Transaction, such shares of the 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 happening 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 limitations on the conversion of the Preferred Shares contained in this
Certificate of Designations), as adjusted in accordance with the provisions of
this Certificate of Designations. Notwithstanding the foregoing, the Required
Holders may elect, by delivery of written notice to the Company to waive this
Section 5 to permit the Fundamental Transaction without the assumption of the
Preferred Shares.  The provisions of this Section 5 shall apply similarly and
equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion or redemption of the Preferred
Shares.   

6.Mandatory Conversion or Mandatory Redemption at the Maturity Date.

(a)General. On the Maturity Date, the Company may require each Holder to convert
all of the Preferred Shares into fully paid, validly issued and nonassessable
shares of Common Stock (a “Maturity Conversion”) or may redeem all of the
Preferred Shares (a “Maturity Redemption”) at a purchase price equal to 100% of
the Conversion Amount of such Preferred Shares (the “Maturity Redemption
Price”).  If the Company elects to require conversion, each Holder of Preferred
Shares shall be required to convert at a conversion price equal to the lower of
(x) the Conversion Price then in effect and (y) 85% of the Market Price as of
the Maturity Date (the “Maturity Conversion Price”). The foregoing provisions of
Section 6(a) notwithstanding, in no event shall the Maturity Conversion Price be
less than the Floor Price per share except as the result of an adjustment as a
result of the application of Section 9(b). Such conversion shall be effected
pursuant to Section 4(c) with “Maturity Conversion Price” replacing “Conversion
Price” for all purposes hereunder and a Conversion Notice being deemed to have
been delivered on the third (3rd) Trading Day immediately prior to the Maturity
Date. The Company may exercise its right to require a Maturity Conversion or
Maturity Redemption under this Section 6(a) by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
Holders and the Transfer Agent (the “Maturity Notice” and the date all of the
Holders received such notice by facsimile is referred to as the “Maturity Notice
Date”). The Maturity Notice shall be irrevocable. The Maturity Notice shall
state (i) whether the Company has elected to effect a Maturity Conversion or
Maturity Redemption, (ii) the aggregate number of Preferred Shares, shares of
the Series C-1 Preferred Stock, shares of the Series C-2 Preferred Stock and
shares of the Series D-2 Preferred Stock subject to conversion or redemption, as
applicable, (iii) if applicable, the Maturity Redemption Price of such Holder,
and (iv) whether there has been an Equity Conditions Failure.  If the Company
fails to deliver the

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Maturity Notice on or prior to the third (3rd) Trading Day prior to the Maturity
Date, the Company shall be deemed to have delivered a Maturity Notice electing a
Maturity Redemption.  Notwithstanding the foregoing, any Conversion Amount
subject to a Maturity Conversion or Maturity Redemption, as applicable, may be
converted by a Holder hereunder prior to the Maturity Date and such aggregate
Conversion Amount converted hereunder on or after the Maturity Notice Date and
prior to such Maturity Date shall reduce the aggregate number of Preferred
Shares to be converted or redeemed, as applicable, on the Maturity Date.  At any
time the Company delivers a Maturity Notice electing a Maturity Conversion, the
Company shall file a prospectus supplement pursuant to Rule 424 disclosing such
election. If on the Maturity Date, the Company elects to convert the Preferred
Shares into shares of Common Stock and an Equity Condition Failure then exists,
the Company shall pay a penalty equal to 20% of the Maturity Redemption Price
payable either in cash or shares of Common Stock.  If the Company elects to pay
this penalty in shares of Common Stock, the number of shares of Common Stock to
be issued is determined by dividing the penalty by the Market Price as of the
Maturity Date, provided that, in no event shall the Market Price be less than
the Floor Price per share except as the result of an adjustment as a result of
the application of Section 9(b).  

(b)Pro Rata Requirement. Upon a Maturity Conversion or Maturity Redemption of
any Preferred Shares pursuant to Section 6(a), the Company must simultaneously
take the same action in the same proportion with respect to all Holders of
Preferred Shares and all holders of Series C-1 Preferred Stock, Series C-2
Preferred Stock and Series D-2 Preferred Stock.

(c)Blocker Notice; Designated Specified Amounts.  Notwithstanding the foregoing,
if (i) the Company has elected to effect a Maturity Conversion pursuant to
Section 6(a), (ii) the Company is permitted pursuant to Section 6(a) to effect
such Maturity Conversion on such Maturity Date and (iii) prior to such Maturity
Date the Holder has delivered (via facsimile or otherwise) to the Company a
written notice (a “Blocker Notice”) (A) stating that such Maturity Conversion
would result in a violation of Section 4(d) and (B) specifying the number of
Preferred Shares with respect to which such Maturity Conversion would result in
a violation of Section 4(d) if such Maturity Conversion were effected (such
number of Preferred Shares so specified is referred to herein as the “Blocked
Shares”, and such aggregate number of shares of Common Stock issuable in such
Maturity Conversion of such Blocked Shares, the “Blocked Conversion Shares”),
the number of Preferred Shares of the Holder to be converted in such Maturity
Conversion shall be automatically reduced by such number of Blocked Shares and
the Conversion Price in effect for such Blocked Shares shall be adjusted to the
Maturity Conversion Price; provided, that no Dividends shall continue to accrue
with respect to the Blocked Shares after the Maturity Date unless a Triggering
Event has occurred and is continuing.

7.Redemptions.  

(a)Mandatory Redemption upon Bankruptcy Triggering Event.  Notwithstanding
anything to the contrary herein, and notwithstanding any conversion that

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is then required or in process, upon any Bankruptcy Triggering Event, whether
occurring prior to or following the Maturity Date, the Company shall immediately
redeem, in cash, each of the Preferred Shares then outstanding at a redemption
price (the “Bankruptcy Redemption Price”) equal to the greater of (i) the
product of (A) the Conversion Amount to be redeemed multiplied by (B) the
Redemption Premium and (ii) the product of (X) the Conversion Rate then in
effect with respect to the Conversion Amount multiplied by (Y) the product of
(1) the Redemption Premium multiplied by (2) the greatest Closing Sale Price of
the Common Stock on any Trading Day during the period commencing on the date
immediately preceding such Bankruptcy Triggering Event and ending on the date
the Company makes the entire payment required to be made under this Section
7(a), 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 conversion, and any
right to payment of other Redemption Price, as applicable.  

(b)Change of Control Redemption Right. No sooner than twenty (20) Trading Days
nor later than ten (10) Trading Days prior to the consummation of a Change of
Control (the “Change of Control Date”), but not prior to the public announcement
of such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier to each Holder (a “Change of Control Notice”).
At any time during the period beginning after a Holder’s receipt of a Change of
Control Notice or such Holder becoming aware of a Change of Control if a Change
of Control Notice is not delivered to such Holder in accordance with the
immediately preceding sentence (as applicable) and ending on the later of twenty
(20) Trading Days after (A) consummation of such Change of Control or (B) the
date of receipt of such Change of Control Notice, such Holder may require the
Company to redeem all or any portion of such Holder’s Preferred Shares by
delivering written notice thereof (“Change of Control Redemption Notice”) to the
Company, which Change of Control Redemption Notice shall indicate the number of
Preferred Shares such Holder is electing to have the Company redeem. Each
Preferred Share subject to redemption pursuant to this Section 7(b) shall be
redeemed by the Company in cash at a price equal to the greatest of (i) the
product of (w) the Change of Control Redemption Premium multiplied by (y) the
Conversion Amount being redeemed, (ii) the product of (x) the Change of Control
Redemption Premium multiplied by (y) the product of (A) the Conversion Amount
being redeemed multiplied by (B) the quotient determined by dividing (I) the
greatest Closing Sale Price of the shares of Common Stock during the period
beginning on the date immediately preceding the earlier to occur of (1) the
consummation of the applicable Change of Control and (2) the public announcement
of such Change of Control and ending on the date such Holder delivers the Change
of Control Redemption Notice by (II) the Conversion Price then in effect and
(iii) the product of (y) the Change of Control Redemption Premium multiplied by
(z) the product of (A) the Conversion Amount being redeemed multiplied by (B)
the quotient of (I) the aggregate cash consideration and the aggregate cash
value of any non-cash consideration per share of Common Stock to be paid to such
holders of the shares of Common Stock upon consummation of such Change of
Control (any such non-cash

