(Amendment No. ____)
This Information Statement
is being made available to the holders of record of the outstanding shares of common stock, $0.001 per value per share (the “Common
Stock”), and the Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), of MagneGas
Corporation, a Delaware corporation (the “Company”), as of the close of business on November 15, 2016 (the “Record
Date”), pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
as well as the holders of record of the outstanding shares of Common Stock and Series A Preferred Stock as of the date of each
of the potential “defective corporate acts” (each a “204 Record Date”) under Section 204 of the Delaware
General Corporation Law (the “DGCL”).
The purpose of the
enclosed Information Statement is to inform you of actions taken on November 21, 2016 by written consent of Global Alpha, LLC (the
“Majority Stockholder”). The Majority Stockholder is a privately owned company of which Carla Santilli (a member of
our Board of Directors) and Ruggero Santilli each own 50%. Ermanno Santilli (our Chief Executive Officer and a member of our Board
of Directors) and Luisa Ingargiola (our Chief Financial Officer and Secretary from 2007 through November 30, 2016, and a current
member of our Board of Directors) are voting members of the Majority Stockholder but have no equity interest. Each share of Series
A Preferred Stock has voting rights of 100,000 votes per share. The total aggregate number of votes for the Series A Preferred
Stock is 100 billion. As of the Record Date, and as of each 204 Record Date, the Majority Stockholder’s holdings represented
approximately 99% of the outstanding shares of our voting stock. The enclosed Information Statement shall be considered the notice
required under Section 228(e) of the DGCL and Section 204 of the DGCL.
On November 21, 2016,
the Board of Directors (the “Board”) submitted the following actions to the Majority Stockholder for ratification
and approval by consent in lieu of meeting, and the Majority Stockholder has ratified and approved the following actions:
1. An
amendment to the Company’s Certificate of Incorporation, as amended, to create “blank check” preferred stock.
2. The
adoption of resolutions that have been adopted by the Board to ratify each potential “defective corporate act” (as
defined in Section 204 of the DGCL) set forth in such resolutions and to approve the filing of certificates of validation with
the Secretary of State of the State of Delaware.
The Board is not soliciting
your consent or your proxy in connection with these actions, and no consents or proxies are being requested from stockholders.
Under Rule 14c-2 of the
Exchange Act, the actions taken by the Majority Stockholder will not be effective until 20 days after the enclosed Information
Statement is first mailed or otherwise delivered to our stockholders entitled to receive notice thereof.
INFORMATION STATEMENT
OF
MAGNEGAS CORPORATION
11885
44th Street North
Clearwater,
FL 33762
(727) 934-3448
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
PURPOSE OF INFORMATION STATEMENT
This Information Statement
advises stockholders of MagneGas Corporation (the “Company”) of action taken on November 21, 2016 by written consent
of Global Alpha, LLC (the “Majority Stockholder”). The Majority Stockholder is a privately owned company of which Carla
Santilli (a member of our Board of Directors) and Ruggero Santilli each own 50%. Ermanno Santilli (our Chief Executive Officer
and a member of our Board of Directors) and Luisa Ingargiola (our Chief Financial Officer and Secretary from 2007 through November
30, 2016, and a current member of our Board of Directors) are voting members of the Majority Stockholder but have no equity interest.
The Majority Stockholder holds a majority of the aggregate voting power of all outstanding shares of capital stock of the Company
entitled to vote on the matters set forth in this Information Statement as of November 15, 2016 (the “Record Date”),
and as of the date of each of the potential “defective corporate acts” (each a “204 Record Date”) under
Section 204 of the Delaware General Corporation Law (the “DGCL”).
OVERVIEW OF ACTION
S
On November 21, 2016,
the Board of Directors (the “Board”) submitted the following actions to the Majority Stockholder for ratification
and approval by consent in lieu of meeting, and the Majority Stockholder has ratified and approved the following actions:
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1.
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Creation of “Blank
Check” Preferred Stock
.
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Article FOURTH of the
Company’s Certificate of Incorporation, as amended, will be amended to provide that the rights and privileges of the Company’s
preferred stock shall be determined by resolution of the Board, prior to the issuance thereof and as set forth in a certificate
of designation relating to the preferred stock setting forth the designations, rights, preferences, powers and limitations of
each series of the preferred stock.
