Execution Version

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES D CONVERTIBLE
PREFERRED STOCK OF GOOD GAMING, INC.

 

I, David Dorwart, hereby certify that I am the Chief Executive Officer of Good
Gaming, Inc. (the “Company”), a corporation organized and existing under the
Nevada Revised Statutes (the “NRS”), and further do hereby certify:

 

That, pursuant to the authority expressly conferred upon the Board of Directors
of the Company (the “Board”) by the Company’s Articles of Incorporation, as
amended (the “Articles of Incorporation”), the Board on October 5, 2017, adopted
the following resolutions creating a series of shares of preferred stock
designated as Series D Convertible Preferred Stock, none of which shares have
been issued:

 

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

 

TERMS OF SERIES D CONVERTIBLE PREFERRED STOCK

 

1. Designation and Number of Shares. There shall hereby be created and
established a series of preferred stock of the Company designated as “Series D
Convertible Preferred Stock” (the “Preferred Shares”). The authorized number of
Preferred Shares shall be 350 shares. Each Preferred Share shall have a par
value of $0.001. Capitalized terms not defined herein shall have the meanings as
set forth in Section 23 below.

 

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

 

3. Dividends.

 

(a) From and after the date of issuance of each share of Preferred Shares (the
“Initial Issuance Date”), each holder of a Preferred Share (each, a “Holder” and
collectively, the “Holders”) shall be entitled to receive dividends (the
“Dividends”), which Dividends shall be paid by the Company out of funds legally
available therefor, payable, subject to the conditions and other terms hereof,
in shares of Common Stock or cash on the Stated Value (as defined below) of such
Preferred Share at the Dividend Rate (as defined below), which shall be
cumulative and shall continue to accrue whether or not declared and whether or
not in any fiscal year there shall be net profits or surplus available for the
payment of dividends in such fiscal year. Dividends on the Preferred Shares
shall commence accumulating on the Initial Issuance Date and shall be computed
on the basis of a 365-day year and actual days elapsed. Subject to Section 4(c),
Dividends shall be payable quarterly, at the Holder’s option, in cash or shares
of Common Stock, with the first (1st) Dividend Date being December 31, 2017
(each, a “Dividend Date”). If a Dividend Date is not a Business Day (as defined
below), then the Dividend shall be due and payable on the Business Day
immediately following such Dividend Date. Additionally, after the first Dividend
Date, the Holder may request the payment of any accrued Dividends on any
Conversion Date or the date of any Installment Redemption Payment (each, an
“Optional Dividend Date”).

 

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

 

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

 

(d) In the event that a Holder requests the payment of Dividends on any Optional
Dividend Date, such Dividends shall be payable in accordance with mechanisms set
forth in Sections 4(c)(i)-(ii) and Section 5(b), as applicable. The Dividends
shall be paid, at the Holder’s option in cash, in Dividend Shares, or any
combination of cash and Dividend Shares, so long as there has been no Equity
Conditions Failure and so long as the delivery of Dividend Shares would not
violate the provisions of Section 4(e). Dividends to be paid to such Holder on
an Optional Dividend Date in Dividend Shares shall be paid in a number of fully
paid and non-assessable shares (rounded to the nearest whole share) of Common
Stock equal to the quotient of (1) the amount of Dividends payable to such
Holder on such Optional Dividend Date less any Dividends paid in cash and (2)
the Conversion Price in effect on the applicable Optional Dividend Date.

 

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

 

(a) Holder’s Conversion Right. Subject to the provisions of Section 4(e) and
Section 5, at any time or times after the date (the “Initial Conversion Date”)
that is six (6) months after the Initial Issuance Date, each Holder shall be
entitled to convert any whole number of Preferred Shares and any accrued but
unpaid Dividends into validly issued, fully paid and non-assessable shares of
Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined
below); provided, however, the maximum number of Preferred Shares that may be
converted by such Holder during the twenty (20) Trading Day period following the
Initial Conversion Date and every twenty (20) Trading Day period thereafter
(each a “Monthly Conversion Period”) shall be no greater than that number of
Preferred Shares with an aggregate Stated Value equal to $35,000 (the “Maximum
Conversion Shares”) unless the Company and the Holder agree in writing to
increase the Maximum Conversion Shares for each respective Monthly Conversion
Period.

 

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(b) Conversion Rate. The number of validly issued, fully paid and non-assessable
shares of Common Stock issuable upon conversion (the “Conversion Shares”) of
each Preferred Share pursuant to Section 4(a) shall be determined according to
the following formula (the “Conversion Rate”):

 

(Conversion Amount x Conversion Premium)

Conversion Price

 

No fractional shares of Common Stock are to be issued upon the conversion of any
Preferred Shares. If the issuance would result in the issuance of a fraction of
a share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share.

 

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

 

(i) Holder’s Conversion. Subject to the provisions of Section 4(e) and Section
5, to convert Preferred Shares into validly issued, fully paid and
non-assessable shares of Common Stock on any date (a “Conversion Date”), a
Holder shall deliver (whether via facsimile or otherwise), for receipt on or
prior to 11:59 p.m., New York time, on such date, a copy of an executed notice
of conversion of Preferred Shares subject to such conversion in the form
attached hereto as Exhibit I (the “Conversion Notice”) to the Company, which
Conversion Notice shall be subject to an adjustment to the Conversion Price set
forth on such Conversion Notice upon the close of the Principal Market on the
Conversion Date. If required by Section 4(c)(vi), within three (3) Trading Days
following a conversion of any such Preferred Shares as aforesaid, such Holder
shall surrender to a nationally recognized overnight delivery service for
delivery to the Company the original certificates representing the share(s) of
Preferred Shares (the “Preferred Share Certificates”) so converted as aforesaid.