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consideration constituting publicly-traded securities shall be valued at the
highest of the Closing Sale Price of such securities as of the Trading Day
immediately prior to the consummation of such Change of Control, the Closing
Sale Price of such securities on the Trading Day immediately following the
public announcement of such proposed Change of Control and the Closing Sale
Price of such securities on the Trading Day immediately prior to the public
announcement of such proposed Change of Control) divided by (II) the Conversion
Price then in effect (the “Change of Control Redemption Price”). (the “Change of
Control Redemption Price”). Redemptions required by this Section 7(b) shall have
priority to payments to all other stockholders of the Company in connection with
such Change of Control (other than payments to the holders of Existing Preferred
Securities, which shall rank pari passu with payments to the Holders of the
Preferred Shares). To the extent redemptions required by this Section 7(b) 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. Notwithstanding anything to the contrary in this Section
7(b), but subject to Section 4(d), until the applicable Change of Control
Redemption Price (together with any Late Charge thereon) is paid in full to the
applicable Holder, the Preferred Shares submitted by such Holder for redemption
under this Section 7(b) may be converted, in whole or in part, by such Holder
into Common Stock pursuant to Section 4 or in the event the Conversion Date is
after the consummation of such Change of Control, stock or equity interests of
the Successor Entity substantially equivalent to the Company’s shares of Common
Stock pursuant to Section 4.  In the event of the Company’s redemption of any of
the Preferred Shares under this Section 7(b), such 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 a Holder. Accordingly, any redemption
premium due under this Section 7(b) 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. The Company shall make payment of the
applicable Change of Control Redemption Price concurrently with the consummation
of such Change of Control if a Change of Control Redemption Notice is received
prior to the consummation of such Change of Control and within two (2) Trading
Days after the Company’s receipt of such notice otherwise (the “Change of
Control Redemption Date”).  

(c)Redemption Mechanics.  If a Holder has submitted a Change of Control
Redemption Notice in accordance with Section 7(b), the Company shall deliver the
applicable Change of Control Redemption Price to such Holder in cash
concurrently with the consummation of such Change of Control if such notice is
received prior to the consummation of such Change of Control and within five (5)
Business Days after the Company’s receipt of such notice otherwise.  The Company
shall deliver the applicable Maturity Redemption Price to each Holder in cash on
the Maturity Date.  Notwithstanding anything herein to the contrary, in
connection with any redemption hereunder at a time a Holder is entitled to
receive a cash payment under any of the other Transaction Documents, at the
option of such Holder delivered in writing to the Company, the applicable
Redemption Price hereunder shall be increased by the amount of such cash payment
owed to such Holder under such other Transaction Document and, upon payment in
full or conversion in accordance herewith, shall satisfy the Company’s

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payment obligation under such other Transaction Document.  In the event of a
redemption of less than all of the Preferred Shares, the Company shall promptly
cause to be issued and delivered to such Holder a new Preferred Certificate (in
accordance with Section 18) representing the number of Preferred Shares which
have not been redeemed. In the event that the Company does not pay the
applicable Redemption Price to a Holder within the time period required for any
reason (including, without limitation, to the extent such payment is prohibited
pursuant to the NRS), at any time thereafter and until the Company pays such
unpaid Redemption Price 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 Price (together with any Late Charge thereon) 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, or
issue a new Preferred Share Certificate (in accordance with Section 18(d)), to
such Holder, and in each case the Additional Amount of such Preferred Shares
shall be increased by an amount equal to the difference between (1) the
applicable Redemption Price (as the case may be, and as adjusted pursuant to
this Section 7(c), if applicable) minus (2) the Stated Value portion of the
Conversion Amount submitted for redemption. 

(d)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 this
Section 7, 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.

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

(a)Purchase Rights. In addition to any adjustments pursuant to Section 9 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 all or substantially all of 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 conversion of all
the Preferred Shares (without taking into account any limitations or
restrictions on the convertibility of the Preferred Shares) held by such

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Holder immediately prior to 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 shares 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 and the other Attribution Parties
exceeding the Beneficial Ownership Limitation, then such Holder shall not be
entitled to participate in such Purchase Right to such extent (and shall not be
entitled to beneficial ownership of such shares of Common Stock as a result of
such Purchase Right (and beneficial ownership) to such extent) and such Purchase
Right to such extent shall be held in abeyance for such Holder until such time
or times , if ever, as its right thereto would not result in such Holder and the
other Attribution Parties exceeding the Beneficial Ownership Limitation), at
which time or times such Holder shall be granted such right (and any Purchase
Right granted, issued or sold on such initial Purchase Right or on any
subsequent Purchase Right to be held similarly in abeyance) to the same extent
as if there had been no such limitation). 

(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 provision to
insure that each Holder will thereafter have the right to receive upon a
conversion of all the Preferred Shares held by such Holder (i) in addition to
the shares of Common Stock receivable upon such conversion, 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 conversion, 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 conversion rights for the form of such consideration (as
opposed to shares of Common Stock) at a conversion rate for such consideration
commensurate with the Conversion Rate. Provision made pursuant the proceeding
sentence shall be in a form and substance satisfactory to the Required
Holders.  The provisions of this Section 8(b) shall apply similarly and equally
to successive Corporate Events and shall be applied without regard to any
limitations on the conversion or redemption of the Preferred Shares contained in
this Certificate of Designations.

9.Rights Upon Issuance of Other Securities.

(a)Adjustment of Conversion Price upon Issuance of Common Stock.  If and
whenever on or after the Closing Date the Company issues or sells, or in
accordance with this Section 9(a) is deemed to have issued or sold, any shares
of Common Stock (including the issuance or sale of shares of Common Stock owned
or held by or for the account of the Company, but excluding any Excluded
Securities issued or sold or deemed

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to have been issued or sold) for a consideration per share (the “New Issuance
Price”) less than a price equal to the Market Price immediately prior to such
issue or sale or deemed issuance or sale (such Market Price then in effect is
referred to herein as the “Applicable Price”) (the foregoing a “Dilutive
Issuance”), then, immediately after such Dilutive Issuance, the Conversion Price
then in effect shall be reduced to the price equal to the Conversion Price in
effect immediately prior to the Dilutive Issuance multiplied by the quotient
obtained by dividing (A) the sum of (i) the amount of Common Stock outstanding
prior to the Dilutive Issuance (including any shares of Common Stock deemed to
have been issued pursuant to Sections 9(a)(i) or 9(a)(ii) but excluding the
number of shares of Common Stock for which this Preferred Stock is convertible
immediately prior to such Dilutive Issuance (the “Preferred Conversion Shares”)
plus (ii) the number of shares of Common Stock equal to the price payable to
exercise the Dilutive Issuance divided by the VWAP as of the date immediately
prior to the Dilutive Issuance, by (B) the sum of (i) the amount of Common Stock
outstanding prior to the Dilutive Issuance (including any shares of Common Stock
deemed to have been issued pursuant to Sections 9(a)(i) or 9(a)(ii) but
excluding the Preferred Conversion Shares) plus (ii) the number of shares of
Common Stock issuable pursuant to the Dilutive Issuance.  For all purposes of
the foregoing (including, without limitation, determining the adjusted
Conversion Price and the New Issuance Price under this Section 9(a)), the
following shall be applicable: 

(i) Issuance of Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is at
any time issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of any
such Option or otherwise pursuant to the terms thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section 9(a)(i), the “lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of
(x) the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option or otherwise pursuant to the terms thereof and (y) the
lowest exercise price set forth in such Option for which one share of Common
Stock is issuable upon the exercise of any such Options or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of any
such Option or otherwise pursuant to the terms thereof minus (2) the sum of all
amounts paid or payable to the holder of such Option (or any other Person) upon
the granting or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option or otherwise pursuant to the terms thereof plus the
value of any other consideration received or receivable by, or benefit conferred
on, the holder of such Option (or any other Person). Except as contemplated
below, no further adjustment of the Conversion Price shall be made upon the
actual issuance of such share of Common Stock or of such

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Convertible Securities upon the exercise of such Options or otherwise pursuant
to the terms thereof or upon the actual issuance of such share of Common Stock
upon conversion, exercise or exchange of such Convertible Securities.  

