Exhibit 10.2

Execution Version

SUBSCRIPTION AGREEMENT

This SUBSCRIPTION AGREEMENT is entered into this 20th day of December, 2016
(this “Subscription Agreement”), by and between KLR Energy Acquisition Corp., a
Delaware corporation (the “Company”), KLR Energy Sponsor, LLC, a Delaware
corporation (“Sponsor”) and each undersigned subscriber (each individually as
used herein, “Subscriber”). Each Subscriber is acting severally and not jointly
with any other Subscriber, including, without limitation, the obligation to
purchase Acquired Securities (defined below) hereunder and the representations
and warranties of Subscriber hereunder (which are made by Subscriber as to
itself only).

WHEREAS, in connection with the proposed business combination (the
“Transaction”) between the Company and Tema Oil and Gas Company, a Maryland
corporation (“Tema”), pursuant to that certain Business Combination Agreement,
dated as of December 20, 2016, by and between the Company and Tema (the
“Business Combination Agreement”), the Company is seeking commitments to
purchase shares of the Company’s 8.000% Series A Cumulative Perpetual
Convertible Preferred Stock, par value $0.0001 per share (the “Series A
Preferred Stock”), and warrants entitling the holder to purchase one share of
the Company’s Class A common stock, par value $0.0001 per share (the “Class A
Common Stock”) at an exercise price of $11.50 per share (the “Warrants”) in a
private placement; and

WHEREAS, in connection with the Transaction, Subscriber desires to subscribe for
and purchase from the Company that number of shares of Series A Preferred Stock
(the “Preferred Stock”) and Warrants set forth on its signature page hereto (the
Preferred Stock and the Warrants together, the “Acquired Securities”), for the
aggregate amount set forth on such signature page hereto (the “Purchase Price”),
and the Company desires to issue and sell to Subscriber the Acquired Securities
in consideration of the payment of the Purchase Price by or on behalf of
Subscriber to the Company on or prior to the Closing (as defined below).

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants, and subject to the conditions, herein
contained, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:

 

  1. Subscription; Share Transfer.

a. Subject to the terms and conditions hereof, Subscriber hereby agrees to
subscribe for and purchase, and the Company hereby agrees to issue and sell to
Subscriber, upon the payment of the Purchase Price, the Acquired Securities
(such subscription and issuance, the “Subscription”). The Preferred Stock shall
have the terms set forth in the form of certificate of designations attached as
Exhibit A (the “Certificate of Designations”). The Warrants shall have the terms
set forth in the Warrant Agreement, dated as of March 10, 2016, between the
Company and Continental Stock Transfer & Trust Company (the “Warrant
Agreement”), and shall have all of the rights and obligations of a “Public
Warrant” as such term is defined thereunder.

b. In consideration of Subscriber’s performance of its obligations described
herein, Sponsor hereby agrees to transfer to the undersigned at Closing, on the
business day following the completion of the Transaction, an aggregate number of
shares of Class A Common Stock (the “Additional Shares”) equal to the product
(rounded to the nearest whole number) obtained by multiplying (i) 0.3334 by
(ii) the quotient of 65 divided by 75 by (iii) 48.3954% by (iv) the excess of
the number of shares of Class A Common Stock issued upon conversion of the
Company’s Class F common stock, par value $0.0001, held by Sponsor on the day
immediately preceding the Closing Date and the number of shares of Class F
common stock held by Sponsor on such date. The transfer of the Additional Shares
is conditioned on the Closing. For U.S. federal income tax purposes (and for
purposes of any applicable state or local tax that follow that U.S. federal
income tax treatment), the parties agree that the Company has directed Sponsor
to transfer to Subscriber the Additional Shares on behalf of the Company, in
lieu of the transfer by Sponsor of such shares to the Company for cancellation
in exchange for no consideration and the reissuance of such shares by the
Company to Subscriber pursuant to this Subscription Agreement.

 

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  2. Closing.

a. The closing of the Subscription contemplated hereby (the “Closing”) shall
occur on the closing date of the Transaction substantially concurrently with the
consummation of the Transaction. Upon not less than five (5) business days’
written notice from (or on behalf of) the Company to Subscriber (the “Closing
Notice”) that the Company reasonably expects all conditions to the closing of
the Transaction to be satisfied on a date that is not less than
five (5) business days from the date of the Closing Notice, Subscriber shall
deliver to the Company on the closing date specified in the Closing Notice (the
“Closing Date”) the Purchase Price for the Acquired Securities by wire transfer
of United States dollars in immediately available funds to the account specified
by the Company in the Closing Notice against delivery by the Company to
Subscriber of (i) the Acquired Securities in book-entry form, free and clear of
any liens or other restrictions whatsoever (other than those arising under state
or federal securities laws), in the name of Subscriber (or its nominee in
accordance with its delivery instructions) or to a custodian designated by
Subscriber, as applicable, (ii) written notice from the Company or its transfer
agent evidencing the issuance to Subscriber of the Acquired Securities on and as
of the Closing Date and (iii) written notice from the Company or its transfer
agent evidencing the transfer of the Additional Shares.

b. The obligations of the Company and Sponsor hereunder are subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions may be waived by the Company and the
Sponsor at any time by providing prior written notice of such waiver:

(i) Subscriber shall have delivered to the Company the applicable Purchase Price
for the Acquired Securities being purchased by Subscriber at the Closing by wire
transfer of immediately available funds pursuant to the wire transfer
instructions provided by the Company;

(ii) all representations and warranties of Subscriber contained in this
Subscription Agreement shall be true and correct in all material respects (other
than representations and warranties that are qualified as to materiality or
material adverse effect (as defined herein), which representations and
warranties shall be true in all respects) at and as of the Closing Date, and
consummation of the Closing shall constitute a reaffirmation by Subscriber of
each of the representations, warranties and agreements of each such party
contained in this Subscription Agreement as of the Closing Date, but in each
case without giving effect to consummation of the Transaction;

(iii) no governmental authority shall have enacted, issued, promulgated,
enforced or entered any judgment, order, law, rule or regulation (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making consummation of the transactions contemplated hereby illegal or
otherwise restraining or prohibiting consummation of the transactions
contemplated hereby, and no governmental authority shall have instituted or
threatened in writing a proceeding seeking to impose any such restraint or
prohibition; and

(vi) all conditions precedent to the closing of the Transaction set forth in the
Business Combination Agreement, including the approval of the Company’s
stockholders, shall have been satisfied or waived.

c. The obligations of Subscriber hereunder are subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for Subscriber’s sole benefit and may be waived by such
Subscriber at any time:

(i) the Company shall have delivered to Subscriber the Acquired Securities being
purchased by Subscriber at the Closing pursuant to this Subscription Agreement;

(ii) Sponsor shall have delivered to Subscriber the Additional Shares being
purchased by the Subscriber at the Closing pursuant to this Subscription
Agreement;

(iii) all representations and warranties of the Company contained in this
Subscription Agreement shall be true and correct in all material respects (other
than representations and warranties that are qualified as to materiality or
material adverse effect (as defined herein), which representations and
warranties shall be true in all respects) at and as of the Closing Date (except

 

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with respect to representations and warranties made as of a particular date,
which shall be true and correct in all material respects as of the date
specified), and consummation of the Closing shall constitute a reaffirmation by
the Company of each of the representations, warranties and agreements of each
such party contained in this Subscription Agreement as of the Closing Date
(except with respect to representations and warranties made as of a particular
date), but in each case without giving effect to consummation of the
Transaction, and Subscriber shall have received a certificate, executed by the
duly authorized officer of the Company, dated as of the Closing Date, to the
foregoing effect;

(iv) no governmental authority shall have enacted, issued, promulgated, enforced
or entered any judgment, order, law, rule or regulation (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
consummation of the transactions contemplated hereby illegal or otherwise
restraining or prohibiting consummation of the transactions contemplated hereby,
and no governmental authority shall have instituted or threatened in writing a
proceeding seeking to impose any such restraint or prohibition;

(v) no suspension of the qualification of the Acquired Securities for offering
or sale or trading in any jurisdiction, or initiation or threatening of any
proceedings for any of such purposes, shall have occurred;

(vi) the Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by this
Subscription Agreement to be performed, satisfied or complied with by it at or
prior to the Closing;

(vii) the Company’s Class A Common Stock shall be listed on the NASDAQ Capital
Market (“Nasdaq”), and the Company shall have obtained approval of Nasdaq to
list the shares of Class A Common Stock issuable upon conversion of the
Preferred Shares (the “Conversion Shares”) or upon exercise of the Warrants (the
“Warrant Exercise Shares”), subject to official notice of issuance, and no
notice of delisting (or notice that the listing or quotation of the Class A
Common Stock will be conditioned or delayed) shall have been received from
Nasdaq;

(viii) all conditions precedent to the closing of the Transaction set forth in
the Business Combination Agreement, including the approval of the Company’s
stockholders, shall have been satisfied or waived;

(ix) the Transaction shall have been, or substantially concurrently with the
Closing shall be, consummated in accordance with the terms of the Business
Combination Agreement, dated as of December 20, 2016, and the Side Letter, dated
as of December 20, 2016, by and between the Company and the Sponsor (the “Side
Letter”, and collectively with the Business Combination Agreement, the “Company
Transaction Documents”); and

(x) (i) the provisions of the Company Transaction Documents relating directly or
indirectly to the right of holders of Class A Common Stock to redeem all or a
portion of their shares of Class A Common Stock in connection with the Closing
or to payments by any person to the Company in connection with such redemptions,
including Section 6.3(d) of the Business Combination Agreement and Section 1(b)
of the Side Letter and any related defined terms, shall not have been amended or
modified in a manner that would have an adverse effect, in any respect, on the
Subscriber’s investment in the Acquired Securities, and none of the Company’s
rights with respect to such provisions shall have been waived in a manner that
would have an adverse effect, in any respect, on the Subscriber’s investment in
the Acquired Securities, and (ii) the Company Transaction Documents shall not
otherwise have been amended or modified in a manner that would have an adverse
effect, in any material respect, on the Subscriber’s investment in the Acquired
Securities, and none of the Company’s other rights under the Company Transaction
Documents shall have been waived in a manner that would have an adverse effect,
in any material respect, on the Subscriber’s investment in the Acquired
Securities, in each case without the prior written consent of Subscriber.

 

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d. At the Closing, the parties hereto shall execute and deliver such additional
documents and take such additional actions as the parties reasonably may deem to
be practical and necessary in order to consummate the Subscription as
contemplated by this Subscription Agreement.

 

  3. Company Representations and Warranties. The Company represents and warrants
that:

a. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its properties and
conduct its business as presently conducted and to enter into, deliver and
perform its obligations under this Subscription Agreement. The Company is duly
qualified or registered to transact business in each jurisdiction in which it
conducts business, except where such failure to be so qualified or registered
would not have a material adverse effect on the Company.

b. This Subscription Agreement, Warrant Agreement, and the Shareholders’ and
Registration Rights Agreement, dated as of December 20, 2016, by and among
Subscriber, Tema, the Sponsor and the Company (the “SHRRA”), have been duly
authorized, executed and delivered by the Company and are enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws relating to or affecting
the rights of creditors generally, and (ii) principles of equity, whether
considered at law or equity. The Side Letter has been duly authorized, executed
and delivered by the Company and Sponsor and is enforceable against each of the
Company and Sponsor in accordance with its terms, except as such enforceability
may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws relating to or affecting
the rights of creditors generally, and (ii) principles of equity, whether
considered at law or equity. The Certificate of Designations has been duly
authorized and, on or prior to the Closing Date, will be duly executed and
delivered by the Company, and when executed and delivered, will be enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws relating to or affecting
the rights of creditors generally, and (ii) principles of equity, whether
considered at law or equity. As of the date hereof, there are no side letters or
other agreements, contracts or arrangements to which the Company or any of its
affiliates is a party related to the Transaction other than the Company
Transaction Documents, the SHRRA and the Waiver Agreement, dated as of
December 20, 2016, by and between Sponsor and the Company (the “Waiver”). The
Company has provided Subscriber with true and correct copies of the Company
Transaction Documents, the SHRRA and the Waiver.

c. The Additional Shares have been and, when the Certificate of Designations is
executed and filed with the Secretary of State of the State of Delaware, the
Preferred Stock will have been duly authorized and, when issued and delivered to
Subscriber against full payment therefor in accordance with the terms of this
Subscription Agreement, the Preferred Stock and the Additional Shares will be
validly issued, fully paid and non-assessable and will not have been issued in
violation of or subject to any preemptive or similar rights, nor any restriction
upon the voting, created under the Company’s certificate of incorporation of the
Company, as amended to the date of issuance (the “Certificate of
Incorporation”), bylaws of the Company (the “Bylaws”) or any other agreement or
other outstanding instrument to which the Company is a party or is bound or
under the Delaware General Corporation Law. The Company has reserved sufficient
shares of Class A Common Stock to be issued upon conversion of the Preferred
Stock.

d. The Warrants have been duly authorized and, when issued and delivered to
Subscriber against full payment therefor in accordance with the terms of this
Subscription Agreement and the Warrant Agreement, the Warrants will constitute
valid and binding obligations of the Company, enforceable in accordance with
their terms and will not have been issued in violation of or subject to any
preemptive or similar rights created under the Certificate of Incorporation,
Bylaws or other agreements or other outstanding instrument to which the Company
is a party or is bound or under the Delaware General Corporation Law. The
Company has reserved sufficient shares of Class A Common Stock to be issued upon
exercise of the Warrants.

 

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e. The Additional Shares have been duly authorized and, when issued in
accordance with the terms of the Certificate of Incorporation, will be validly
issued, fully paid and non-assessable and will not have been issued in violation
of or subject to any preemptive or similar rights created under the Certificate
of Incorporation, Bylaws or any agreement or other outstanding instrument to
which the Company is a party or is bound or under the Delaware General
Corporation Law.

f. The issuance and sale of the Acquired Securities and the performance by the
Company of all of the provisions of this Subscription Agreement and the
consummation of the transactions herein will be done in accordance with the
Nasdaq marketplace rules.

g. Subject to obtaining all required approvals in connection with the
performance of the Business Combination Agreement and any required approvals
pursuant to the applicable rules of Nasdaq, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority or other person
on the part of the Company is required in connection with the offer, sale or
issuance of the Acquired Securities or transfer of the Additional Shares
pursuant hereto. The Company is not in violation of the listing requirements of
Nasdaq.

h. Assuming that the representations of Subscriber set forth in the Investor
Questionnaire in the form attached hereto as Exhibit B (the “Investor
Questionnaire”) are true and correct, the offer, sale and issuance of the
Acquired Securities and transfer of the Additional Shares, each in conformity
with the terms of this Subscription Agreement, are exempt from the registration
requirements of Section 5 of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemptions. Neither the Company nor, to the Company’s
knowledge, any person acting on behalf of the Company has offered or sold any of
the Acquired Securities by any form of general solicitation or general
advertising.

i. Subject to obtaining all required approvals in connection with the
performance of the Business Combination Agreement and any required approvals
pursuant to the applicable rules of Nasdaq, the execution, delivery, and
performance by the Company of this Subscription Agreement and the Warrants, the
issuance and sale of the Acquired Securities, the issuance of the Conversion
Shares upon conversion of the Preferred Stock, the issuance of the Warrant
Exercise Shares upon exercise of the Warrants and the transfer of the Additional
Shares, in each case as contemplated by this Subscription Agreement, the
Certificate of Designations and the Warrant Agreement, as applicable, will not
(i) result in a violation of, be in conflict with or constitute, with or without
the passage of time or giving of notice, a default under, or require any consent
or waiver under, or result in the creation of any mortgage, pledge, lien,
encumbrance, option, security interest, claim, loan, restriction or charge upon
any of the properties or assets of the Company or its subsidiaries pursuant to,
any provision of any instrument, mortgage, deed of trust, loan, contract,
commitment, judgment, writ, decree, order or obligation to which Company is a
party or by which it or any of its properties or assets are bound, which would
materially adversely affect the Company or its subsidiaries’ business,
properties, assets or financial condition, (ii) result in a violation of any
provision of any federal, state, or local statute, rule or governmental
regulation applicable to the Company or its subsidiaries which would materially
adversely affect the Company or its subsidiaries’ business, properties, assets
or financial condition or (iii) conflict with or violate any provisions of the
Certificate of Incorporation or Bylaws or any capital stock of the Company.

j. Neither the Company nor any of its subsidiaries are (i) in violation of its
charter or bylaws or similar organizational documents; (ii) in default, and no
event has occurred that, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or its subsidiaries are a
party or by which the Company or its subsidiaries are bound or to which any of
the property or assets of the Company or its subsidiaries are subject; or
(iii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of each of clauses (ii) and (iii) above, for any such
violation or default that would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect.

 

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k. As of the date hereof:

(i) The authorized capital stock of the Company consists of 42,000,000 shares of
Common Stock, including 35,000,000 shares of Class A Common Stock and 6,000,000
shares of the Company’s Class F Common Stock, par value $0.0001 (the “Class F
Common Stock”, and when used collectively with the Class A Common Stock, the
“Common Stock”), and 1,000,000 shares of Preferred Stock of the Company, par
value $0.0001 per share (the “Preferred Stock”).

(ii) (A) 10,231,650 shares of Common Stock (including 8,185,320 shares of
Class A Common Stock and 2,046,330 shares of Class F Common Stock) and no shares
of Preferred Stock were issued and outstanding; (B) 16,594,158 Warrants,
including 8,408,838 warrants issued pursuant to that certain Sponsor Warrants
Purchase Agreement, effective as of March 10, 2016, between the Company and
Sponsor; (C) no shares of Common Stock were subject to issuance upon exercise of
outstanding options; and (D) no indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on which
the equityholders of such Person may vote of the Company (“Voting Debt”) was
issued and outstanding.

(iii) No Warrants are exercisable until after the Closing.

(iv) All outstanding shares of Common Stock and Warrants have been duly
authorized, validly issued, fully paid and are non-assessable and, except as
provided in the Certificate of Incorporation, the Bylaws, the Business
Combination Agreement, Other Subscription Agreements, the Amended and Restated
LLC Agreement of Rosehill Operating Company, LLC (“Rosehill”), that certain
Contribution Agreement by and between Tema and Rosehill, the SHRRA, the Tax
Receivable Agreement, by and between Tema and the Company, the Waiver and the
Side Letter (the “Ancillary Agreements”), not subject to preemptive rights.