 

(ii) Company’s Response. On or before the first (1st) Trading Day following the
date of receipt of a Conversion Notice, the Company shall transmit by facsimile
or electronic mail an acknowledgment of confirmation, in the form attached
hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and
the Transfer Agent, which confirmation shall constitute an instruction to the
Transfer Agent to process such Conversion Notice in accordance with the terms
herein. On or before the second (2nd) Trading Day following the date of receipt
by the Company of such Conversion Notice, the Company shall (1) provided that
(x) the Transfer Agent is participating in DTC Fast Automated Securities
Transfer Program and (y) such Conversion Shares and Dividend Shares (as
applicable) to be so issued are eligible for resale pursuant to Rule 144 (as
defined in the Securities Purchase Agreement) credit such aggregate number of
Conversion Shares and Dividend Shares (as applicable) to which such Holder shall
be entitled to such Holder’s or its designee’s balance account with DTC through
its Deposit/Withdrawal at Custodian system, or (2) if either of the immediately
preceding clauses (x) or (y) are not satisfied, issue and deliver (via reputable
overnight courier) to the address as specified in such Conversion Notice, a
certificate, registered in the name of such Holder or its designee, for the
number of Conversion Shares and Dividend Shares (as applicable) to which such
Holder shall be entitled. If the number of Preferred Shares represented by the
Preferred Share Certificate(s) submitted for conversion pursuant to Section
4(c)(vi) is greater than the number of Preferred Shares being converted, then
the Company shall if requested by such Holder, as soon as practicable and in no
event later than three (3) Trading Days after receipt of the Preferred Share
Certificate(s) and at its own expense, issue and deliver to such Holder (or its
designee) a new Preferred Share Certificate representing the number of Preferred
Shares not converted.

 

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Execution Version

 

(iii) Record Holder. The Person or Persons entitled to receive the shares of
Common Stock issuable upon a conversion of Preferred Shares shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
the Conversion Date.

 

(iv) Company’s Failure to Timely Convert. If the Company shall fail, for any
reason or for no reason, to issue to a Holder within two (2) Trading Days after
the Company’s receipt of a Conversion Notice (whether via facsimile or
otherwise) (the “Share Delivery Deadline”), a certificate for the number of
shares of Common Stock to which such Holder is entitled and register such shares
of Common Stock on the Company’s share register or to credit such Holder’s or
its designee’s balance account with DTC for such number of shares of Common
Stock to which such Holder is entitled upon such Holder’s conversion of any
Preferred Shares (as the case may be) (a “Conversion Failure”), then, in
addition to all other remedies available to such Holder, such Holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned (as the case may be) any Preferred Shares that have
not been converted pursuant to such Holder’s Conversion Notice, provided that
the voiding of a Conversion Notice shall not affect the Company’s obligations to
make any payments which have accrued prior to the date of such notice pursuant
to the terms of this Certificate of Designations or otherwise. In addition to
the foregoing, if within two (2) Trading Days after the Company’s receipt of a
Conversion Notice (whether via facsimile or otherwise), the Company shall fail
to issue and deliver a certificate to such Holder and register such shares of
Common Stock on the Company’s share register or credit such Holder’s or its
designee’s balance account with DTC for the number of Conversion Shares and
Dividend Shares (as applicable) to which such Holder is entitled upon such
Holder’s conversion hereunder (as the case may be), and if on or after such
second (2nd) Trading Day such Holder (or any other Person in respect, or on
behalf, of such Holder) purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Holder of
all or any portion of the number of shares of Common Stock, or a sale of a
number of shares of Common Stock equal to all or any portion of the number of
shares of Common Stock, issuable upon such conversion that such Holder so
anticipated receiving from the Company, then, in addition to all other remedies
available to such Holder, the Company shall, within three (3) Business Days
after such Holder’s request, which request shall include reasonable
documentation of all fees, costs and expenses, and in such Holder’s discretion,
either (i) pay cash to such Holder in an amount equal to such Holder’s total
purchase price (including brokerage commissions and other out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (including,
without limitation, by any other Person in respect, or on behalf, of such
Holder) (the “Buy-In Price”), at which point the Company’s obligation to so
issue and deliver such certificate or credit such Holder’s balance account with
DTC for the number of shares of Common Stock to which such Holder is entitled
upon such Holder’s conversion hereunder (as the case may be) (and to issue such
shares of Common Stock) shall terminate, or (ii) promptly honor its obligation
to so issue and deliver to such Holder a certificate or certificates
representing such shares of Common Stock or credit such Holder’s balance account
with DTC for the number of shares of Common Stock to which such Holder is
entitled upon such Holder’s conversion hereunder (as the case may be) and pay
cash to such Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common Stock multiplied
by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day
during the period commencing on the date of the applicable Conversion Notice and
ending on the date of such issuance and payment under this clause (ii).
Immediately following the voiding of a Conversion Notice as aforesaid, the
Conversion Price of any Preferred Shares returned or retained by such Holder for
failure to timely convert shall be adjusted to the lesser of (I) the Conversion
Price relating to the voided Conversion Notice and (II) the lowest average VWAP
of the Common Stock during the period beginning on the Conversion Date and
ending on the date such Holder voided the Conversion Notice, subject to further
adjustment as provided in this Certificate of Designations.

 

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(v) Pro Rata Conversion; Disputes. In the event the Company receives a
Conversion Notice from more than one Holder for the same Conversion Date and the
Company can convert some, but not all, of such Preferred Shares submitted for
conversion, the Company shall convert from each Holder electing to have
Preferred Shares converted on such date a pro rata amount of such Holder’s
Preferred Shares submitted for conversion on such date based on the number of
Preferred Shares submitted for conversion on such date by such Holder relative
to the aggregate number of Preferred Shares submitted for conversion on such
date. In the event of a dispute as to the number of shares of Common Stock
issuable to a Holder in connection with a conversion of Preferred Shares, the
Company shall issue to such Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 22.

