Document:

Exhibit 4.4

 

 

 

NEWTEK BUSINESS SERVICES CORP.

2015 STOCK INCENTIVE PLAN

 

		1.	PURPOSE OF THE PLAN.

 

The purpose of this
Plan is to advance the interests of the Newtek Business Services Corp. (the “Company”) through providing select Employees,
Directors and Officers of the Company with the opportunity to acquire Common Stock and Restricted Stock. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the best available personnel for positions of substantial responsibility
and to provide additional incentives to promote the success of the business. The Plan is not tax-qualified under Section 401(a)
of the Code.

 

		2.	DEFINITIONS.

 

As used herein, the
following definitions shall apply.

 

(a)          “1940
Act” shall mean the Investment Company Act of 1940, as amended, and the rulings issued and regulations thereunder.

 

(b)          “Account”
shall mean a bookkeeping account maintained by the Company in the name of a Participant.

 

(c)          “Affiliate”
shall mean any corporation or other entity that stands in a relationship to the Company that would result in the Company and such
corporation or other entity being treated as one employer under Section 414(b) or Section 414(c) of the Code. The Company may at
any time by amendment provide that different ownership thresholds apply (consistent with Section 409A of the Code). Notwithstanding
the foregoing provisions of this definition, except as otherwise determined by the Board, a corporation or entity shall be treated
as an Affiliate only if its employees would be treated as employees of the Company for purposes of the rules promulgated under
the Securities Act of 1933, as amended, with respect to the use of Form S-8.

 

(d)          “Agreement”
shall mean a written agreement entered into in accordance with Section 5(c) of the Plan.

 

(e)          “Award”
shall mean an Option or Restricted Stock awarded pursuant to the Plan.

 

(f)          “Board”
shall mean the Board of Directors of the Company, as the same may be constituted from time to time.

 

(g)          “Change
in Control” shall mean any one of the following events: (i) the acquisition following the Effective Date of ownership, holding
or power to vote more than 25% of the Company’s voting shares by any person or persons acting as a “group” (within
the meaning of Section 13(d) of the Securities Exchange Act of 1934), (ii) the acquisition of the ability to control the election
of a majority of the Board by any person or persons acting as a “group” (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), (iii) the acquisition of a controlling influence over the management or policies of the Company
by any person or by persons acting as a “group” (within the meaning of Section 13(d) of the Securities Exchange Act
of 1934), or (iv) during any period of two consecutive years, individuals (the “Continuing Directors”) who at the beginning
of such period constitute the Board (the “Existing Board”) cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for election as a member of the Existing Board was approved by a vote
of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director. For purposes of defining
Change in Control, the term “person” refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed
herein. The decision of the Committee as to whether a Change in Control has occurred shall be conclusive and binding.

 

     

     

    

  

(h)          “Code”
shall mean the Internal Revenue Code of 1986, as amended, and the rulings issued and regulations promulgated thereunder.

 

(i)          “Committee”
shall mean the committee appointed by the Board to administer the Plan, in accordance with Section 5(a) hereof.

 

(j)          “Common
Stock” shall mean the common stock, par value $0.02 per share, of the Company.

 

(k)          “Company”
shall mean Newtek Business Services Corp., and its successors and assigns.

 

(l)          “Continuous
Service” shall mean the absence of any interruption or termination of service as an Employee, Director or Officer. Continuous
Service shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by
the Company or transfers between payroll locations of the Company or between the Company and a successor, provided the Participant
is continuously performing services for the Company.

 

(m)          “Director”
shall mean any member of the Board.

 

(o)          “Disability”
shall mean a physical or mental condition, which in the sole and absolute discretion of the Committee, is reasonably expected to
be of indefinite duration and to substantially prevent a Participant from fulfilling his or her duties or responsibilities to the
Company.

 

(p)          “Effective
Date” shall mean the date specified in Section 14 hereof.

 

(q)          “Employee”
shall mean any person employed by the Company.

 

(r)          “Employee
Director” shall mean any member of the Board who is an Employee.

 

(s)          “Exercise
Price” shall mean the price per Optioned Share at which an Option may be exercised.

 

(t)          “ISO”
shall mean an Option which an Agreement identifies as an “incentive stock option” within the meaning of Section 422
of the Code and which satisfies the requirements under Section 422 of the Code to qualify as an “incentive stock option.”

 

(u)          “Market
Value” shall mean the fair market value of the Common Stock, as determined under Section 7(b) hereof.

 

(v)          “Non-Employee
Director” shall have the meaning provided in Rule 16b-3.

 

(v)          “Non-ISO”
shall mean an option to purchase Common Stock which meets the requirements set forth in the Plan but which an Agreement identifies
as not being an ISO or which by operation or the terms of grant fails to satisfy the requirements of Section 422 of the Code.

 

(w)          “Officer”
shall mean any officer of the Company.

 

(x)          “Option”
shall mean an ISO or a Non-ISO.

 

(y)          “Optioned
Shares” shall mean shares of Common Stock subject to an Option granted pursuant to this Plan.

 

     

     

    

 

(z)          “Participant”
shall mean any person who receives an Award pursuant to the Plan.

 

(aa)         “Performance
Award” means an Award made pursuant to this Plan that is subject to the attainment of one or more performance goals.

 

(bb)         “Plan”
shall mean this Newtek Business Services Corp. 2015 Stock Incentive Plan.

 

(cc)         “Restricted
Stock” shall mean a grant of Common Stock under Section 9 of this Plan that is subject to certain restrictions and a risk
of forfeiture.

 

(dd)         “Rule
16b-3” shall mean Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.

 

(ee)         “Year
of Service” shall mean a full twelve-month period, measured from the grant date of an Award and each annual anniversary of
that date, during which a Participant has not terminated Continuous Service for any reason.

 

		3.	TERM OF THE PLAN AND OPTIONS.

 

(a)          Term
of the Plan. This Plan shall remain in effect until terminated by the Board. Termination of the Plan shall not affect any Awards
previously granted, and such Awards shall remain valid and in effect in accordance with their terms until they have been earned
and paid, or by their terms expire or are forfeited. No Option shall be granted under the Plan after ten years from the Effective
Date.

 

(b)          Term
of Options. The term of each Option granted under the Plan shall be established by the Committee, but shall not exceed 10 years;
provided, however, that in the case of an Employee who owns Common Stock representing more than 10% of the outstanding Common Stock
at the time an ISO is granted, the term of such ISO shall not exceed five years.

 

		4.	COMMON STOCK SUBJECT TO THE PLAN; CERTAIN LIMITS.

 

(a)          Share
Reserve. Except as otherwise required under Section 11, the aggregate number of shares of Common Stock deliverable pursuant
to Awards shall not exceed three million (3,000,000) shares of Common Stock. Such shares may either be authorized but unissued
shares or shares held in treasury. The amount of voting securities that would result from the exercise of all of the Company’s
outstanding warrants, options and rights, together with any Restricted Stock issued and outstanding pursuant to the Plan, will
not at the time of issuance of any warrant, option, right or share of Restricted Stock under the Plan, exceed 20 percent of the
outstanding voting securities of the Company. If any Award should expire, become unexercisable, or be forfeited for any reason,
the shares subject to the Award shall, unless the Plan shall have been terminated, be available for the grant of additional Awards
under the Plan.

 

(b)          Limits
on Individual Grants. The maximum number of shares of Common Stock for which an Employee or Employee Director may be granted
Awards in any calendar year is 250,000 shares, subject to adjustment as described herein.

 

(c)          Limits
on Grants of Restricted Stock. The amount of Restricted Stock issued and outstanding will not at the time of issuance of any
shares of Restricted Shares exceed 10% of the outstanding voting securities of the Company. No single person shall be granted Awards
of Restricted Stock relating to more than 25% of the shares reserved for issuance under the Plan.