The term “blank
check” preferred stock refers to stock which gives the board of directors of a corporation the flexibility to create one
or more series of preferred stock, from time to time, and to determine the relative rights, preferences, powers and limitations
of each series, including, without limitation: (i) the number of shares in each series, (ii) whether a series will bear dividends
and whether dividends will be cumulative, (iii) the dividend rate and the dates of dividend payments, (iv) liquidation preferences
and prices, (v) terms of redemption, including timing, rates and prices, (vi) conversion rights, (vii) any sinking fund requirements,
(viii) any restrictions on the issuance of additional shares of any class or series, (ix) any voting rights and (x) any other
relative, participating, optional or other special rights, preferences, powers, qualifications, limitations or restrictions. Any
issuances of preferred stock by the Company will need to be approved the Board.
The Board believes that
the authorization of shares of preferred stock is desirable because it will provide the Company with increased flexibility of
action to meet future working capital and capital expenditure requirements through equity financings without the delay and expense
ordinarily attendant on obtaining further stockholder approvals. The Board believes that the authorization of blank check preferred
stock will improve the Company’s ability to attract needed investment capital, as various series of the preferred stock
may be customized to meet the needs of any particular transaction or market conditions.
The shares of preferred
stock to be authorized as “blank check” preferred stock pursuant to the amendment to the Certificate of Incorporation
could be issued, at the discretion of the Board, for any proper corporate purpose, without further action by the stockholders
other than as may be required by applicable law or as may be required by the terms of the Series A Preferred Stock. The Company
does not currently have any plan or proposal to issue any shares of preferred stock. Existing stockholders do not have preemptive
rights with respect to future issuance of preferred stock by the Company and their interest in the Company could be diluted by
such issuance with respect to earnings per share, voting, liquidation rights and book and market value.
The Board will have the
power to issue the shares of preferred stock in one or more classes or series with such preferences and voting rights as the Board
may fix in the resolution providing for the issuance of such shares. The issuance of shares of preferred stock could affect the
relative rights of the Company’s shares of common stock. Depending upon the exact terms, limitations and relative rights
and preferences, if any, of the shares of preferred stock as determined by the Board at the time of issuance, the holders of shares
of preferred stock may be entitled to a higher dividend rate than that paid on the common stock, a prior claim on funds available
for the payment of dividends, a fixed preferential payment in the event of liquidation and dissolution of the Company, redemption
rights, rights to convert their shares of preferred stock into shares of common stock, and voting rights which would tend to dilute
the voting control of the Company by the holders of shares of common stock. Depending on the particular terms of any series of
the preferred stock, holders thereof may have significant voting rights and the right to representation on the Company’s
Board. In addition, the approval of the holders of shares of preferred stock, voting as a class or as a series, may be required
for the taking of certain corporate actions, such as mergers.
The creation of “blank
check” preferred stock is not proposed in response to, or for the purpose of deterring, any current effort by a hostile
bidder to obtain control of the Company or as an anti-takeover measure.
The form of amendment
to the Company’s Certificate of Incorporation, as amended, to create “blank check” preferred is attached hereto
as
Annex A
.
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2.
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Ratification of potential
“defective corporate acts” (as defined in Section 204 of the DGCL) and the
filing of certificates of validation with the Secretary of State of the State of Delaware
.
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Background
:
The Board has determined
that it would be appropriate to ratify certain prior actions retroactive to the respective dates of such actions pursuant to Section 204
of the DGCL in order to avoid any uncertainty related to the effectiveness of each such action. The Board adopted resolutions
(attached hereto as
Annex B
and referred to herein as the “Ratification Resolutions”) identifying the possible
defective corporate acts under Section 204 of the DGCL, identifying the respective dates of each of the possible defective corporate
acts, identifying the number and type of shares of any putative stock issued and the date or dates upon which such putative shares
were purported to have been issued, setting forth the nature of the potential failures of authorization (as discussed herein),
and approving the ratification of certain prior actions retroactive to the respective dates of such actions.
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a.
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Amendment to the preferences
and rights of the Series A Preferred Stock.
On May 14, 2013, the Company filed Amendment
No. 1 to Certificate of Designations, Preferences and Rights of Series A Preferred Stock
with the Secretary of State of the State of Delaware to require the vote, or written
consent, of at least 51% of the outstanding shares of Series A Preferred Stock in order
to create, issue, repeal or modify any other series of the Company’s preferred
stock (the “Series A Amendment”). The terms and other information relating
to the Series A Amendment were set forth in detail in the Company’s Current Report
on Form 8-K filed with the SEC on May 16, 2013 and available to the public from the web
site maintained by the SEC at http://www.sec.gov.