 

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(vi) Book-Entry. Notwithstanding anything to the contrary set forth in this
Section 4, upon conversion of any Preferred Shares in accordance with the terms
hereof, no Holder thereof shall be required to physically surrender the
certificate representing the Preferred Shares to the Company following
conversion thereof unless (A) the full or remaining number of Preferred Shares
represented by the certificate are being converted (in which event such
certificate(s) shall be delivered to the Company as contemplated by this Section
4(c)(vi)) or (B) such Holder has provided the Company with prior written notice
(which notice may be included in a Conversion Notice) requesting reissuance of
Preferred Shares upon physical surrender of any Preferred Shares. Each Holder
and the Company shall maintain records showing the number of Preferred Shares so
converted by such Holder and the dates of such conversions or shall use such
other method, reasonably satisfactory to such Holder and the Company, so as not
to require physical surrender of the certificate representing the Preferred
Shares upon each such conversion. In the event of any dispute or discrepancy,
such records of such Holder establishing the number of Preferred Shares to which
the record holder is entitled shall be controlling and determinative in the
absence of manifest error. A Holder and any transferee or assignee, by
acceptance of a certificate, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of any Preferred Shares, the
number of Preferred Shares represented by such certificate may be less than the
number of Preferred Shares stated on the face thereof. Each certificate for
Preferred Shares shall bear the following legend:

 

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

 

(d) Taxes. The Company shall pay any and all documentary, stamp, transfer (but
only in respect of the registered holder thereof), issuance and other similar
taxes that may be payable with respect to the issuance and delivery of shares of
Common Stock upon the conversion of Preferred Shares.

 

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(e) Limitation on Beneficial Ownership.

 

(i) Notwithstanding anything to the contrary contained in this Certificate of
Designations, the Preferred Shares held by a Holder shall not be convertible by
such Holder, and the Company shall not effect any conversion of any Preferred
Shares held by such Holder, to the extent (but only to the extent) that such
Holder or any of its affiliates would beneficially own in excess of 4.99% (the
“Maximum Percentage”) of the then issued and outstanding shares of Common Stock.
To the extent the above limitation applies, the determination of whether the
Preferred Shares held by such Holder shall be convertible (vis-à-vis other
convertible, exercisable or exchangeable securities owned by such Holder or any
of its affiliates) and of which such securities shall be convertible,
exercisable or exchangeable (as among all such securities owned by such Holder
and its affiliates) shall, subject to such Maximum Percentage limitation, be
determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability of a Holder to
convert Preferred Shares, or of the Company to issue shares of Common Stock to
such Holder, pursuant to this Section 4(e) shall have any effect on the
applicability of the provisions of this Section 4(e) with respect to any
subsequent determination of convertibility or issuance (as the case may be). For
purposes of this Section 4(e), beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the 1934 Act and the rules and regulations promulgated thereunder. The
provisions of this Section 4(e) shall be implemented in a manner otherwise in
strict conformity with the terms of this Section 4(e) to correct this Section
4(e) (or any portion hereof) which may be defective or inconsistent with the
intended Maximum Percentage beneficial ownership limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to
such Maximum Percentage limitation. The limitations contained in this Section
4(e) shall apply to a successor holder of Preferred Shares. The holders of
Common Stock shall be third party beneficiaries of this Section 4(e) and the
Company may not waive this Section 4(e) without the consent of holders of a
majority of its Common Stock. For any reason at any time, upon the written or
oral request of a Holder, the Company shall within one (1) Business Day confirm
orally and in writing to such Holder the number of shares of Common Stock then
outstanding, including by virtue of any prior conversion or exercise of
convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Certificate of Designations or securities issued
pursuant to the other Transaction Documents. By written notice to the Company,
any Holder may increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the 61st day after such notice is
delivered to the Company, and (ii) any such increase or decrease will apply only
to such Holder sending such notice and not to any other Holder.

 

Notwithstanding anything contained in this Section 4(e) to the contrary, the
Holder may, at its option and in its sole discretion, determine (A) whether the
Preferred Shares held by such Holder shall be convertible (vis-à-vis other
convertible, exercisable or exchangeable securities owned by such Holder or any
of its affiliates) and (B) of which such securities shall be convertible,
exercisable or exchangeable (as among all such securities owned by such Holder
and its affiliates) on any basis, order, or amounts for conversion, exercise or
exchange (as the case may be).

 

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(ii) Principal Market Regulation. Notwithstanding anything herein to the
contrary, the Company shall not issue any shares of Common Stock upon conversion
of any Preferred Shares or otherwise pursuant to this Certificate of
Designations, until the Company obtains the Stockholder Approval, to the extent
such Stockholder Approval is necessary for such issuance.

 

(f) Anti-Dilution. If, at any time while the Preferred Shares are outstanding,
the Company or any Subsidiary, as applicable, sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of or
issues (or announces any sale, grant or any option to purchase or other
disposition), any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock at or with a conversion formula that creates
an effective price per share that is lower than the then Conversion Price (such
lower price or conversion formula, the “Base Conversion Price” and such
issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share that is lower
than the Conversion Price, such issuance shall be deemed to have occurred for
less than the Conversion Price on such date of the Dilutive Issuance), then the
Conversion Price shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustment will be made under this
Section 4(f) in respect of an Exempt Issuance. The Company shall notify the
Holders in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this Section 4(f),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price, conversion formula and other pricing terms
(such notice, the “Dilutive Issuance Notice”). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this
Section 4(f), upon the occurrence of any Dilutive Issuance, the Holders will be
entitled to receive a number of Conversion Shares based upon the Base Conversion
Price on or after the date of such Dilutive Issuance, regardless of whether the
Holder accurately refers to the Base Conversion Price in the Notice of
Conversion.

 

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5. Optional and Triggered Redemption

 