(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is at any time issuable upon the conversion, exercise or
exchange thereof or otherwise pursuant to the terms thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per share. For
purposes of this Section 9(a)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the
lower of (x) the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Common Stock upon the
issuance or sale of the Convertible Security and upon conversion, exercise or
exchange of such Convertible Security or otherwise pursuant to the terms thereof
and (y) the lowest conversion price set forth in such Convertible Security for
which one share of Common Stock is issuable upon conversion, exercise or
exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of
all amounts paid or payable to the holder of such Convertible Security (or any
other Person) upon the issuance or sale of such Convertible Security plus the
value of any other consideration received or receivable by, or benefit conferred
on, the holder of such Convertible Security (or any other Person). Except as
contemplated below, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such share of Common Stock upon conversion, exercise
or exchange of such Convertible Securities or otherwise pursuant to the terms
thereof, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustment of the Conversion Price has
been or is to be made pursuant to other provisions of this Section 9(a), except
as contemplated below, no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exercise or exchange of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases at
any time, the Conversion Price in effect at the time of such increase or
decrease shall be adjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or increased or
decreased conversion rate (as the case may be) at the time initially granted,
issued or sold. For purposes of this Section 9(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the Closing Date are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 9(a) shall be made if such adjustment would
result in an increase of the Conversion Price then in effect

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(iv) Calculation of Consideration Received. If any Option is issued in
connection with the issuance or sale of any other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any shares
of Common Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received therefor will
be deemed to be the net amount of consideration received by the Company
therefor. If any shares of Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the Company
for such securities will be the average VWAP of such security for the five (5)
Trading Day period immediately preceding the date of receipt. If any shares of
Common Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be deemed to be the
fair value of such portion of the net assets and business of the non-surviving
entity as is attributable to such shares of Common Stock, Options or Convertible
Securities. The fair value of any consideration other than cash or publicly
traded securities will be determined jointly by the Company and the Required
Holders. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within five (5) Trading
Days after the tenth (10th) day following such Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Required Holders. If such appraiser’s valuation differs by less than 5% from the
Company’s proposed valuation, the fees and expenses of such appraiser shall be
borne by the Holder, and if such appraiser’s valuation differs by more than 5%
from the Company’s proposed valuation, the fees and expenses of such investment
bank shall be borne by the Company. Such appraiser’s resolution of such dispute
shall be final and binding upon all parties absent manifest error. 

(v) Record Date. If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase (as the case may be).

(b)Adjustment of Conversion Price upon Subdivision or Combination of Common
Stock. Without limiting any provision of Section 5 or Section 9(a), if the
Company at any time on or after the Closing Date subdivides (by any stock split,
stock dividend, stock combination, recapitalization or other similar
transaction)  one or more classes of its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. Without limiting any provision
of Section 5 or Section 9(a), if the Company at

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any time on or after the Closing Date combines (by any stock split, stock
dividend, stock combination, recapitalization or other similar transaction) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment pursuant to this Section 9(b)
shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this Section 9(b)
occurs during the period that a Conversion Price is calculated hereunder, then
the calculation of such Conversion Price shall be adjusted appropriately to
reflect such event. 

(c)Variable Rate Transactions.  For the avoidance of doubt, if the Company
enters into a Variable Rate Transaction (as defined in the Securities Purchase
Agreement), despite the prohibition set forth in the Securities Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents (as defined in the Securities Purchase Agreement) at the
lowest possible conversion price at which such securities may be converted or
exercised.

(d)Other Events. In the event that the Company (or any Subsidiary) shall take
any action to which the provisions hereof are not strictly applicable, or, if
applicable, would not operate to protect any Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 9 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Board shall in good faith determine and
implement an appropriate adjustment in the Conversion Price so as to protect the
rights of such Holder, provided that no such adjustment pursuant to this Section
9(b) will increase the Conversion Price as otherwise determined pursuant to this
Section 9, provided further that if such Holder does not accept such adjustments
as appropriately protecting its interests hereunder against such dilution, then
the Board and such Holder shall agree, in good faith, upon an independent
investment bank of nationally recognized standing to make such appropriate
adjustments, whose determination shall be final and binding absent manifest
error.  If such investment bank’s resolution differs by less than 5% from the
Company’s proposed determination, the fees and expenses of such investment bank
shall be borne by the Holder, and if such investment bank’s resolution differs
by more than 5% from the Company’s proposed determination, the fees and expenses
of such investment bank shall be borne by the Company.

(e)Calculations. All calculations under this Section 9 shall be made by rounding
to the nearest cent or the nearest 1/100th of a share, as applicable. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

(f)Voluntary Adjustment by Company. The Company may at any time any Preferred
Shares remain outstanding, with the prior written consent of the Required
Holders, reduce the then current Conversion Price to any amount and for any
period of time deemed appropriate by the Board.

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(g)Limitation on Adjustment. The foregoing provisions of Section 9
notwithstanding, in no event shall the Conversion Price be reduced, as a result
of the application of Section 9(a), 9(c), 9(d) or 9(f), to less than the Floor
Price per share.  (For the avoidance of doubt, the foregoing limitation does not
apply to an adjustment as a result of the application of Section 9(b).). 

10.Noncircumvention. The Company hereby covenants and agrees that the Company
will not, by amendment of its Articles of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) 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 or the other Transaction Documents, the Company (a)
shall not increase the par value of any shares of Common Stock receivable upon
the conversion of any Preferred Shares above the Conversion Price then in
effect, (b) 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 conversion of Preferred Shares
and (c) 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 conversion of
the Preferred Shares, the maximum number of shares of Common Stock as shall from
time to time be necessary to effect the conversion of the Preferred Shares then
outstanding (without regard to any limitations on conversion contained
herein).  Notwithstanding anything herein to the contrary, if after the
seventy-five (75) calendar day anniversary of the Issuance Date, each Holder is
not permitted to convert such Holder’s Preferred Shares in full for any reason
(other than pursuant to restrictions set forth in Section 4(d) hereof), the
Company shall use its best efforts to promptly remedy such failure, including,
without limitation, obtaining such consents or approvals as necessary to effect
such conversion into shares of Common Stock.

11.Authorized Shares.

(a)Reservation. So long as any Preferred Shares remain outstanding, the Company
shall at all times reserve at least 125% of the number of shares of Common Stock
as shall from time to time be necessary to effect the conversion of all of the
Preferred Shares then outstanding (without regard to any limitations on
conversions) (the “Required Reserve Amount”).  The Required Reserve Amount
(including, without limitation, each increase in the number of shares so
reserved) shall be allocated pro rata among the Holders based on the number of
the Preferred Shares held by each Holder on the Exchange Date or increase in the
number of reserved shares, as the case may be (the “Authorized Share
Allocation”). In the event that 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 which ceases to hold any Preferred Shares
shall be allocated to the remaining Holders of Preferred Shares, pro rata based
on the number of the Preferred Shares then held by the Holders.

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(b)Insufficient Authorized Shares.  If, notwithstanding Section 11(a) and not in
limitation thereof, while any of the Preferred Shares remain outstanding the
Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion
of the Preferred Shares at least a number of shares of Common Stock equal to the
Required Reserve 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
the Required Reserve Amount for 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 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 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.   

12.Voting Rights.

(a)General.  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 shares 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 the Required Holders (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(d), 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(d) 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 Conversion 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).  

(b) [Intentionally Omitted].

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13.Covenants.  

(a)Incurrence of Indebtedness. Except with the approval of holders holding a
majority of the aggregate of the Series C-1 Preferred Stock and the Series C-2
Preferred Stock, the Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, incur or guarantee, assume or
suffer to exist any Indebtedness (other than Permitted Indebtedness).

(b)Existence of Liens. Except with the approval of holders holding a majority of
the aggregate of the Series C-1 Preferred Stock and the Series C-2 Preferred
Stock, the Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, allow or suffer to exist any
mortgage, lien, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by the
Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted
Liens.

14.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, but pari passu with any Parity Stock
then outstanding, an amount per Preferred Share equal to the greater or (A) the
Conversion Amount thereof on the date of such payment 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 14. All the preferential amounts
to be paid to the Holders under this Section 14 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 14 applies.