(v) Except as set forth in this Section 3(k) or as provided in the Ancillary
Agreements, there are no outstanding: (A) options, warrants or other rights to
subscribe for, purchase or acquire from the Company any Common Stock or other
equity interests in the Company (collectively, “Equity Interests”), Voting Debt
or other voting securities of the Company; (B) securities of the Company
convertible into or exchangeable or exercisable for Equity Interests, Voting
Debt or other voting securities of the Company; and (C) options, warrants (other
than the Warrants), calls, rights (including preemptive rights), commitments or
agreements to which the Company is a party or by which it is bound in any case
obligating the Company to issue, deliver, sell, purchase, redeem or acquire, or
cause to be issued, delivered, sold, purchased, redeemed or acquired, additional
shares of capital stock or any Voting Debt or other voting securities of the
Company, or obligating the Company to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.

(vi) Except as provided in the Ancillary Agreements, there are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting of any Equity
Interests.

l. The Company has filed with the United States Securities and Exchange
Commission (the “Commission”) all material forms, documents and reports required
to be filed or furnished prior to the date hereof by it with the Commission (the
“Company SEC Documents”). As of their respective dates, or, if amended or
superseded by a filing prior to the date of this Subscription Agreement, as of
the date of such amendment or superseding filing, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as the
case may be, and the applicable rules and regulations promulgated thereunder,
and none of the Company SEC Documents at the time it was filed contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements (including all related notes and schedules) of the Company
included in the Company SEC Documents fairly present in all material respects
the financial position of the Company as at the respective dates thereof and
their results of operations and cash flows for the respective periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments, to the absence of notes and to any other adjustment described
therein, including in any notes thereto) in conformity with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be

 

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indicated therein or in the notes thereto and, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC). The books and records of the
Company have been, and are being, maintained in all material respects in
accordance with GAAP (to the extent applicable) and all other applicable
accounting requirements and legal requirements.

m. The Company has not entered into any agreement or arrangement entitling any
agent, broker, investment banker, financial advisor or other person to any
broker’s or finder’s fee or any other commission or similar fee in connection
with the transactions contemplated by this Subscription Agreement for which any
Subscriber could become liable.

n. The Company understands that the foregoing representations and warranties
shall be deemed material and to have been relied upon by Subscriber.

4. Investor Questionnaire; Form W-9. Subscriber has, concurrently with the
execution and delivery of this Subscription Agreement, executed and delivered
the Investor Questionnaire and the Form W-9 in the form attached hereto as
Exhibit C. The representations and warranties of Subscriber in the Investor
Questionnaire shall be true and correct as of the date hereof and as of the date
of the Closing as if made on and as of such date. Subscriber agrees to promptly
notify the Company and provide it with the relevant updated information for any
change in circumstances at any time on or prior to the Closing.

5. Other Subscription Agreements. The Company represents and warrants that
concurrently with the execution of this Subscription Agreement, the Company is
entering into subscription agreements with stockholders affiliated with each of
Geode Diversified Fund (“Geode”) and The K2 Principal Fund, L.P. (the “Other
Subscription Agreements”), which collectively provide for the purchase of 20,000
shares of Series A Preferred Stock, 1,754,322 Warrants and 97,961 Additional
Shares for $20,000,000, and that each Subscription Agreement is on terms and
conditions no more favorable in any respect than the terms of this Subscription
Agreement (except with respect to the mix of Warrants and Additional Shares to
be sold to Geode, as previously described to Subscriber). The Company
acknowledges and agrees that, in the event that following the date hereof and in
connection with the Transaction, the Company enters into any new subscription
agreements, or amends, waives, terminates or otherwise modifies any of the Other
Subscription Agreements entered into on the date hereof, with any other person
on terms and conditions that are more favorable to such other person in any
respect than the terms and conditions contained in this Subscription Agreement
(except with respect to allocations of Warrants to Geode granted as of the date
hereof), then the Company shall promptly advise Subscriber of such fact (and the
relevant terms and conditions) and, unless otherwise agreed by the Company and
Subscriber, this Agreement, without any further action of the Company or
Subscriber, shall be deemed automatically amended and modified to include such
more favorable terms such that Subscriber shall receive the benefit of such more
favorable terms.

6. Termination. This Subscription Agreement shall terminate and be void and of
no further force and effect, and all rights and obligations of the applicable
parties hereunder shall terminate without any further liability on the part of
any party in respect thereof: (a) on such date and time as the Business
Combination Agreement is terminated in accordance with its terms, (b) upon the
mutual written agreement of each of the parties hereto to terminate this
Subscription Agreement, (c) if the Closing shall not have occurred by April 30,
2017 or (d) if any of the conditions to Closing set forth in Section 2(b) or
Section 2(c) of this Subscription Agreement are not satisfied or duly waived by
the applicable party on or prior to the Closing and, as a result thereof, the
transactions contemplated by this Subscription Agreement are not consummated at
the Closing; provided, however, that nothing herein will relieve any party from
liability for any willful breach hereof prior to the time of termination, and
each party will be entitled to any remedies at law or in equity to recover
losses, liabilities or damages arising from such breach. The Company shall
notify Subscriber of the termination of the Business Combination Agreement
promptly after the termination of such agreement or the consummation of the
transactions contemplated by the Business Combination Agreement promptly after
such consummation. The Company and Subscriber, as applicable, shall use their
reasonable best efforts to take, or cause to be taken, all appropriate action to
do, or cause to be done, all things necessary, proper or advisable under
applicable law or otherwise to consummate and make effective the transactions
contemplated by this Subscription Agreement as promptly as practicable including
the satisfaction of the conditions to the Closing set forth in Sections 2(b) and
2(c) of this Subscription Agreement, respectively.

 

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7. Trust Account Waiver. Subscriber acknowledges that the Company is a blank
check company with the powers and privileges to effect a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities. Subscriber further
acknowledges that, as described in the Company’s prospectus relating to its
initial public offering dated March 10, 2016 (the “Prospectus”) available at
www.sec.gov, substantially all of the Company’s assets consist of the cash
proceeds of the Company’s initial public offering and private placements of its
securities, and substantially all of those proceeds have been deposited in a
trust account (the “Trust Account”) for the benefit of the Company, its public
stockholders and the underwriters of the Company’s initial public offering.
Except with respect to interest earned on the funds held in the Trust Account
that may be released to the Company to pay its income tax obligations, if any,
the cash in the Trust Account may be disbursed only as set forth in Section
9.1(b) of the Certificate of Incorporation. Subscriber hereby acknowledges and
agrees that, except with respect to shares of Class A Common Stock of the
Company owned by the undersigned acquired other than pursuant to this
Subscription Agreement, Subscriber has no right of set-off or any right, title,
interest or claim of any kind (“Claim”) to, or to any monies or other assets in,
the Trust Account, and hereby irrevocably waives any Claim to, or to any monies
or other assets in, the Trust Account that it may have now or in the future.
Subscriber further agrees not to seek recourse against the Trust Account as a
result of, or arising out of, this Subscription. The undersigned acknowledges
and agrees that the undersigned shall not have any redemption rights with
respect to the Acquired Securities pursuant to the Certificate of Incorporation
in connection with any stockholder proposals related to the Transaction, any
subsequent liquidation of the Trust Account or the Company or otherwise. In the
event the undersigned has any Claim against the Company under this Subscription
Agreement or otherwise, the undersigned shall pursue such Claim solely against
the Company and its assets held outside of the Trust Account and not against the
Trust Account or any monies or other assets held in the Trust Account.

8. Furnishing of Information. In order to enable Subscriber to sell the Acquired
Securities, Additional Shares, Conversion Shares and Warrant Exercise Shares,
during the Registration Period, the Company shall use its best efforts to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. If, during such period, the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to Subscriber and make publicly available in accordance with Rule 144(c)
such information as is required for Subscriber to sell the Acquired Securities,
Additional Shares, Conversion Shares or Warrant Exercise Shares under Rule 144.

9. Indemnification of Subscriber. Subject to the provisions of this Section 9,
the Company will indemnify and hold Subscriber and its directors, officers,
shareholders, members, partners, employees and agents (and any other persons
with a functionally equivalent role of a person holding such titles
notwithstanding a lack of such title or any other title), each person who
controls Subscriber (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other persons with a
functionally equivalent role of a person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, an
“Subscriber Party”) harmless from any and all losses, liabilities (or actions or
proceedings in respect thereof), obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys’ fees and costs of investigation that any such
Subscriber Party may suffer or incur as a result of or relating to (i) any
breach of any of the representations, warranties, covenants or agreements made
by the Company in this Subscription Agreement (provided, that with respect to a
registration Event, the liquidated damages provided for therein shall be the
sole monetary remedy for Subscriber), (ii) any action instituted against
Subscriber in any capacity, or any Subscriber Party or their respective
affiliates, by any stockholder of the Company who is not an affiliate of
Subscriber seeking indemnification, with respect to any of the transactions
contemplated by this Subscription Agreement (unless such action is based upon a
breach of Subscriber’s representations, warranties or covenants under this
Subscription Agreement or any other agreement with the Company, or any
agreements or understandings Subscriber may have with any such stockholder or
any violations by Subscriber of state or federal securities laws or any conduct
by Subscriber which constitutes fraud, gross negligence, willful misconduct or
malfeasance) or (iii) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in the
Registration Statement, including all documents filed as a part thereof and
information deemed to be a part thereof, on the effective date thereof, or any
amendment or supplements thereto, or arising out of any failure of the Company
to fulfill any undertaking or covenant included in the Registration Statement or
to perform its obligations hereunder or under applicable law except to the
extent such statement or alleged statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Subscriber and stated to be specifically for use in preparation of the
Registration Statement. Promptly after receipt by any such person (the
“Indemnified Person”) of notice of any demand, claim or circumstances which
would or might give rise

 

8

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to a claim or the commencement of any action, proceeding or investigation in
respect of which indemnity may be sought pursuant to this Section 9, such
Indemnified Person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses relating to such action, proceeding or investigation;
provided, however, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company of its obligations hereunder except to the
extent that the Company is actually and materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless: (x) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
(y) the Company shall have failed promptly to assume the defense of such
proceeding and to employ counsel reasonably satisfactory to such Indemnified
Person in such proceeding; or (z) in the reasonable judgment of counsel to such
Indemnified Person, representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them;
provided, however, that in no event shall the Company be liable for the fees and
expenses of more than one counsel (together with appropriate local counsel)
separate from its own counsel. The Company shall not be liable for any
settlement of any proceeding effected without its prior written consent, which
consent shall not be unreasonably withheld, delayed or conditioned. Without the
prior written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, delayed or conditioned, the Company shall not affect any
settlement of any pending or threatened claim or proceeding in respect of which
any Indemnified Person is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Person, unless such settlement does
not include any admission of liability, wrongdoing or misconduct on behalf of
such Indemnified Person and includes an unconditional release of such
Indemnified Person from all liability arising out of such proceeding.

10. Buy-in. If the Company shall fail for any reason or for no reason to
instruct its transfer agent to issue to Subscriber unlegended certificates
within three trading days after receipt of all documents necessary for the
removal of the legend set forth in Section III(10) of the Investor Questionnaire
(the “Deadline Date”), then, in addition to all other remedies available to
Subscriber, if on or after the trading day immediately following such three
trading day period, Subscriber is required to purchase (in an open market
transaction or otherwise) shares of Class A Common Stock to deliver in
satisfaction of a sale by the holder of shares of Class A Common Stock that
Subscriber anticipated receiving from the Company without any restrictive legend
(a “Buy-In”), then the Company shall, within three trading days after
Subscriber’s request and in Subscriber’s sole discretion, either (i) pay cash to
Subscriber in an amount equal to Subscriber’s total purchase price (including
brokerage commissions, if any) for the shares of Class A Common Stock so
purchased (the “Buy-In Price”), at which point the shares of Class A Common
Stock held by Subscriber equal to the number of shares of Class A Common Stock
so purchased shall be forfeited to the Company and the Company’s obligation to
deliver such certificate (and to issue such shares of Class A Common Stock)
shall terminate, or (ii) promptly honor its obligation to deliver to Subscriber
a certificate or certificates representing such shares of Class A Common Stock
and pay cash to Subscriber in an amount equal to the excess (if any) of the
Buy-In Price over the product of (x) such number of shares of Class A Common
Stock, multiplied by (y) the closing bid price on Nasdaq on the Deadline Date.
Subscriber shall provide the Company written notice indicating the amounts
payable to Subscriber in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company.

 

  11. Miscellaneous.

a. Subscriber acknowledges that the Company, Sponsor and others will rely on the
acknowledgments, understandings, agreements, representations and warranties
contained in this Subscription Agreement. Prior to the Closing, Subscriber
agrees to promptly notify the Company if any of the acknowledgments,
understandings, agreements, representations and warranties of Subscriber set
forth herein are no longer accurate in all material respects. The Company
acknowledges that Subscriber will rely on the acknowledgments, understandings,
agreements, representations and warranties contained in this Subscription
Agreement. Prior to the Closing, the Company agrees to promptly notify
Subscriber if any of the acknowledgments, understandings, agreements,
representations and warranties of the Company set forth herein are no longer
accurate in all material respects.

b. Each of the Company, Sponsor and Subscriber is entitled to rely upon this
Subscription Agreement and is irrevocably authorized to produce this
Subscription Agreement or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

 

9

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c. Neither this Subscription Agreement nor any rights that may accrue to
Subscriber hereunder (other than the Acquired Securities or Additional Shares
acquired hereunder, or Conversion Shares or Warrant Exercise Shares, if any) may
be transferred or assigned, except that Subscriber may assign this Subscription
Agreement or rights that may accrue to Subscriber hereunder to one or more
affiliates of Subscriber, provided that no such assignment shall relieve
Subscriber of its obligations hereunder if such assignee does not perform such
obligations. Neither this Subscription Agreement nor any rights that may accrue
to the Company hereunder may be transferred or assigned.

d. All the agreements, representations and warranties made by each party hereto
in this Subscription Agreement shall survive the Closing.

e. The Company may request from Subscriber such additional information as the
Company may deem necessary to evaluate the eligibility of Subscriber to acquire
the Acquired Securities, and Subscriber shall provide such information as may be
reasonably requested, to the extent readily available and to the extent
consistent with its internal policies and procedures.

f. This Subscription Agreement may not be modified, waived or terminated except
by an instrument in writing, signed by the party against whom enforcement of
such modification, waiver, or termination is sought. No such modification,
waiver or termination shall be deemed to be or shall constitute a modification,
waiver or termination with respect to any other terms or provisions of this
Subscription Agreement, whether or not similar. Each such modification, waiver
or termination shall be effective only in the specific instance and for the
purpose for which it was given, and shall not constitute a continuing
modification, waiver or termination.

g. This Subscription Agreement constitutes the entire agreement, and supersedes
all other prior agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter hereof.
This Subscription Agreement shall not confer any rights or remedies upon any
person other than the parties hereto and their respective successor and assigns.

h. Except as otherwise provided herein, this Subscription Agreement shall be
binding upon, and inure to the benefit of the parties hereto and their heirs,
executors, administrators, successors, legal representatives, and permitted
assigns, and the agreements, representations, warranties, covenants and
acknowledgments contained herein shall be deemed to be made by, and be binding
upon, such heirs, executors, administrators, successors, legal representatives
and permitted assigns.

i. If any provision of this Subscription Agreement shall be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions of this Subscription Agreement shall not in any way be affected or
impaired thereby and shall continue in full force and effect.

j. This Subscription Agreement may be executed in one or more counterparts
(including by facsimile or electronic mail or in .pdf) and by different parties
in separate counterparts, with the same effect as if all parties hereto had
signed the same document. All counterparts so executed and delivered shall be
construed together and shall constitute one and the same agreement.

k. The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Subscription Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Subscription Agreement and to enforce
specifically the terms and provisions of this Subscription Agreement, without
posting bond, this being in addition to any other remedy to which such party is
entitled at law, in equity, in contract, in tort or otherwise.

l. THIS SUBSCRIPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THAT WOULD OTHERWISE REQUIRE

 

10

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THE APPLICATION OF THE LAW OF ANY OTHER STATE. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE
STATE OF NEW YORK, SEATED IN NEW YORK COUNTY AND ANY FEDERAL COURT SITTING IN
THE SOUTHERN DISTRICT OF NEW YORK (AND ANY APPLICABLE COURTS OF APPEAL THERETO)
OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SUBSCRIPTION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
PURSUANT TO THIS SUBSCRIPTION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY.

m. As soon as practicable following the date of this Subscription Agreement, but
in no event later than the fourth (4th) business day following such date, the
Company shall issue one or more press releases or file with the Commission a
current report on Form 8-K (collectively, the “Disclosure Document”) disclosing
all material terms of the transactions contemplated hereby, the Transaction, and
any other material, nonpublic information that the Company, or any of its
officers, directors, employees or agents acting on its behalf, has provided to
Subscriber at any time prior to the filing of the Disclosure Document. From and
after the issuance of the Disclosure Document, the Company covenants and agrees
that neither it, nor any of its officers, directors or employees, will provide
Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information without the prior written
consent of Subscriber. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Subscriber or any of its affiliates, or include
the name of Subscriber or any of its affiliates in any press release or in any
filing with the Commission or any regulatory agency or trading market, without
the prior written consent of Subscriber, except (i) as required by the federal
securities law in connection with the Registration Statement, (ii) the filing of
this Subscription Agreement with the Commission and in the related current
report on Form 8-K in a manner acceptable to Subscriber, (iii) in the press
release issued by the Company in connection with the announcement of the
Transaction in a manner acceptable to Subscriber, and (iv) to the extent such
disclosure is required by law, at the request of the Staff of the Commission or
regulatory or self-regulatory agency or under the regulations of Nasdaq, in
which case the Company shall, to the extent legally permitted, provide
Subscriber with prior written notice of such disclosure permitted under this
subclause (iv).

n. Subscriber acknowledges the relationship between the Company and one of the
placement agents in the private placement of the Acquired Securities. KLR Group,
LLC (the “KLR Group”) is a wholly owned subsidiary of KLR Group Holdings, LLC
(“KLR Holdings”). Sponsor is also a wholly owned subsidiary of KLR Holdings.
Edward Kovalik, the Company’s President and a member of its Board of Directors,
is also the Chief Executive Officer and Managing Partner of KLR Holdings and the
KLR Group.

o. The Company and Subscriber will pay their respective fees and expenses
incident to and in connection with the consummation of the transactions
contemplated hereby; provided that the Company will reimburse Subscriber for the
reasonable and documented fees and disbursements of one counsel to Subscriber in
an amount not to exceed $100,000.