(a) Company One-Time Redemption. In addition to the Company’s Monthly Redemption
right as set forth in Section 5(c), at any time before December 6, 2017 and
provided that no Equity Conditions Failure (as defined below) exists, the
Company shall have the right to redeem all, but not less than all, of the
Preferred Shares then outstanding, plus the then accrued and unpaid Dividends
(the “Company One-Time Redemption Amount”). The Preferred Shares subject to
redemption described herein shall be redeemed by the Company, in cash at a price
per Preferred Share (the “Company One-Time Redemption Price”) equal to (1) one
hundred and fifteen percent (115%) of the Stated Value, plus (2) all Additional
Amounts, plus (3) all Make-Whole Amounts, plus (4) any accrued and unpaid Late
Charges (as defined in Section 22(b)(ii)) with respect to such Stated Value as
of such date of determination. The Company may exercise its redemption option
under this Section 5(a) by delivering a written notice thereof by facsimile or
electronic mail to all, but not less than all, of the Holders (the “Company
One-Time Redemption Notice” and the date all of the Holders received such notice
is referred to as the “Company One-Time Redemption Notice Date”). The Company
may deliver only one Company One-Time Redemption Notice hereunder and such
Company One-Time Redemption Notice shall be irrevocable. The Company One-Time
Redemption Notice shall (x) state the date on which the Company One-Time
Redemption shall occur (the “Company One-Time Redemption Date”) which date shall
not be less than thirty (30) Trading Days nor more than forty-five (45) Trading
Days following the Company One-Time Redemption Notice Date, (y) certify that
there has been no Equity Conditions Failure and (z) state the aggregate Company
One-Time Redemption Amount of the Preferred Shares which is being redeemed in
such Company Optional Redemption from such Holder and all of the other Holders
of the Preferred Shares pursuant to this Section 5(a) on the Company Optional
Redemption Date. Notwithstanding anything herein to the contrary, (i) if no
Equity Conditions Failure has occurred as of the Company Optional Redemption
Notice Date but an Equity Conditions Failure occurs at any time prior to the
Company One-Time Redemption Date, (A) the Company shall provide each Holder a
subsequent notice to that effect and (B) unless such Holder waives the Equity
Conditions Failure, the Company One-Time Redemption with respect to such Holder
shall be cancelled and the applicable Company One-Time Redemption Notice shall
be null and void and (ii) at any time prior to the date the Company One-Time
Redemption Price is paid, in full, the Company One-Time Redemption Amount may be
converted, in whole or in part, by any Holder into shares of Common Stock
pursuant to Section 4. All Conversion Amounts converted by a Holder after the
Company One-Time Redemption Notice Date shall reduce the Company One-Time
Redemption Amount of the Preferred Shares of such Holder required to be redeemed
on the Company One-Time Redemption Date. Redemptions made pursuant to this
Section 5(a) shall be made in accordance with Section 5(d). In the event of the
Company’s redemption of any of the Preferred Shares under this Section 5(a), a
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for such Holder.
Accordingly, any redemption premium due under this Section 5(a) is intended by
the parties to be, and shall be deemed, a reasonable estimate of such Holder’s
actual loss of its investment opportunity and not as a penalty. For the
avoidance of doubt, the Company shall have no right to effect a Company One-Time
Redemption if any Triggering Event has occurred and is continuing, but any
Triggering Event shall have no effect upon any Holder’s right to convert
Preferred Shares in its discretion.

 

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Execution Version

 

(b) Triggering Event Redemptions.

 

(i) Triggering Event. Each of the following events shall constitute a
“Triggering Event” and each of the events in clauses (ix), (x) and (xi) shall
constitute a “Bankruptcy Triggering Event”:

 

a. any of the shares of Common Stock issuable upon conversion of the Preferred
Shares are not freely tradable without restriction by any of the Holders due to
a breach by the Company which remains uncured for a period of five (5)
consecutive Trading Days;

 

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

 

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

 

d. at any time following the fifth (5th) consecutive day that a Holder’s pro
rata Authorized Share Allocation (as defined in Section 9 below) is less than
300% of the number of shares of Common Stock that such Holder would be entitled
to receive upon a conversion in full of the Preferred Shares held by such Holder
(without regard to any limitations on conversion set forth in this Certificate
of Designations);

 

e. the Company’s Board of Directors fails to declare any Dividend to be paid on
the applicable Dividend Date in accordance with Section 3;

 

f. the Company’s failure to pay to any Holder any Dividend (whether or not
declared by the Board of Directors) or any other amount when and as due under
this Certificate of Designations (including, without limitation, the Company’s
failure to pay any redemption payments or amounts hereunder) or any other
Transaction Document or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated hereby (in
each case, as permitted pursuant to the NRS), except, in the case of a failure
to pay Dividends and Late Charges (as defined in Section 22(b)(ii)) when and as
due, in each such case only if such failure remains uncured for a period of at
least three (3) Trading Days;

 

g. the Company, on three or more occasions, either (A) fails to cure a
Conversion Failure by delivery of the required number of shares of Common Stock
within two (2) Trading Days after the applicable Conversion Date or (B) fails to
remove any restrictive legend on any certificate for any shares of Common Stock
issued to such Holder upon conversion of any Preferred Shares acquired by such
Holder as and when required with respect to such securities in accordance with
applicable federal securities laws, and any such failure remains uncured for at
least three (3) Trading Days;

 

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

 

i. bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for the relief of debtors shall be instituted by or against the
Company or any Subsidiary and, if instituted against the Company or any
Subsidiary by a third party, shall not be dismissed within thirty (30) days of
their initiation;

 

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

 

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

 

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Execution Version

 

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

 

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

 

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

 

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

 

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Execution Version

 

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

 

q. occurrence of any Material Adverse Effect;

 

r. the occurrence or continuance of an Event of Default under any Transaction
Document and such Event of Default has not been cured during the applicable cure
period; or

 

s. any Equity Condition Failure.

 