15.Distribution of Assets. In addition to any adjustments pursuant to Section 9,
if the Company shall declare or make any dividend or other distributions of its
assets (or rights to acquire its assets) to any or all holders of shares of
Common Stock, by way of return of capital or otherwise (including without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (the
“Distributions”), then each Holder, as holders of Preferred Shares, will be
entitled to such Distributions as if such Holder had held the number of shares
of Common Stock acquirable upon complete conversion of the Preferred Shares
(without taking into account any limitations or restrictions on the
convertibility of the

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Preferred Shares) immediately prior to the date on which a record is taken for
such Distribution or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for such Distributions
(provided, however, that to the extent that such Holder’s right to participate
in any such Distribution would result in such Holder and the other Attribution
Parties exceeding the Beneficial Ownership Limitation, then such Holder shall
not be entitled to participate in such Distribution to such extent (and shall
not be entitled to beneficial ownership of such shares of Common Stock as a
result of such Distribution (and beneficial ownership) to such extent) and the
portion of such Distribution shall be held in abeyance for such Holder until
such time or times as its right thereto would not result in such Holder and the
other Attribution Parties exceeding the Beneficial Ownership Limitation, at
which time or times, if any, such Holder shall be granted such rights (and any
rights under this Section 15 on such initial rights or on any subsequent such
rights to be held similarly in abeyance) to the same extent as if there had been
no such limitation). 

16.Vote to Change the Terms of or Issue Preferred Shares.

(a)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: (i) 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; (ii) increase or decrease (other than by conversion)
the authorized number of Preferred Shares; or (iii) without limiting any
provision of Section 9, whether or not prohibited by the terms of the Preferred
Shares, circumvent a right of the Preferred Shares; provided, however, that the
Holders shall not have the right to vote on the increase or decrease of
authorized shares of any other class or series of the Company’s capital stock.

(b)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 Holders and each holder of Series D-2
Preferred Stock, voting together as a single class, the Company shall not:
(i) create or authorize (by reclassification or otherwise) any new class or
series of shares that has a preference over or is on a parity with the Preferred
Shares with respect to dividends or the distribution of assets on the
liquidation, dissolution or winding up of the Company; (ii) 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); (iii) pay
dividends or make any other distribution on any shares of any capital stock of
the Company junior in rank to the Preferred Shares; or (iv) issue

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any Preferred Shares other than pursuant to the Securities Purchase Agreement;
provided, however, that the Holders shall not have the right to vote on the
increase or decrease of authorized shares of any other class or series of the
Company’s capital stock. 

17.Transfer of Preferred Shares. A Holder may transfer some or all of its
Preferred Shares without the consent of the Company, except as may otherwise be
required by Section 4.1 of the Securities Purchase Agreement.

18.Reissuance of Preferred Certificates.

(a)Transfer. If any Preferred Shares are to be transferred, the applicable
Holder shall surrender the applicable Preferred Share Certificate to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of such Holder a new Preferred Share Certificate (in accordance with Section
18(d)), registered as such Holder may request, representing the outstanding
number of Preferred Shares being transferred by such Holder and, if less than
the entire outstanding number of Preferred Shares is being transferred, a new
Preferred Share Certificate (in accordance with Section 18(d)) to such Holder
representing the outstanding number of Preferred Shares not being transferred.
Such Holder and any assignee, by acceptance of the Preferred Share Certificate,
acknowledge and agree that, by reason of the provisions of Section 4(c)(i)
following conversion or redemption of any of the Preferred Shares, the
outstanding number of Preferred Shares represented by the Preferred Shares may
be less than the number of Preferred Shares stated on the face of the Preferred
Shares.

(b)Lost, Stolen or Mutilated Preferred Share Certificate. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of a Preferred Share Certificate (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 any
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 such Preferred Share Certificate, the Company shall execute and
deliver to such Holder a new Preferred Share Certificate (in accordance with
Section 18(d)) representing the applicable outstanding number of Preferred
Shares.

(c)Preferred Share Certificate Exchangeable for Different Denominations. Each
Preferred Share Certificate is exchangeable, upon the surrender hereof by the
applicable Holder at the principal office of the Company, for a new Preferred
Share Certificate or Preferred Share Certificate(s) (in accordance with Section
18(d)) representing in the aggregate the outstanding number of the Preferred
Shares in the original Preferred Share Certificate, and each such new 18(d) will
represent such portion of such outstanding number of Preferred Shares from the
original Preferred Share Certificate as is designated by such Holder at the time
of such surrender.

(d)Issuance of New Preferred Share Certificate. Whenever the Company is required
to issue a new Preferred Share Certificate pursuant to the terms of this
Certificate of Designations, such new Preferred Share Certificate (i) shall
represent, as

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indicated on the face of such Preferred Share Certificate, the number of
Preferred Shares remaining outstanding (or in the case of a new Preferred Share
Certificate being issued pursuant to Section 18(a) or Section 18(c), the number
of Preferred Shares designated by such Holder which, when added to the number of
Preferred Shares represented by the other new Preferred Share Certificates
issued in connection with such issuance, does not exceed the number of Preferred
Shares remaining outstanding under the original Preferred Share Certificate
immediately prior to such issuance of new Preferred Share Certificate), and (ii)
shall have an issuance date, as indicated on the face of such new Preferred
Share Certificate, which is the same as the issuance date of the original
Preferred Share Certificate. 

19.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 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, conversion 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. 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.

20.Payment of Collection, Enforcement and Other Costs.  If (a) any Preferred
Shares are placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or a Holder otherwise
takes action to collect amounts due under this Certificate of Designations with
respect to the Preferred Shares or to enforce the provisions of this Certificate
of Designations or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and
involving a claim under this Certificate of Designations, then the Company shall
pay the costs incurred by such Holder for such collection, enforcement or action
or in connection with such bankruptcy, reorganization, receivership or other
proceeding, including, without limitation, attorneys’ fees and disbursements.

21.Construction; Headings.  This Certificate of Designations shall be deemed to
be jointly drafted by the Company and the Holders and shall not be construed
against any such Person as the drafter hereof. The headings of this Certificate
of Designations are for convenience of reference and shall not form part of, or
affect the interpretation of, this Certificate of

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Designations.  Unless the context clearly indicates otherwise, each pronoun
herein shall be deemed to include the masculine, feminine, neuter, singular and
plural forms thereof. The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import
refer to this entire Certificate of Designations instead of just the provision
in which they are found. Unless expressly indicated otherwise, all section
references are to sections of this Certificate of Designations.  Terms used in
this Certificate of Designations and not otherwise defined herein, but defined
in the other Transaction Documents, shall have the meanings ascribed to such
terms on the Closing Date in such other Transaction Documents unless otherwise
consented to in writing by the Required Holders. 

22.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.  Notwithstanding the foregoing, nothing contained in this Section 22
shall permit any waiver of any provision of Section 4(d).

23.Dispute Resolution.

(a)Submission to Dispute Resolution.

(i) In the case of a dispute relating to a Bid Price, a Closing Bid Price, a
Closing Sale Price, a Conversion Price, a VWAP or a fair market value or the
arithmetic calculation of a Conversion Rate, or the applicable Redemption Price
(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 or
electronic mail (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 promptly resolve
such dispute relating to such Bid Price, such Closing Bid Price, such Closing
Sale Price, such Conversion Price, such VWAP or such fair market value, or the
arithmetic calculation of such Conversion Rate or such applicable Redemption
Price (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 such
Holder may, at its sole option, select an independent, reputable investment bank
to resolve such dispute.

(ii) Such Holder and the Company shall each deliver to such investment bank (A)
a copy of the initial dispute submission so delivered in accordance with the
first sentence of this Section 23 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New

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York time) by the fifth (5th) Business Day immediately following the date on
which such Holder selected such investment bank (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
such investment bank with respect to such dispute and such investment bank shall
resolve such dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission
Deadline).  Unless otherwise agreed to in writing by both the Company and such
Holder or otherwise requested by such investment bank, neither the Company nor
such Holder shall be entitled to deliver or submit any written documentation or
other support to such investment bank in connection with such dispute (other
than the Required Dispute Documentation).

(iii) The Company and such Holder shall cause such investment bank 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. If such investment bank’s resolution differs by
less than 5% from the Company’s proposed determination, the fees and expenses of
such investment bank shall be borne by such Holder, and if such investment
bank’s resolution differs by more than 5% from the Company’s proposed
determination, the fees and expenses of such investment bank shall be borne by
the Company. Such investment bank’s resolution of such dispute shall be final
and binding upon all parties absent manifest error.