(Signature Page Follows)

 

11

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IN WITNESS WHEREOF, each of the Company and Subscriber has executed or caused
this Subscription Agreement to be executed by its duly authorized representative
as of the date set forth below.

 

SUBSCRIBER

Anchorage Illiquid Opportunities V, L.P.

By: Anchorage Capital Group, L.L.C., its Investment Manager

By:

 

/s/ Jason Cohen

Name:

 

Jason Cohen

Title:

 

Secretary

Address:

 

610 Broadway, 6th Floor

 

New York, NY 10112

 

 

 

Number of shares of Series A Preferred Stock Subscribed For:   26,617  

 

Number of Warrants Subscribed For:   1,570,759  

 

Aggregate Purchase Price   $26,617,000  

 

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ACKNOWLEDGED AND AGREED: KLR ENERGY ACQUISITION CORP. By:  

/s/ Gary C. Hanna

Name:   Gary C. Hanna Title:   Chief Executive Officer KLR ENERGY SPONSOR, LLC
By:   KLR Group Investments, LLC, its managing member

By:

 

/s/ Edward Kovalik

Name:   Edward Kovalik Title:   Manager

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EXHIBIT A

FORM OF CERTIFICATE OF DESIGNATIONS

 

A-1

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Proposed Final Form

KLR ENERGY ACQUISITION CORP.

 

 

FORM OF CERTIFICATE OF DESIGNATIONS

Pursuant to Section 151 of the General

Corporation Law of the State of Delaware

 

 

8.000% SERIES A CUMULATIVE PERPETUAL CONVERTIBLE PREFERRED STOCK

(Par Value $0.0001 Per Share)

KLR Energy Acquisition Corp. (the “Corporation”), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
“DGCL”), hereby certifies that, pursuant to the authority expressly granted to
and vested in the Board by the Amended and Restated Certificate of Incorporation
of the Corporation (as so amended and as further amended from time to time in
accordance with its terms and the DGCL, the “Certificate of Incorporation”),
which authorizes the Board, by resolution, to set forth the designation, powers,
preferences and relative, participating, optional and other special rights, if
any, and the qualifications, limitations and restrictions thereof, in one or
more series of up to 1,000,000 shares of preferred stock, par value $0.0001 per
share (the “Preferred Stock”), and in accordance with the provisions of
Section 151 of the DGCL, the Board duly adopted on [●], 201[●] the following
resolution, which resolution remains in full force and effect on the date
hereof:

RESOLVED, that pursuant to the authority granted to and vested in it, the Board
hereby creates a new series of preferred stock, par value $0.0001 per share, of
the Corporation, designated 8.000% Series A Cumulative Perpetual Convertible
Preferred Stock, and hereby fixes the relative rights, preferences, and
limitations of the Preferred Stock as set forth in this certificate of
designations (this “Certificate of Designations”):

1. General.

(a) There shall be created from the 1,000,000 shares of Preferred Stock of the
Corporation authorized to be issued pursuant to the Certificate of
Incorporation, a series of Preferred Stock designated as “8.000% Series A
Cumulative Perpetual Convertible Preferred Stock” par value $0.0001 per share
(the “Series A Preferred Stock”), and the authorized number of shares of Series
A Preferred Stock shall be [●]. Shares of Series A Preferred Stock that are
purchased or otherwise acquired by the Corporation, or that are converted into
shares of Common Stock, shall be cancelled and shall revert to authorized but
unissued shares of Series A Preferred Stock.

(b) The Series A Preferred Stock, with respect to dividend rights and rights
upon the liquidation, winding-up or dissolution of the Corporation, ranks:
(i) senior to all Junior Stock; (ii) on a parity with all Parity Stock;
(iii) junior to all Senior Stock; (iv) junior to existing and future
indebtedness of the Corporation; and (v) structurally junior to all existing and
future indebtedness and other liabilities (including trade payables) of the
Corporation’s Subsidiaries and any Capital Stock of the Corporation’s
Subsidiaries not held by the Corporation, in each case as provided more fully
herein.

--------------------------------------------------------------------------------

2. Definitions. As used herein, the following terms shall have the following
meanings:

(a) “Agent Members” shall have the meaning specified in Section 13(a)(ii).

(b) “Board” shall mean the Board of Directors of the Corporation or, with
respect to any action to be taken by the Board of Directors, any committee of
the Board of Directors duly authorized to take such action.

(c) “Business Day” shall mean any day other than Saturday, Sunday or a day on
which the Federal Reserve Bank of New York is authorized or required by law or
executive order to close or be closed.

(d) “Capital Stock” shall mean, for any entity, any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) stock issued by that entity; provided that,
“Capital Stock” shall not include any convertible or exchangeable debt
securities which, prior to conversion or exchange, will rank senior in right of
payment to the Series A Preferred Stock.

(e) “Certificated Series A Preferred Stock” shall have the meaning specified in
Section 13(a)(iii).

(f) “Certificate of Designations” shall have the meaning specified in the
recitals.

(g) “Certificate of Incorporation” shall have the meaning specified in the
recitals.

(h) “Close of Business” shall mean 5:00 p.m., New York City time.

(i) “Closing Sale Price” of the Common Stock on any date means the closing sale
price per share (or if no closing sale price is reported, the average of the
closing bid and ask prices or, if more than one in either case, the average of
the average closing bid and the average closing ask prices) on such date as
reported in composite transactions for the principal U.S. national or regional
securities exchange on which the Common Stock is traded or, if the Common Stock
is not listed for trading on a U.S. national or regional securities exchange on
the relevant date, the last quoted bid price for the Common Stock in the
over-the-counter market on the relevant date, as reported by OTC Markets Group
Inc. or a similar organization. In the absence of such a quotation, the Closing
Sale Price shall be the average of the mid-point of the last bid and ask prices
for the Common Stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by the Corporation for
this purpose. The Closing Sale Price of any other security shall be determined
in the same manner as set forth in this Section 2(i) for the determination of
the Closing Sale Price of the Common Stock.

(j) “Common Stock” shall mean the Class A Common Stock, par value $0.0001 per
share, of the Corporation, subject to Section 8(h).

 

2

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(k) “Conversion Agent” shall have the meaning specified in Section 8(b).

(l) “Conversion Date” shall have the meaning specified in Section 8(b).

(m) “Conversion Price” shall mean, at any time, $1,000.00 divided by the
Conversion Rate in effect at such time.

(n) “Conversion Rate” shall have the meaning specified in Section 8(a).

(o) “Corporation” shall have the meaning specified in the recitals.

(p) “CUSIP” shall mean the Committee on Uniform Securities Identification
Procedures.

(q) “DCGL” shall have the meaning specified in the recitals.

(r) “Dividend Agent” shall have the meaning specified in Section 4(d).

(s) “Dividend Payment Date” shall mean January 15, April 15, July 15 and
October 15 of each year, commencing on [●], 2017.

(t) “Dividend Rate” shall mean the rate per annum of 8.000% per share of Series
A Preferred Stock on the Liquidation Preference plus all accumulated and unpaid
dividends on a per share basis, whether or not declared.

(u) “Dividend Record Date” shall mean, with respect to any Dividend Payment
Date, the January 1, April 1, July 1 and October 1, as the case may be,
immediately preceding such Dividend Payment Date.

(v) “DTC” or “Depository” shall mean The Depository Trust Corporation, or any
successor depository.

(w) “Effective Date” shall mean the date on which a Fundamental Change event
occurs or becomes effective, except that, as used in Section 8(d), Effective
Date shall mean the first date on which shares of the Common Stock trade on the
applicable exchange or in the applicable market, regular way, reflecting the
relevant share subdivision or share combination, as applicable.

(x) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

(y) “Ex-Date,” when used with respect to any issuance, dividend or distribution
of Common Stock, shall mean the first date on which the Common Stock trades on
the applicable exchange or in the applicable market, regular way, without the
right to receive such issuance, dividend or distribution from the Corporation
or, if applicable, from the seller of the Common Stock on such exchange or
market (in the form of due bills or otherwise), as determined by such exchange
or market.

 

3

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(z) “Expiration Date” shall have the meaning specified in Section 8(d)(v).

(aa) A “Fundamental Change” shall be deemed to have occurred at any time after
the Series A Preferred Stock is originally issued if any of the following
occurs:

(i) the consummation of any transaction (other than any transaction described in
clause (ii) below, whether or not the proviso therein applies) the result of
which is that a “person” or “group” (within the meaning of Section 13(d) of the
Exchange Act), other than the Corporation, the Corporation’s wholly-owned
Subsidiaries and its or their employee benefit plans, Rosehill Operating
Company, LLC or Tema Oil and Gas Company, has become the direct or indirect
“beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of more
than 50% of the voting power of the Corporation’s common equity;

(ii) the consummation of (A) any recapitalization, reclassification or change of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or changes resulting from a
subdivision or combination), as a result of which the Common Stock would be
converted into, or exchanged for, stock, other securities or other property or
assets (including cash or any combination thereof); (B) any consolidation,
merger or other combination of the Corporation or binding share exchange
pursuant to which the Common Stock would be converted into, or exchanged for,
stock, other securities or other property or assets (including cash or any
combination thereof); or (C) any sale, lease or other transfer or disposition in
one transaction or a series of transactions of all or substantially all of the
consolidated assets of the Corporation and its Subsidiaries, taken as a whole,
to any Person other than one or more of the Corporation’s wholly-owned
Subsidiaries; provided, however, that none of the transactions described in
clauses (A), (B) or (C) shall constitute a “Fundamental Change” if (x) the
holders of all classes of the Corporation’s common equity immediately prior to
such transaction continue to own at least, directly or indirectly, more than 50%
of the surviving corporation or transferee, or the parent thereof, immediately
after such event or (y) such transaction is effected solely to change the
Corporation’s jurisdiction of formation or to form a holding company for the
Corporation and that results in a share exchange or reclassification or similar
exchange of the outstanding Common Stock solely into common stock of the
surviving entity;

(iii) the Corporation’s Class A common stock (or other common stock into which
the Series A Preferred Stock is convertible) ceases to be listed or quoted on
any of The New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ
Global Market or the NASDAQ Capital Market (or any of their respective
successors), other than any cessation to be listed or quoted that persists for
not more than ten (10) days in connection with a transition among the above
exchanges; or

(iv) the stockholders of the Corporation approve any plan or proposal for the
liquidation or dissolution of the Corporation (other than in a transaction
described in clause (ii) above);

 

4

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provided, however, that a transaction or transactions described in clause (i) or
(ii) above shall not constitute a “Fundamental Change” if at least 90% of the
consideration received or to be received by holders of Common Stock (excluding
cash payments for fractional shares and cash payments made pursuant to
dissenters’ appraisal rights) in connection with such transaction or
transactions that would otherwise constitute a “Fundamental Change” consists of
shares of common stock or common equity interests that are listed or quoted on
any of The New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ
Global Market or the NASDAQ Capital Market (or any of their respective
successors), or that will be so listed or quoted when issued or exchanged in
connection with such transaction or transactions and as a result of such
transaction or transactions the Series A Preferred Stock becomes convertible
into such consideration (excluding cash payments for fractional shares and cash
payments made pursuant to dissenters’ appraisal rights).

(bb) “Fundamental Change Conversion Period” shall have the meaning specified in
Section 5(a).

(cc) “Fundamental Change Notice” shall have the meaning specified in
Section 5(d).

(dd) “Global Series A Preferred Stock” shall have the meaning specified in
Section 13(a)(i).

(ee) “Holder” shall mean a holder of record of shares of Series A Preferred
Stock.

(ff) “Initial Issue Date” shall mean [●], 201[●], the original date of issuance
of the Series A Preferred Stock.

(gg) “Junior Stock” shall mean (i) the Common Stock and (ii) each other class or
series of the Corporation’s Capital Stock established after the Initial Issue
Date, the terms of which do not expressly provide that such class or series
ranks senior to or on a parity with the Series A Preferred Stock as to dividend
rights and distribution rights upon the liquidation, winding-up or dissolution
of the Corporation.

(hh) “Liquidation Preference” shall mean, with respect to each share of Series A
Preferred Stock, $1,000.00.

(ii) “Make-Whole Premium” shall have the meaning specified in Section 5(f).

(jj) “Mandatory Conversion Date” shall have the meaning specified in
Section 9(b).

(kk) “Notice of Conversion” shall have the meaning specified in Section 8(b).

(ll) “Officer” shall mean the Chief Executive Officer, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Corporation.

(mm) “Officers’ Certificate” shall mean a certificate signed by two Officers.

 

5

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(nn) “Open of Business” shall mean 9:00 a.m., New York City time.

(oo) “Parity Stock” shall mean any class or series of the Corporation’s Capital
Stock established after the Initial Issue Date, the terms of which expressly
provide that such class or series will rank on parity with the Series A
Preferred Stock as to dividend rights and distribution rights upon the
liquidation, winding up or dissolution of the Corporation.

(pp) “Person” shall mean any individual, corporation, general partnership,
limited partnership, limited liability partnership, joint venture, association,
joint-stock company, trust, limited liability company, unincorporated
organization or government or any agency or political subdivision thereof.

(qq) “Preferred Stock” shall have the meaning specified in the recitals.

(rr) “Record Date” shall mean, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Stock (or other
applicable security) have the right to receive any cash, securities or other
property or in which Common Stock (or such other security) is exchanged for or
converted into any combination of cash, securities or other property, the date
fixed for determination of the holders of Common Stock (or such other security)
entitled to receive such cash, securities or other property (whether such date
is fixed by the Board, statute, contract or otherwise).

(ss) “Reference Property” shall have the meaning specified in Section 8(h).

(tt) “Reorganization Event” shall have the meaning specified in Section 8(h).

(uu) “SEC” shall mean the Securities and Exchange Commission.

(vv) “Securities Act” shall mean the Securities Act of 1933, as amended.

(ww) “Senior Stock” shall mean any class or series of the Corporation’s Capital
Stock established after the Initial Issue Date, the terms of which expressly
provide that such class or series will rank senior to the Series A Preferred
Stock as to dividend rights and distribution rights upon the liquidation,
winding up or dissolution of the Corporation.

(xx) “Series A Preferred Stock” shall have the meaning specified in
Section 1(a).

(yy) “Special Rights End Date” shall have the meaning specified in Section 5(a).

(zz) “Spin-Off” shall have the meaning specified in Section 8(d)(iii).

(aaa) “Stock Price” shall mean (i) if holders of shares of Common Stock receive
in exchange for their Common Stock only cash in the transaction constituting a
Fundamental Change, the cash amount paid per share or (ii) otherwise, the
average of the Closing Sale Prices of the Common Stock on the 10 consecutive
Trading Days immediately preceding, but not including, the Effective Date of the
Fundamental Change.

 

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(bbb) “Subsidiary” shall mean, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, general partners or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(i) such Person; (ii) such Person and one or more Subsidiaries of such Person;
or (iii) one or more Subsidiaries of such Person.

(ccc) “Trading Day” shall mean a day during which trading in the Common Stock
generally occurs on the NASDAQ Capital Market or, if the Common Stock is not
listed on the NASDAQ Capital Market, on the principal other U.S. national or
regional securities exchanges on which the Common Stock is then listed or, if
the Common Stock is not listed on a U.S. national or regional securities
exchange, on the principal other market on which the Common Stock is then listed
or admitted for trading. If the Common Stock is not so listed or admitted for
trading, Trading Day means a Business Day.

(ddd) “Transfer Agent” shall mean Continental Stock Transfer & Trust Company,
acting as the Corporation’s duly appointed transfer agent, registrar,
redemption, conversion and dividend disbursing agent for the Series A Preferred
Stock and the Common Stock. The Corporation may, in its sole discretion, remove
the Transfer Agent with 10 days’ prior notice to the Transfer Agent and Holders;
provided that the Corporation shall appoint a successor Transfer Agent who shall
accept such appointment prior to the effectiveness of such removal.

(eee) “Voting Rights Class” shall have the meaning specified in Section 6(a).

(fff) “Voting Rights Triggering Event” shall mean a time at which dividends on
the Series A Preferred Stock or dividends on any other series of Preferred Stock
or preference securities that ranks equally with the Series A Preferred Stock as
to payment of dividends and with similar voting rights are in arrears and unpaid
with respect to six or more quarterly dividend periods (whether or not
consecutive and including the dividend period beginning on the Initial Issue
Date and ending on [●], 2017).

(ggg) “VWAP” shall mean the volume-weighted average price, as displayed under
the heading “Bloomberg VWAP” on Bloomberg page “KLRE <equity> AQR” (or its
equivalent successor if such page is not available) in respect of the period
from the scheduled open of trading until the scheduled close of trading of the
primary trading session on each such trading day (or if such volume-weighted
average price is unavailable on any such day, the Closing Sale Price shall be
used for such day). The per share VWAP on each such day will be determined
without regard to after-hours trading or any other trading outside of the
regular trading session trading hours.

3. Dividends.

(a) Subject to the rights of holders of Senior Stock, Holders shall be entitled
to receive, when, as and if declared by the Board out of funds of the
Corporation legally available for payment, cumulative dividends at the Dividend
Rate, payable in cash, by delivery of shares of Series A Preferred Stock or
through any combination of cash and shares of Series A Preferred

 

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Stock at the Corporation’s sole election, as provided pursuant to Section 4.
Dividends on the Series A Preferred Stock shall be payable quarterly in arrears
at the Dividend Rate, and shall accumulate on a daily basis from the most recent
date as to which dividends have been paid, or, if no dividends have been paid,
from the Initial Issue Date (whether or not (i) in any dividend period or
periods any agreements of the Corporation prohibit the current payment of
dividends, (ii) there shall be earnings or funds of the Corporation legally
available for the payment of such dividends or (iii) the Corporation declares
the payment of dividends). Dividends shall be payable quarterly in arrears on
each Dividend Payment Date (commencing on [●], 2017) to the Holders as they
appear on the Corporation’s stock register at the Close of Business on the
relevant Dividend Record Date. Dividends payable for any period less than a full
quarterly dividend period (based upon the number of days elapsed during the
period) shall be computed on the basis of a 360-day year consisting of twelve
30-day months.

(b) If any Dividend Payment Date falls on a day that is not a Business Day, the
required payment will be made on the next succeeding Business Day and no
interest or dividends on such payment will accrue or accumulate, as the case may
be, in respect of the delay.