 

		5.	ADMINISTRATION OF THE PLAN.

 

(a)          Composition
of the Committee. The Plan shall be administered by the Committee, appointed by the Board, and consisting of at least two members
of the Board who are Non-Employee Directors. Members of the Committee shall serve at the pleasure of the Board. In the absence
at any time of a duly appointed Committee, the Plan shall be administered by the Board. Notwithstanding the foregoing, with respect
to Awards granted to Non-Employee Directors, the Board will act as the Committee.

 

     

     

    

 

(b)          Powers
of the Committee. Except as limited by the express provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select Participants and grant Awards, (ii) to determine the form and
content of Awards to be issued under the Plan, (iii) to interpret the Plan, (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations necessary or advisable for the administration of the Plan. The Committee
shall have and may exercise such other power and authority as may be delegated to it by the Board from time to time. The Committee
may delegate its power and authority to a sub-committee or, with respect to Participants who are not elected Officers and/or subject
to section 16 of the Securities Exchange Act of 1934, to one or more Officers, subject to guidelines established by the Committee.
The Committee will delegate it power and authority to a sub-committee consisting of at least two Non-Employee Directors who are
“outside directors” within the meaning of Section 162(m) of the Code, with respect to the grant or administration of
an Award intended to be “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.
A majority of the entire Committee shall constitute a quorum and the action of a majority of the members present at any meeting
at which a quorum is present, or acts approved in writing by a majority of the Committee without a meeting, shall be deemed the
action of the Committee. A “required majority”, as defined in Section 57(o) of the 1940 Act, will approve the issuance
of Awards in accordance with Section 61(a)(3)(A)(iv) of the 1940 Act.

 

(c)          Agreement.
Each Award shall be evidenced by an Agreement containing such provisions as may be approved by the Committee. Each such Agreement
shall constitute a binding contract between the Company and the Participant, and every Participant, upon acceptance of an Agreement,
shall be bound by the terms and restrictions of the Plan and of such Agreement. The terms of each such Agreement shall be in accordance
with the Plan, but each Agreement may include such additional provisions and restrictions determined by the Committee, in its discretion,
provided that such additional provisions and restrictions are not inconsistent with the terms of the Plan. In particular, the Committee
shall set forth in each Agreement (i) the Exercise Price of an Option, if applicable, (ii) the number of shares of Common Stock
subject to the Award, (iii) the manner, time and rate (cumulative or otherwise) of exercise or vesting of such Award, (iv) the
restrictions, if any, to be placed upon such Award, or upon shares of Common Stock which may be issued upon exercise of such Award,
and (v) whether the issuance or vesting of any shares of Common Stock is conditioned upon the achievement of certain performance
metrics. The Chairman of the Committee and such other Directors and officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company with respect to Awards granted to Employee Directors and Employees and
to cause them to be delivered to the recipients of the Awards. The Chairman of the Board and such other Directors and officers
as shall be designated by the Board are hereby authorized to execute Agreements on behalf of the Company with respect to Awards
granted to Non-Employee Directors and to cause them to be delivered to the recipients of the awards.

 

(d)          Effect
of the Committee’s Decisions. All decisions, determinations and interpretations of the Committee shall be final and conclusive
on all persons affected thereby.

 

(e)          Indemnification.
In addition to such other rights of indemnification as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any action taken or failure to act under or in connection
with the Plan or any Award, granted hereunder to the full extent provided for under the Company’s governing instruments and
insurance policies with respect to the indemnification of Directors.

 

		6.	GRANT OF OPTIONS.

 

(a)          General
Rule. The Committee shall have the discretion to grant Employees, Employee Directors and Officers Options to purchase Optioned
Shares, which shall be subject to any restrictions or conditions imposed pursuant to Sections 5 or 17 of this Plan, provided, that
ISOs may not be granted to Officers who are not also Employees or Employee Directors. Options may not be granted to any Non-Employee
Director or to any employee, director or officer of any Affiliate who is not also an Employee, Employee Director or Officer.

 

     

     

    

 

(b)          Special
Rules for ISOs. The aggregate Market Value, as of the date an Option is granted, of the shares of Common Stock with respect
to which ISOs are exercisable for the first time by an Employee during any calendar year (under all incentive stock option plans,
as defined in Section 422 of the Code, of the Company or any present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the foregoing limitations, in which case such Options
granted in excess of such limitation shall be Options which are Non-ISOs.

  

		7.	EXERCISE PRICE FOR OPTIONS.

 

(a)          Limits
on Committee Discretion. The Exercise Price for an Option shall not be less than 100% of the Market Value of the Optioned Shares
on the date of grant. In the case of an ISO to be granted to an Employee who owns shares of Common Stock representing more than
10% of the Company’s outstanding Common Stock at the time an ISO is granted, the Exercise Price shall not be less than 110%
of the Market Value of the Optioned Shares on the date of grant.

 

(b)          Standards
for Determining Exercise Price. If the Common Stock is listed on a national securities exchange (including the NASDAQ Market
System) on the date in question, then the Market Value per Share shall be the average of the highest and lowest selling price on
such exchange on such date, or if there were no sales on such date, then the Exercise Price shall be the average of the highest
and lowest selling price on such exchange on the last date on which a Share was sold. If the Common Stock is not traded on a national
securities exchange on the date in question, then the Market Value per Share shall be its fair market value as determined by the
Committee in its sole and absolute discretion in accordance with Section 409A of the Code, provided that such fair market value
shall not be less than the Company’s then-current net asset value as determined for purposes of section 61(a)(3)(A)(iii)
of the 1940 Act.

 

		8.	EXERCISE OF OPTIONS.

 

(a)          Generally.
Unless the Committee specifically eliminates any vesting requirement or imposes a different vesting schedule in an Agreement granting
an Option, each Option shall became vested and exercisable according to the following schedule:

 

	
         

        Years of Continuous Service
	 	Vested Percentage (applied to

Optioned Shares)
	Less than 1	 	0%
	1	 	25%
	2	 	50%
	3	 	75%
	4 or more	 	100%

 

Notwithstanding the
foregoing, each Participant shall become fully (100%) vested immediately (i) upon termination of the Participant’s Continuous
Service due to the Participant’s Disability or death, or (ii) upon a Change in Control or, if earlier, the execution of a
definitive agreement to effect a Change in Control. An Option may not be exercised for a fractional Share.

 

(b)          Procedure
for Exercise. A Participant may exercise an Option in whole or in part, subject to provisions relative to its termination and
limitations on its exercise, only by delivery to the Committee or its designee, in accordance with procedures for the exercise
of Options as the Committee may establish from time to time, of (i) written notice of intent to exercise the Option with respect
to a specified number of whole shares of Common Stock, (ii) payment to the Company (contemporaneously with delivery of such notice)
of the amount of the Exercise Price for the number of shares of Common Stock with respect to which the Option is then being exercised
in (A) cash, or, if so permitted by the Board and if permitted by the 1940 Act and otherwise legally permissible, (B) through a
net settlement, using shares of Common Stock received in the Option exercise or other shares of Common Stock owned by the Participant,
(C) by such other means of payment that may be acceptable to the Board, or (D) in any combination of the foregoing permitted forms
of payment, (iii) such representations and documents as are necessary or advisable to effect compliance with all applicable provisions
of Federal or state securities laws or regulations; and (iv) in the event that the Option or portion thereof shall be exercised
by any individual other than the Participant, appropriate proof of the right of such individual to exercise the Option or portion
thereof. Each such notice (and payment where required) shall be delivered, or mailed by prepaid registered or certified mail, addressed
to the Treasurer of the Company at its executive offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be valued at their Market Value at the date of exercise. Notwithstanding the foregoing, if the Exercise Price
may be paid in Common Stock as provided above, Common Stock delivered by the Participant may be shares of Common Stock which were
received by the Participant upon exercise of one or more previously exercised Options, but only if such Common Stock has been held
by the Participant for at least six months, or such other period of time as is required, in the opinion of the independent auditor
for the Plan, to avoid adverse financial accounting results.