(ii) Notice of a Triggering Event; Redemption Right. Upon the occurrence of a
Triggering Event with respect to the Preferred Shares, the Company shall within
one (1) Business Day deliver written notice thereof via facsimile or electronic
mail (a “Triggering Event Notice”) to each Holder. At any time after the earlier
of a Holder’s receipt of a Triggering Event Notice and such Holder becoming
aware of a Triggering Event (such earlier date, the “Triggering Event Right
Commencement Date”) and ending (such ending date, the “Triggering Event Right
Expiration Date”, and each such period, a “Triggering Event Redemption Right
Period”) on the tenth (10th) Trading Day after the later of (x) the date such
Triggering Event is cured (notwithstanding, the Company shall only have five (5)
calendar days to cure any Equity Conditions Failure) and (y) such Holder’s
receipt of a Triggering Event Notice that includes (I) a reasonable description
of the applicable Triggering Event, (II) a certification as to whether, in the
opinion of the Company, such Triggering Event is capable of being cured and, if
applicable, a reasonable description of any existing plans of the Company to
cure such Triggering Event and (III) a certification as to the date the
Triggering Event occurred and, if cured on or prior to the date of such
Triggering Event Notice, the applicable Triggering Event Right Expiration Date,
such Holder may require the Company to redeem (regardless of whether such
Triggering Event has been cured on or prior to the Triggering Event Right
Expiration Date) all or any of the Preferred Shares held by such Holder by
delivering written notice thereof (the “Triggering Event Redemption Notice”) to
the Company, which Triggering Event Redemption Notice shall indicate the number
of the Preferred Shares such Holder is electing to redeem. Each of the Preferred
Shares subject to redemption by the Company pursuant to this Section 5(b) shall
be redeemed by the Company, at the Holder’s option, for shares of Common Stock
or cash at a price equal to the greater of (i) the product of (A) the Conversion
Amount to be redeemed multiplied by (B) one hundred thirty five percent (135%)
(the “Triggering Event Redemption Premium”) and (ii) the product of (X) the
Conversion Rate with respect to the Conversion Amount in effect at such time as
such Holder delivers a Triggering Event Redemption Notice multiplied by (Y) the
product of (1) the Trigger Event Redemption Premium multiplied by (2) the
greatest Closing Sale Price of the Common Stock on any Trading Day during the
period commencing on the date immediately preceding such Triggering Event and
ending on the date the Company makes the entire payment required to be made
under this Section 5(b) (the “Triggering Event Redemption Price”). In the event
that the Company elects to pay the Trigger Event Redemption Price in shares of
Common Stock, the Company shall issue the shares of Common Stock at a conversion
price equal to 40% of the average of the VWAPs for the fifteen (15) consecutive
Trading Days ending on the Trading Day that is immediately prior to the date
payment in connection with such Trigger Event (the “Triggering Event Redemption
Conversion Price”). For the avoidance of doubt, if Holders are requesting
redemptions at the Triggering Event Redemption Conversion Price due to an Equity
Conditions Failure, upon a cure of the Equity Conditions Failure, the Company
shall not be required to pay to the Holders the redemptions described in this
Section 5(b) in shares of Common Stock at the Triggering Event Conversion
Redemption Price. Triggering Redemptions required by this Section 5(b) shall be
made in accordance with the provisions of Section 5. To the extent redemptions
required by this Section 5(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Preferred Shares by the Company, such
redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 5(b), but subject to Section 4(e),
until the Triggering Event Redemption Price (together with any Late Charges (as
defined in Section 22(b)(ii)) thereon) is paid in full, the Conversion Amount
submitted for redemption under this Section 5(b) (together with any Late Charges
(as defined in Section 22(b)(ii)) thereon) may be converted, in whole or in
part, by such Holder into Common Stock pursuant to the terms of this Certificate
of Designations. In the event of the Company’s redemption of any of the
Preferred Shares under this Section 5(b), a Holder’s damages would be uncertain
and difficult to estimate because of the parties’ inability to predict future
interest rates and the uncertainty of the availability of a suitable substitute
investment opportunity for such Holder. Accordingly, any redemption premium due
under this Section 5(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of such Holder’s actual loss of its investment opportunity
and not as a penalty. Any redemption upon a Triggering Event shall not
constitute an election of remedies by the applicable Holder or any other Holder,
and all other rights and remedies of each Holder shall be preserved.

 

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Execution Version

 

(iii) Notwithstanding anything to the contrary contained in this Section 5(b),
upon a Trigger Event, each Holder shall have the option to redeem all of its
Preferred Shares in accordance with this Section 5(b). Additionally, following a
Triggering Event, interest shall accrue on the amount due to a Holder at a rate
of two percent (2%) per month until such Holder is paid in full. The Holder may
also require the Company to deposit all revenues that are due it into an account
at a bank or financial institution that is subject to a deposit account control
agreement in a form reasonably satisfactory to the Holder.

 

(iv) Mandatory Redemption upon Bankruptcy Triggering Event. Notwithstanding
anything to the contrary herein, and notwithstanding any conversion that is then
required or in process, upon any Bankruptcy Triggering Event, the Company shall
immediately redeem, in cash, each of the Preferred Shares then outstanding at a
redemption price equal to the applicable Triggering Event Redemption Price
(calculated as if such Holder shall have delivered the Triggering Event
Redemption Notice immediately prior to the occurrence of such Bankruptcy
Triggering Event), without the requirement for any notice or demand or other
action by any Holder or any other person or entity, provided that a Holder may,
in its sole discretion, waive such right to receive payment upon a Bankruptcy
Triggering Event, in whole or in part, and any such waiver shall not affect any
other rights of such Holder or any other Holder hereunder, including any other
rights in respect of such Bankruptcy Triggering Event, any right to conversion,
and any right to payment of such Triggering Event Redemption Price or any other
Redemption Price, as applicable.

 

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Execution Version

 

(c) Company Monthly Redemption. On or after the date that is six (6) months from
the Initial Issuance Date, on each Business Day before the Monthly Conversion
Period as described in Section 4(a), the Company, at its sole discretion, shall
have the right to redeem all or a portion of the Maximum Conversion Shares (the
“Monthly Redemption Shares”), in cash at a price per Maximum Conversion Share
(the “Company Monthly Redemption Price”) equal to (1) one hundred twenty percent
(120%) of the Stated Value of such Monthly Redemption Shares, plus (2) all
Additional Amounts with respect to such Monthly Redemption Shares, plus (3) all
Make-Whole Amounts with respect to such Monthly Redemption Shares, plus (4) any
accrued and unpaid Late Charges (as defined in Section 22(b)(ii)) with respect
to the Stated Value of such Monthly Redemption Shares as of such date of
determination. The Company may exercise its redemption option under this Section
5(c) by delivering a written notice thereof by facsimile or electronic mail to
all, but not less than all, of the Holders (the “Company Monthly Redemption
Notice” and the date all of the Holders received such notice is referred to as
the “Company Monthly Redemption Notice Date”). The Company may deliver only one
Company Monthly Redemption Notice with respect to any Monthly Conversion Period
hereunder and such Company Monthly Redemption Notice shall be irrevocable. The
Company Monthly Redemption Notice shall (x) state the date on which the Company
One-Time Redemption shall occur (the “Company Monthly Redemption Date”) which
date shall be no more than three (3) Trading Days following the Company Monthly
Redemption Notice Date, (y) certify that there has been no Equity Conditions
Failure and (z) state the aggregate Company Monthly Redemption Shares which is
being redeemed in such Company Monthly Redemption from such Holder and all of
the other Holders of Monthly Redemption Shares pursuant to this Section 5(c) on
the Company Monthly Redemption Date. Redemptions made pursuant to this Section
5(c) shall be made in accordance with Section 5(d). In the event of the
Company’s redemption of any of the Preferred Shares under this Section 5(c), a
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for such Holder.
Accordingly, any redemption premium due under this Section 5(c) is intended by
the parties to be, and shall be deemed, a reasonable estimate of such Holder’s
actual loss of its investment opportunity and not as a penalty. For the
avoidance of doubt, the Company shall have no right to effect a Company Monthly
Redemption if any Triggering Event has occurred and is continuing, but any
Triggering Event shall have no effect upon any Holder’s right to convert
Preferred Shares in its discretion.