(c) No dividend shall be declared or paid upon, or any sum of cash set apart for
the payment of dividends upon, any outstanding share of the Series A Preferred
Stock with respect to any dividend period unless all accumulated dividends for
all preceding dividend periods have been declared and paid upon, or a sufficient
sum in cash or number of shares of Series A Preferred Stock have been set apart
for the payment of such dividends upon, all outstanding shares of Series A
Preferred Stock.

(d) So long as any shares of Series A Preferred Stock remain outstanding, no
dividends or other distributions (other than (x) in the case of Parity Stock, a
dividend or distribution payable solely in shares of Parity Stock or Junior
Stock, (y) in the case of Junior Stock, a dividend or distribution payable
solely in shares of Junior Stock and (z) cash in lieu of fractional shares) may
be declared, made or paid upon, or set apart for payment upon, any Parity Stock
or Junior Stock, nor may any Parity Stock or Junior Stock be redeemed, purchased
or otherwise acquired for any consideration (or any money paid to or made
available for a sinking fund for the redemption of any Parity Stock or Junior
Stock) by the Corporation or on behalf of the Corporation or by any of the
Corporation’s Subsidiaries, unless all accumulated and unpaid dividends for all
preceding dividend periods have been or contemporaneously are declared and paid
in full on, or a sufficient sum of cash or number of shares of Series A
Preferred Stock for the payment thereof is set apart for such dividends upon,
the Series A Preferred Stock and any Parity Stock for all dividend payment
periods ending on or prior to the date of such declaration, payment, redemption,
purchase or acquisition. The foregoing limitation shall not apply to:

(i) conversions into or exchanges for, (A) in the case of Parity Stock, shares
of Parity Stock or Junior Stock or cash solely in lieu of fractional shares of
Parity Stock or Junior Stock, and, (B) in the case of Junior Stock, shares of
Junior Stock or cash solely in lieu of fractional shares of Junior Stock;

(ii) payments in connection with the satisfaction of employees’ tax withholding
obligations pursuant to employee benefit plans or outstanding awards (and
payment of any corresponding requisite amounts to the appropriate governmental
authority);

 

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(iii) purchases, redemptions or other acquisitions of Parity Stock or Junior
Stock in connection with the administration of any benefit or other incentive
plan, including any employment contract, in the ordinary course of business;

(iv) any dividends or distributions of rights in connection with a stockholders’
rights plan or any redemption or repurchase of rights pursuant to any
stockholders’ rights plan; or

(v) the deemed purchase or acquisition of fractional interests in shares of
Parity Stock or Junior Stock pursuant to the conversion or exchange provisions
of such Parity Stock or Junior Stock or the security being converted or
exchanged.

Notwithstanding the foregoing, if full dividends have not been paid on the
Series A Preferred Stock and any Parity Stock, dividends may be declared and
paid on the Series A Preferred Stock and such Parity Stock so long as the
dividends are declared and paid pro rata so that the amounts of dividends
declared per share on the shares of Series A Preferred Stock and shares of such
Parity Stock shall in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share (whether or not declared) on the
shares of Series A Preferred Stock and shares of such Parity Stock bear to each
other, in proportion to their respective liquidation preferences.

(e) Holders of shares of Series A Preferred Stock shall not be entitled to any
dividend in excess of full cumulative dividends.

(f) Holders at the Close of Business on a Dividend Record Date shall be entitled
to receive, when, as and if declared by the Board, out of funds legally
available for payment, the dividend payment on their respective shares of Series
A Preferred Stock on the corresponding Dividend Payment Date; provided, however,
that shares of Series A Preferred Stock surrendered for conversion during the
period between the Close of Business on any Dividend Record Date and the Close
of Business on the Conversion Date or the Mandatory Conversion Date, as
applicable, shall only be entitled to the dividends accrued and unpaid through
the Conversion Date or the Mandatory Conversion Date, respectively.

(g) Subject to the foregoing, such dividends (payable in cash, securities or
other property) as may be determined by the Board may be declared and paid on
any of the Corporation’s securities, including Common Stock, from time to time
out of funds legally available for such payment, and the Holders shall not be
entitled to participate in any such dividends.

4. Method of Payment of Dividends.

(a) The Corporation will pay any dividend on the Series A Preferred Stock for a
current dividend period or any prior dividend period (including in connection
with the payment of declared and unpaid dividends pursuant to Section 5,
Section 8, and Section 9), at the Corporation’s sole election, either: (i) in
cash, (ii) by delivery of shares of Series A Preferred Stock or (iii) through a
combination of cash and shares of Series A Preferred Stock.

 

9

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(b) If the Corporation makes any payment of dividends on the Series A Preferred
Stock in shares of Series A Preferred Stock, the number of shares of Series A
Preferred Stock deliverable shall be equal to (i) the cash amount of such
dividend payment that would apply if no payment were to be made in Series A
Preferred Stock, or such portion, divided by (ii) the Liquidation Preference (as
equitably adjusted by the Board to the extent necessary for any stock splits,
combinations or like transactions).

(c) The Corporation shall make each dividend payment on the Series A Preferred
Stock in cash, except to the extent the Corporation elects to make all or any
portion of such payment in shares of Series A Preferred Stock as set forth
above. The Corporation shall give Holders notice of any such election and the
portion of such payment that will be made in cash and the portion that will be
made in Series A Preferred Stock ten (10) scheduled Trading Days prior to the
Dividend Payment Date for such dividend.

(d) If the Corporation elects to pay all or a portion of a dividend on the
Series A Preferred Stock in the form of shares of Series A Preferred Stock, the
Corporation shall deliver such shares of Series A Preferred Stock to the
Transfer Agent or another agent (in such capacity, the “Dividend Agent”) on
behalf of the Holders of the Series A Preferred Stock and shall instruct the
Dividend Agent to deliver such shares to or for the account of the Holders less
any shares required to be withheld on account of taxes or other governmental
charges. In order to satisfy any obligation to withhold taxes arising from any
payment of a dividend or deemed dividend with respect to the Series A Preferred
Stock, the Corporation and the Dividend Agent shall be authorized to make any
deductions required by law, and pay to any taxing authority any amount necessary
to satisfy such obligation.

(e) The Corporation shall not issue fractional shares in respect of any dividend
payment. If a dividend would result in the issuance of a fractional share of
Series A Preferred Stock, each fractional share shall be rounded to the nearest
whole share (with 0.5 shares of Series A Preferred Stock rounded to the next
higher share of Series A Preferred Stock).

5. Special Rights Upon a Fundamental Change.

(a) A Holder shall have the right, in connection with any Fundamental Change, to
convert shares of Series A Preferred Stock in accordance with Section 8 for that
number of shares of Common Stock set forth in Section 5(b) at any time during
the period (the “Fundamental Change Conversion Period”) beginning at the Open of
Business on the Trading Day immediately following the Effective Date of a
Fundamental Change and ending at the Close of Business on the 20th Trading Day
immediately following such Effective Date (or (x) if earlier, the Mandatory
Conversion Date, if applicable, or (y) if later, as extended by Section 5(d))
(such end date, the “Special Rights End Date”), subject to the provisions of
this Section 5.

(b) If a Holder converts shares of its Series A Preferred Stock pursuant to this
Section 5 during the Fundamental Change Conversion Period, the Corporation shall
deliver to such converting Holder, for each share of Series A Preferred Stock
surrendered for conversion, a

 

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number of shares of Common Stock equal to the sum of (A) the Conversion Rate and
(B) the Make-Whole Premium determined pursuant to Section 5(f), if any. In
addition, each Holder that converts shares of its Series A Preferred Stock
pursuant to this Section 5, in addition to the number of shares of Common Stock
issuable upon conversion pursuant to this Section 5(b) shall, on any conversion
date during the Fundamental Change Conversion Period, have the right to receive
an amount equal to any accumulated and unpaid dividends on such converted
shares, whether or not declared prior to that date, for all prior dividend
periods ending on or prior to the Dividend Payment Date immediately preceding
(or, if applicable, ending on) the conversion date (other than previously
declared dividends payable to Holders of record as of a prior date), provided
that the Corporation is then legally permitted to pay such dividends. The amount
payable in respect of such dividends will be paid, at the Corporation’s sole
election, either: (i) in cash, (ii) by delivery of shares of Common Stock or
(iii) through a combination of cash and shares of Common Stock. If the
Corporation elects to issue shares of Common Stock pursuant to this Section 5(b)
in respect of any accrued and unpaid dividends on Series A Preferred Stock, the
number of shares of Common Stock to be so issued will be determined by
(x) first, determining the number of shares of Series A Preferred Stock that
would be issuable pursuant to Section 4(b) in respect to such dividend (or
partial dividend) and (y) second, determining the number of shares of Common
Stock that would be issuable upon conversion pursuant to the first sentence of
this Section 5(b) of such number of shares of Series A Preferred Stock.

(c) For any shares of Series A Preferred Stock that are converted pursuant to
this Section 5 during the Fundamental Change Conversion Period, subject to the
limitations described herein, the Corporation shall have the right to pay the
Make-Whole Premium, in its sole discretion, (i) in cash; (ii) by delivery of
shares of Common Stock; or (iii) by delivery of any combination of cash and
shares of Common Stock. Except to the extent the Corporation elects to make all
or any portion of such payment in shares of Common Stock, the Corporation will
pay the Make-Whole Premium on the Series A Preferred Stock in cash.

(d) The Corporation shall give notice (a “Fundamental Change Notice”) of each
Fundamental Change to all Holders no later than fifteen (15) Business Days prior
to the anticipated Effective Date of the Fundamental Change or, if such prior
notice is not practicable, no later than two (2) Business Days after such
Fundamental Change. If the Corporation notifies Holders of a Fundamental Change
later than the 15th Business Day prior to the actual Effective Date of such
Fundamental Change, the Fundamental Change Conversion Period will be extended by
a number of days equal to the number of days from, and including, the 15th
Business Day prior to the Effective Date of such Fundamental Change to, but not
including, the date of the notice; provided that the Fundamental Change
Conversion Period will not be extended beyond the Mandatory Conversion Date, if
applicable.

(e) The Fundamental Change Notice shall be given in any manner compliant with
the procedures of the Depository in effect at such time to each Holder on the
date such notice is given. The Fundamental Change Notice shall state (i) the
anticipated Effective Date of such Fundamental Change, (ii) the Special Rights
End Date, (iii) the name and address of the Transfer Agent and (iv) the
procedures that Holders must follow to exercise their conversion right pursuant
to this Section 5.

 

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(f) The number of additional shares of Common Stock, if any, to be added to the
Conversion Rate per share of Series A Preferred Stock in connection with a
Fundamental Change pursuant to Section 5(b) above (the “Make-Whole Premium”)
shall be determined by reference to the table below, based on the Effective Date
and the Stock Price with respect to such Fundamental Change.

 

     Stock Price1        $10.400      $11.000      $11.500      $12.500     
$15.000      $17.500      $20.000      $25.000      $50.000      $75.000  

[●], 2017

     9.1973         8.4980         7.9826         7.1075         5.5168        
4.4435         3.6585         2.5755         0.5575         0.0821   

[●], 2018

     9.1973         6.1798         5.6609         4.8435         3.5501        
2.8149         2.3235         1.6715         0.4115         0.0648   

[●], 2019

     9.1973         4.3162         3.5217         2.0995         0.0000        
0.0000         0.0000         0.0000         0.0000         0.0000   

(g) The exact Stock Price and Effective Date may not be set forth on the table
above, in which case:

(i) if the Stock Price is between two Stock Prices on the table or the Effective
Date is between two Effective Dates on the table, the Make-Whole Premium shall
be determined by straight-line interpolation between the Make-Whole Premium set
forth for the higher and lower Stock Prices or the earlier and later Effective
Dates, as applicable, based on a 365-day year;

(ii) if the Stock Price is in excess of $[●] per share (subject to adjustment in
the same manner as the Stock Prices), no Make-Whole Premium will be added to the
Conversion Rate; and

(iii) if the Stock Price is less than $[●] per share (subject to adjustment in
the same manner as the Stock Prices), no Make-Whole Premium will be added to the
Conversion Rate.

(h) Whenever any provision of this Certificate of Designations requires the
Corporation to calculate the Closing Sale Prices or the Stock Prices for
purposes of determining any Make-Whole Premium in connection with a Fundamental
Change, the Board shall make appropriate adjustments to each to account for any
adjustment to the Conversion Rate that becomes effective, or any event requiring
an adjustment to the Conversion Rate where the Record Date of the event occurs,
at any time during the period when such Closing Sale Prices or Stock Prices are
to be calculated.

6. Voting. The shares of Series A Preferred Stock shall not have voting rights
other than those set forth below or as otherwise required by Delaware law or the
Certificate of Incorporation:

(a) If at any time a Voting Rights Triggering Event has occurred, then the
Holders, voting as a single class with any other series of Preferred Stock or
preference securities having similar voting rights that are exercisable
(together, the “Voting Rights Class”), shall be entitled at the next regular or
special meeting of stockholders of the Corporation to elect two additional
directors to the Board. Upon the election of any such additional directors, the
number of directors that comprise the Board shall be increased by such number of
additional directors.

 

1 Note to Draft: Subject to change based on Initial Issue Date.

 

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(b) The voting rights set forth in Section 6(a) may be exercised at a special
meeting of the Corporation’s stockholders, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at each
such special or annual meeting until such time as all dividends in arrears, the
nonpayment of which caused the Voting Rights Triggering Event, shall have been
paid in full, at which time or times, automatically and without any further
action by any Person, such voting rights shall terminate (subject to the
reinstatement of such rights upon a subsequent Voting Rights Triggering Event).

(c) At any meeting at which the holders of shares of the Voting Rights
Class shall have the right to elect directors as provided in Section 6(a), the
presence in person or by proxy of the holders of shares representing more than
fifty percent (50%) in voting power of the then outstanding shares of the Voting
Rights Class shall be required and shall be sufficient to constitute a quorum of
such class for the election of directors by such class. The affirmative vote of
the holders of shares representing more than fifty percent (50%) in voting power
of the then outstanding shares of the Voting Rights Class present at such
meeting, in person or by proxy, shall be sufficient to elect any such director.
Any director elected pursuant to the voting rights set forth in this Section 6
may be removed at any time, with or without cause, by the holders of record of
shares representing more than fifty percent (50%) in voting power of the then
outstanding shares of the Voting Rights Class at any time during which such
holders’ rights pursuant to Section 6(a) continue. Any vacancy in respect of any
such additional director arising at any time during which such holders’ rights
pursuant to Section 6(a) continue (other than prior to the first election
immediately following the applicable Voting Rights Triggering Event) may be
filled by the written consent of the director elected by the Voting Rights
Class remaining in office, or, if none remains in office, by a vote of the
holders of shares representing more than fifty percent (50%) in voting power of
the then outstanding shares of the Voting Rights Class; provided that the
filling of each vacancy shall not violate the Amended and Restated Bylaws of the
Corporation as in effect on the effective date of this Certificate of
Designations or the corporate governance requirements of the NASDAQ Capital
Market (or any other exchange or automated quotation system on which securities
of the Corporation may be listed or quoted) that requires listed or quoted
companies to have a majority of independent directors. Directors elected
pursuant to the voting rights set forth in Section 6(a) shall be entitled to one
vote per director on any matter.

(d) Any director elected pursuant to the voting rights set forth in Section 6(a)
shall hold office until the next annual meeting of stockholders; provided,
however, notwithstanding the foregoing, at such time as all dividends in
arrears, the nonpayment of which caused the Voting Rights Triggering Event, have
been paid in full, then, automatically and without any further action by any
Person, the terms of office of directors elected pursuant to the voting rights
set forth in this Section 6 shall cease and the number of directors comprising
the Board shall be reduced accordingly.

(e) So long as any shares of Series A Preferred Stock remain outstanding, the
Corporation shall not, without the affirmative vote or consent of the Holders of
at least a majority in voting power of the shares of Series A Preferred Stock
outstanding at the time, voting together as a single class with all series of
Parity Stock upon which similar voting rights have been conferred and are
exercisable, given in person or by proxy, either in writing or at a meeting:

(i) amend or alter the provisions of the Certificate of Incorporation or this
Certificate of Designations so as to authorize or create, or increase the
authorized or issued amount of, any class or series of Senior Stock or
reclassify any of our authorized Capital Stock into shares of Senior Stock, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any shares of Senior Stock;

 

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(ii) amend, alter or repeal the provisions of the Certificate of Incorporation
or this Certificate of Designations so as to adversely affect any right,
preference, privilege or voting power of the shares of Series A Preferred Stock;

(iii) consummate a binding share exchange or reclassification involving the
shares of Series A Preferred Stock or a merger or consolidation of the
Corporation with another entity, unless in each case: (A) shares of Series A
Preferred Stock remain outstanding or, in the case of any such merger or
consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of
the surviving or resulting entity or its ultimate parent; and (B) such shares of
Series A Preferred Stock remaining outstanding or such preference securities, as
the case may be, have such rights, preferences, privileges and voting powers,
taken as a whole, as are not materially less favorable to the holders thereof
than the rights, preferences, privileges and voting powers of the Series A
Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that:

(A) any increase in the amount of authorized but unissued shares of Preferred
Stock;

(B) any increase in the authorized or issued shares of Series A Preferred Stock;
and

(C) the creation and issuance, or an increase in the authorized or issued
amount, of any other series of Parity Stock or Junior Stock,

shall be deemed not to adversely affect the rights, preferences, privileges or
voting powers of Holders and shall not require the affirmative vote or consent
of Holders.

(f) If any amendment, alteration, repeal, share exchange, reclassification,
merger or consolidation described in this Section 6 would affect one or more but
not all series of voting Preferred Stock (including the Series A Preferred Stock
for this purpose), then only the series of voting Preferred Stock adversely
affected and entitled to vote shall vote as a class in lieu of all other series
of voting Preferred Stock.

(g) Whether a plurality, majority or other portion of the Series A Preferred
Stock and any other voting Preferred Stock have been voted in favor of any
matter shall be determined by reference to the respective liquidation preference
amounts of the Series A Preferred Stock and such other voting Preferred Stock.

 

14

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(h) Without the consent of the Holders, the Corporation may amend, alter,
supplement or repeal any terms of the Series A Preferred Stock to file a
certificate of correction with respect to this Certificate of Designations to
the extent permitted by Section 103(f) of the DGCL.