(b)Miscellaneous.  The Company expressly acknowledges and agrees that (i) this
Section 23 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 23, (ii) a dispute relating to a
Conversion Price, the terms of this Certificate of Designations and each other
applicable Transaction Document shall serve as the basis for the selected
investment bank’s resolution of the applicable dispute, (iii) such investment
bank shall be entitled (and is hereby expressly authorized) to make all
findings, determinations and the like that such investment bank determines are
required to be made by such investment bank in connection with its resolution of
such dispute and in resolving such dispute such investment bank shall apply such
findings, determinations and the like to the terms of this Certificate of
Designations and any other applicable Transaction Documents, (iv) the applicable
Holder (and only such Holder with respect to disputes solely relating to such
Holder), in its sole discretion, shall have the right to submit any dispute
described in this Section 23 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 23 and (v) nothing in this Section 23 shall limit such Holder
from obtaining

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any injunctive relief or other equitable remedies (including, without
limitation, with respect to any matters described in this Section 23).  

24.Notices; Currency; Payments.

(a)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. Any and all notices or other communications
or deliveries to be provided by the Holders hereunder including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier
service, addressed to the Company, at 8515 Georgia Avenue, Suite 650, Silver
Spring, Maryland, Attention: Corporate Secretary, facsimile number 301-608-9313,
email address dmartens@rljentertainment.com, or such other facsimile number or
address as the Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section 24.  Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the Company, or if no
such facsimile number or address appears on the books of the Company, at the
principal place of business of such Holder, as set forth in the Securities
Purchase Agreement.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section prior to 5:30 p.m. (New York City
time) on any date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth in this Section on a day that is not a Trading Day or later than 5:30
p.m. (New York City time) on any Trading Day, (iii) the second Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The Company shall provide each Holder with prompt written
notice of all actions taken pursuant to this Certificate of Designations,
including in reasonable detail a description of such action and the reason
therefore.  Without limiting the generality of the foregoing, the Company shall
give written notice to each Holder (i) immediately upon any adjustment of the
Conversion 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 holders of shares of
Common Stock 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 in conjunction
with such notice being provided to such Holder.

(b)Currency.  All dollar amounts referred to in this Certificate of Designations
are in United States Dollars (“U.S. Dollars”), and all amounts owing under

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this Certificate of Designations shall be paid in U.S. Dollars. All amounts
denominated in other currencies (if any) shall be converted into the U.S. Dollar
equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange Rate” means, in relation to any amount of currency to be
converted into U.S. Dollars pursuant to this Certificate of Designations, the
U.S. Dollar exchange rate as published in the Wall Street Journal on the
relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of
calculation shall be the final date of such period of time).  

(c)Payments. 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 and
sent via overnight courier service to such Person at such address as previously
provided to the Company in writing (which address, in the case of each of the
Holders, shall initially be as set forth on the signature page of such Holder
attached to the Securities Purchase Agreement), 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.  Except with respect to amounts payable
hereunder accruing Dividends at the Dividend Default Rate, any amount due under
the Transaction Documents which is not paid when due shall result in a late
charge being incurred and payable by the Company in an amount equal to interest
on such amount at the rate of fifteen percent (15%) per annum from the date such
amount was due until the same is paid in full (“Late Charge”).  

25.Waiver of Notice.  To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Certificate of Designations and the Securities Purchase
Agreement.

26.Governing Law.  This Certificate of Designations shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Certificate of Designations
shall be governed by, the internal laws of the State of Nevada, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Nevada or any other jurisdictions) that would cause the application of
the laws of any jurisdictions other than the State of Nevada.  Except as
otherwise required by Section 23 above, the Company hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in The
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.  Nothing

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contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  Nothing contained herein (i) shall be deemed or
operate to preclude any Holder from bringing suit or taking other legal action
against the Company in any other jurisdiction to collect on the Company’s
obligations to such Holder, to realize on any collateral or any other security
for such obligations, or to enforce a judgment or other court ruling in favor of
such Holder or (ii) shall limit, or shall be deemed or construed to limit, any
provision of Section 23.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS CERTIFICATE OF
DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED HEREBY. 

27.Judgment Currency.

(a)If for the purpose of obtaining or enforcing judgment against the Company in
any court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 27 referred to
as the “Judgment Currency”) an amount due in U.S. dollars under this Certificate
of Designations, the conversion shall be made at the Exchange Rate prevailing on
the Trading Day immediately preceding:

(i) the date actual payment of the amount due, in the case of any proceeding in
the courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

(ii) the date on which the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 27(a)(ii) being hereinafter referred
to as the “Judgment Conversion Date”).

(b)If in the case of any proceeding in the court of any jurisdiction referred to
in Section 27(a)(ii) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

(c)Any amount due from the Company under this provision shall be due as a
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this Certificate of Designations.

28.Severability.  If any provision of this Certificate of Designations is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity

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or unenforceability of such provision shall not affect the validity of the
remaining provisions of this Certificate of Designations so long as this
Certificate of Designations as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).  

29.Maximum Payments.  Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law.  In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the applicable Holder and thus refunded to the
Company.

30.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.

(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.

31.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, and the
rules and regulations thereunder.

(b)“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, whether or not declared (other than Capitalized Dividends).

(c) “Adjustment Right” means any right granted with respect to any securities
issued in connection with, or with respect to, any issuance or sale (or deemed
issuance or sale in accordance with Section 9(a)) of shares of Common Stock
(other than rights of the type described in Section 8(a) hereof) that could
result in a decrease in the

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net consideration received by the Company in connection with, or with respect
to, such securities (including, without limitation, any cash settlement rights,
cash adjustment or other similar rights). 

(d) “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
“control” of a Person means the power directly or indirectly either to vote 10%
or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

(e)“Attribution Parties” means, collectively, the following Persons and
entities: (i) any investment vehicle, including, any funds, feeder funds or
managed accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder's investment manager or
any of its Affiliates or principals, (ii) any direct or indirect Affiliates of
the Holder or any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Company's Common
Stock would or could be aggregated with the Holder's and the other Attribution
Parties for purposes of Section 13(d) of the 1934 Act.  For clarity, the purpose
of the foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage.  

(f)“Bankruptcy Triggering Events” means the commencement by 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 filing by it of
a petition seeking reorganization or relief under any applicable federal, state
or foreign law, 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 taking of corporate
action by any such Subsidiary in furtherance of any such action;

(g)“Bloomberg” means Bloomberg, L.P.

(h)“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.

(i)“Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
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 bid price or the closing trade price (as the case may be)
then the last bid price or last trade price, respectively, 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

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market for such security, the last closing bid price or last trade price,
respectively, 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 closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, 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 in the “pink sheets” by OTC
Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as
the case may be) of such security on such date shall be the fair market value as
mutually determined by the Company and the Required Holder. If the Company and
the Required Holders 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 23. All such determinations shall be appropriately adjusted for any
stock splits, stock dividends, stock combinations, recapitalizations or other
similar transactions during such period. 

(j)“Change of Control” means any Fundamental Transaction other than (A) any
merger of the Company or any of its, direct or indirect, wholly-owned
Subsidiaries with or into any of the foregoing Persons, (B) any reorganization,
recapitalization or reclassification of the shares of Common Stock in which
holders of 50% of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, are, in all material respects, such
holders of the voting power of the surviving entity (or entities with the
authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities) after
such reorganization, recapitalization or reclassification, (C) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company or any of its Subsidiaries, or (D) merger in
connection with a bona fide acquisition by the Company of any Person in which
(x) the gross consideration paid, directly or indirectly, by the Company (as
calculated in accordance with Section 9(a)(iv) above, but treating any
assumption of indebtedness, directly or indirectly, by the Company as an
increase in the consideration paid on a dollar-for-dollar basis) in such
acquisition is not greater than 20% of the Company’s market capitalization as
calculated on each of (1) the date of the public announcement of such merger and
(2) the date of the consummation of such merger and (y) such merger does not
contemplate (i) any change to the identity of the board of directors of the
Company or any of the members of the senior management of the Company,
including, without limitation, the chief executive officer and the chief
financial officer of the Company or (ii) a replacement at one time or within a
one year period of more than one‑half of the members of the Board of Directors
which is not approved by a majority of those individuals who are members of the
Board of Directors on the Initial Issuance Date (or by those individuals who are
serving as members of the Board of Directors on any date whose nomination to the
Board of Directors was approved by a majority of the members of the Board of
Directors who are members on the Initial Issuance Date).  Notwithstanding
anything herein to the contrary, the transaction

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contemplated by the Investment Agreement dated August [___], 2016, between the
Company and the Investor (including, without limitation, in connection with the
exercise of any warrants to purchase Common Stock issued to the Investor in such
transactions) shall not be considered a Change of Control. 