 

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Execution Version

(d) Redemptions.

 

(i) General. If a Holder has submitted a Triggering Event Redemption Notice in
accordance with Section 5(b)(ii), the Company shall deliver the applicable
Triggering Event Redemption Price to such Holder in cash within five (5)
Business Days after the Company’s receipt of such Holder’s Triggering Event
Redemption Notice. If the Company has delivered a Monthly Redemption Notice in
accordance with Section 5(c), the Company shall deliver the Monthly Redemption
Price, in cash, within three (3) Trading Days following the Company Monthly
Redemption Notice Date. In the event of a redemption of less than all of the
Preferred Shares held by such Holder, the Company shall promptly cause to be
issued and delivered to such Holder a new Preferred Certificate (likewise to the
procedure set forth in Section 14) representing the number of Preferred Shares
which have not been redeemed. In the event that the Company does not pay the
applicable Redemption Price to a Holder within the time period required for any
reason (except if such payment is prohibited pursuant to the NRS), at any time
thereafter and until the Company pays such unpaid Redemption Price in full, such
Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to such Holder all or any of the Preferred Shares that were
submitted for redemption and for which the applicable Redemption Price has not
been paid. Upon the Company’s receipt of such notice, (x) the applicable
Redemption Notice shall be null and void with respect to such Preferred Shares,
(y) the Company shall immediately return the applicable Preferred Share
Certificate, or issue a new Preferred Share Certificate (likewise to the
procedure set forth in Section 14), to such Holder, and in each case the
Additional Amount of such Preferred Shares shall be increased by an amount equal
to the difference between (1) the applicable Redemption Price (as the case may
be, and as adjusted pursuant to this Section 5(d), if applicable) minus (2) the
Stated Value portion of the Conversion Amount submitted for redemption and (z)
the Conversion Price of such Preferred Shares shall be automatically adjusted
with respect to each conversion effected thereafter by such Holder to the lower
of (A) the Fixed Conversion Price as in effect on the date on which the
applicable Redemption Notice is voided, and (B) 40% of the average of the VWAPs
for the fifteen (15) consecutive Trading Days ending on the Trading Day that is
immediately prior to the date on which the applicable Redemption Notice is
voided (it being understood and agreed that all such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period). A Holder’s delivery of a notice
voiding a Redemption Notice and exercise of its rights following such notice
shall not affect the Company’s obligations to make any payments of Late Charges
(as defined in Section 22(b)(ii)) which have accrued prior to the date of such
notice with respect to the Preferred Shares subject to such notice.

 

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

 

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Execution Version

 

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

 

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

 

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

 

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

 

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

 

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Execution Version

 

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

 

9. Authorized Shares.

 

(a) Reservation. The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock equal to the sum of (i)
300% of the Conversion Rate with respect to the Conversion Amount of each
Preferred Share as of the Initial Issuance Date (assuming for purposes hereof,
that all the Preferred Shares issuable pursuant to the Securities Purchase have
been issued, such Preferred Shares are convertible at the Conversion Price and
without taking into account any limitations on the conversion of such Preferred
Shares set forth in herein) and (ii) the maximum number of Dividend Shares
issuable pursuant to the terms of this Certificate of Designations from the
Initial Issuance Date through the fifth (5th) anniversary of the Initial
Issuance Date (assuming for purposes hereof, that all the Preferred Shares
issuable pursuant to the Second Securities Purchase Agreement have been issued
and without taking into account any limitations on the issuance of securities
set forth herein). So long as any of the Preferred Shares are outstanding, the
Company shall take all action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, as of any given date, the sum
of (i) 300% of the number of shares of Common Stock as shall from time to time
be necessary to effect the conversion of all of the Preferred Shares issued or
issuable pursuant to the Securities Purchase Agreement and (ii) the maximum
number of Dividend Shares issuable pursuant to the terms of this Certificate of
Designations from such date through the fifth (5th) anniversary of such given
date, assuming for purposes hereof, that all the Preferred Shares issuable
pursuant to the Securities Purchase Agreement have been issued and without
taking into account any limitations on the issuance of securities set forth
herein), provided that at no time shall the number of shares of Common Stock so
available be less than the number of shares required to be reserved by the
previous sentence (without regard to any limitations on conversions contained in
this Certificate of Designations) (the “Required Amount”). The initial number of
shares of Common Stock reserved for conversions of the Preferred Shares and for
issuance as Dividend Shares and each increase in the number of shares so
reserved shall be allocated pro rata among the Holders based on the number of
Preferred Shares held by each Holder on the Initial Issuance Date or increase in
the number of reserved shares (as the case may be) (the “Authorized Share
Allocation”). In the event a Holder shall sell or otherwise transfer any of such
Holder’s Preferred Shares, each transferee shall be allocated a pro rata portion
of such Holder’s Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Preferred Shares
shall be allocated to the remaining Holders of Preferred Shares, pro rata based
on the number of Preferred Shares then held by such Holders.