7. Liquidation Preference.

(a) In the event of any liquidation, winding up or dissolution of the
Corporation, whether voluntary or involuntary, each Holder shall be entitled to
receive in respect of its shares of Series A Preferred Stock and to be paid out
of the assets of the Corporation legally available for distribution to its
stockholders, after satisfaction of liabilities to the Corporation’s creditors
and holders of shares of Senior Stock and before any payment or distribution is
made to holders of Junior Stock (including the Common Stock), the Liquidation
Preference per share of Series A Preferred Stock plus an amount equal to all
accumulated and unpaid dividends on such shares, whether or not declared, to,
but not including the date fixed for liquidation, winding up or dissolution.

(b) Neither the sale, conveyance, exchange or transfer of all or substantially
all the assets or business of the Corporation (other than in connection with the
liquidation, winding up or dissolution of the Corporation), nor the merger or
consolidation of the Corporation into or with any other Person, nor any share
exchange or division involving the Corporation pursuant to applicable statutes
providing for the consolidation, merger, share exchange or division, shall be
deemed to be a liquidation, winding up or dissolution, whether voluntary or
involuntary, for the purposes of this Section 7, notwithstanding that, for other
purposes, such as for tax purposes, such an event may constitute a liquidation,
dissolution or winding up. In addition, no payment shall be made to Holders
pursuant to this Section 7 upon the liquidation, dissolution or winding up,
whether voluntary or involuntary, of any of the Corporation’s Subsidiaries or
upon any reorganization of the Corporation’s Subsidiaries with or without the
approval of the Corporation’s stockholders.

(c) After the payment to the Holders of the shares of Series A Preferred Stock
of full preferential amounts provided for in this Section 7, the Holders of
Series A Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.

(d) In the event the assets of the Corporation available for distribution to the
Holders and holders of shares of Parity Stock upon any liquidation, winding up
or dissolution of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to this Section 7, such Holders and such holders of shares of Parity
Stock shall share, equally and ratably in proportion to the respective full
amounts to which such holders are entitled pursuant to this Section 7, in any
distribution of the assets of the Corporation.

8. Conversion.

(a) Each Holder shall have the right at any time, at its option, to convert,
subject to the terms and provisions of this Section 8, any or all of such
Holder’s shares of Series A Preferred Stock at an initial conversion rate of
86.9565 shares of fully paid and nonassessable

 

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shares of Common Stock, subject to adjustment as provided in this Section 8,
(the “Conversion Rate”), per share of Series A Preferred Stock. Upon conversion
of any share of Series A Preferred Stock, the Corporation shall deliver to the
converting Holder, in respect of each share of Series A Preferred Stock being
converted, (i) a number of shares of Common Stock equal to the Conversion Rate
on the third Business Day immediately following the relevant Conversion Date
plus (ii) the amount of any accumulated and unpaid dividends on such share,
whether or not declared (subject to the proviso in Section 3(f)), which will be
paid, at the Corporation’s election, either: (i) in cash, (ii) by delivery of
shares of Common Stock at the Conversion Rate or (iii) through a combination of
cash and shares of Common Stock; provided, however, that if a Holder so elects,
all or any portion of any accrued and unpaid dividend owed to such Holder
pursuant hetero shall be paid by the delivery of shares of Common Stock at the
Conversion Rate.

(b) Before any Holder shall be entitled to convert a share of Series A Preferred
Stock as set forth in Section 8(a), such Holder shall (i) in the event such
Holder holds a beneficial interest in Global Series A Preferred Stock, comply
with the procedures of the Depository in effect at the time of conversion for
converting a beneficial interest in a global security, and (ii) in the event
such Holder holds Certificated Series A Preferred Stock, (A) complete and
manually sign the conversion notice on the back of such share of Certificated
Series A Preferred Stock (or a facsimile thereof), stating the number of shares
of Series A Preferred Stock to be converted and the name or names (with
addresses) in which such Holder wishes the certificate or certificates for any
shares of Common Stock to be delivered to be registered (a “Notice of
Conversion”), a form of which is attached hereto as Exhibit B, and deliver such
Notice of Conversion, which is irrevocable, to the Transfer Agent, in its
capacity as the conversion agent (or such other agent designated by the
Corporation) (the “Conversion Agent”), (B) surrender such shares of Certificated
Series A Preferred Stock to the Conversion Agent, (C) if required, furnish
appropriate endorsements and transfer documents, and (D) if required, pay all
transfer or similar taxes, if any, as set forth more fully herein. The
Conversion Agent shall notify the Corporation of any conversion pursuant to this
Section 8 on the Conversion Date for such conversion. The date on which a Holder
complies with the procedures in this Section 8(b) is the “Conversion Date.” If
more than one share of Series A Preferred Stock shall be surrendered for
conversion at one time by the same Holder, the number of shares of Common Stock
to be delivered upon conversion of such shares of Series A Preferred Stock shall
be computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered.

(c) Immediately prior to the Close of Business on the Conversion Date with
respect to a conversion, conversion of the shares of Series A Preferred Stock
surrendered for conversion shall be deemed to have been effected, and, as of the
Close of Business on the Conversion Date, the converting Holder of such shares
of Series A Preferred Stock shall be deemed to be the holder of record of the
Common Stock issuable upon conversion of such Holder’s Series A Preferred Stock
notwithstanding that the share register of the Corporation shall then be closed
or that certificates representing such Common Stock shall not then be actually
delivered to such Holder. On the date of any conversion, all rights with respect
to the shares of Series A Preferred Stock so converted, including the rights, if
any, to receive notices, will terminate, excepting only the rights of holders
thereof to (i) receive certificates for the number of whole shares of Common
Stock into which such shares of Series A Preferred Stock have been converted,
and (ii) exercise the rights to which they are thereafter entitled as holders of
Common Stock.

 

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(d) The Conversion Rate shall be adjusted, without duplication, upon the
occurrence of any of the following events:

(i) If the Corporation issues shares of Common Stock as a dividend or
distribution on all or substantially all shares of Common Stock, or if the
Corporation effects a share subdivision or share combination, the Conversion
Rate shall be adjusted based on the following formula:

 

CR1 =  

OS1

   CR0 x   OS0   

where,

 

CR0   =    the Conversion Rate in effect immediately prior to the Close of
Business on the Record Date for such dividend or distribution, or immediately
prior to the Open of Business on the Effective Date of such share subdivision or
share combination, as the case may be; CR1   =    the Conversion Rate in effect
immediately after the Close of Business on the Record Date for such dividend or
distribution, or immediately after the Open of Business on the Effective Date of
such share subdivision or share combination, as the case may be; OS0   =    the
number of shares of Common Stock outstanding immediately prior to the Close of
Business on the Record Date for such dividend or distribution, or immediately
prior to the Open of Business on the Effective Date of such share subdivision or
share combination, as the case may be; and OS1   =    the number of shares of
Common Stock outstanding immediately after, and solely as a result of, giving
effect to such dividend or distribution, or such share subdivision or share
combination, as the case may be.

Any adjustment made under this Section 8(d)(i) shall become effective
immediately after the Close of Business on the Record Date for such dividend or
distribution, or immediately after the Open of Business on the Effective Date
for such share subdivision or share combination, as the case may be. If any
dividend, distribution, share subdivision or share combination of the type
described in this Section 8(d)(i) is declared but not so paid or made, the
Conversion Rate shall be immediately readjusted, effective as of the earlier of
(A) the date the Board determines not to pay or make such dividend,
distribution, subdivision or combination and (B) the date the dividend or
distribution was to be paid or the date the subdivision or combination was to
have been effective, to the Conversion Rate that would then be in effect if such
dividend, distribution, subdivision or combination had not been declared.

The Corporation shall not pay any dividend or make any distribution on shares of
Common Stock held in treasury.

 

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(ii) If the Corporation distributes to all or substantially all holders of its
Common Stock any rights, options or warrants entitling them, for a period
expiring not more than 45 calendar days after the date of issuance thereof, to
purchase or subscribe for shares of Common Stock at a price per share that is
less than the average of the Closing Sale Prices of Common Stock over the 10
consecutive Trading Day period ending on, and including, the Trading Day
immediately preceding the Ex-Date of such distribution, the Conversion Rate
shall be adjusted based on the following formula:

 

CR1 = CR0  

OS0 + X

   x   OS0 + Y   

where,

 

CR0

  =    the Conversion Rate in effect immediately prior to the Close of Business
on the Record Date for such distribution;

CR1

  =    the Conversion Rate in effect immediately after the Close of Business on
the Record Date for such distribution;

OS0

  =    the number of shares of Common Stock outstanding immediately prior to the
Close of Business on the Record Date for such distribution;

X

  =    the total number of shares of Common Stock issuable pursuant to such
rights, options or warrants; and

Y

  =    the number of shares of Common Stock equal to the quotient of (A) the
aggregate price payable to exercise such rights, options or warrants and (B) the
average of the Closing Sale Prices of the Common Stock over the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately
preceding the Ex-Date of such distribution.

Any increase made under this Section 8(d)(ii) shall be made successively
whenever any such rights, options or warrants are issued and shall become
effective immediately after the Close of Business on the Record Date for such
distribution. To the extent that shares of Common Stock are not issued prior to
the expiration or termination of such rights, options or warrants, the
Conversion Rate shall be decreased, effective as of the date of such expiration,
to the Conversion Rate that would then be in effect had the increase with
respect to the distribution of such rights, options or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. If such rights, options or warrants are not so distributed, the
Conversion Rate shall be decreased, effective as of the earlier of (A) the date
the Board determines not to make such distribution and (B) the date such rights,
options or warrants were to have been issued, to be the Conversion Rate that
would then be in effect if such Record Date for such distribution had not
occurred. If such rights, options or warrants are only exercisable upon the
occurrence of certain triggering events, then the Conversion Rate shall not be
adjusted until the triggering events occur.

 

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For purposes of this Section 8(d)(ii), in determining whether any rights,
options or warrants entitle the holders of the Common Stock to subscribe for or
purchase shares of Common Stock at less than the average of the Closing Sale
Prices of the Common Stock for the 10 consecutive Trading Day period ending on,
and including, the Trading Day immediately preceding the Ex-Date of such
distribution, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received by
the Corporation for such rights, options or warrants and any amount payable on
exercise or conversion thereof, the value of such consideration, if other than
cash, to be determined by the Board.

(iii) If the Corporation distributes shares of its Capital Stock, evidences of
its indebtedness or other assets, securities or property of the Corporation or
rights, options or warrants to acquire its Capital Stock or other securities, to
all or substantially all holders of Common Stock, excluding (A) dividends,
distributions, rights, options, warrants or other issuances as to which an
adjustment was effected pursuant to Section 8(d)(i) or Section 8(d)(ii), (B)
rights issued to all holders of Common Stock pursuant to a rights plan, where
such rights are not presently exercisable, trade with Common Stock and the plan
provides that Holders will receive such rights along with any Common Stock
received upon conversion of the Series A Preferred Stock, (C) dividends or
distributions paid exclusively in cash as to which an adjustment was effected
pursuant to (or a cash amount paid pursuant to the last paragraph of)
Section 8(d)(iv), (D) any dividends and distributions in connection with any
recapitalization, reclassification, change, consolidation, merger or other
combination, share exchange, or sale, lease or other transfer or disposition
resulting in the change in the conversion consideration as described in
Section 8(h) and (E) Spin-Offs as to which the provisions set forth below in the
last two paragraphs of this Section 8(d)(iii) shall apply, then the Conversion
Rate shall be adjusted based on the following formula:

 

CR1 = CR0 x  

SP0

     SP0 – FMV   

where,

 

CR0   =    the Conversion Rate in effect immediately prior to the Close of
Business on the Record Date for such distribution; CR1   =    the Conversion
Rate in effect immediately after the Close of Business on the Record Date for
such distribution; SP0   =    the average of the Closing Sale Prices of the
Common Stock over the 10 consecutive Trading Day period ending on, and
including, the Trading Day immediately preceding the Ex-Date for such
distribution; and FMV   =    the fair market value as of the Record Date for
such distribution (as determined in good faith by the Board) of the shares of
the Corporation’s Capital Stock (other than Common Stock), evidences of
indebtedness, assets, securities, property, rights, options or warrants
distributed with respect to each outstanding share of Common Stock.

 

19

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Any increase made under the portion of this Section 8(d)(iii) above shall become
effective immediately after the Close of Business on the Record Date for such
distribution. If such distribution is not so paid or made, the Conversion Rate
shall be decreased, effective as of the earlier of (A) the date the Board
determines not to pay the distribution and (B) the date such dividend or
distribution was to have been paid, to be the Conversion Rate that would then be
in effect if such distribution had not been declared.

Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or
greater than “SP0” (as defined above), or if the difference is less than $1.00,
in lieu of the foregoing increase, each Holder shall receive, for each share of
Series A Preferred Stock held by it, at the same time and upon the same terms as
holders of the Common Stock, the amount and kind of the Corporation’s Capital
Stock (other than Common Stock), evidences of indebtedness, or other assets,
securities or property of the Corporation, or rights, options or warrants to
acquire the Corporation’s Capital Stock or other securities that such Holder
would have received if such Holder owned a number of shares of Common Stock
equal to the Conversion Rate in effect immediately prior to the Close of
Business on the Record Date for the distribution.

With respect to an adjustment pursuant to this Section 8(d)(iii) where there has
been a payment of a dividend or other distribution on the Common Stock
consisting solely of shares of Capital Stock of any class or series, or similar
equity interests, of or relating to a Subsidiary or other business unit of the
Corporation where such Capital Stock or similar equity interest is, or will be
when issued, listed or admitted for trading on a U.S. national securities
exchange (a “Spin-Off”), the Conversion Rate will be increased based on the
following formula:

 

CR1 =

CR0 x

 

  FMV

  +

  MP0

       MP0   

where,

 

CR0   =    the Conversion Rate in effect immediately prior to the Close of
Business on the 10th Trading Day immediately following, and including, the
Ex-Date for the Spin-Off; CR1   =    the Conversion Rate in effect immediately
after the Close of Business on the 10th Trading Day immediately following, and
including, the Ex-Date for the Spin-Off; FMV   =    the average of the Closing
Sale Prices of the Capital Stock or similar equity interest distributed to
holders of the Common Stock applicable to one share of Common Stock over the 10
consecutive Trading Day period immediately following, and including, the Ex-Date
for the Spin-Off; and MP0   =    the average of the Closing Sale Prices of the
Common Stock over the 10 consecutive Trading Day period immediately following,
and including, the Ex-Date for the Spin-Off.

 

20

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The adjustment to the Conversion Rate under the preceding paragraph shall become
effective at the Close of Business on the 10th Trading Day immediately
following, and including, the Ex-Date for the Spin-Off; provided that, for
purposes of determining the Conversion Rate in respect of any conversion during
the 10 Trading Days following, and including, the Ex-Date of any Spin-Off,
references to “10 consecutive Trading Days” within the portion of this
Section 8(d)(iii) related to Spin-Offs shall be deemed to be replaced with such
lesser number of consecutive Trading Days as have elapsed between the Ex-Date of
such Spin-Off and the relevant Conversion Date.

(iv) If any cash dividend or distribution is made to all or substantially all
holders of Common Stock (excluding dividends or distributions made in connection
with the liquidation, dissolution or winding up of the Corporation and any
consideration payable in connection with a tender or exchange offer made by the
Corporation or any of its Subsidiaries), the Conversion Rate shall be adjusted
based on the following formula:

 

CR1 =  

  SP0

   CR0 x     SP0 – C   

where,

 

CR0   =    the Conversion Rate in effect immediately prior to the Close of
Business on the Record Date for such dividend or distribution; CR1   =    the
Conversion Rate in effect immediately after the Close of Business on the Record
Date for such dividend or distribution; SP0   =    the average of the Closing
Sale Prices of the Common Stock over the 10 consecutive Trading Day period
ending on, and including, the Trading Day immediately preceding the Ex-Date for
such dividend or distribution; and C   =    the amount in cash per share of
Common Stock the Corporation distributes to all or substantially all holders of
its Common Stock.

Any adjustment made under this Section 8(d)(iv) shall become effective
immediately after the Close of Business on the Record Date for such dividend or
distribution. If such dividend or distribution is not so paid, the Conversion
Rate shall be decreased, effective as of the earlier of (A) the date the Board
determines not to pay or make such dividend or distribution and (B) the date
such dividend or distribution was to have been paid, to be the Conversion Rate
that would then be in effect if such dividend or distribution had not been
declared.

Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater
than “SP0” (as defined above), of if the difference is less than $1.00, in lieu
of the foregoing increase, each Holder shall receive, for each share of Series A
Preferred Stock,

 

21

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at the same time and upon the same terms as holders of Common Stock, the amount
of cash that such Holder would have received if such Holder owned a number of
shares of Common Stock equal to the Conversion Rate on the Record Date for such
cash dividend or distribution.

(v) If the Corporation or any of its Subsidiaries make a payment in respect of a
tender or exchange offer for Common Stock to the extent that the cash and value
of any other consideration included in the payment per share of Common Stock
exceeds the average of the Closing Sale Prices of the Common Stock over the 10
consecutive Trading Day period commencing on, and including, the Trading Day
next succeeding the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer (the “Expiration Date”), the Conversion Rate
shall be adjusted based on the following formula:

 

CR1 =

CR0 x

 

  AC +

  (SP1 x OS1)

       SP1 x OS0   

where,

CR0   =    the Conversion Rate in effect immediately prior to the Close of
Business on the last Trading Day of the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the Expiration
Date; CR1   =    the Conversion Rate in effect immediately after the Close of
Business on the last Trading Day of the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the Expiration
Date; AC   =    the aggregate value of all cash and any other consideration (as
determined in good faith by the Board) paid or payable for shares of Common
Stock purchased in such tender or exchange offer; OS0   =    the number of
shares of Common Stock outstanding immediately prior to the Expiration Date
(prior to giving effect to the purchase of all shares of Common Stock accepted
for purchase or exchange in such tender or exchange offer); OS1   =    the
number of shares of Common Stock outstanding immediately after the Expiration
Date (after giving effect to the purchase of all shares of Common Stock accepted
for purchase or exchange in such tender or exchange offer); and SP1   =    the
average of the Closing Sale Prices of the Common Stock over the 10 consecutive
Trading Day period commencing on, and including, the Trading Day next succeeding
the Expiration Date.