(k)“Change of Control Redemption Premium” means 125%.

(l)“Closing Date” shall have the meaning set forth in the Securities Purchase
Agreement, which date is the date the Company initially issued the Preferred
Shares and the Warrants pursuant to the terms of the Securities Purchase
Agreement.

(m)“Common Stock” means (i) the Company’s shares of common stock, $0.001 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.

(n)“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.

(o)“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of the Preferred Shares in accordance with the terms hereof.

(p)“Dividend Conversion Price” means with respect to any Dividend Date that
price which shall be the lower of (i) the applicable Conversion Price and (ii)
85% of the Market Price, provided, however, that in no event shall the Dividend
Conversion Price be less than the Floor Price per share except as the result of
an adjustment as a result of the application of Section 9(b).

(q)“Dividend Rate” means (A) eight percent (8.0%) per annum and (B) for the
period from and after the occurrence of a Triggering Event through such time
that such Triggering Event is cured, fifteen percent (15%) per annum (the
“Dividend Default Rate”).

(r)“Eligible Market” means any of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to
any of the foregoing).

(s)“Equity Conditions” means, with respect to an given date of determination:
(i) on each day during the period beginning thirty calendar days prior to the
applicable date of determination and ending on and including the applicable date
of determination (the “Equity Conditions Measuring Period”), the Common Stock
(including all Registrable Securities) 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

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applicable date of determination due to business announcements by the Company)
nor shall delisting or suspension by an Eligible Market have been threatened
(with a reasonable prospect of delisting occurring after giving effect to all
applicable notice, appeal, compliance and hearing periods) or reasonably likely
to occur or pending as evidenced by (A) a writing by such Eligible Market or (B)
the Company falling below the minimum listing maintenance requirements of the
Eligible Market on which the Common Stock is then listed or designated for
quotation (as applicable); (ii) during the Equity Conditions Measuring Period,
the Company shall have delivered all shares of Common Stock issuable upon
conversion of the Preferred Shares as set forth in Section 4 hereof and all
other shares of capital stock required to be delivered by the Company as set
forth in the other Transaction Documents; (iii) except with respect to a
Maturity Conversion, any shares of Common Stock to be issued in connection with
the event requiring determination (or issuable upon conversion of the Conversion
Amount being redeemed in the event requiring this determination) may be issued
in full without violating Section 4(d) hereof; (iv) any shares of Common Stock
to be issued in connection with the event requiring determination (or issuable
upon conversion of the Conversion Amount being redeemed in the event requiring
this determination (without regards to any limitations on conversion set forth
herein)) 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); (v) on each day during the Equity Conditions
Measuring Period, no public announcement of a pending, proposed or intended
Fundamental Transaction shall have occurred which has not been abandoned,
terminated or consummated; (vi) none of the Holders 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; (vii) on each day during the Equity
Conditions Measuring Period, the Company otherwise shall have been in compliance
with each, and shall not have breached 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
materially breached any covenant or other term or condition of any Transaction
Document, including, without limitation, the Company shall not have failed to
make any payment pursuant to any Transaction Document; (viii) on each Trading
Day during the Equity Conditions Measuring Period, there shall not have occurred
any Volume Failure as of such applicable date of determination; (ix) on the
applicable date of determination (A) no Authorized Share Failure shall exist or
be continuing and the applicable Required Minimum Securities Amount of shares of
Common Stock are available under the certificate of incorporation of the Company
and reserved by the Company to be issued pursuant to the Preferred Shares and
(B) all shares of Common Stock to be issued in connection with the event
requiring this determination (or issuable upon conversion of the Conversion
Amount being redeemed in the event requiring this determination (without regards
to any limitations on conversion set forth herein)) may be issued in full
without resulting in an Authorized Share Failure; (x) on each day during the
Equity Conditions Measuring Period, there shall not have occurred and there
shall not exist a Triggering Event; (xi) the shares of Common Stock issuable
pursuant the event requiring the satisfaction of the Equity Conditions are duly
authorized and listed and eligible for trading without restriction on an
Eligible Market, (xii) all of the Conversion

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Shares and Dividend Shares issuable pursuant to the Transaction Documents may be
resold pursuant to Rule 144 without volume or manner-of-sale restrictions or
current public information requirements as determined by the counsel to the
Company as set forth in a written opinion letter to such effect, addressed and
acceptable to the Transfer Agent and the affected Holders, and (xiii) the
Dividend Conversion Price is not less than the Floor Price per share
(appropriate adjusted for any stock split, stock dividend, stock combination or
other similar transaction). 

(t)“Equity Conditions Failure” means that (i) on any day during the period
commencing twenty (20) Trading Days prior to the applicable Dividend Notice Date
through the applicable Dividend Date or (ii) on any day during the period
commencing twenty (20) Trading Days prior to the Maturity Date through the
Maturity Date, the Equity Conditions have not been satisfied (or waived in
writing by the applicable Holder), provided that a Volume Failure shall not
constitute an Equity Conditions Failure for the purposes of Section 3.

(u)“Excluded Securities” means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted by a majority of the non-employee members of the
Board of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any securities issued pursuant to the Securities
Purchase Agreement and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
the Securities Purchase Agreement, provided that such securities have not been
amended since the date of the Securities Purchase Agreement to increase the
number of such securities or to decrease the exercise price, exchange price or
conversion price of any such securities, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities, and (d) shares of Common Stock issued to the Investor
or its Affiliates in connection with the transactions contemplated by the
Investment Agreement, dated August [___], 2016, between the Company and the
Investor (including, without limitation, in connection with the exercise of
warrants to purchase Common Stock issued to the Investor in such transactions
and shares of Common Stock issued pursuant to the Credit and Guaranty Agreement
to be entered into between the Company and the Investor).

(v)“Financial Covenants” means the financial covenants set forth in (i) Sections
6.7(a), (b), (c) and (e) of the Credit and Guaranty Agreement dated as of
September 11, 2014 as amended on April 15, 2015, among the Company, certain
subsidiaries of the Company named therein, the lenders named therein, MCP
Opportunities LLC (as successor to McLarty Capital Partners SBIC, L.P.) as

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Administrative Agent and Collateral Agent, McLarty Capital Partners SBIC, L.P.,
as Arranger, Bookmanager and Syndication Agent and Crystal Financial LLC, as
Documentation Agent, as such financial covenants from time to time hereafter may
amended and/or waived, in the manner provided in such Credit and Guaranty
Agreement or (ii) the substantially similar financial covenants included in the
agreement governing any Indebtedness which substantially refinances the
Indebtedness under the such Credit and Guaranty Agreement, and any agreement
governing any Indebtedness which substantially refinances such refinanced
Indebtedness, all as from time to time may be amended and/or waived, in the
manner provided in such agreement. 

(w)“Floor Price” means $0.50 (as adjusted for stock splits, stock dividends,
stock combinations, recapitalizations and similar events).

(x)“Fundamental Transaction” means that the Company shall, directly or
indirectly, in one or more related transactions, (1) consolidate or merge with
or into (whether or not the Company 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 properties or assets to any other
Person, (3) assist or agree to assist any other Person to make a purchase,
tender or exchange offer that is accepted by such holders of more than 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 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) the Company
shall, directly or indirectly, in one or more related transactions, reorganize,
recapitalize or reclassify the Common Stock (which shall not include a reverse
stock split).

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

(z)“Group” means a “group” as that term is used in Section 13(d) of the 1934 Act
and as defined in Rule 13d-5 thereunder.