 

     

     

    

 

(c)          Period
of Exercisability. Except to the extent otherwise provided herein or in the terms of an Agreement, an Option may be exercised
by a Participant only while he has maintained Continuous Service from the date of the grant of the Option, or within ninety (90)
days after termination of such Continuous Service (but not later than the date on which the Option would otherwise expire). Notwithstanding
the foregoing, the Participant’s rights to exercise such option shall expire:

 

(1)          immediately
upon termination of the Participant’s Continuous Service due to “Just Cause” which for purposes hereof shall
have the meaning set forth in any unexpired employment, consulting, severance, retention, change-in-control or similar written
agreement between the Participant and the Company or an Affiliate (and, in the absence of any such agreement, shall mean termination
because of the Participant’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty, intentional
failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses),
as determined by the Committee in its discretion or pursuant to a final cease-and-desist order;

 

(2)          immediately
upon a determination by the Committee that the Participant has violated a non-competition provision contained in any unexpired
employment, or consulting, or other written agreement between the Participant and the Company or an Affiliate;

 

(3)          two
years from the date on which the Participant’s Continuous Service terminates due to his death (but not later than the date
on which the Option would otherwise expire), during which time the Option may be exercised (to the extent that the Participant
would have been entitled to exercise it immediately prior to his death) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will or by the laws of descent and distribution; or

 

(4)          ninety
(90) days following the termination of Participant’s Continuous Service for reasons other than Just Cause or death of the
Participant

 

(d)          Effect
of the Committee’s Decisions. The Committee’s determination whether a Participant’s Continuous Service has
ceased, and the effective date thereof, shall be final and conclusive on all persons affected thereby.

 

		9.	RESTRICTED STOCK.

 

(a)          Grants
to Employees. The Committee shall have the discretion to grant Restricted Stock to Employees. The Committee shall notify the
Participant in writing of the grant of the Award, the number of shares covered by the Award, and the terms upon which the shares
subject to the Award may vest. The Committee shall maintain records as to all grants of Restricted Stock under the Plan.

 

(b)          Grants
to Non-Employee Directors. Notwithstanding any other provision of the Plan to the contrary, each Participant who is a Non-Employee
Director shall be granted up to 2,000 shares of Restricted Stock at the beginning of each one-year term of service on the Board.
One-third of such shares of Restricted Stock shall vest on each of the next three anniversaries of the date of grant, provided
that such Participant’s director relationship has not been terminated prior to such anniversary. Each grant of Restricted
Stock to Non-Employee Directors will be made pursuant to this schedule and will not be changed without Commission approval.

 

     

     

    

 

(c)          Vesting.
Except for grants to Non-Employee Directors and unless the Committee specifically eliminates any vesting requirement or imposes
a different vesting schedule in an Agreement, Restricted Stock granted to Employees will become vested according to the following
schedule:

 

 

	Years of Continuous Service	 	Vested Percentage
	Less than 1	 	0%
	1	 	25%
	2	 	50%
	3	 	75%
	4 or more	 	100%

 

Notwithstanding the
foregoing, each Participant shall become fully (100%) vested immediately (i) upon the termination of the Participant’s Continuous
Service due to the Participant’s Disability or death, or (ii) upon a Change in Control, or, if earlier, the execution of
a definitive agreement to affect a Change in Control. Unless the Committee expressly provides otherwise, immediately upon the cessation
of Continuous Service (as determined under criteria established by the Committee), that portion, if any, of any Restricted Stock
that is not then vested will be returned to the Company and will be available to be issued as Awards under the Plan. The Board
may provide in any Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting from any cause, and the Board may in other cases
waive in whole or in part the forfeiture of Restricted Stock.

 

(d)          Dividends.
Dividends, including deemed dividends, paid on Restricted Stock shall be paid at the dividend payment date, in cash or in shares
of Common Stock having a Market Value equal to the amount of such dividends. Unless otherwise determined by the Board, Common Stock
distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject
to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property
has been distributed.

 

		10.	PERFORMANCE AWARDS.

 

(a)          Generally.
An Award may be in the form of a Performance Award. The terms, conditions and limitations applicable to an Award that is a Performance
Award shall be determined by the Committee, but in all cases such Performance Award will take the form of either Option or Restricted
Stock. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine
the value and/or amount of Performance Awards that will be paid out to the Participant and/or the portion that may be exercised.
Performance Awards granted to Participants that are not intended to qualify as qualified performance-based compensation under Section
162(m) of the Code shall be based on achievement of such goals and be subject to such terms, conditions and restrictions as the
Committee or its delegate shall determine.

 

(b)          Qualified
Performance Awards. Performance Awards granted to Employees under the Plan that are intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code shall be granted, paid, vested or otherwise deliverable solely on account of the
attainment of one or more pre-established, objective performance goals established by the Committee prior to the earlier to occur
of (x) 90 days after the commencement of the period of service to which the performance goal relates or (y) the lapse of 25% of
the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially
uncertain. A performance goal is objective if a third party having knowledge of the relevant facts could determine whether the
goal is met. Such a performance goal may be based on one or more business criteria that apply to the Employee, one or more business
segments, units, or divisions of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with
a peer group of companies. A performance goal shall include one or more of the following:

 

	 	•	Net Unrealized Appreciation and Net Realized Gains;

 

	 	•	Net Investment Income or Net Realized Income per share (actual or targeted growth);

 

	 	•	Economic value added;

 

	 	•	Net Investment Income or Net Realized Income measures;

 

     

     

    

 

	 	•	Dividend and Dividends per share measures;

 

	 	•	Cash flow and liquidity measures;

 

	 	•	Return measures (including but not limited to return on capital employed, return on equity, return on investment and return on assets);

 

	 	•	Operating measures (including but not limited to productivity, efficiency, and scheduling measures);
	 	 	 
	 	•	Expense targets (including but not limited to funding and development costs and general and administrative expenses); or

 

	 	•	Stock price measures (including but not limited to growth measures and total stockholder return).

 

Unless otherwise stated,
such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include,
for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business
criteria). In interpreting Plan provisions applicable to performance goals, it is the intent of the Plan to conform with the standards
of Section 162(m) of the Code and Treasury Regulation Section 1.162-27(e)(2)(i) as to grants to those Employees whose compensation
is, or is likely to be, subject to Section 162(m) of the Code, and the Committee, in establishing such goals and interpreting the
Plan, shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of performance goals,
the Committee must certify in writing that applicable performance goals and any of the material terms thereof were, in fact, satisfied.
The Committee may, in its discretion and consistent with the terms of the Performance Award, reduce the amount of a Performance
Award paid upon achievement of the performance goals, but it may not exercise any discretion to increase such amount. Subject to
the foregoing provisions, the terms, conditions and limitations applicable to any qualified performance awards made pursuant to
this paragraph (b) shall be determined by the Committee.

 

		11.	CHANGE IN CONTROL; EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.

 

(a)          Change
in Control. Immediately prior to a Change in Control or, if earlier, the execution of a definitive agreement to effect a Change
in Control, all Options and Restricted Stock shall become fully vested and exercisable notwithstanding any other provision of the
Plan or any Agreement.