Any increase made under this Section 8(d)(v) shall become effective at the Close
of Business on the 10th Trading Day immediately following, and including, the
Trading Day next succeeding the Expiration Date; provided that, for purposes of
determining the Conversion Rate in respect of any conversion during the 10
Trading Days immediately

 

22

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following, and including, the Trading Day next succeeding the Expiration Date,
references to “10 consecutive Trading Days” within this Section 8(d)(v) shall be
deemed to be replaced with such lesser number of consecutive Trading Days as
have elapsed between the Expiration Date for such tender or exchange offer and
the relevant Conversion Date.

In the event that the Corporation or one of its Subsidiaries is obligated to
purchase shares of Common Stock pursuant to any such tender offer or exchange
offer, but the Corporation or such Subsidiary is permanently prevented by
applicable law from effecting any such purchases, or all such purchases are
rescinded, then the Conversion Rate shall be readjusted to be such Conversion
Rate that would then be in effect if such tender offer or exchange offer had not
been made.

(vi) All calculations and other determinations under this Section 8(d) shall be
made by the Corporation and shall be made to the nearest one-ten thousandth
(1/10,000th) of a share. Notwithstanding anything herein to the contrary, no
adjustment under this Section 8(d) shall be made to the Conversion Rate unless
such adjustment would result in a change of at least 1% in the Conversion Rate
then in effect. Any lesser adjustment shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment, if any, which,
together with any adjustment or adjustments so carried forward, shall amount to
a change of at least 1% in such Conversion Rate; provided, however, that the
Corporation shall make all such carried-forward adjustments, regardless of
whether the aggregate adjustment is less than 1%, (A) on December 31 of each
calendar year, (B) on the Conversion Date for any conversions of Series A
Preferred Stock, (C) upon the occurrence of a Fundamental Change and (D) in the
event that the Corporation exercises its mandatory conversion right pursuant to
Section 9. No adjustment to the Conversion Rate shall be made if it results in a
Conversion Price that is less than the par value (if any) of the Common Stock.
The Corporation shall not take any action that would result in the Conversion
Price being less than the par value (if any) of the Common Stock pursuant to
this Certificate of Designations and without giving effect to the previous
sentence.

(vii) In addition to those adjustments required by clauses (i), (ii), (iii),
(iv) and (v) of this Section 8(d), and to the extent permitted by applicable law
and subject to the applicable rules of the NASDAQ Capital Market, the
Corporation, from time to time, may increase the Conversion Rate by any amount
for a period of at least twenty (20) Business Days or any longer period
permitted or required by law, so long as the increase is irrevocable during that
period and the Board determines that such increase would be in the Corporation’s
best interest. Whenever the Conversion Rate is increased pursuant to the
preceding sentence, the Corporation shall send to each Holder at its last
address appearing on the stock register of the Corporation a notice of the
increase at least 15 calendar days prior to the date the increased Conversion
Rate takes effect, and such notice shall state the increased Conversion Rate and
the period during which it will be in effect.

(viii) Notwithstanding the foregoing in this Section 8(d) and for the avoidance
of doubt, the Conversion Rate shall not be adjusted for: (A) the issuance of
Common

 

23

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Stock pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of additional optional amounts in shares of Common Stock under any
plan; (B) the issuance of Common Stock, options, restricted stock, restricted
stock units, performance units or rights to purchase those shares or similar
equity instruments pursuant to any present or future employee, director, trustee
or consultant benefit plan, employee agreement or arrangement or program of the
Corporation or any of its Subsidiaries; (C) the issuance of Common Stock
pursuant to any option, warrant, right or excisable, exchangeable or convertible
security outstanding as of the Initial Issue Date; (D) a change in the par value
of Common Stock; (E) a sale of Common Stock, or securities convertible or
exercisable for Common Stock, for cash, other than in a transaction described in
Section 8(d)(i) through Section 8(d)(v); (F) ordinary course of business stock
repurchases that are not tender offers referred to in Section 8(d)(v), including
structured or derivative transactions or pursuant to a stock repurchase program
approved by the Board; (G) a third-party tender or exchange offer, other than a
tender or exchange offer by one of the Corporation’s Subsidiaries as described
in Section 8(d)(v); and (H) accumulated and unpaid dividends or distributions,
except as provided in Section 5, Section 8, and Section 9. Except as described
in this Section 8, we will not adjust the Conversion Rate.

(e) Notwithstanding Section 8(d)(ii) and Section 8(d)(iii), if the Corporation
has a rights plan (including the distribution of rights pursuant thereto to all
holders of Common Stock) in effect while any shares of Series A Preferred Stock
remain outstanding (including the rights plan adopted by the Corporation in May
2016), Holders will receive, upon conversion of shares of Series A Preferred
Stock, in addition to shares of Common Stock to which each such Holder is
entitled, a corresponding number of rights in accordance with such rights plan.
If, prior to any conversion of shares of Series A Preferred Stock, such rights
have separated from the shares of Common Stock in accordance with the provisions
of the applicable rights plan, the Conversion Rate will be adjusted at the time
of separation as if the Corporation had distributed to all or substantially all
holders of Common Stock, shares of Capital Stock, evidences of indebtedness,
assets, securities, property, rights, options or warrants as described in
Section 8(d)(iii) above, subject to readjustment in the event of the expiration,
termination or redemption of such rights. Any distribution of rights, options or
warrants pursuant to a rights plan that would allow a Holder to receive upon
conversion of shares of Series A Preferred Stock, in addition to any shares of
Common Stock to which such Holder is entitled, the rights described therein
(unless such rights, options or warrants have separated from the Common Stock
(in which case the Conversion Rate will be adjusted at the time of separation as
if the Corporation made a distribution to all holders of Common Stock as
described in Section 8(d)(iii), subject to readjustment in the event of the
expiration, termination or redemption of such rights)) shall not constitute a
distribution of rights, options or warrants that would entitle such Holder to an
adjustment to the Conversion Rate.

(f) The Corporation may also (but is not required to) increase each Conversion
Rate to avoid or diminish any income tax to holders of Common Stock or rights to
purchase shares of Common Stock in connection with a dividend or distribution of
shares (or rights to acquire shares) or similar event. However, in either case,
the Corporation may only make such a discretionary adjustment if it makes the
same proportionate adjustment to each Conversion Rate.

 

24

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(g) Upon any increase in the Conversion Rate, the Corporation promptly shall
deliver to each Holder a certificate signed by an Officer of the Corporation,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated, and specifying the increased
Conversion Rate then in effect following such adjustment.

(h) In the case of:

(i) any recapitalization, reclassification or change in Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value, or changes resulting from a subdivision or combination),

(ii) any consolidation, merger or other combination involving the Corporation,

(iii) any sale, lease or other transfer or disposition to a third party of the
consolidated assets of the Corporation and the Corporation’s Subsidiaries
substantially as an entirety, or

(iv) any statutory share exchange of the Corporation’s securities with another
person (other than in connection with a merger or acquisition),

in each case, as a result of which Common Stock would be converted into, or
exchanged for, stock, other securities or other property or assets (including
cash or any combination thereof) (any such transaction or event, a
“Reorganization Event”), then, at and after the effective time of such
Reorganization Event, the right to convert each share of Series A Preferred
Stock into shares of Common Stock shall be changed into a right to convert such
share of Series A Preferred Stock into the kind and amount of shares of stock,
other securities or other property or assets (including cash or any combination
thereof) that a holder of a number of shares of Common Stock equal to the
Conversion Rate immediately prior to such Reorganization Event would have been
entitled to receive upon such Reorganization Event (such stock, securities or
other property or assets, the “Reference Property”). The Corporation shall amend
its Certificate of Incorporation to effect this change, if applicable. In the
event that, in connection with any such Reorganization Event, the holders of
Common Stock have the opportunity to elect the form of all or any portion of the
consideration to be received by such holders in such Reorganization Event, the
Reference Property into which shares of Series A Preferred Stock will be
convertible shall be deemed to be the weighted average of the types and amounts
of consideration received by the holders of Common Stock that affirmatively make
such election (or of all holders of Common Stock if no holders of Common Stock
make such election). The Corporation shall not become a party to any
Reorganization Event unless its terms are consistent with this Section 8(h).
Notwithstanding Section 8(d), no adjustment to the Conversion Rate shall be made
for any Reorganization Event to the extent stock, securities or other property
or assets become the Reference Property receivable upon conversion of Series A
Preferred Stock.

The Corporation shall provide, by amendment hereto effective upon any such
Reorganization Event, for anti-dilution and other adjustments that shall be as
nearly equivalent as is possible to the adjustments provided for in this
Section 8. The provisions of this Section 8(h) shall apply to successive
Reorganization Events.

 

25

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None of the foregoing provisions of this Section 8(h) shall affect the right of
a Holder to convert its Series A Preferred Stock into shares of Common Stock as
set forth in Section 8(a) prior to the effective time of such Reorganization
Event.

In this Certificate of Designations, if Common Stock has been replaced by
Reference Property as a result of any such Reorganization Event, references to
“Common Stock” are intended to refer to such Reference Property.

(i) The Corporation shall at all times reserve and keep available for issuance
upon the conversion of shares of Series A Preferred Stock a number of its
authorized but unissued shares of Common Stock equal to the maximum number of
shares of Common Stock deliverable upon conversion of all shares of Series A
Preferred Stock (including the maximum number of shares of Common Stock
deliverable upon conversion during a Fundamental Change Conversion Period), and
shall take all action required to increase the authorized number of shares of
Common Stock if at any time there shall be insufficient unissued shares of
Common Stock to permit such reservation or to permit the conversion of all
outstanding shares of Series A Preferred Stock.

(j) A converting Holder is not required to pay any transfer or similar taxes due
upon conversion of such Holder’s shares of Series A Preferred Stock, except that
such Holder shall pay such transfer or similar taxes payable relating to any
transfer involved in the issuance or delivery of shares of Common Stock, if any,
due upon conversion of such shares of Series A Preferred Stock in a name other
than that of the converting Holder. The Corporation may require that such
converting Holder establish to the reasonable satisfaction of the Corporation,
that such converting Holder has paid in full all applicable transfer or similar
taxes, if any, payable by such converting Holder prior to issuing and delivered
the shares of Common Stock due upon conversion of such converting Holder’s
shares of Series A Preferred Stock. Notwithstanding the foregoing, upon
surrender of a share of Series A Preferred Stock for conversion, the Corporation
or an applicable withholding agent may deduct and withhold on cash dividends,
shares of Common Stock or sale proceeds paid, subsequently paid or credited (or
on the consideration otherwise delivered) with respect to such Holder or its
successors and assigns the amount required to be deducted and withheld under
applicable law.

9. Mandatory Conversion.

(a) At any time on or after [●], 2019, the Corporation shall have the right, at
its option, to elect to cause all or any portion of the outstanding shares of
Series A Preferred Stock to be automatically converted into that number of
shares of Common Stock for each share of Series A Preferred Stock equal to the
Conversion Rate in effect on the Mandatory Conversion Date. The Corporation may
exercise its right to cause a mandatory conversion pursuant to this Section 9
only if the Closing Sale Price of the Common Stock equals or exceeds 120% of the
Conversion Price then in effect for at least 20 Trading Days (whether or not
consecutive) in a period of 30 consecutive Trading Days, including the last
Trading Day of such 30 Trading Day period, ending on, and including, the Trading
Day immediately preceding the Business Day on which the Corporation issues a
press release announcing the mandatory conversion as described in Section 9(b).
Notwithstanding anything to the contrary in this Section 9(a), the Corporation
shall not, in any calendar month, convert pursuant to this Section 9 a number of
shares of Series

 

26

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A Preferred Stock in excess of the number of shares of Series A Preferred Stock
the conversion of which would result in the issuance of a number of shares of
Common Stock in excess of 15% the number of shares of Common Stock traded on the
NASDAQ Capital Market (or any other exchange or automated quotation system on
which securities of the Corporation may be listed or quoted) during the calendar
month preceding the month of the Mandatory Conversion Date (as defined below).

(b) To exercise the mandatory conversion right described in Section 9(a), the
Corporation must issue a press release giving notice of such mandatory
conversion for publication on the Dow Jones News Service or Bloomberg Business
News (or another broadly disseminated news or press release service selected by
the Corporation) prior to the Open of Business on the first Trading Day
immediately following any date on which the condition described in Section 9(a)
is met, announcing such a mandatory conversion. The conversion date will be a
date selected by the Corporation (the “Mandatory Conversion Date”) and will be
no later than 10 calendar days after the date on which the Corporation issues
the press release described in this Section 9(b). In addition to any information
required by applicable law or regulation, such press release and notice of a
mandatory conversion shall state, as appropriate: (i) the Mandatory Conversion
Date; (ii) the number of shares of Common Stock to be issued upon conversion of
each share of Series A Preferred Stock; and (iii) that dividends on the Series A
Preferred Stock to be converted will cease to accumulate on the Mandatory
Conversion Date.

(c) On and after the Mandatory Conversion Date, dividends shall cease to
accumulate on the Series A Preferred Stock called for a mandatory conversion
pursuant to this Section 9 and all rights of Holders shall terminate except for
the right to receive the shares of Common Stock issuable upon conversion thereof
and, if applicable, a dividend on the Mandatory Conversion Date as provided in
the following sentence. An amount equal to the amount of any accumulated and
unpaid dividends with respect to the Series A Preferred Stock called for a
mandatory conversion pursuant to this Section 9 as of the Close of Business on
the Mandatory Conversion Date shall be paid on such Mandatory Conversion Date to
the record holder of such share at the Close of Business on such Mandatory
Conversion Date at the Corporation’s sole election, either: (i) in cash, (ii) by
delivery of shares of Common Stock at the Conversion Rate or (iii) through a
combination of cash and shares of Common Stock.

(d) The Corporation may not authorize, issue a press release or give notice of
any mandatory conversion pursuant to this Section 9 unless, prior to giving the
mandatory conversion notice, all accumulated and unpaid dividends on the Series
A Preferred Stock (whether or not declared) for dividend periods ended prior to
the date of such mandatory conversion notice shall have been paid or such
accumulated and unpaid dividends are declared and a sufficient sum in cash or
number of shares of Series A Common Stock or Common Stock for payment of such
dividends shall have been set aside for payment on or prior to the Mandatory
Conversion Date.

10. No Fractional Shares. No fractional shares of Common Stock or securities
representing fractional shares of Common Stock will be delivered upon redemption
or conversion of the Series A Preferred Stock, whether voluntary or mandatory.
Instead, the Corporation shall round up to the nearest whole share the number of
shares of Common Stock to be delivered.

 

27

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11. Rule 144A Information. At any time the Corporation is not subject to
Section 13 or 15(d) of the Exchange Act, the Corporation will, so long as any
shares of the Series A Preferred Stock or any shares of Common Stock issuable
upon conversion of the Series A Preferred Stock will, at such time, constitute
“restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, promptly provide to Continental Stock Transfer & Trust Company,
as Transfer Agent, and, upon written request, provide to any holder, beneficial
owner or prospective purchaser of such shares of Series A Preferred Stock or
shares of Common Stock the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act to facilitate the resale of such shares
of Series A Preferred Stock or shares of Common Stock pursuant to Rule 144A
under the Securities Act. The Corporation will take such further action as any
Holder or beneficial owner of such shares of Series A Preferred Stock may
reasonably request to the extent from time to time required to enable such
Holder or beneficial owner to sell such shares of Series A Preferred Stock or
shares of Common Stock in accordance with Rule 144A under the Securities Act, as
such rule may be amended from time to time.

12. [Reserved.]

13. Certificates.

(a) Form and Dating. The Series A Preferred Stock and the Transfer Agent’s
certificate of authentication shall be substantially in the form set forth in
Exhibit A, which is hereby incorporated in and expressly made a part of this
Certificate of Designations. The Series A Preferred Stock certificate may have
notations, legends or endorsements required by law or stock exchange rules;
provided that any such notation, legend or endorsement is in a form acceptable
to the Corporation. Each Series A Preferred Stock certificate shall be dated the
date of its authentication.

(i) Global Series A Preferred Stock. The Series A Preferred Stock shall be
issued initially in the form of one or more fully registered global certificates
with the global securities legend set forth in Exhibit A hereto (the “Global
Series A Preferred Stock”), which shall be deposited on behalf of the Holders
represented thereby with the Transfer Agent, as custodian for DTC (or with such
other custodian as DTC may direct), and registered in the name of Cede & Co. or
other nominee of DTC, duly executed by the Corporation and authenticated by the
Transfer Agent as hereinafter provided. The number of shares of Series A
Preferred Stock represented by Global Series A Preferred Stock may from time to
time be increased or decreased by adjustments made on the records of the
Transfer Agent and DTC or its nominee as hereinafter provided.

(ii) Book-Entry Provisions. In the event Global Series A Preferred Stock is
deposited with or on behalf of DTC, the Corporation shall execute and the
Transfer Agent shall authenticate and deliver initially one or more Global
Series A Preferred Stock certificates that (A) shall be registered in the name
of Cede & Co. as nominee for DTC as depository for such Global Series A
Preferred Stock, or other nominee of DTC and (B) shall be delivered by the
Transfer Agent to DTC or, pursuant to DTC’s instructions, held by the Transfer
Agent as custodian for DTC. Members of, or participants in, DTC (“Agent
Members”) shall have no rights under this Certificate of Designations with
respect to any Global Series A Preferred Stock held on their behalf by DTC or by
the

 

28

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Transfer Agent as the custodian of DTC or under such Global Series A Preferred
Stock, and DTC may be treated by the Corporation, the Transfer Agent and any
agent of the Corporation or the Transfer Agent as the absolute owner of such
Global Series A Preferred Stock for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Corporation, the Transfer Agent or
any agent of the Corporation or the Transfer Agent from giving effect to any
written certification, proxy or other authorization furnished by DTC or impair,
as between DTC and its Agent Members, the operation of customary practices of
DTC governing the exercise of the rights of a holder of a beneficial interest in
any Global Series A Preferred Stock.

(iii) Certificated Series A Preferred Stock. Except as provided in this
Section 13(a) or in Section 13(c), owners of beneficial interests in Global
Series A Preferred Stock will not be entitled to receive physical delivery of
Series A Preferred Stock in fully registered certificated form (“Certificated
Series A Preferred Stock”).

(b) Execution and Authentication. The (i) Chairman of the Board, Chief Executive
Officer, President or a Vice President and (ii) either the Treasurer or an
Assistant Treasurer of the Corporation, or the Secretary or Assistant Secretary
of the Corporation, shall sign each Series A Preferred Stock certificate for the
Corporation by manual or facsimile signature, and such certificates may bear the
seal of the Corporation or a facsimile thereof.