 

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(b) Insufficient Authorized Shares. If, notwithstanding Section 9(a) and not in
limitation thereof, at any time while any of the Preferred Shares remain
outstanding the Company does not have a sufficient number of authorized and
unissued shares of Common Stock to satisfy its obligation to have available for
issuance upon conversion of the Preferred Shares at least a number of shares of
Common Stock equal to the Required Amount (an “Authorized Share Failure”), then
the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve and have available the Required Amount for all of the
Preferred Shares then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting or obtain written consent of its stockholders for the approval of an
increase in the number of authorized shares of Common Stock. In connection with
such meeting, the Company shall provide each stockholder with a proxy statement
or information statement, as applicable, and shall use its best efforts to
solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its Board to recommend to the stockholders that they
approve such proposal.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Execution Version

 

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

 

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

 

21. Stockholder Matters; Amendment.

 

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

 

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

 

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Execution Version

 

22. Dispute Resolution.

 

(a) Submission to Dispute Resolution.

 

(i) In the case of a dispute relating to a Closing Sale Price, a Conversion
Price, a VWAP or a fair market value or the arithmetic calculation of a
Conversion Rate (as the case may be) (including, without limitation, a dispute
relating to the determination of any of the foregoing), the Company or the
applicable Holder (as the case may be) shall submit the dispute to the other
party via facsimile (A) if by the Company, within two (2) Business Days after
the occurrence of the circumstances giving rise to such dispute or (B) if by
such Holder at any time after such Holder learned of the circumstances giving
rise to such dispute. If such Holder and the Company are unable to promptly
resolve such dispute relating to such Closing Sale Price, such Conversion Price,
such VWAP or such fair market value, or the arithmetic calculation of such
Conversion Rate (as the case may be), at any time after the second (2nd)
Business Day following such initial notice by the Company or such Holder (as the
case may be) of such dispute to the Company or such Holder (as the case may be),
then such Holder may, at its sole option, select an independent, reputable
investment bank to resolve such dispute.

 

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

 

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

 

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Execution Version

 

(b) Miscellaneous.

 

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

 

(ii) Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Certificate of Designations, unless otherwise expressly set
forth herein, such payment shall be made in lawful money of the United States of
America by a certified check drawn on the account of the Company and sent via
overnight courier service to such Person at such address as previously provided
to the Company in writing, provided that such Holder may elect to receive a
payment of cash via wire transfer of immediately available funds by providing
the Company with prior written notice setting out such request and such Holder’s
wire transfer instructions. Whenever any amount expressed to be due by the terms
of this Certificate of Designations is due on any day which is not a Business
Day, the same shall instead be due on the next succeeding day which is a
Business Day. Any amount due hereunder which is not paid when due shall result
in a late charge being incurred and payable by the Company in an amount equal to
interest on such amount at the rate of nine percent (9%) per annum from the date
such amount was due until the same is paid in full (“Late Charge”).

 

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

 

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

 

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Execution Version

 

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

 

(c) “Approved Share Plan” means any employee benefit plan which has been
approved by the board of directors of the Company prior to or subsequent to the
date hereof pursuant to which shares of Common Stock and standard options to
purchase Common Stock may be issued to any employee, officer or director for
services provided to the Company in their capacity as such.

 

(d) “Bloomberg” means Bloomberg, L.P.

 

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

 

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

 

(g) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

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

 

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Execution Version

 

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

 

(j) “Conversion Amount” means, with respect to each Preferred Share, as of the
applicable date of determination, the sum of (1) the Stated Value thereof, plus
(2) the Additional Amount thereon as of such date of determination, plus (3) the
Make-Whole Amount.

 

(k) “Conversion Premium” means One Hundred Twenty Five Percent (125%).

 

(l) “Conversion Price” means, with respect to each Preferred Share, the lower of
(i) the Fixed Conversion Price; or (ii) the lower of the VWAP of the Common
Stock on the Trading Day prior to the Conversion Date or the VWAP of the Common
Stock on the Conversion Date, subject to changes as set forth herein.

 

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

 

(n) “Dividend Notice Due Date” means the eleventh (11th) Trading Day immediately
prior to the applicable Dividend Date.

 

(o) “Dividend Rate” means five percent (5.0%) per annum.

 

(p) “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the
Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

 

(q) “Equity Conditions” means: (i) with respect to the applicable date of
determination all of the shares of Common Stock issuable upon conversion of all
of the Preferred Shares are freely tradable without the need for registration
under any applicable federal or state securities laws (in each case,
disregarding any limitation on conversion contained herein); (ii) on each day
during the period beginning thirty (30) days prior to the applicable date of
determination and ending on and including the applicable date of determination
(the “Equity Conditions Measuring Period”), the Common Stock (including all of
the shares of Common Stock issuable upon conversion of all of the Preferred
Shares) is listed or designated for quotation (as applicable) on an Eligible
Market and shall not have been suspended from trading on an Eligible Market
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by the Company);
(iii) on each day during the Equity Conditions Measuring Period, the Company
shall have delivered all shares of Common Stock issuable upon conversion of
Preferred Shares on a timely basis as set forth in Section 4 hereof, and all
other shares of capital stock required to be delivered by the Company on a
timely basis as set forth in the other Transaction Documents; (iv) any shares of
Common Stock to be issued in connection with the event requiring determination
may be issued in full without violating Section 4(e) hereof (each Holder
acknowledges that the Company shall be entitled to assume that this condition
has been met for all purposes hereunder absent written notice from such Holder);
(v) any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating the rules or
regulations of the Eligible Market on which the Common Stock is then listed or
designated for quotation (as applicable); (vi) on each day during the Equity
Conditions Measuring Period, no public announcement of a pending, proposed or
intended Fundamental Transaction shall have occurred which has not been
abandoned, terminated or consummated; (vii) the Company shall have no knowledge
of any fact that would reasonably be expected to cause any of the shares of
Common Stock issuable upon conversion of any Preferred Shares to not be freely
tradable without the need for registration under any applicable state securities
laws (disregarding any limitation on conversion contained herein); (viii) no
Holder shall be in possession of any material, non-public information provided
to any of them by the Company, any of its Subsidiaries or any of their
respective affiliates, employees, officers, representatives, agents or the like;
(ix) on each day during the Equity Conditions Measuring Period, the Company
otherwise shall have been in material compliance with each, and shall not have
breached any, provision, covenant, representation or warranty of any Transaction
Document; (x) on each day during the Equity Conditions Measuring Period, there
shall not have occurred any Volume Failure or Price Failure; (xi) there shall be
no Triggering Events; (xii) The Company’s Common Stock must be DWAC eligible and
not subject to “DTC chill”; (xiii) the Company must be current on all of its
filings under the 1934 Act; (xiv) the Preferred Shares must be able to be
delivered via an “Automatic Conversion” of principal and/or interest.