 

(b)          Recapitalizations;
Stock Splits, Etc. In the event any recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or exchange of shares of Common Stock or other securities, any stock dividend or other special and nonrecurring
dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution, or other similar
transactions or events, affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement
of the rights of Participants under the Plan, then the Committee shall make equitable adjustment in (i) the number and kind of
shares of Common Stock deemed to be available thereafter for grants of Awards under this Plan, (ii) the number and kind of shares
that may be delivered or deliverable in respect of outstanding Awards, and (iii) the exercise price to prevent such dilution or
enlargement of rights.

 

(c)          Transactions
in which the Company is Not the Surviving Entity. In the event of (i) the liquidation or dissolution of the Company, (ii) a
merger or consolidation in which the Company is not the surviving entity, or (iii) the sale or disposition of all or substantially
all of the Company’s assets (any of the foregoing to be referred to herein as a “Transaction”), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted for any change or exchange of shares of Common Stock
for a different number or kind of shares or other securities which results from the Transaction, and the forfeiture provisions
set forth in Sections 8(c)(2) and 17(c) shall automatically become null and void.

 

(d)          Special
Rule for ISOs. Any adjustment made pursuant to subsections (a) or (b) hereof shall be made in such a manner as not to constitute
a modification of an ISO, within the meaning of Section 424(h) of the Code.

 

(e)          Conditions
and Restrictions on New, Additional, or Different Shares or Securities. If, by reason of any adjustment made pursuant to this
Section 11, a Participant becomes entitled to new, additional, or different shares of stock or securities, then, except as expressly
provided in this Section 11, such new, additional, or different shares of stock or securities shall thereupon be subject to all
of the conditions and restrictions which were applicable to the shares of Common Stock pursuant to the Award before the adjustment
was made.

     

     

    

 

(f)          Other
Issuances. Except as expressly provided in this Section, the issuance by the Company or an Affiliate of shares of stock
of any class, or of securities convertible into stock of another class, for cash or property or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe therefor, shall not affect, and no adjustment shall
be made with respect to, the number, class, or Exercise Price of Common Stock then subject to Awards or reserved for issuance
under the Plan.

 

(g)          Certain
Special Dividends. The Exercise Price of and number of shares of Common Stock subject to outstanding Awards shall be proportionately
adjusted upon the payment of a special, nonrecurring dividend that has the effect of a return of capital to the shareholders.

 

		12.	TRANSFERABILITY OF AWARDS.

 

ISOs and Restricted
Stock may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws
of descent and distribution. Notwithstanding the foregoing, or any other provision of this Plan, a Participant who holds Non-ISOs
may transfer such Awards to his or her spouse, lineal ascendants, or to a duly established trust for the benefit of one or more
of these individuals. The Awards so transferred may thereafter be transferred only to the Participant who originally received the
grant or to an individual or trust to whom the Participant could have initially transferred the Awards pursuant to this Section
12. Awards which are transferred pursuant to this Section 12 shall be exercisable or earned by the transferee according to the
same terms and conditions as applied to the Participant. Notwithstanding any other provision of this Plan to the contrary, Common
Stock that is received pursuant to an Award may not be sold within the six-month period following the grant date of that Award,
except in the event of the Participant’s death or Disability, or such other event as the Board may specifically deem appropriate.

 

		13.	TIME OF GRANTING AWARDS.

 

The date of grant of
an Award shall, for all purposes, be the later of the date on which the Committee, or, if applicable, the “required majority”,
as defined in Section 57(o) of the 1940 Act, approves the issuance of the Award, and the Effective Date. Notice of the determination
shall be given to each Participant to whom an Award is so granted within a reasonable time after the date of such grant.

 

		14.	EFFECTIVE DATE.

 

The Plan was adopted
by the Board on April 27, 2015, and will become effective upon the Plan’s approval by a favorable vote of shareholders of
a majority of the total votes cast at a duly called meeting of the Company’s shareholders held in accordance with applicable
laws, but its effectiveness and the effectiveness of any grants of Awards shall be contingent upon the U.S. Securities and Exchange
Commission granting an order exempting the Company from Sections 23(a), 23(b), 23(c), and 63 of the 1940 Act.

 

		15.	MODIFICATION OF OPTIONS.

 

At any time, and from
time to time, the Board may authorize the Committee to direct execution of an instrument providing for the modification of any
outstanding Option, provided no such modification shall confer on the holder of said Option any right or benefit which could not
be conferred on him by the grant of a new Option at such time, impair the Option without the consent of the holder of the Option,
or have the effect of reducing the Exercise Price for the Option.

 

		16.	AMENDMENT AND TERMINATION OF THE PLAN.

 

The Board may from
time to time amend the terms of the Plan and, with respect to any shares of Common Stock at the time not subject to Awards, suspend
or terminate the Plan, subject to applicant requirements in (a) the Company’s articles of incorporation or by-laws and (b)
applicable law and orders. Unless sooner termination, the Plan shall terminate on the day before the tenth (10th) anniversary of
the date the Plan is approved by the Stockholders of the Company. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair the balance credited to the Participant’s Account or any
rights or obligations under any Award theretofore granted.

     

     

    

  

		17.	CONDITIONS UPON ISSUANCE OF SHARES OF COMMON STOCK.

 

(a)          Compliance
with Securities Laws. Common Stock shall not be issued with respect to any Award unless the issuance and delivery of such shares
of Common Stock shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, any applicable state securities law, and the requirements of any stock
exchange upon which the shares of Common Stock may then be listed.

 

(b)          Special
Circumstances. The inability of the Company to obtain approval from any regulatory body or authority deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any shares of Common Stock hereunder shall relieve the Company of any
liability in respect of the non-issuance or sale of such shares of Common Stock. As a condition to the Award, the Committee may
require the person receiving or exercising the Award to make such representations and warranties as may be necessary to assure
the availability of an exemption from the registration requirements of federal or state securities law.

 

(c)          Repurchase
Right; Damages. The Company shall have the right to cause the forfeiture of the Common Stock (in the case of Optioned Shares,
in exchange for any Exercise Price paid by the Participant) received pursuant to an Award if the Participant breaches a non-competition
provision in any unexpired employment, consulting or other written agreement between the Participant and the Company or an Affiliate.
If a Participant has disposed of such shares of Common Stock, the Company may seek compensatory damages from the Participant, as
well as seek specific performance for the sale to the Company of such other shares of Common Stock that the Participant owns or
controls (but only to the extent necessary to provide the Company with the recovery contemplated in the preceding sentence).

 

(d)          Committee
Discretion. The Committee shall have the discretionary authority to impose in Agreements such restrictions on shares of Common
Stock as it may deem appropriate or desirable, including but not limited to the authority to impose a right of first refusal, or
to establish repurchase rights, or to pay a Participant the in-the-money value of his or her Award in consideration for its cancellation,
or all of these restrictions.

 

		18.	RESERVATION OF SHARES OF COMMON STOCK.

 

The Company, during
the term of the Plan, will reserve and keep available a number of shares of Common Stock sufficient to satisfy the requirements
of the Plan.

 

		19.	WITHHOLDING TAX.

 

The Company’s
obligation to deliver shares of Common Stock or make cash payments pursuant to an Award shall be subject to the Participant’s
satisfaction of all applicable federal, state and local income and employment tax withholding obligations. To the extent that the
Company is required to withhold any federal, state or local income and employment taxes in respect of any compensation income realized
by the Participant in respect of Common Stock acquired pursuant to an Award, or in respect of any Common Stock becoming vested,
then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such federal,
state or local income and employment taxes required to be so withheld. If no such payments are due or to become due to such Participant,
or if such payments are insufficient to satisfy such federal, state or local income or employment taxes, then such Participant
will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company
of, the aggregate amount of any such taxes. The Committee, in its discretion, may permit the Participant to satisfy the obligation,
in whole or in part, by irrevocably electing to have the Company withhold shares of Common Stock, or to deliver to the Company
shares of Common Stock that he already owns, having a value equal to the amount required to be withheld. The value of the shares
of Common Stock to be withheld, or delivered to the Company, shall be based on the Market Value of the Common Stock on the date
the amount of tax to be withheld is determined. As an alternative, the Company may retain, or sell without notice, a number of
such shares of Common Stock sufficient to cover the amount required to be withheld.