(aa)“Holder Pro Rata Amount” means, with respect to any Holder, a fraction
(i) the numerator of which is the number of Series B-1 Preferred Shares issued
to such Holder pursuant to the Securities Purchase Agreement on the Initial
Issuance Date and (ii) the denominator of which is the number of Series B-1
Preferred Shares issued to all Holders pursuant to the Securities Purchase
Agreement on the Initial Issuance Date.

(bb)“Indebtedness” shall have the meaning ascribed to such term in the
Securities Purchase Agreement.

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(cc)“Investor” means Digital Entertainment Holdings LLC. 

(dd)“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.

(ee)“Market Price” means, as of any given date, the quotient of (i) the sum of
the VWAP of the Common Stock for each of the five (5) consecutive Trading Days
immediately prior to such given date, divided by (ii) five (5).  All such
determinations to be appropriate adjusted for any stock split, stock dividend,
stock combination or other similar transaction during such measuring period.

(ff)“Maturity Date” shall mean May 19, 2020; provided, however, the Maturity
Date may be extended at the option of a Holder (i) in the event that, and for so
long as, a Triggering Event shall have occurred and be continuing or any event
shall have occurred and be continuing that with the passage of time and the
failure to cure would result in a Triggering Event or (ii) through the date that
is twenty (20) Business Days after the consummation of a Fundamental Transaction
in the event that a Fundamental Transaction is publicly announced or a
Fundamental Transaction Notice is delivered prior to the Maturity Date, provided
further that if a Holder elects to convert some or all of its Preferred Shares
pursuant to Section 4 hereof, and the Conversion Amount would be limited
pursuant to Section 4(d) hereunder, the Maturity Date shall automatically be
extended until such time as such provision shall not limit the conversion of
such Preferred Shares.

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

(hh)“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.

(ii) “Permitted Indebtedness” means (a) the Indebtedness existing on the Initial
Issuance Date and set forth on Schedule 3.1(bb) attached to the Securities
Purchase Agreement, including any accruals permitted thereunder, and any
Indebtedness which substantially refinances such Indebtedness on more favorable
or substantially similar terms, (b) Program Financing Indebtedness and (c) lease
obligations and purchase money indebtedness of up to $500,000 in the aggregate,
incurred in connection with the acquisition of capital assets and lease
obligations with respect to newly acquired or leased assets.

(jj)“Permitted Liens” means the individual and collective reference to the
following: (a) Liens for taxes, assessments and other governmental charges or
levies not yet due or Liens for taxes, assessments and other governmental
charges or levies being

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contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien, (c) Liens
incurred in connection with Permitted Indebtedness under clause (a) thereunder,
and (d) Liens incurred in connection with Permitted Indebtedness under clause (b
or c) thereunder, provided that such Liens are not secured by assets of the
Company or its Subsidiaries other than the assets so financed, acquired or
leased. 

(kk)“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.

(ll) “Principal Market” means the Nasdaq Capital Market

(mm)“Production Entity” means any direct or indirect Subsidiary of the Company
formed primarily for the purpose of the production of motion picture and
television programming content or the mastering and offering of packaged media
masters, including the creation of added content, artwork and other one-time
value-added materials to prepare finished masters suitable for offer and sale to
the public.

(nn)“Program Financing Indebtedness” means Indebtedness of a Production Entity
which is nonrecourse to the Company or any its Subsidiaries, except a Production
Entity.

(oo)“Redemption Notices” means, collectively, the Maturity Notice with respect
to a Maturity Redemption and the Change of Control Redemption Notices, and each
of the foregoing, individually, a “Redemption Notice.”

(pp)“Redemption Premium” means 125%.

(qq)“Redemption Prices” means, collectively, Bankruptcy Event Redemption Prices,
the Change of Control Redemption Prices and the Maturity Redemption Price, and
each of the foregoing, individually, a “Redemption Price.”

(rr) “Registration Rights Agreement” means the Registration Rights Agreement,
dated as of the date of the Securities Purchase Agreement, among the Company and
the original Holders, in the form of Exhibit B attached to the Securities
Purchase Agreement.

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(ss)“Required Holders” means the holders of at least a majority of the
outstanding Preferred Shares. 

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

(uu)“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

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

(ww)“Securities Purchase Agreement” means that certain securities purchase
agreement by and among the Company and the initial holders of Preferred Shares,
dated May 14, 2015, as amended by the Exchange Agreements, and as may be further
amended from time in accordance with the terms thereof.

(xx)“Senior Loan Agreement” means the Credit and Guaranty Agreement dated as of
September 11, 2014 as amended on April 15, 2015, among the Company, certain
subsidiaries of the Company named therein, the lenders named therein, MCP
Opportunities LLC (as successor to McLarty Capital Partners SBIC, L.P.) as
Administrative Agent and Collateral Agent, McLarty Capital Partners SBIC, L.P.,
as Arranger, Bookmanager and Syndication Agent and Crystal Financial LLC, as
Documentation Agent, as amended from time to time hereafter, the agreement
governing any Indebtedness which substantially refinances the Indebtedness under
the such Credit and Guaranty Agreement, as amended from time to time, and any
agreement governing any Indebtedness which substantially refinances such
refinanced Indebtedness, as amended from time to time.

(yy)“Shareholder Approval” means such approval as may be required by the
applicable rules and regulations of the Nasdaq Stock Market (or any successor
entity) from the shareholders of the Company with respect to the transactions
contemplated by the Transaction Documents, including the issuance of all of the
Underlying Shares in excess of 19.99% of the issued and outstanding Common Stock
on the Closing Date.

(zz)“Stated Value” shall means, with respect to each Preferred Share, the sum of
(i) $1,000 per share and (ii) any Capitalized Dividends with respect to such
Preferred 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 such Preferred Share.

(aaa)“Subsidiary” means any significant subsidiary of the Company (as defined in
Rule 1-02 of Regulation S-X), as set forth on Schedule 3.1(a) of the Securities
Purchase Agreement, and shall, where applicable, also include any direct or
indirect

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significant subsidiary of the Company formed or acquired after the date of the
Securities Purchase Agreement. 

(bbb) “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.  Notwithstanding anything herein to the contrary, the
Investor shall not be considered a “Successor Entity” as a result of any of the
transactions contemplated by the Investment Agreement, dated August [___], 2016,
between the Company and the Investor (including, without limitation, in
connection with the exercise of any warrants to purchase Common Stock issued to
the Investor in such transactions).

(ccc)“Trading Day” means, as applicable, (x) with respect to all price or
trading volume determinations relating to the Common Stock, 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 Holder or (y)
with respect to all determinations other than price determinations relating to
the Common Stock, any day on which The New York Stock Exchange (or any successor
thereto) is open for trading of securities.

(ddd) “Triggering Events” means each of the following events:

(i) the failure of the initial Conversion Shares Registration Statement to be
declared effective by the Commission on or prior to the 180th day after the
Initial Issuance Date or the Company does not meet the current public
information requirements under Rule 144 in respect of the Registrable Securities
(as defined under the Registration Rights Agreement) for more than 10
consecutive calendar days or an aggregate of 30 calendar days (which need not be
consecutive calendar days) during any 12 month period;

(ii) if, during the Effectiveness Period (as defined in the Registration Rights
Agreement), the effectiveness of the Conversion Shares Registration Statement
lapses for more than an aggregate of 60 calendar days (which need not be
consecutive calendar days) during any 12 month period, or the Holders shall not
otherwise be permitted to resell Registrable Securities under the Conversion
Shares Registration Statement for more than an aggregate of 60 calendar days
(which need not be consecutive calendar days) during any 12 month period;

(iii) the suspension from trading or failure of the Common Stock to be

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trading or listed (as applicable) on an Eligible Market for a period of ten (10)
consecutive Trading Days; 

(iv) the Company’s notice, written or oral, to any holder of Preferred Shares or
Warrants, 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 exercise of any Warrants for Warrant Shares in
accordance with the provisions of the Warrants or a request for conversion 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(d) hereof;

(v) at any time following the tenth (10th) consecutive day that a Holder’s
Authorized Share Allocation (as defined in Section 11(a) above) is less than
125% of the number of shares of Common Stock that such Holder would be entitled
to receive upon a conversion, in full, of all of the Preferred Shares then held
by such Holder (without regard to any limitations on conversion set forth in
this Certificate of Designations);