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b.
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Issuance of Series B Convertible Preferred Stock.
On January 24, 2014, the Company filed
a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock with the Secretary
of State of the State of Delaware to establish the preferences and rights of the Series B Convertible Preferred Stock (the “Series
B Designation”). The terms and other information relating to the Series B Designation were set forth in detail in the Company’s
Current Report on Form 8-K filed with the SEC on January 22, 2014 (the as-filed Series B Designation was attached as an exhibit
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014) and
available to the public from the web site maintained by the SEC at http://www.sec.gov. On January 27, 2014, the Company issued
2,141.13280 shares of the Company's Series B Convertible Preferred Stock, which were convertible into a total of 2,676,416 shares
of Common Stock, to an institutional investor pursuant to that certain Securities Purchase Agreement dated January 21, 2014, which
shares are putative stock. As of the date of this Information Statement, all shares of Series B Convertible Preferred Stock have
been converted into common stock.
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c.
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Issuance of Series C Convertible Preferred Stock.
On March 26, 2014, the Company filed a
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock with the Secretary of
State of the State of Delaware to establish the preferences and rights of the Series C Convertible Preferred Stock (the “Series
C Designation”). The terms and other information relating to the Series C Designation were set forth in detail in the Company’s
Current Report on Form 8-K filed with the SEC on March 27, 2014 (the as-filed Series C Designation was attached as an exhibit to
the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014, filed with the SEC on May 12, 2014) and
available to the public from the web site maintained by the SEC at http://www.sec.gov. On March 28, 2014, the Company issued 2,100.5
shares of the Company's Series C Convertible Preferred Stock, which were convertible into a total of 1,448,276 shares of Common
Stock, to an institutional investor pursuant to that certain Securities Purchase Agreement dated March 24, 2014, which shares are
putative stock. As of the date of this Information Statement, all shares of Series C Convertible Preferred Stock have been converted
into common stock.
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d.
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Issuance of Series D-1 Convertible Preferred Stock.
On October 22, 2014, the Company filed
a Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock with the Secretary
of State of the State of Delaware to establish the preferences and rights of the Series D-1 Convertible Preferred Stock (the “Series
D-1 Designation”). The terms and other information relating to the Series D-1 Designation were set forth in detail in the
Company’s Current Report on Form 8-K filed with the SEC on October 21, 2014 (the as-filed Series D-1 Designation was attached
as an exhibit to the Company’s Registration Statement on Form S-3 filed with the SEC on November 26, 2014) and available
to the public from the web site maintained by the SEC at http://www.sec.gov. On October 24, 2014, the Company issued 1,060 shares
of the Company's Series D-1 Convertible Preferred Stock, which were convertible into a total of 1,060,000 shares of Common Stock,
to an institutional investor pursuant to that certain Securities Purchase Agreement dated October 21, 2014, which shares are putative
stock. As of the date of this Information Statement, all shares of Series D-1 Convertible Preferred Stock have been converted into
common stock.
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e.
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Issuance of Series D-2 Convertible Preferred Stock.
On October 22, 2014, the Company filed
a Certificate of Designation of Preferences, Rights and Limitations of Series D-2 Convertible Preferred Stock with the Secretary
of State of the State of Delaware to establish the preferences and rights of the Series D-2 Convertible Preferred Stock (the “Series
D-2 Designation”). The terms and other information relating to the Series D-2 Designation were set forth in detail in the
Company’s Current Report on Form 8-K filed with the SEC on October 21, 2014 (the as-filed Series D-2 Designation was attached
as an exhibit to the Company’s Registration Statement on Form S-3 filed with the SEC on November 26, 2014) and available
to the public from the web site maintained by the SEC at http://www.sec.gov. On October 24, 2014, the Company issued 940 shares
of the Company's Series D-2 Convertible Preferred Stock, which were convertible into a total of 940,000 shares of Common Stock,
to an institutional investor pursuant to that certain Securities Purchase Agreement dated October 21, 2014, which shares are putative
stock. As of the date of this Information Statement, all shares of Series D-2 Convertible Preferred Stock have been converted into
common stock.