     

     

    

 

		20.	NO SHAREHOLDER RIGHTS.

 

No Participant shall
have any voting or dividend rights or other rights of a shareholder in respect of any shares of Common Stock subject to an Option
covered by an Award prior to the time said shares are actually distributed. Subject to the provisions of the Plan and the applicable
Agreement, holders of Restricted Stock shall have all the rights upon issuance of the Restricted Stock Award including, without
limitations, voting rights and the right to receive dividends.

 

		21.	NO EMPLOYMENT OR OTHER RIGHTS.

 

In no event shall an
Employee’s, Director’s or Officer’s eligibility to participate or participation in the Plan create or be deemed
to create any legal or equitable right of the Employee, Director, Officer or any other party to continue service with the Company
or any Affiliate. No Employee, Director or Officer shall have a right to be granted an Award or, having received an Award, the
right to again be granted an Award. However, an Employee, Director or Officer who has been granted an Award may, if otherwise eligible,
be granted an additional Award or Awards.

 

		22.	NO FIDUCIARY RELATIONSHIP.

 

None of the members
of the Board has any duty to manage or operate the Plan to maximize the benefits granted hereunder, but rather shall have full
discretionary power to make all management and operational decisions based on their determination of the respective best interests
of the Company, it shareholders and the Participants. The Plan shall not be construed to create any fiduciary relationship between
the Board or the Committee and the Participants.

 

		23.	SEVERABILITY.

 

If any provision of
the Plan is held invalid or unenforceable, such determination shall not affect the remaining parts of the Plan, and the Plan shall
be enforced and construed as if such provision had not been included.

 

		24.	1940 ACT.

 

No provision of this
Plan is intended to contravene any portion of the 1940 Act, and in the event of any conflict between the provisions of the Plan
or any Award and the 1940 Act, the applicable Section of the 1940 Act shall control and all Awards under the Plan shall be so modified.
All Participants holding such modified Awards shall be notified of the change to their Awards and such change shall be binding
on such Participants. At all times during such periods as the Company qualifies or is intended to qualify as a “business
development company,” no Award may be granted under the Plan if the grant of such Award would cause the Company to violate
the 1940 Act and, if otherwise approved for grant, shall be void and of no effect. Additionally, notwithstanding any provision
in this Plan to the contrary, the Plan will be operated, administered, and construed consistent with any exemptive order issued
by the Commission under the 1940 Act.

 

		25.	GOVERNING LAW.

 

Except to the extent
that federal law shall be deemed to apply, the Plan shall be governed by and construed in accordance with the laws of the State
of New York, excluding any conflicts or choice of law principle that might otherwise refer construction or interpretation of the
Plan to another jurisdiction. Unless otherwise provided in an Agreement, recipients of an Award under the Plan are deemed to submit
to the exclusive jurisdiction and venue of the Federal or state courts of the State of New York to resolve any issue that may arise
out of or relate to the Plan or any Award.ex10-1.htm

Exhibit 10.1

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (the “Agreement”), dated as of April 24, 2015, is made by and between Majesco Entertainment Company, a Delaware corporation (“Company”), and the holder of the Warrants (as defined below) signatory hereto  (“Holder”).

WHEREAS, pursuant to that certain Subscription Agreement (the “Subscription Agreement”), dated as of December 17, 2014, by and between the Company and the Holder, whereby, among other things, the Holder  purchased from the Company units of the Company’s securities (the “Units”) with each Unit consisting of one share of the Company’s 0% Series A Convertible Preferred Stock and a five year warrant (the “Warrants”) to purchase one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”);

WHEREAS, the Holder holds such number of Warrants as set forth on Schedule A hereto (such Warrants, the “Exchange Securities”);

WHEREAS, the Company has authorized a new series of convertible preferred stock of the Company designated as Series B Convertible Preferred Stock, $0.001 par value, the terms of which are set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (the “Certificate of Designations”) in the form attached hereto as Exhibit A (together with any convertible preferred shares issued in replacement thereof in accordance with the terms thereof, the “Preferred Stock”), which Preferred Stock shall be convertible into the Company’s Common Stock, in accordance with the terms of the Certificate of Designations;

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to exchange with the Holder, and the Holder desires to exchange with the Company, the Exchange Securities for shares of the Company’s Common Stock, or, at the election of any Holder who would, as a result of receipt of the Common Stock hold in excess of 4.99% of the Company’s issued and outstanding Common Stock, shares of Preferred Stock.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Holder agree as follows:

1.             Terms of the Exchange. The Company and Holder agree that the Holder will exchange the Exchange Securities and will relinquish any and all other rights he may have under the Exchange Securities in exchange for such number of shares of Common Stock (the “Shares”) or the Preferred Stock (the “Preferred Shares”, and such Preferred Shares as converted into Common Stock, the “Conversion Shares”, and together with the Common Shares and the Preferred Shares, the “Securities”) as set forth on Schedule A, annexed hereto.

2.            Closing. Upon satisfaction of the conditions set forth herein, a closing shall occur at the principal offices of the Company, or such other location as the parties shall mutually agree. At closing, Holder shall deliver certificates representing the Exchange Securities to the Company and the Company shall deliver to such Holder a certificate evidencing the Shares or the Preferred Shares, as the case may be, in the name(s) and amount(s) as indicated on Schedule A annexed hereto.  Upon closing, any and all obligations of the Company to Holder under the Exchange Securities shall be fully satisfied, the certificates evidencing the Exchange Securities shall be cancelled and Holder will have no remaining rights, powers, privileges, remedies or interests under the Exchange Securities.  Notwithstanding the foregoing, the Company acknowledges that it will continue to have ongoing obligations under the terms of the Subscription Agreement to the Holder.

 

 

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3.

	
Further Assurances

 

Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

4.             Representations and Warranties of the Holder. The Holder represents and warrants as of the date hereof and as of the closing to the Company as follows:

a.           Authorization; Enforcement. The Holder has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement by the Holder and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Holder and no further action is required by the Holder.  This Agreement has been (or upon delivery will have been) duly executed by the Holder and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Holder enforceable against the Holder in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

b.                      Tax Advisors. The Holder has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. With respect to such matters, the Holder relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The Holder understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

c.            Information Regarding Holder.  Holder is an “accredited investor”, as such term is defined in Rule 501 of Regulation D promulgated by the United States Securities and Exchange Commission (the “Commission”)  under the Securities Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Holder to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment.  Holder has the authority and is duly and legally qualified to purchase and own the Securities.  Holder is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.