(vi) the Company’s failure to pay to any Holder any Dividend on any Dividend
Date (whether or not declared by the Board of Directors) or any redemption
payments (in each case, whether or not permitted pursuant to the NRS), except,
in the case of a failure to pay Dividends when and as due, in each such case
only if such failure remains uncured for a period of at least three (3) Trading
Days;

(vii) the Company, on two or more occasions, either (A) fails to cure a
Conversion Failure or a Delivery Failure (as defined in the Warrants) by
delivery of the required number of shares of Common Stock within five (5)
Trading Days after the applicable Conversion Date or Exercise Date (as defined
in the Warrants) (as the case may be) or (B) fails to remove any restrictive
legend on any certificate or any shares of Common Stock issued to such Holder
upon conversion or exercise (as the case may be) of any Securities (as defined
in the Securities Purchase Agreement) acquired by such Holder under the
Securities Purchase Agreement as and when required by such Securities or the
Securities Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such failure remains uncured for at least five
(5) Trading Days;

(viii) the occurrence of any default under, redemption of or acceleration prior
to maturity of at least an aggregate of $500,000 of Indebtedness (as defined in
the Securities Purchase Agreement) of the Company or any of its Subsidiaries;

(ix) any Bankruptcy Triggering Event occurs;

(x) a final judgment or judgments for the payment of money aggregating in excess
of $500,000 are rendered against the Company and/or any of its Subsidiaries and
which judgments are not, within thirty (30) days after the

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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 $500,000 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; 

(xi) the Company and/or any Subsidiary, individually or in the aggregate, either
(i) fails to pay, when due, or within any applicable grace period, any payment
with respect to any Indebtedness in excess of $500,000 due to any third party
(other than, with respect to unsecured Indebtedness only, 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 agreements for monies owed or owing in an amount in excess of
$500,000, which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
any other circumstance or event that results in a default or event of default
under any agreement binding the Company or any Subsidiary, which default or
event of default is likely to have a material adverse effect on the business,
assets, operations (including results thereof), liabilities, properties,
condition (including financial condition) or prospects of the Company or any of
its Subsidiaries, individually or in the aggregate;

(xii) other than as specifically set forth in another clause of this definition,
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
materially breaches 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;

(xiii) a false or inaccurate certification (including a false or inaccurate
deemed certification) by the Company that either (A) the Equity Conditions are
satisfied, (B) there has been no Equity Conditions Failure, or (C) as to whether
any Triggering Event has occurred;

(xiv) any breach or failure in any respect by the Company or any Subsidiary to
comply with any provision of Section 12 or Section 13 of this Certificate of
Designations;

(xv) any Material Adverse Effect (as defined in the Securities Purchase

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Agreement) occurs;  or 

(xvi) any provision of any Transaction Document shall at any time for any reason
(other than pursuant to the express terms thereof) cease to be valid and binding
on or enforceable against the parties thereto, or the validity or enforceability
thereof shall be contested by any party thereto, or a proceeding shall be
commenced by the Company or any Subsidiary or any governmental authority having
jurisdiction over any of them, seeking to establish the invalidity or
unenforceability thereof, or the Company or any Subsidiary shall deny in writing
that it has any liability or obligation purported to be created under any
Transaction Document.

(eee)“Transaction Documents” means the Securities Purchase Agreement, this
Certificate of Designations, the Series C-1 Preferred Stock Certificate of
Designations, the Series C-2 Preferred Stock Certificate of Designations, the
Series D-2 Preferred Stock Certificate of Designations, the Warrants, the
Registration Rights Agreement 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 by the Securities Purchase Agreement, all as
may be amended from time to time in accordance with the terms thereof.

(fff)“Underlying Shares” means the shares of Common Stock issued and issuable
upon conversion or redemption of the Preferred Shares, the Series C-1 Preferred
Stock, the Series C-2 Preferred Stock and the Series D-2 Preferred Stock, upon
exercise of the Warrants and issued and issuable in lieu of the cash payment of
dividends on the Preferred Shares, the Series C-1 Preferred Stock, the Series
C-2 Preferred Stock and the Series D-2 Preferred Stock in accordance with the
terms of this Certificate of Designation, the Series C-1 Preferred Stock
Certificate of Designations, the Series C-2 Preferred Stock Certificate of
Designations and the Series D-2 Preferred Stock Certificate of Designations.

(ggg)“Volume Failure” means, with respect to a particular date of determination,
(i) the quotient of (x) the sum of the aggregate daily dollar trading volume (as
reported on Bloomberg) of the Common Stock on the Principal Market for each
Trading Day during the twenty (20) consecutive Trading Day period ending and
including the Trading Day immediately preceding such date of determination,
divided by (y) twenty (20), is less than $350,000 and (ii) the quotient of (x)
the sum of the aggregate daily dollar trading volume (as reported on Bloomberg)
of the Common Stock on the Principal Market on each of the last five (5) Trading
Days during the twenty (20) Trading Day period ending and including the Trading
Day immediately preceding such date of determination, divided by (y) five (5),
is less than $350,000.

(hhh)“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

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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). 

(iii)“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 period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP”
function (set to weighted-average) or, if the foregoing does not apply, the
dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, 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
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by OTC Markets Group
Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such
security on such date 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 the Required Holders.  If the Company and the Required Holders 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 23 All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination, recapitalization or other similar transaction during
such period.

(jjj)“Warrants” has the meaning ascribed to such term in the Securities Purchase
Agreement, and shall include all warrants issued in exchange therefor or
replacement thereof.

(kkk)“Warrant Shares” means, collectively, the shares of Common Stock issuable
upon exercise of the Warrants.

32.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 within one (1) Business Day after any
such receipt or delivery publicly disclose 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 such Holder
contemporaneously with delivery of such notice, and in the absence of any such
indication, such 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 any of its Subsidiaries. Nothing contained in this Section 32 shall
limit any obligations of the Company, or any rights of any Holder, under the
Securities Purchase Agreement.

*  *  *  *  *

 

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IN WITNESS WHEREOF, the Company has caused this Certificate of Designations of
Series D-1 Convertible Preferred Stock of RLJ Entertainment, Inc. to be signed
by its President and its Secretary on this ___ day of __________, 2016.

 

 

RLJ ENTERTAINMENT, INC.

 

By:

Name:  Miguel Penella
Title:    President

 

 

 

By:

Name:  Dawn Martens
Title:    Secretary

 

 

 

 

 

 

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EXHIBIT I

 

RLJ ENTERTAINMENT, INC.

CONVERSION NOTICE

Reference is made to the Certificate of Designations, Preferences and Rights of
the Series D-1 Convertible Preferred Stock of RLJ Entertainment, Inc. (the
“Certificate of Designations”). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to convert the number
of shares of Series D-1 Convertible Preferred Stock, $0.001 par value per share
(the “Preferred Shares”), of RLJ Entertainment, Inc., a Nevada corporation (the
“Company”), indicated below into shares of common stock, $0.001 value per share
(the “Common Stock”), of the Company, as of the date specified below.

Date of Conversion:

 

Aggregate number of Preferred Shares to be converted

 

Aggregate Stated Value of such Preferred Shares to be converted:

 

Aggregate accrued and unpaid Dividends and accrued and unpaid Late Charges with
respect to such Preferred Shares and such Aggregate Dividends to be converted:

 

AGGREGATE CONVERSION AMOUNT  TO BE CONVERTED:

 

Please confirm the following information:

Conversion Price:

 

Number of shares of Common Stock to be issued:

 

oPlease issue the Common Stock into which the applicable Preferred Shares are
being converted to Holder, or for its benefit, as follows:

oCheck here if requesting delivery as a certificate to the following name and to
the following address:

Issue to:

 

 

 

 

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oCheck here if requesting delivery by Deposit/Withdrawal at Custodian as
follows:

DTC Participant:

 

DTC Number:

 

Account Number:

 

 

 

Date: _____________ __,

Name of Registered Holder

 

By:  
Name:
Title:

Tax ID:_____________________

Facsimile:___________________

E-mail Address:

 

 

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EXHIBIT II

 

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs
_________________ to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated _____________, 20__
from the Company and acknowledged and agreed to by ________________________.

 

RLJ ENTERTAINMENT, INC.

 

By:

Name:
Title