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Potential Defective Corporate Acts
:
Our Certificate of Incorporation,
as amended, does not provide for “blank check” preferred stock, which means the Board cannot establish or amend the
preferences, powers, designations and other special rights of the Corporation’s preferred stock without the vote of a majority
of the aggregate voting power of all outstanding shares of capital stock of the Company entitled to vote. In addition, the Series
A Amendment, Series B Designation, Series C Designation, Series D-1 Designation and Series D-2 Designation were each incorrectly
filed with the Secretary of State of Delaware as certificates of designations, preferences and rights in accordance with Section
151 of the DGCL instead of as certificates of amendment to the Company’s Certificate of Incorporation in accordance with
Section 242 of the DGCL.
After consultation and
investigation with outside counsel, our Board determined that each of the Series A Amendment, Series B Designation, Series C Designation,
Series D-1 Designation and Series D-2 Designation may be void or voidable by reason of the following potential “failures
of authorization” (as defined in Section 204 of the DGCL):
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(i)
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each of the Series A Amendment, Series B Designation,
Series C Designation, Series D-1 Designation and Series D-2 Designation was not approved by holders of a majority of the aggregate
voting power of all outstanding shares of capital stock of the Company entitled to vote.
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Accordingly, because the
foregoing may be deemed a failure of authorization, it could be argued that the Company would not have been authorized to execute,
acknowledge and file each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation and Series
D-2 Designation with the Delaware Secretary of State, or issuance any shares of putative stock pursuant thereto. If it is
concluded that the Company was not so authorized, each of the Series A Amendment, Series B Designation, Series C Designation,
Series D-1 Designation and Series D-2 Designation, and the resulting issuances of putative stock, would be void or voidable under
the DGCL.
Board Approval and Ratification
:
Section 204 of the
DGCL, which is a statutory provision that became effective on April 1, 2014, provides that defects in stock issuances and
other corporate acts render such stock and acts voidable and not void. Prior to the adoption of Section 204 of the
DGCL, it was unclear whether under Delaware law defects in stock issuances or other corporate acts would render the stock or such
other corporate acts void, and thus incapable of being validated or ratified, or merely voidable, and thus susceptible to cure
by ratification. Section 204 allows the board of directors of a company, by following specified procedures, to validate
a defective corporate act retroactive to the date the defective corporate act was originally taken.
On November 21, 2016,
our Board determined that it would be appropriate to ratify each of the Series A Amendment, Series B Designation, Series C Designation,
Series D-1 Designation and Series D-2 Designation, and the resulting issuances of putative stock, pursuant to DGCL Section 204
in order to avoid any uncertainty related to each of their effectiveness.
Our Board adopted the
Ratification Resolutions (attached hereto as
Annex B
) identifying each of the following:
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(a)
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the Series A Amendment as a possible defective corporate act under Section 204 of the DGCL,
identifying May 14, 2013 at 4:32 p.m. (the date and time the Series A Amendment was filed with the Delaware Secretary of State)
as the time of the possible defective corporate act, setting forth the nature of the potential failures of authorization (as discussed
above), and approving the ratification of the Series A Amendment.
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(b)
|
the Series B Designation as a possible defective corporate act under Section 204 of the DGCL, identifying
January 24, 2014 at 4:11 p.m. (the date and time the Series B Designation was filed with the Delaware Secretary of State) as the
time of the possible defective corporate act, setting forth the nature of the potential failures of authorization (as discussed
above), approving the ratification of the Series B Designation, and approving the ratification of the issuance of 141.13280 shares
of the Company's Series B Convertible Preferred Stock, which were convertible into a total of 2,676,416 shares of Common Stock,
on January 27, 2014, all of which shares are putative stock.
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(c)
|
the Series C Designation as a possible defective corporate act under Section 204 of the DGCL, identifying
March 26, 2014 at 11:02 a.m. (the date and time the Series C Designation was filed with the Delaware Secretary of State) as the
time of the possible defective corporate act, setting forth the nature of the potential failures of authorization (as discussed
above), approving the ratification of the Series C Designation, and approving the ratification of the issuance of 2,100.5 shares
of the Company's Series C Convertible Preferred Stock, which were convertible into a total of 1,448,276 shares of Common Stock,
on March 26, 2014, all of which shares are putative stock.
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(d)
|
the Series D-1 Designation as a possible defective corporate act under Section 204 of the
DGCL, identifying October 22, 2014 at 6:05 p.m. (the date and time the Series D-1 Designation was filed with the Delaware Secretary
of State) as the time of the possible defective corporate act, setting forth the nature of the potential failures of authorization
(as discussed above), approving the ratification of the Series D-1 Designation, and approving the ratification of the issuance
of 1,060 shares of the Company's Series D-1 Convertible Preferred Stock, which were convertible into a total of 1,060,000 shares
of Common Stock, on October 24, 2014, all of which shares are putative stock.