 

d.           Legend.   The Holder understands that the Securities have been issued (or will be issued in the case of the Conversion Shares) pursuant to an exemption from registration or qualification under the Securities Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

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[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

e.           Removal of Legends.   Certificates evidencing Securities shall not be required to contain the legend set forth in Section 4(d) above or any other legend (i) while a registration statement covering the resale of such Securities is effective under the Securities Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 and the Subscriber is not an affiliate of the Company (provided that the Holder provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of the Holder’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Holder provides the Company with an opinion of counsel to the Holder, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the Securities Act or (v) if such legend is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC).  If a legend is not required pursuant to the foregoing, the Company shall no later than three (3) business days following the delivery by the Holder to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Holder as may be required above in this Section 4(e), as directed by the Holder, either:  (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are Shares or Conversion Shares, credit the aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the Holder, a certificate representing such Securities that is free from all restrictive and other legends, registered in the name of the Holder or its designee.  The Company shall be responsible for any transfer agent fees or DTC fees with respect to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith, including, but not limited to, fees for the opinions of counsel rendered to the transfer agent in connection with the removal of any legends.

f.           Restricted Securities.   The Holder understands that: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Holder shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Holder, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Holder provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

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5.            Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Holder:

a.           Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors of the Company or the Company’s stockholders in connection therewith, including, without limitation, the issuance of the Shares or Preferred Shares, as the case may be, and the reservation for issuance and issuance of Conversion Shares issuable upon conversion of the Preferred Shares have been duly authorized by the Company's Board of Directors and no further filing, consent, or authorization is required by the Company, its Board of Directors or its stockholders.  This Agreement and any Other Agreement (as defined herein) have been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

b.           Organization and Qualification.  Each of the Company and its subsidiaries (the “Subsidiaries”) are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted.  Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.  As used in this Agreement, “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, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Exchange Documents or (iii) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documents. Other than its Subsidiaries, there is no Person (as defined below) in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest.  “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.

c.           No Conflict.  The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Shares and the Preferred Shares and reservation for issuance and issuance of the Conversion Shares) will not (i) (i) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of the OTC Markets (the “Principal Market”) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect.

 

 

 

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d.                      No Consents.  Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date of this Agreement, and neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents.  The Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

 

e.           Securities Law Exemptions.  Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the Securities is exempt from registration under the Securities Act.  The offer and issuance of the Securities is exempt from registration under the Securities Act pursuant to the exemption provided by Section 3(a)(9) thereof.  The Company covenants and represents to the Holder that neither the Company nor any of its Subsidiaries has received, anticipates receiving, has any agreement to receive or has been given any promise to receive any consideration from the Holder or any other Person in connection with the transactions contemplated by the Exchange Documents.

 

f.           Issuance of Securities.  The issuance of the Shares and the Preferred Shares are duly authorized and upon issuance in accordance with the terms of the Exchange Documents shall be validly issued, fully paid and non-assessable and free from all taxes, liens, charges and other encumbrances with respect to the issue thereof.  Upon issuance or conversion in accordance with the Certificate of Designations, the Conversion Shares, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.

 

g.           Transfer Taxes.  As of the date of this Agreement, all share transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance of the Shares and the Preferred Shares to be exchanged with the Holder hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

 

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h.           Equity Capitalization.  Except as disclosed on Schedule 5(h): (i) none of the Company’s or any Subsidiary’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act; (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the in the Company’s filings with the SEC (the “SEC Documents”) which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The Company has furnished to the Holder true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto that have not been disclosed in the SEC Documents.

 

(i)           Shell Company Status.  The Company is not and has not been for a period of at least one (1) year prior to the date of this Agreement an issuer identified in Rule 144(i)(1) of the Securities Act.  The Company is, and has been for a period of at least 90 days, subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.

 

6.           Additional Acknowledgments.  The Holder and the Company confirm that the Company has not received any consideration for the transactions contemplated by this Agreement.  Pursuant to Rule 144 promulgated by the Commission pursuant to the Securities Act and the rules and regulations promulgated thereunder as such Rule 144 may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule 144, the holding period of the  Shares and the Preferred Shares (including the Conversion Shares upon conversion of the Preferred Shares) tacks back to December 17, 2014, the issue date of the Exchange Securities.  The Company agrees not to take a position contrary to this paragraph.

7.         Release by the Holder.

In consideration of the foregoing, Holder releases and discharges Company, Company’s officers, directors, principals, control persons, past and present employees, insurers, successors, and assigns (“Company Parties”) from all actions, cause of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, which against Company Parties ever had, now have or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever, whether or not known or unknown, arising under the Exchange Securities.  It being understood that this Section shall be limited in all respects to only matters arising under or related to the Exchange Securities and shall under no circumstances constitute a release, waiver or discharge with respect to the Securities, the Subscription Agreement, the related registration rights agreement or any Exchange Documents or limit the Holder from taking action for matters with respect to the Securities, the Subscription Agreement or any Exchange Document or events that may arise in the future.

 

 

 

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8.

	
Miscellaneous.

a.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

 

b.           Governing Law; Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by and construed under the laws of the State of New York without regard to the choice of law principles thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York located in The City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or therewith or with any transaction contemplated hereby or thereby, and hereby irrevocably waives any objection that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

c.           Severability.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

d.           Counterparts/Execution.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.

 

e.           Notices.  Any notice or communication permitted or required hereunder shall be in writing and shall be deemed sufficiently given if hand-delivered or sent (i) postage prepaid by registered mail, return receipt requested, or (ii) by facsimile, to the respective parties as set forth below, or to such other address as either party may notify the other in writing.

	  	
If to the Company, to:

	
Majesco Entertainment Company

4041- T Handley Road

S. Plainfield, NJ 07080

Attention: Chief Executive Officer

If to Holder, to the address set forth on the signature page of the Holder

 

f.           Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith.

 

 

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g.           Entire Agreement; Amendments.  This Agreement constitutes the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties.  This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance.  Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.

 

h.           Headings.  The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

i.           Independent Nature of the Holder’s Obligations and Rights.  The obligations of the Holder under the Exchange Documents are several and not joint with the obligations of any other holder of Warrants (each, an “Other Holder”) under any other agreement to exchange Warrants (each, an “Other Agreement”), and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holders under any Other Agreement. Nothing contained herein or in any Other Agreement, and no action taken by the Holder pursuant hereto or any Other Holder pursuant to any Other Agreement, shall be deemed to constitute the Holder or any Other Holder as, and the Company acknowledges that the Holder and the Other Holders do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holder and any Other Holder are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Exchange Documents, any other agreement or any matters, and the Company acknowledges that the Holder and the Other Holders are not acting in concert or as a group or entity, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Exchange Documents and any Other Agreement. The decision of the Holder to acquire the Securities pursuant to the Exchange Documents has been made by the Holder independently of any Other Holder. The Holder acknowledges that no Other Holder has acted as agent for the Holder in connection with the Holder making its acquisition hereunder and that no Other Holder will be acting as agent of the Holder in connection with monitoring the Holder’s Securities or enforcing its rights under the Exchange Documents.  The Company and the Holder confirm that the Holder has independently participated with the Company in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any of the Other Agreements, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose. To the extent that any of the Other Holders and the Company enter into the same or similar documents, all such matters are solely in the control of the Company, not the action or decision of the Holder, and would be solely for the convenience of the Company and not because it was required or requested to do so by the Holder or any Other Holder.  For clarification purposes only and without implication that the contrary would otherwise be true, the transactions contemplated by the Exchange Documents include only the transaction between the Company and the Holder and do not include any other transaction between the Company and any Other Holder.

 

j.           Most Favored Nation.  The Company hereby represents and warrants as of the date hereof and covenants and agrees from and after the date hereof that none of the terms offered to any Other Holder in any Other Agreement, is or will be more favorable to such Other Holder than those of the Holder and this Agreement.  If, and whenever on or after the date hereof, the Company desires to enter into an Other Agreement, then (i) the Company shall provide prior written notice thereof to the Holder and (ii) upon execution by the Company and such Other Holder of such Other Agreement, the terms and conditions of this Agreement, the Other Agreement and the Securities (other than any limitations on conversion set forth therein) shall be, without any further action by the Holder or the Company, automatically amended and modified in an economically and legally equivalent manner such that the Holder shall receive the benefit of the more favorable terms and/or conditions (as the case may be) set forth in such Other Agreement, provided that upon written notice to the Company at any time the Holder may elect not to accept the benefit of any such amended or modified term or condition, in which event the term or condition contained in this Agreement or the Securities (as the case may be) shall apply to the Holder as it was in effect immediately prior to such amendment or modification as if such amendment or modification never occurred with respect to the Holder.