If any person who has signed or whose facsimile signature has been placed upon a
Series A Preferred Stock certificate on behalf of the Corporation shall have
ceased to be Chairman of the Board or shall have ceased to be an Officer before
such certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as if such person were such officer at the date
of its issuance.

A Series A Preferred Stock certificate shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of authentication
on the Series A Preferred Stock certificate. The signature shall be conclusive
evidence that the Series A Preferred Stock certificate has been authenticated in
accordance with this Certificate of Designations.

The Transfer Agent shall authenticate and deliver certificates for up to [●]
shares of Series A Preferred Stock for original issue upon a written order of
the Corporation signed by two Officers of the Corporation. Such order shall
specify the number of shares of Series A Preferred Stock to be authenticated and
the date on which the original issue of the Series A Preferred Stock is to be
authenticated.

The Transfer Agent may appoint an authenticating agent reasonably acceptable to
the Corporation to authenticate the certificates for the Series A Preferred
Stock. Unless limited by the terms of such appointment, an authenticating agent
may authenticate certificates for the Series A Preferred Stock whenever the
Transfer Agent may do so. Each reference in this Certificate of Designations to
authentication by the Transfer Agent includes authentication by such agent. An
authenticating agent has the same rights as the Transfer Agent or agent for
service of notices and demands.

 

29

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(c) Transfer and Exchange.

(i) Transfer and Exchange of Certificated Series A Preferred Stock. When
Certificated Series A Preferred Stock is presented to the Transfer Agent with a
request to register the transfer of such Certificated Series A Preferred Stock
or to exchange such Certificated Series A Preferred Stock for an equal number of
shares of Certificated Series A Preferred Stock, the Transfer Agent shall
register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided that the Certificated Series
A Preferred Stock surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Corporation and the Transfer Agent, duly executed by the holder thereof
or its attorney duly authorized in writing.

(ii) Restrictions on Transfer of Certificated Series A Preferred Stock for a
Beneficial Interest in Global Series A Preferred Stock. Certificated Series A
Preferred Stock may not be exchanged for a beneficial interest in Global Series
A Preferred Stock except upon satisfaction of the requirements set forth below.
Upon receipt by the Transfer Agent of Certificated Series A Preferred Stock,
duly endorsed or accompanied by appropriate instruments of transfer, in form
reasonably satisfactory to the Corporation and the Transfer Agent, together with
written instructions directing the Transfer Agent to make, or to direct DTC to
make, an adjustment on its books and records with respect to such Global Series
A Preferred Stock to reflect an increase in the number of shares of Series A
Preferred Stock represented by the Global Series A Preferred Stock, then the
Transfer Agent shall cancel such Certificated Series A Preferred Stock and
cause, or direct DTC to cause, in accordance with the standing instructions and
procedures existing between DTC and the Transfer Agent, the number of shares of
Series A Preferred Stock represented by the Global Series A Preferred Stock to
be increased accordingly. If no Global Series A Preferred Stock is then
outstanding, the Corporation shall issue and the Transfer Agent shall
authenticate, upon written order of the Corporation in the form of an Officers’
Certificate, a new Global Series A Preferred Stock representing the appropriate
number of shares.

(iii) Transfer and Exchange of Global Series A Preferred Stock. The transfer and
exchange of Global Series A Preferred Stock or beneficial interests therein
shall be effected through DTC, in accordance with this Certificate of
Designations (including applicable restrictions on transfer set forth herein, if
any) and the procedures of DTC therefor.

(iv) Transfer of a Beneficial Interest in Global Series A Preferred Stock for
Certificated Series A Preferred Stock.

(A) If at any time: (1) DTC notifies the Corporation that DTC is unwilling or
unable to continue as depository for the Global Series A Preferred Stock and a
successor depository for the Global Series A Preferred Stock is not appointed by
the Corporation within 90 days after delivery of such notice; or (2) DTC ceases
to be a clearing agency registered under the Exchange Act and a successor
depository for the Global Series A Preferred Stock is not appointed by

 

30

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the Corporation within 90 days, then the Corporation shall execute, and the
Transfer Agent, upon receipt of a written order of the Corporation signed by two
Officers of the Corporation requesting the authentication and delivery of
Certificated Series A Preferred Stock to the Persons designated by the
Corporation, shall authenticate and deliver Certificated Series A Preferred
Stock equal to the number of shares of Series A Preferred Stock represented by
the Global Series A Preferred Stock, in exchange for such Global Series A
Preferred Stock. Subject to the foregoing, the beneficial interests in a Global
Series A Preferred Stock shall not be exchangeable for Certificated Series A
Preferred Stock.

(B) Certificated Series A Preferred Stock issued in exchange for a beneficial
interest in a Global Series A Preferred Stock pursuant to this Section 13(c)(iv)
shall be registered in such names and in such authorized denominations as DTC,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Transfer Agent. The Transfer Agent shall deliver such
Certificated Series A Preferred Stock to the Persons in whose names such Series
A Preferred Stock are so registered in accordance with the instructions of DTC.

(v) Restrictions on Transfer of Global Series A Preferred Stock. Notwithstanding
any other provisions of this Certificate of Designations (other than the
provisions set forth in Section 13(c)(iv)), Global Series A Preferred Stock may
not be transferred as a whole except by DTC to a nominee of DTC or by a nominee
of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a
successor depository or a nominee of such successor depository.

(vi) Cancellation or Adjustment of Global Series A Preferred Stock. At such time
as all beneficial interests in Global Series A Preferred Stock have either been
exchanged for Certificated Series A Preferred Stock, converted or canceled, such
Global Series A Preferred Stock shall be returned to DTC for cancellation or
retained and canceled by the Transfer Agent. At any time prior to such
cancellation, if any beneficial interest in Global Series A Preferred Stock is
exchanged for Certificated Series A Preferred Stock, converted or canceled, the
number of shares of Series A Preferred Stock represented by such Global Series A
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Series A Preferred
Stock, by the Transfer Agent or DTC, to reflect such reduction.

(vii) Obligations with Respect to Transfers and Exchanges of Series A Preferred
Stock.

(A) To permit registrations of transfers and exchanges, the Corporation shall
execute and the Transfer Agent shall authenticate Certificated Series A
Preferred Stock and Global Series A Preferred Stock as required pursuant to the
provisions of this Section 13(c).

 

31

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(B) All Certificated Series A Preferred Stock and Global Series A Preferred
Stock issued upon any registration of transfer or exchange of Certificated
Series A Preferred Stock or Global Series A Preferred Stock shall be the valid
Capital Stock of the Corporation, entitled to the same benefits under this
Certificate of Designations as the Certificated Series A Preferred Stock or
Global Series A Preferred Stock surrendered upon such registration of transfer
or exchange.

(C) Prior to due presentment for registration or transfer of any shares of
Series A Preferred Stock, the Transfer Agent and the Corporation may deem and
treat the Person in whose name such shares of Series A Preferred Stock are
registered as the absolute owner of such Series A Preferred Stock and neither
the Transfer Agent nor the Corporation shall be affected by notice to the
contrary.

(D) No service charge shall be made to a Holder for any registration of transfer
or exchange upon surrender of any Series A Preferred Stock certificate or Common
Stock certificate at the office of the Transfer Agent maintained for that
purpose. However, except as otherwise set forth herein, the Corporation may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Series A Preferred Stock certificates or Common Stock certificates.

(viii) No Obligation of the Transfer Agent.

(A) The Transfer Agent shall have no responsibility or obligation to any
beneficial owner of Global Series A Preferred Stock, any Agent Member or any
other Person with respect to the accuracy of the records of DTC or its nominee
or of any participant or member thereof, with respect to any ownership interest
in the Series A Preferred Stock or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than DTC) of any
notice or the payment of any amount, under or with respect to such Global Series
A Preferred Stock. All notices and communications to be given to the Holders and
all payments to be made to such Holders under this Certificate of Designations
shall be given or made only to the Holders (which shall be DTC or its nominee in
the case of the Global Series A Preferred Stock). The rights of beneficial
owners in any Global Series A Preferred Stock shall be exercised only through
DTC subject to the applicable rules and procedures of DTC. The Transfer Agent
may rely and shall be fully protected in relying upon information furnished by
DTC with respect to its Agent Members and any beneficial owners.

(B) The Transfer Agent shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Certificate of Designations or under applicable law with respect to any transfer
of any interest in any Series A Preferred Stock (including any transfers between
or among DTC participants, members or beneficial owners in any Global Series A
Preferred Stock) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and

 

32

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when expressly required by, the terms of this Certificate of Designations, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.

(d) Replacement Certificates. If any of the Series A Preferred Stock
certificates shall be mutilated, lost, stolen or destroyed, the Corporation
shall issue, in exchange and in substitution for and upon cancellation of the
mutilated Series A Preferred Stock certificate, or in lieu of and substitution
for the Series A Preferred Stock certificate lost, stolen or destroyed, a new
Series A Preferred Stock certificate of like tenor and representing an
equivalent number of shares of Series A Preferred Stock, but only upon receipt
of evidence of such loss, theft or destruction of such Series A Preferred Stock
certificate and indemnity, if requested, satisfactory to the Corporation and the
Transfer Agent.

(e) Temporary Certificates. Until definitive Series A Preferred Stock
certificates are ready for delivery, the Corporation may prepare and the
Transfer Agent shall authenticate temporary Series A Preferred Stock
certificates. Any temporary Series A Preferred Stock certificates shall be
substantially in the form of definitive Series A Preferred Stock certificates
but may have variations that the Corporation considers appropriate for temporary
Series A Preferred Stock certificates. Without unreasonable delay, the
Corporation shall prepare and the Transfer Agent shall authenticate definitive
Series A Preferred Stock certificates and deliver them in exchange for temporary
Series A Preferred Stock certificates.

(f) Cancellation. In the event the Corporation shall purchase or otherwise
acquire Certificated Series A Preferred Stock, the same shall thereupon be
delivered to the Transfer Agent for cancellation.

(i) At such time as all beneficial interests in Global Series A Preferred Stock
have either been exchanged for Certificated Series A Preferred Stock, converted,
repurchased or canceled, such Global Series A Preferred Stock shall thereupon be
delivered to the Transfer Agent for cancellation.

(ii) The Transfer Agent and no one else shall cancel and destroy all Series A
Preferred Stock certificates surrendered for transfer, exchange, replacement or
cancellation and deliver a certificate of such destruction to the Corporation
unless the Corporation directs the Transfer Agent to deliver canceled Series A
Preferred Stock certificates to the Corporation. The Corporation may not issue
new Series A Preferred Stock certificates to replace Series A Preferred Stock
certificates to the extent they evidence Series A Preferred Stock which the
Corporation has purchased or otherwise acquired.

14. Other Provisions.

(a) With respect to any notice to a Holder required to be provided hereunder,
neither failure to send such notice, nor any defect therein or in the sending
thereof, to any particular Holder shall affect the sufficiency of the notice or
the validity of the proceedings referred to in such notice with respect to the
other Holders or affect the legality or validity of any distribution, rights,
warrant, reclassification, consolidation, merger, conveyance, transfer,
dissolution,

 

33

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liquidation or winding-up, or the vote upon any such action. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the Holder receives the notice.

(b) Shares of Series A Preferred Stock that have been issued and reacquired in
any manner, including shares of Series A Preferred Stock that are purchased or
exchanged or converted, shall (upon compliance with any applicable provisions of
the laws of Delaware) have the status of authorized but unissued shares of
Preferred Stock of the Corporation undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of Preferred Stock of the Corporation; provided that any issuance
of such shares as Series A Preferred Stock must be in compliance with the terms
hereof.

(c) All notice periods referred to herein shall commence on the date of the
mailing of the applicable notice. Notice to any Holder shall be given to the
registered address set forth in the Corporation’s records for such Holder, or
for Global Series A Preferred Stock, to the Depository in accordance with its
procedures.

(d) Any payment required to be made hereunder on any day that is not a Business
Day shall be made on the next succeeding Business Day and no interest or
dividends on such payment will accrue or accumulate, as the case may be, in
respect of such delay.

(e) Holders of shares of Series A Preferred Stock shall not be entitled to any
preemptive rights to acquire additional Capital Stock of the Corporation.

[The Remainder of this Page Intentionally Left Blank]

 

34

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IN WITNESS WHEREOF, the undersigned has caused this Certificate of Designations
to be duly executed this [●] day of [●], 20[●].

 

KLR ENERGY ACQUISITION CORP. By:  

 

  Name:   Title:

[Signature Page to Certificate of Designations of KLR Energy Acquisition Corp.]

--------------------------------------------------------------------------------

EXHIBIT A

FORM OF CERTIFICATED SERIES A PREFERRED STOCK CERTIFICATE

FACE OF SECURITY

[INSERT 144A LEGEND]

[THIS GLOBAL CERTIFICATE IS HELD BY THE DEPOSITORY TRUST COMPANY (55 WATER
STREET, NEW YORK, NEW YORK) (“DTC”) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (1) THIS GLOBAL CERTIFICATE MAY BE DELIVERED TO THE
TRANSFER AGENT FOR CANCELLATION PURSUANT TO SECTION 13 OF THE CERTIFICATE OF
DESIGNATIONS AND (2) THIS GLOBAL CERTIFICATE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY IN ACCORDANCE WITH THE CERTIFICATE OF DESIGNATIONS.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SERIES A PREFERRED
STOCK IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DTC TO THE CORPORATION OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]2

 

2 Insert if a global security

 

Exhibit A-1

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Certificate Number [            ]    Number of Shares of    Series A Preferred
Stock [            ]    CUSIP No.: [●]    ISIN No.: [●]

8.000% Series A Cumulative Perpetual Convertible Preferred Stock

of

KLR Energy Acquisition Corp.

KLR ENERGY ACQUISITION CORP., a Delaware corporation (the “Corporation”) hereby
certifies that [            ] (the “Holder”) is the registered owner of
[            ] fully paid and non-assessable shares of preferred stock, par
value $0.0001 per share, of the Corporation, designated as the 8.000% Series A
Cumulative Perpetual Convertible Preferred Stock (the “Series A Preferred
Stock”). The shares of Series A Preferred Stock are transferrable on the books
and records of the Transfer Agent, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designations, rights, privileges, restrictions, preferences and
other terms and provisions of the Series A Preferred Stock represented hereby
are as specified in, and the shares of the Series A Preferred Stock are issued
and shall in all respects be subject to the provisions of, the Certificate of
Designations dated [●], 201[●], as the same may be amended from time to time
(the “Certificate of Designations”). Capitalized terms used but not defined
herein shall have the meaning given to them in the Certificate of Designations.
The Corporation will provide a copy of the Certificate of Designations to a
Holder without charge upon written request to the Corporation at its principal
place of business.

Reference is hereby made to the Certificate of Designations, which shall for all
purposes have the same effect as if set forth at this place.

Upon receipt of this certificate, the Holder is bound by the Certificate of
Designations and is entitled to the benefits thereunder.

Unless the Transfer Agent’s Certificate of Authentication hereon has been
properly executed, these shares of Series A Preferred Stock shall not be
entitled to any benefit under the Certificate of Designations or be valid for
any purpose.

IN WITNESS WHEREOF, the Corporation has executed this certificate this [    ]
day of [                ], 20[    ]

 

KLR ENERGY ACQUISITION CORP. By:  

 

Name:  

 

Title:  

 

By:  

 

Name:  

 

Title:  

 

 

Exhibit A-2

--------------------------------------------------------------------------------

TRANSFER AGENT’S CERTIFICATE OF AUTHENTICATION

These are shares of Series A Preferred Stock referred to in the within-mentioned
Certificate of Designations.

 

Dated:  

 

 

CONTINENTAL STOCK TRANSFER & TRUST COMPANY By:  

 

  Authorized Signatory

 

Exhibit A-3

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REVERSE OF SECURITY

The Corporation will furnish without charge and upon written request to each
Holder the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock and the qualifications,
limitations or restrictions of such preferences and/or rights. Requests may be
made to:

KLR Energy Acquisition Corp.

[Address]

[City, State, Zip]

Attention: [●]

 

Exhibit A-4

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ASSIGNMENT

To assign this Series A Preferred Stock certificate, fill in the form below:

FOR VALUE RECEIVED, the undersigned hereby assigns and transfer the shares of
Series A Preferred Stock evidenced hereby to:

(Insert assignee’s legal name)

(Insert assignee’s social security or tax identification number)

(Insert assignee’s name, address and zip code)

and irrevocably appoints:

as agent to transfer the shares of Series A Preferred Stock evidenced hereby on
the books of the Transfer Agent. The agent may substitute another to act for him
or her.

 

Dated:  

 

 

Your Signature:  

 

(Sign exactly as your name appears on the face of this certificate)

 

Signature Guarantee:3  

 

 

3 Signature must be guaranteed by an “eligible guarantor institution” that is a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Transfer Agent, which requirements include membership or
participation in the Securities Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Transfer
Agent in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

Exhibit A-5

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EXHIBIT B

FORM OF NOTICE OF CONVERSION

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the Series A Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”) shares
of 8.000% Series A Cumulative Perpetual Convertible Preferred Stock (the “Series
A Preferred Stock”) of Resolute Energy Corporation (the “Corporation”),
represented by stock certificate No(s). [            ] (the “Preferred Stock
Certificates”), into shares of common stock, par value $0.0001 per share, of the
Corporation (“Common Stock”) according to the conditions of the Certificate of
Designations of the Series A Preferred Stock (the “Certificate of
Designations”). The Corporation will pay any documentary, stamp or similar issue
or tax on the issuance of shares of Common Stock upon conversion of the Series A
Preferred Stock, unless the tax is due because the undersigned requests such
shares of Common Stock to be issued in a name other than the undersigned’s name,
in which case the undersigned will pay the tax. A copy of each Preferred Stock
Certificate is attached hereto (or evidence of loss, theft or destruction
thereof).

Capitalized terms used but not defined herein shall have the meaning given to
them in the Certificate of Designations.

Number of shares of Series A Preferred Stock to be converted:

Name(s) (with address(es)) in which the certificate(s) for any shares of Common
Stock are to be registered:4

 

Signature:  

 

Name of registered Holder:  

 

Fax No.:  

 

Telephone No.:  

 

 

4 The Corporation is not required to issue shares of Common Stock until you,
among other things, (a) if required, furnish appropriate endorsements and
transfer documents and (b) if required, pay funds equal to any dividend payable
on the next Dividend Payment Date to which you are not entitled.