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(e)
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the Series D-2 Designation as a possible defective corporate act under Section 204 of the
DGCL, identifying October 22, 2014 at 6:12 p.m. (the date and time the Series D-2 Designation was filed with the Delaware Secretary
of State) as the time of the possible defective corporate act, setting forth the nature of the potential failures of authorization
(as discussed above), approving the ratification of the Series D-2 Designation, and approving the ratification of the issuance
of 940 shares of the Company's Series D-2 Convertible Preferred Stock, which were convertible into a total of 940,000 shares of
Common Stock, on October 24, 2014, all of which shares are putative stock.
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Our Board further declared
the ratification advisable and in the best interest of the Company, and recommended that the Majority Stockholder adopt the Ratification
Resolutions.
Our Board further directed
that this Information Statement be provided (i) to all stockholders of the Company as of the Record Date, and (ii) to
all stockholders of the Company of record as of the time of each possible defective corporate act other than those whose identities
or addresses could not be determined from our corporate records. Our Board directed that this Information Statement (i) contain
a copy of the Ratification Resolutions, and (ii) contain a statement that any claim that the possible defective corporate
act or putative stock ratified pursuant to the Ratification Resolutions is void or voidable due to the identified failures of
authorizations, or that the Delaware Court of Chancery should declare in its discretion that the ratification set forth in the
Ratification Resolutions pursuant to Section 204 of the DGCL not be effective or be effective only on certain conditions,
must be brought within 120 days from the validation effective time.
Reasons for the Ratifications
:
Our Board approved the
ratification of each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation and Series
D-2 Designation, and the resulting issuances of putative stock, and declared the ratification of each of the Series A Amendment,
Series B Designation, Series C Designation, Series D-1 Designation and Series D-2 Designation, and the resulting issuances of
putative stock, to be advisable and in the best interest of the Company and its stockholders, and recommended that the Majority
Stockholder vote to adopt the Ratification Resolutions and approve the ratification of each of the Series A Amendment, Series
B Designation, Series C Designation, Series D-1 Designation and Series D-2 Designation, and the resulting issuances of putative
stock.
Our Board determined that
it would be appropriate to ratify each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation
and Series D-2 Designation pursuant to DGCL Section 204 in order to avoid any uncertainty related to the effectiveness of
each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation and Series D-2 Designation
and the validity of the issuances of putative stock.
Filing of Certificates of Validation
:
We will file certificates
of validation with respect to each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation
and Series D-2 Designation with the Delaware Secretary of State. The effective time of the filing of each of the certificates
of validation will be the applicable validation effective time with respect to each such ratification within the meaning of Section 204
of the DGCL.
Effect of Ratification;
Retroactive Validation
:
At each of the respective
validation effective times, each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation
and Series D-2 Designation and the resulting putative stock issuances will no longer be deemed void or voidable as a result of
the failures of authorization described above, and the effect of each of the ratifications will be retroactive to the time of
the original filing of each of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation and
Series D-2 Designation.
Time Limitations on Legal Challenges
to the Ratification
:
Under the DGCL, any claim
that the possible defective corporate act or putative stock ratified pursuant to the Ratification Resolutions is void or voidable
due to the identified failures of authorizations, or that the Delaware Court of Chancery should declare in its discretion that
the ratification set forth in the Ratification Resolutions pursuant to Section 204 of the DGCL not be effective or be effective
only on certain conditions, must be brought within 120 days from the validation effective time.
The Consequences
if the Ratifications were Not Approved
:
If the Ratification Resolutions
were not approved by the Majority Stockholder, we would not be able to file certificates of validation in order to ratify each
of the Series A Amendment, Series B Designation, Series C Designation, Series D-1 Designation and Series D-2 Designation pursuant
to DGCL Section 204. The failure to ratify each of the Series A Amendment, Series B Designation, Series C Designation,
Series D-1 Designation and Series D-2 Designation under Section 204 could result in claims that each of the Series A Amendment,
Series B Designation, Series C Designation, Series D-1 Designation and Series D-2 Designation had not been validly approved by
our stockholders and that the shares of putative stock had not been validly issued.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business
on the Record Date, there were 52,139,304 shares of our Common Stock outstanding. At the close of business on each applicable 204
Record Date, there were (i) 20,115,019 shares of our Common Stock outstanding on May 14, 2013, (ii) 23,259,109 shares of our Common
Stock outstanding on January 24, 2014, (iii) 28,451,263 shares of our Common Stock outstanding on March 26, 2014, and (iv) 33,581,757
shares of our Common Stock outstanding on October 22, 2014.