 

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Execution Version

 

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

 

(s) “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers, directors, advisors or independent contractors
of the Company pursuant to any stock or option plan duly adopted for such
purpose, (b) shares of Common Stock, warrants or options to advisors or
independent contractors of the Company for compensatory purposes, (c) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the Initial Issuance Date,
provided that such securities have not been amended since the Initial Issuance
Date to increase the number of such securities or to decrease the exercise
price, exchange price or conversion price of such securities, (d) securities
issuable pursuant to any contractual anti-dilution obligations of the Company in
effect as of the Initial Issuance Date, provided that such obligations have not
been materially amended since the Initial Issuance Date, (e) securities issued
pursuant to acquisitions or any other strategic transactions approved by the
Board of Directors, provided that any such issuance shall not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities and (f) shares issued in lieu of cash payments under the Company’s
management agreement with Via One Services Inc.

 

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Execution Version

 

(t) “Fixed Conversion Price” means, with respect to each Preferred Share, the
result of 110% multiplied by the VWAP of the common stock of the Company on the
First Closing Date of the Securities Purchase Agreement relating to the purchase
and sale of the Preferred Shares as described herein, subject to changes as set
forth herein.

 

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

 

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Execution Version

 

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

 

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

 

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

 

(y) “Make-Whole Amount” means as of any given date, the amount of any Dividend
that, but for any conversion hereunder on such given date, would have accrued
with respect to the Conversion Amount being redeemed hereunder at the Dividend
Rate then in effect for the period from such given date through the first
anniversary of the Initial Issuance Date.

 

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

 

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Execution Version

 

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

 

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

 

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

 

(dd) “Price Failure” means, with respect to a particular date of determination,
that the quotient of (x) the sum of the VWAP of the Common Stock for each
Trading Day in the thirty (30) consecutive Trading Day period ending and
including the Trading Day immediately preceding such date of determination,
divided by (y) thirty (30) is less than $0.005 (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations or other similar
transactions).

 

(ee) “Principal Market” means the OTCPINK, OTCQB or OTCQX.

 

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

 

(gg) “Redemption Premium” means One Hundred Thirty Percent (130%).

 

(hh) “Redemption Prices” means, collectively, the Triggering Event Redemption
Price, the Company One-Time Redemption Price and the Monthly Redemption Price,
and each of the foregoing, individually, a “Redemption Price”.

 

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

 

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

 

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

 

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

 

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Execution Version

 

(mm) “Securities Purchase Agreement” shall mean that certain Securities Purchase
Agreement, dated October 5, 2017, by and between the Company and the Holder.

 

(nn) “Stated Value” shall mean $1,000 per share, subject to adjustment for stock
splits, stock dividends, recapitalizations, reorganizations, reclassifications,
combinations, subdivisions or other similar events occurring after the Initial
Issuance Date with respect to the Preferred Shares.

 

(oo) “Stockholder Approval” means, for the purposes of this Certificate of
Designations and any other Transaction Document, the affirmative approval of the
stockholders of the Company providing for the Company’s issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market.

 

(pp) “Subscription Date” means October 5, 2017.

 

(qq) “Subsidiary” or “Subsidiaries” means any subsidiary of the Company,
including, where applicable, any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.

 

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

 

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

 

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

 

(uu) “Volume Failure” means, with respect to a particular date of determination,
the aggregate dollar trading volume (as reported on Bloomberg) of the Common
Stock on the Principal Market of any Trading Day in the twenty (20) consecutive
Trading Day period ending on the Trading Day immediately preceding such date of
determination is less than $35,000 (adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such period).

 

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Execution Version

 

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

 

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

 

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

 

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Execution Version

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations
of Series D Convertible Preferred Stock of Good Gaming, Inc. to be signed by its
Chief Executive Officer on this 5th day of October, 2017.

 

  Good Gaming, Inc.                      By:          Name:   Title:

 

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Execution Version

 

EXHIBIT I

 

Good Gaming, Inc.

 

CONVERSION NOTICE

 

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

 

Date of Conversion:
_________________________________________________________________________  
Number of Preferred Shares to be converted:
______________________________________________________   Share certificate
no(s). of Preferred Shares to be converted:
___________________________________________   Tax ID Number (If applicable):
_________________________________________________________________   Conversion
Price**: _________________________________________________________________  
Number of shares of Common Stock to be issued:
___________________________________________________

 

Please issue the shares of Common Stock into which the Preferred Shares are
being converted in the following name and to the following address:

 

Issue to: _______________________________________________________________  
 _______________________________________________________________   Address:
_______________________________________________________________   Telephone
Number: ____________________________________________________   Facsimile Number:
_______________________________________________________   Holder:
______________________________________________________________

 

By: ___________________________________________________   Title:
_________________________________________________   Dated:
_______________________________________________

 

Account Number (if electronic book entry transfer):
_____________________________________________   Transaction Code Number (if
electronic book entry transfer): ________________________________________

 

** Conversion Price may be based on the VWAP of the Trading Day prior to the
Conversion Date and remains subject to adjustment upon the close of the
Principal Market on the Conversion Date.

 

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Execution Version

 

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs [  ]
to issue the above indicated number of shares of Common Stock in accordance with
the Irrevocable Transfer Agent Instructions dated __________, 2017 from the
Company and acknowledged and agreed to by [   ].

 

  Good Gaming, Inc.       By:   Name:   Title:

 

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