 

Exhibit B-1

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EXHIBIT B

INVESTOR QUESTIONNAIRE

This Investor Questionnaire is to be completed by persons interested in
acquiring Acquired Securities and Additional Shares (collectively, the
“Securities”). The following information is needed in order to ensure compliance
with the requirements of the private placement exemptions from federal and state
securities registration provisions and to determine whether the undersigned is
an “accredited investor” within the meaning of Rule 501 of Regulation D
(“Regulation D”) under the Securities Act. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the undersigned’s
Subscription Agreement (the “Subscription Agreement”) to which this Investor
Questionnaire relates. The undersigned understands that the information
contained herein will be relied upon by the Company and its counsel for purposes
of such determination.

The undersigned hereby represents and warrants that he, she or it is an
“accredited investor,” within the meaning of Rule 501(a) of Regulation D, based
upon the fact that he, she or it meets at least one of the following
requirements (check all that apply):

SECTION I: INDIVIDUALS

 

1. I am a natural person whose individual net worth, or joint net worth with my
spouse, exceeds $1,000,000.1

Yes ☐ No ☐ (Please check either yes or no)

 

2. I am a natural person who had individual income exceeding $200,000 in each of
the last two calendar years and I have a reasonable expectation of reaching the
same income level in the current calendar year.2

Yes ☐ No ☐ (Please check either yes or no)

 

3. I am a natural person who had joint income with my spouse exceeding $300,000
in each of the last two calendar years and I have a reasonable expectation of
reaching the same income level in the current calendar year, as defined above.

Yes ☐ No ☐ (Please check either yes or no)

 

1  For purposes of this item, “net worth” means the excess of total assets at
fair market value (including personal and real property, but excluding the
estimated fair market value of a person’s primary home) over total liabilities.
Total liabilities excludes any mortgage on the primary home in an amount of up
to the home’s estimated fair market value as long as the mortgage was incurred
more than 60 days before the Securities are purchased, but includes (i) any
mortgage amount in excess of the home’s fair market value and (ii) any mortgage
amount that was borrowed during the 60-day period before the closing date for
the sale of Securities for the purpose of investing in the Securities.

2  For purposes of this item, “income” means annual adjusted gross income, as
reported for federal income tax purposes, plus (i) the amount of any tax-exempt
interest income received; (ii) the amount of losses claimed as a limited partner
in a limited partnership; (iii) any deduction claimed for depletion;
(iv) amounts contributed to an IRA or Keogh retirement plan; (v) alimony paid;
and (vi) any amount by which income from long-term capital gains has been
reduced in arriving at adjusted gross income pursuant to the provisions of
Section 1202 of the Internal Revenue Code of 1986, as amended.

 

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4. I am a director, executive officer or general partner of the Company, or a
director, executive officer or general partner of a general partner of the
Company.3

Yes ☐ No ☐ (Please check either yes or no)

 

5. I have such knowledge and experience in financial and business matters that I
am capable of evaluating the merits and risks of investing in the Securities.

Yes ☐ No ☐ (Please check either yes or no).

 

6. In addition, please provide the following information:

 

  (a) Your name:                                          
                                   

 

  (b) The state in which you currently reside:                                 

 

  (c) Social Security Number:                                          
               

SECTION II: ENTITIES AND TRUSTS

 

7. The undersigned is an institutional investor of one or more of the following
types. Please check the appropriate description which applies to you.

 

               A bank as defined in Section 3(a)(2) of the Securities Act or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary
capacity.                A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934, as amended. An insurance company as defined
in Section 2(13) of the Act.                An investment company registered
under the Investment Company Act of 1940, as amended (the “1940 Act”).
               A business development company as defined in Section 2(a)(48) of
the 1940 Act.                A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended.                A plan established
and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of its
employees, with total assets in excess of $5,000,000.

 

3  For purposes of this item, executive officer means the president; any vice
president in charge of a principal business unit, division or function, such as
sales, administration or finance; or any other person or persons who perform(s)
similar policymaking functions for the Company.

 

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               An employee benefit plan within the meaning of the Employment
Retirement Income Security Act of 1974 (“ERISA”), and either (i) the investment
decision with respect to this subscription is to be made by a plan fiduciary, as
defined in Section 3 (21) of ERISA, which is either a bank, savings and loan
association, an insurance company, or a registered investment adviser, or (ii)
the employee benefit plan has total assets in excess of $5,000,000, or (iii) if
a self-directed plan, investment decisions are made solely by “accredited
investors” within the meaning of U.S. federal securities laws.                A
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940, as amended.                A corporation,
Massachusetts or similar business trust, or partnership, or an organization
described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended,
that was not formed for the specific purpose of acquiring the Securities, and
that has total assets in excess of $5,000,000.                A trust, with
total assets in excess of $5,000,000, not formed for the specific purpose of
acquiring the Securities, which acquisition is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of Regulation D promulgated under the
Securities Act.                A trust, which has total assets equal to or less
than $5,000,000 and any investment decisions are made by a “bank” or “savings
and loan association,” as defined in the Securities Act, acting in a fiduciary
capacity as trustee thereunder.                A revocable trust, which may be
amended or revoked at any time by the grantors thereof, and all of the grantors
are “accredited investors” as described herein.                An entity not
formed for the specific purpose of acquiring the Securities and has total assets
of at least $5,000,000.                An entity (other than trust) in which all
of the equity owners are “accredited investors,” as that term is defined in Rule
501 (a) under Regulation D of the Securities Act, and as described in this
questionnaire. The Company may, in its sole discretion, request information
regarding the basis on which such equity owners are accredited.

 

8. In addition, please provide the following information:

 

  (a) Name of Entity:                                          
                       

 

  (b) State of Formation:                                          
                                            

 

 

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  (c) Primary Place of Business:4                                          
                               

 

  (d) Tax I.D. Number:                                          
                                       

SECTION III: ADDITIONAL REPRESENTATIONS AND WARRANTIES, UNDERSTANDINGS, RISK
ACKNOWLEDGMENTS, AND COVENANTS

 

9. The undersigned is acquiring the Securities for its own account, not as a
nominee or agent, for investment purposes and not with a view towards
distribution or resale within the meaning of the Securities Act (absent the
registration of the Securities for resale under the Securities Act or a valid
exemption from registration). The undersigned will not sell, assign or transfer
such securities at any time in violation of the Securities Act or applicable
state securities laws. The undersigned acknowledges that the Securities cannot
be sold unless subsequently registered under the Securities Act and applicable
state securities laws or an exemption from such registration is available.

 

10. The undersigned acknowledges that any certificates issued representing the
Preferred Stock, the Warrants and the Additional Shares sold pursuant to the
Subscription Agreement will be imprinted with a legend in substantially the
following forms, respectively:

“THE SERIES A CONVERTIBLE PREFERRED STOCK EVIDENCED HEREBY AND THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SHARES OF SERIES A CONVERTIBLE
PREFERRED STOCK, IF ANY, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NONE OF THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
OR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK, IF ANY, AND ANY INTEREST OR PARTICIPATION
THEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR
(2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE
SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT
FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

“THE WARRANTS EVIDENCED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF SUCH WARRANTS, IF ANY, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NONE OF THE WARRANTS OR THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF SUCH WARRANTS, IF ANY, AND ANY INTEREST OR
PARTICIPATION THEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE
SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT
FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

 

4  Please provide the address of your principal place of business (or, if there
is more than one place of business, the chief executive office). With respect to
each natural person trustee of a signatory that is a trust, please provide the
address of your primary residence and place of business (or, if there is more
than one place of business, the chief executive office). With respect to each
signatory that is a trust with an entity trustee, please provide the information
requested of an entity.

 

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“THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. THE COMMON STOCK MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE
SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE
OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

 

11. The undersigned has knowledge, skill and experience in financial, business
and investment matters relating to an investment of this type and is capable of
evaluating the merits and risks of such investment and protecting the
undersigned’s interest in connection with the acquisition of the Securities
pursuant to the Subscription Agreement. The undersigned understands that the
acquisition of the Securities is a speculative investment and involves
substantial risks and that the undersigned could lose the undersigned’s entire
investment. Further, the undersigned has (i) carefully read and considered the
risks identified in the Disclosure Documents (as defined below), (ii) been
provided a reasonable opportunity to ask questions of, and to receive answers
from, the officers and employees of the Company, and (iii) carefully considered
the risks related to the Transaction and its investment, and has taken full
cognizance of and understands all of the risks related to the Company, Tema, the
Transaction, the Securities and the transactions contemplated hereby and
thereby, including, without limitation, the acquisition of the Securities. The
undersigned has retained, at its own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal merits and
consequences of the foregoing, including, without limitation, acquiring and
owning the Securities. The undersigned has the ability to bear the economic
risks of the undersigned’s investment in the Company, including a complete loss
of the investment, and the undersigned has no need for liquidity in such
investment.

 

12. The undersigned has been furnished by the Company all information (or
provided access to all information) regarding the business and financial
condition of the Company, Tema, their expected plans for future business
activities, the attributes of the Securities and the merits and risks of an
investment in the Securities which the undersigned has requested or otherwise
needs to evaluate the investment in the Company. The undersigned is in receipt
of and has carefully read and understands the following items (collectively,
the “Disclosure Documents”):

 

  (a) the Registration Statement on Form S-1 filed by the Company with the
Commission on January 19, 2016, and all amendments thereto, and the definitive
prospectus filed by the Company with the Commission on March 11, 2016 (the
“Prospectus”);

 

  (b) each filing made by the Company with the Commission since the filing of
the Prospectus;

 

  (c) the Business Combination Agreement (including all schedules, exhibits and
annexes thereto), which the undersigned has received in draft form; and

 

  (d) the December 2016 Investor Presentation.

The undersigned understands the significant extent to which certain of the
disclosures contained in items (a) through (d) above shall no longer apply
following the respective dates of such disclosures and/or following the
acquisition of Tema by the Company in accordance with the Business Combination
Agreement. The undersigned acknowledges that the Business Combination Agreement
is subject to change without notice and that the undersigned has no rights to
object to, nor will the undersigned be entitled to

 

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consent to, any proposed changes to the Business Combination Agreement. The
undersigned acknowledges that, except as expressly set forth in the Subscription
Agreement, neither the Company, nor Tema, nor any of their respective
affiliates, advisors or representatives has made or makes any representation or
warranty to the undersigned in respect of the Company, Tema, the Transaction, or
the transactions contemplated hereby and thereby, including, without limitation,
with respect to (i) the Company’s, Tema’s, or any of their subsidiaries’
businesses, operations, assets, liabilities, condition (financial or otherwise)
or prospects or any other matter relating to them or (ii) the accuracy or
completeness of any documentation, forecasts, projections, estimates or other
information provided by the Company, Tema, or any of their respective
affiliates, advisors or representatives.

 

13. In making its investment decision to acquire the Securities, the undersigned
is relying solely on investigations made by itself and the undersigned’s
representatives. The offer to sell the Securities was communicated to the
undersigned in such a manner that the undersigned was able to ask questions of
and receive answers from the management of the Company and Tema concerning the
terms and conditions of the proposed transaction and that at no time was the
undersigned presented with or solicited by or through any advertisement,
article, leaflet, public promotional meeting, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting or any other form of
general or public advertising or solicitation.

 

14. The undersigned agrees to furnish the Company with such other information as
the Company may reasonably request in order to verify the accuracy of the
information contained herein and agrees to notify the Company as soon as
reasonably practical of any material change in the information provided herein
that occurs prior to the acceptance of the undersigned’s subscription pursuant
to the Subscription Agreement.

 

15. The undersigned has adequate means of providing for the undersigned’s
current financial needs and contingencies, is able to bear the substantial
economic risks of an investment in the Securities for an indefinite period of
time, has no need for liquidity in such investment, at the present time, could
afford a complete loss of such investment and, if the undersigned is a natural
person, the undersigned has reached the age of majority in the state in which
the undersigned resides.

 

16. If the undersigned is a partnership, corporation, trust, estate or other
entity (an “Entity”): (i) such Entity has the full legal right and power and all
authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, the Subscription Agreement and all other instruments
executed and delivered by or on behalf of such Entity in connection with the
acquisition of the Securities, (b) to delegate authority pursuant to power of
attorney and (c) to acquire and hold such Securities; (ii) the signature of the
party signing on behalf of such Entity is binding upon such Entity; and
(iii) such Entity has not been formed for the specific purpose of acquiring such
Securities, unless each beneficial owner of such entity is a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act,
is qualified as an accredited investor within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act and has submitted information
substantiating such individual qualification.

 

17. The Subscription Agreement has been duly authorized, executed and delivered
by the undersigned and constitutes a legal, valid and binding obligation of the
undersigned enforceable against the undersigned in accordance with its terms,
except as such enforceability may be limited: (i) by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws in effect that
limit creditors’ rights generally; (ii) by equitable limitations on the
availability of specific remedies; (iii) by principles of equity (regardless of
whether such enforcement is considered in a proceeding in law or in equity); and
(iv) to the extent rights to indemnification and contribution may be limited by
federal securities laws or the public policy underlying such laws.

 

18.

Subscriber understands that the Securities are being offered in a transaction
not involving any public offering within the meaning of the Securities Act and
that the Securities have not been registered under the Securities Act.
Subscriber understands that the Securities, and any Conversion Shares or Warrant
Exercise Shares, may not be resold, transferred, pledged or otherwise disposed
of by Subscriber absent an effective registration statement under the Securities
Act, except (i) to the Company or a subsidiary thereof, (ii) to

 

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  non-U.S. persons pursuant to offers and sales that occur outside the United
States within the meaning of Regulation S under the Securities Act or
(iii) pursuant to another applicable exemption from the registration
requirements of the Securities Act, and, in each of cases (i) and (iii), in
accordance with any applicable securities laws of the states and other
jurisdictions of the United States, and that any certificates representing the
Securities shall contain a legend to such effect. Subscriber acknowledges that
the Securities, and any Conversion Shares or Warrant Exercise Shares, will not
be eligible for resale pursuant to Rule 144A promulgated under the Securities
Act. Subscriber understands and agrees that the Acquired Securities, and any
Conversion Shares or Warrant Exercise Shares, will be subject to transfer
restrictions and, as a result of these transfer restrictions, Subscriber may not
be able to readily resell the Securities, Conversion Shares or Warrant Exercise
Shares and may be required to bear the financial risk of an investment in the
Securities, Conversion Shares or Warrant Exercise Shares for an indefinite
period of time. Subscriber understands that it has been advised to consult legal
counsel prior to making any offer, resale, pledge or transfer of any of the
Securities, Conversion Shares or Warrant Exercise Shares.

 

19. Subscriber understands and agrees that Subscriber is purchasing the Acquired
Securities directly from the Company. Subscriber further acknowledges that there
have been no representations, warranties, covenants and agreements made to
Subscriber by the Company, Tema or any of their respective officers or
directors, expressly or by implication, other than those representations,
warranties, covenants and agreements of the Company included in this
Subscription Agreement.

 

20. Subscriber represents and warrants that its acquisition and holding of the
Securities will not constitute or result in a non-exempt prohibited transaction
under Section 406 of ERISA, Section 4975 of the Internal Revenue Code of 1986,
as amended, or any applicable similar law.

 

21. Subscriber understands and agrees that no federal or state agency has passed
upon or endorsed the merits of the offering of the Securities or made any
findings or determination as to the fairness of this investment.

 

22. Subscriber represents and warrants that Subscriber is not (i) a person or
entity named on the List of Specially Designated Nationals and Blocked Persons
administered by the U.S. Treasury Department’s Office of Foreign Assets Control
(“OFAC”) or in any Executive Order issued by the President of the United States
and administered by OFAC (“OFAC List”), or a person or entity prohibited by any
OFAC sanctions program, (ii) a Designated National as defined in the Cuban
Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank
or providing banking services indirectly to a non-U.S. shell bank (collectively,
a “Prohibited Investor”). Subscriber agrees to provide law enforcement agencies,
if requested thereby, such records as required by applicable law, provided that
Subscriber is permitted to do so under applicable law. Subscriber represents
that if it is a financial institution subject to the Bank Secrecy Act (31 U.S.C.
Section 5311 et seq.) (the “BSA”), as amended by the USA PATRIOT Act of 2001
(the “PATRIOT Act”), and its implementing regulations (collectively, the
“BSA/PATRIOT Act”), that Subscriber maintains policies and procedures reasonably
designed to comply with applicable obligations under the BSA/PATRIOT Act.
Subscriber also represents that, to the extent required, it maintains policies
and procedures reasonably designed for the screening of its investors against
the OFAC sanctions programs, including the OFAC List. Subscriber further
represents and warrants that, to the extent required, it maintains policies and
procedures reasonably designed to ensure that the funds held by Subscriber and
used to purchase the Securities were legally derived.

 

23. The undersigned understands and confirms that the Company will rely on the
representations and covenants contained herein, including that the undersigned
has carefully read and considered the risks identified in the Disclosure
Documents, in effecting the transactions contemplated by the Subscription
Agreement and the Business Combination Agreement. All representations and
warranties provided to the Company furnished by or on behalf of the undersigned,
taken as a whole, are true and correct and do not contain any untrue statement
of material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.

 

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24. Neither the undersigned nor, to the extent it has them, any of its
stockholders, members, managers, general or limited partners, directors,
affiliates or executive officers (collectively with the undersigned, the
“Subscriber Covered Persons”), are subject to any of the “Bad Actor”
disqualifications described in Rule 506(d) under the Securities Act
(a “Disqualification Event”), except for a Disqualification Event exempted by
Rule 506(d)(2) or (d)(3). The undersigned has exercised reasonable care to
determine whether any Subscriber Covered Person is subject to a Disqualification
Event. The acquisition of the Securities by the undersigned will not subject the
Company to any Disqualification Event.

(Signature Page Follows)

 

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Signature Page

By signing below, you as the undersigned are representing to the Company that
(a) the information you have provided and the representations set forth in this
Investor Questionnaire is complete and accurate on the date set forth below and
that the Company may rely upon such information, and (b) you will notify the
Company immediately of any material change in any of such information that
occurs prior to the issuance to you of the Securities.

 

Full Legal Name of the Investor:  

 

 

 

     

 

Signature of Proposed Investor       Signature of Proposed Co-Investor or person
signing on its behalf       or person signing on its behalf       (required if
any Securities will be jointly held) Dated:
                                         
                           ,                            Dated:
                                         
                       ,                     

 

     

 

Print name and title of the signatory (if any)       Print name and title of the
signatory (if any)

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EXHIBIT C

FORM W-9

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