 

 

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k.           Reporting Status.  Until the date on which none of the Securities are outstanding, the Company shall timely file all reports required to be filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Company shall continue to timely file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise no longer require or permit such filings.

 

l.           Listing.  The Company shall use reasonable best efforts to promptly secure the listing or designation for quotation (as the case may be) of all of the Shares and the Conversion Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) (but in no event later than the date of this Agreement) and shall use reasonable best efforts to maintain such listing or designation for quotation (as the case may be) of all Shares and Conversion Shares from time to time issuable under the terms of this Agreement on such national securities exchange or automated quotation system.  The Company shall maintain the Common Stock’s listing or authorization for quotation (as the case may be) on the Principal Market, The New York Stock Exchange, the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (each, an “Eligible Market”).  Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market.  The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 8(l).

 

m.           Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by the Holder in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities.  The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and if the Holder effects a pledge of Securities it shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any Other Agreement.  The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by the Holder.

(Signature Pages Follow)

 

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.

MAJESCO ENTERTAINMENT COMPANY

By:____________________________________

Name:

Title:

HOLDER:  [_________]

 

 

By:____________________________________

	  	
Election to Received Preferred Stock: (check here)__________

	  	
Election for Beneficial Ownership Limitation of the Series B Preferred Stock to immediately be 2.49% ______

	  	
Address for Notices:

	  	
__________________________________________

	  	
__________________________________________

	  	
__________________________________________

	  	
__________________________________________

	  	
Address for delivery of Securities:

	  	
__________________________________________

	  	
__________________________________________

	  	
__________________________________________

	  	
__________________________________________

 

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SCHEDULE A

	
 

 

 

 

 

 

Name and Address

of Holder

	
 

 

 

 

 

Number of Warrants to be Exchanged

	
 

 

 

 

Number of Shares of Common Stock to be Issued

	
 

 

 

 

 

 

Number of Shares of Series B Preferred Stock to be Issued

	  	  	  	  

 

 

  

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Exhibit A

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE

 

0% SERIES B CONVERTIBLE PREFERRED STOCK OF

 

MAJESCO ENTERTAINMENT COMPANY

 

I, Jesse Sutton, hereby certify that I am the Chief Executive Officer of Majesco Entertainment Company (the “Company”), a corporation organized and existing under the Delaware General Corporation Law (the “DGCL”), 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 Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Board on April 23, 2015, adopted the following resolutions creating a series of shares of Preferred Stock designated as 0% Series B Convertible Preferred Stock, none of which shares have been issued:

 

RESOLVED, that the Board designates the 0% Series B 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 Certificate of Incorporation as follows:

 

TERMS OF SERIES B 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 “0% Series B Convertible Preferred Stock” (the “Preferred Shares”).  The authorized number of Preferred Shares shall be 54,250 shares. Each Preferred Share shall have $0.001 par value (the “Par Value”). Capitalized terms not defined herein shall have the meaning as set forth in Section 23 below.

 

    2.      Liquidation. Upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder of Preferred Shares shall be entitled to receive, for each share thereof, out of assets of the Company legally available therefor, a preferential amount in cash equal to (and not more than) the Par Value.  All preferential amounts to be paid to the holders of Preferred Shares in connection with such liquidation, dissolution or winding up shall be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of (i) any other class or series of capital stock whose terms expressly provide that the holders of Preferred Shares should receive preferential payment with respect to such distribution (to the extent of such preference) and (ii) the Common Stock but not before any payment to holders of outstanding shares of the Company’s Series A Preferred Stock.  If upon any such distribution the assets of the Company shall be insufficient to pay the holders of the Preferred Shares (or the holders of any class or series of capital stock ranking on a parity with the  Preferred Shares as to distributions in the event of a liquidation, dissolution or winding up of the Company) the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full.  Any distribution in connection with the liquidation, dissolution or winding up of the Company, or any bankruptcy or insolvency proceeding, shall be made in cash to the extent possible.  Whenever any such distribution shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Company.

 

    3.      Dividends. In addition to Sections 5(a) and 11 below, from and after the first date of issuance of any 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 (“Dividends”) when and as declared by the Board, from time to time, in its sole discretion, which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in cash as if such Holders had converted the Preferred Shares into Common Stock (without regard to any limitations on conversion) 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 Common Stock.

 

  

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

 

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

 

Base Amount

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. To convert a Preferred Share 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 the share(s) of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by Section 4(c)(vi), within five (5) 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 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 the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(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.

 

(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.

 

  

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(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 three (3) 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 and (y) the Company shall pay in cash to such Holder on each day after such third (3rd) Trading Day that the issuance of such shares of Common Stock is not timely effected an amount equal to 1.5% of the product of (A) the aggregate number of shares of Common Stock not issued to such Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible date on which the  Company could have issued such shares of Common Stock to the Holder without violating Section 4(c).  In addition to the foregoing, if within three (3) 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 shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be), and if on or after such third (3rd) 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 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

 

(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 B PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(vi) THEREOF. THE NUMBER OF SHARES OF SERIES B PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES B PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(vi) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES B 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.  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 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 than 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). For any reason at any time, upon the written or oral request of a Holder, the Company shall within two (2) Business Days 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 Exchange Agreements.  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.

 

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

 

(a)                       Purchase Rights. In addition to any adjustments pursuant to Section 7 below, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of Common Stock (the “Purchase Rights”), then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares) held by such 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).

  

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(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 5(b) 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.

 

6.     Rights Upon Fundamental Transactions.  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 5 and 11, which shall continue to be receivable thereafter)) issuable upon the conversion of the Preferred Shares prior to such Fundamental Transaction, such shares of the Successor Entity (including its Parent Entity) or other consideration which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations), as adjusted in accordance with the provisions of this Certificate of Designations.  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.

 

    7.               Intentionally Omitted.

 

(a)           Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Sections 5 and 11, if the Company at any time on or after the Initial Issuance 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 Sections 5 and 11, if the Company at any time on or after the Initial Issuance 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 7(a) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7(a) 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.

 

  

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(b)           Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect any Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Board shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of such Holder, provided that no such adjustment pursuant to this Section 7(b) will increase the Conversion Price as otherwise determined pursuant to this Section 7, provided further that if such Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Board and such Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.

 

(c)           Calculations. All calculations under this Section 7 shall be made by rounding to the nearest one-hundred thousandth of a cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

    8.               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 100% of the Conversion Rate with respect to the Base Amount of each Preferred Share as of the Initial Issuance Date (assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Exchange Agreement 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) issuable pursuant to the terms of this Certificate of Designations from the Initial Issuance Date through the second anniversary of the Initial Issuance Date assuming (assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Exchange 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, 100% 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 Exchange Agreement assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Exchange 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 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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(i) Insufficient Authorized Shares.  If, notwithstanding Section 8(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 promptly 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 sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders or conduct a consent solicitation for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its commercially reasonable efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board to recommend to the stockholders that they approve such proposal.  Nothing contained in this Section 8 shall limit any obligations of the Company under any provision of the Exchange Agreement.  In the event that the Company is prohibited from issuing shares of Common Stock upon a conversion of any Preferred Share due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to such Holder of such Preferred Shares, the Company shall pay cash in exchange for the cancellation of such Preferred Shares convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the Closing Sale Price on the Trading Day immediately preceding the date such Holder delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to the Company and (ii) to the extent 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 Authorization Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of such Holder incurred in connection therewith.

 

    9.               Voting Rights. Except as otherwise expressly required by law, each holder of Preferred Shares shall be entitled to vote on all matters submitted to shareholders of the Company and shall be entitled to the number of votes for each Preferred Share owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited, equal to the number of shares of Common Stock such Preferred Shares are convertible into (voting as a class with Common Stock) based on a per share price of $1.40, but not in excess of the conversion limitations set forth in Section 4(e) herein. Except as otherwise required by law, the holders of Preferred Shares shall vote together with the holders of Common Stock on all matters and shall not vote as a separate class.

 

    10.               Intentionally Omitted.

 

    11.               Participation. In addition to any adjustments pursuant to Section 7(a), 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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    12.               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 Certificate of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the holders of at least 60% of the outstanding Preferred Shares (the “Required Holders”), voting together as a single class, the Company shall not: (a) amend or repeal any provision of, or add any provision to, its Certificate 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 Certificate of Incorporation or by merger, consolidation or otherwise; (b) increase or decrease (other than by conversion) the authorized number of Preferred Shares; (c) issue any Preferred Shares other than pursuant to the Exchange Agreement; or (d) without limiting any provision of Section 16, whether or not prohibited by the terms of the Preferred Shares, circumvent a right of the Preferred Shares.

 

    13.               Intentionally Omitted.

 

    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. The Company shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company’s compliance with the terms and conditions of this Certificate of Designations.

 

    16.               Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate 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).

 

 

  

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

 

    18.               Notices. The Company shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designations, unless otherwise provided herein, such notice must be in writing and shall be given in accordance with Section 8(e) of the Exchange 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.

 

    19.               Transfer of Preferred Shares. The 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 DGCL, the Certificate 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 DGCL. This provision is intended to comply with the applicable sections of the DGCL 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 DGCL, 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 DGCL and the Certificate of Incorporation.

 

22.               Dispute Resolution.

 

(a)      Disputes Over Closing Bid Price, Closing Sale Price, Conversion Price, VWAP or Fair Market Value.

  

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(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, a VWAP or fair market value (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or such applicable Holder (as the case may be) shall submit the dispute via facsimile (I) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or such Holder (as the case may be) or (II) if no notice gave rise to such dispute, at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable to resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price, such VWAP or such fair market value (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery 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 shall select an independent, reputable investment bank to resolve such dispute.

 

(ii) Such Holder and the Company shall each deliver to such investment bank (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 22(a) and (y) 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 (x) and (y) 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.

 

(b)      Disputes Over Arithmetic Calculation of the Conversion Rate.

 

(i) In the case of a dispute as to the arithmetic calculation of a Conversion Rate, the Company or such Holder (as the case may be) shall submit the disputed arithmetic calculation via facsimile (i) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or such Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable to resolve such disputed arithmetic calculation of such Conversion Rate by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or such Holder (as the case may be) of such disputed arithmetic calculation, then such Holder shall select an independent, reputable accountant or accounting firm to perform such disputed arithmetic calculation.

  

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(ii) Such Holder and the Company shall each deliver to such accountant or accounting firm (as the case may be) (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 22(a) and (y) written documentation supporting its position with respect to such disputed arithmetic calculation, 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 accountant or accounting firm (as the case may be) (the “Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Documentation”) (it being understood and agreed that if either such Holder or the Company fails to so deliver all of the Required Documentation by the Submission Deadline, then the party who fails to so submit all of the Required Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) with respect to such disputed arithmetic calculation and such accountant or accounting firm (as the case may be) shall perform such disputed arithmetic calculation based solely on the Required Documentation that was delivered to such accountant or accounting firm (as the case may be) prior to the Submission Deadline). Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested by such accountant or accounting firm (as the case may be), neither the Company nor such Holder shall be entitled to deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) in connection with such disputed arithmetic calculation of the Conversion Rate (other than the Required Documentation).

 

(iii) The Company and such Holder shall cause such accountant or accounting firm (as the case may be) to perform such disputed arithmetic calculation and notify the Company and such Holder of the results no later than ten (10) Business Days immediately following the Submission Deadline. The fees and expenses of such accountant or accounting firm (as the case may be) shall be borne solely by the Company, and such accountant’s or accounting firm’s (as the case may be) arithmetic calculation shall be final and binding upon all parties absent manifest error.

 

(c)      Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 22 constitutes an agreement to arbitrate between the Company and such Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that each party shall be entitled to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 22, (ii) a dispute relating to a Conversion Price includes, without limitation, disputes as to (1) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, and (2) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security 4, (iii) the terms of this Certificate of Designations and the Exchange Agreement 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 the Exchange Agreement, (iv) the terms of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis for the selected accountant’s or accounting firm’s performance of the applicable arithmetic calculation, (v) for clarification purposes and without implication that the contrary would otherwise be true, disputes relating to matters described in Section 22(a)  shall be governed by Section 22(a) and not by Section 22(b), (vi) such Holder (and only 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 in lieu of utilizing the procedures set forth in this Section 22 and (vii) 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 Section 22(a) or Section 22(b)).

  

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

 

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

 

(b)                        “Base 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 Unpaid Dividend Amount thereon as of such date of determination.

 

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

 

(d)                       “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.

 

(e)                       “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the 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.

 

(f)                       “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.

 

(g)                       “Conversion Price” means, with respect to each Preferred Share, as of any Conversion Date or other applicable date of determination, $1.40, subject to adjustment as provided herein.

 

(h)                       “Conversion Shares” means (i) the shares of Common Stock into which the Preferred Shares are convertible, and (ii) any capital stock into which such Conversion Shares shall have been changed or any share capital resulting from a reclassification of such common stock

 

(i)                        “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.

 

(j)                       “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the Over-the-Counter Bulletin Board, the OTCQB, the OTCQX or the Principal Market (or any successor thereto).

  

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(k)                       Exchange Agreement” means that certain Exchange Agreement by and among the Company and the initial holders of Preferred Shares, dated as of the Initial Issuance Date, as may be amended from time in accordance with the terms thereof.

 

(l)                        “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 unless immediately following the closing of such transaction or series of related transactions the Persons holding more than 50% of the Voting Stock of the Company prior to such closing continue to hold more than 50% of the Voting Stock of the Company following such closing, 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) assist any other Person in making a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) excluding any equity financing transaction in which shares of Voting Stock are issued, or (5) reorganize, recapitalize or reclassify 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 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

 

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

 

(n)                       “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.

 

(o)                        “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.

 

(p)                        “Principal Market” means The NASDAQ Capital Market.

 

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

 

(r)                       “Stated Value” shall mean $140.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the Initial Issuance Date with respect to the Preferred Shares.

 

(s)                       “Subsidiaries” shall have the meaning as set forth in the Exchange Agreement.

 

(t)                       “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.

  

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

 

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

 

(w)                        “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).

 

(x)                       “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function set to “weighted average” or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and 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, under the Exchange Agreement.

 

*  *  *  *  *

  

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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations of Series B Convertible Preferred Stock of Majesco Entertainment Company to be signed by its Chief Executive Officer on this 30th day of April, 2015.

 

	
  

	
By: /s/ Jesse Sutton

Name: Jesse Sutton

Title: Chief Executive Officer

 

  

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EXHIBIT I

MAJESCO ENTERTAINMENT COMPANY

CONVERSION NOTICE

 

Reference is made to the Certificate of Designations, Preferences and Rights of the Series B Convertible Preferred Stock of Majesco Entertainment Company (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 B Convertible Preferred Stock, $0.001 par value per share (the “Preferred Shares”), of Majesco Entertainment Company, a Delaware corporation (the “Company”), indicated below into shares of common stock, $0.001 par 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):                                                                                                                             

 

  

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EXHIBIT II

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs [                                ] to issue the above indicated number of shares of Common Stock in accordance with the Irrevocable Transfer Agent Instructions dated __________, 2015 from the Company and acknowledged and agreed to by [                              ].

 

MAJESCO ENTERTAINMENT COMPANY

By:                                                      

      Name:

      Title:

 

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