At the close of business
on the Record Date and each applicable 204 Record Date, there were 1,000,000 shares of Series A Preferred Stock outstanding. All
1,000,000 shares of Series A Preferred Stock are held by the Majority Stockholder. Each share of Series A Preferred Stock has
voting rights of 100,000 votes per share. The total aggregate number of votes for the Series A Preferred Stock is 100 billion.
As of the Record Date and each applicable 204 Record Date, the Majority Stockholder’s holdings represented approximately
99% of the outstanding shares of our voting stock, all of which approved and adopted the matters set forth herein.
The Board is not soliciting
your consent or your proxy in connection with these actions, and no consents or proxies are being requested from stockholders.
The vote that was required to approve the transactions described in this Information Statement was the affirmative vote of the
holders of a majority of the aggregate voting power of all outstanding shares of capital stock of the Company entitled as of the
Record Date and as of each applicable 204 Record Date to vote on such matters.
Section 228 of the
Delaware General Corporation Law and Article II, Section 11 of the Company’s By-Laws, as amended, provide that stockholders
of the Company may act by written consent without a meeting if such stockholders hold the number of shares representing not less
than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled
to vote thereon were present and voted.
EFFECTIVENESS OF CORPORATE ACTIONS
Under Rule 14c-2 of the
Securities Exchange Act of 1934, as amended, the actions taken by the Majority Stockholder will not be effective until 20 days
after this Information Statement is first mailed or otherwise delivered to our stockholders entitled to receive notice thereof.
INTEREST OF CERTAIN PERSONS IN OR OPPOSITION
TO MATTERS ACTED UPON
No officer or director
has any substantial interest in the matters acted upon by our Board of Directors and the Majority Stockholder, other than in their
roles as an officer or director or Majority Shareholder.
ADDITIONAL INFORMATION
The Company is subject
to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information
including annual and quarterly reports on Form 10-K and 10-Q with the Commission. Reports and other information filed by the Company
can be inspected and copied at the public reference facilities maintained at the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549. Copies of such material can be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a web site on the Internet
(http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file
electronically with the Commission through the Electronic Data Gathering, Analysis and Retrieval System (also known as “EDGAR”).
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS
SHARING AN ADDRESS
We will send only one
Information Statement and other corporate mailings to stockholders who share a single address unless we received contrary instructions
from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and
postage costs. However, the Company will deliver promptly upon written or oral request a separate copy of the Information Statement
to a stockholder at a shared address to which a single copy of the Information Statement was delivered. You may make such a written
or oral request by (a) sending a written notification stating (i) your name, (ii) your shared address and (iii) the address to
which the Company should direct the additional copy of Information Statement, to the Company at Corporate Secretary, 11885 44th
Street North, Clearwater, FL 33762, telephone: (727) 934-3448.
If multiple stockholders
sharing an address have received one copy of the Information Statement or any other corporate mailing and would prefer the Company
to mail each stockholder a separate copy of future mailings, you may send notification to or call the Company’s principal
executive offices. Additionally, if current stockholders with a shared address received multiple copies of the Information Statement
or other corporate mailings and would prefer the Company to mail one copy of future mailings to stockholders at the shared address,
notification of such request may also be made by mail or telephone to the Company’s principal executive offices.
ANNEX A
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of Delaware (the “
Corporation
”),
does hereby certify that:
FIRST: The name
of the Corporation is MagneGas Corporation.
SECOND: This Certificate
of Amendment (this “
Certificate of Amendment
”) amends the provisions of the Corporation’s Certificate
of Incorporation filed with the Secretary of State on December 9, 2005 as amended to date (as amended, the “
Certificate
of Incorporation
”).
THIRD: That the
Board of Directors of the Corporation (the “
Board
”), by unanimous written consent duly adopted resolutions
in accordance with Sections 141(f) and 242 of the General Corporation Law of the State of Delaware (the “
DGCL
”)
(i) proposing an amendment to the Certificate of Incorporation, (ii) declaring such amendment to be advisable and in the best
interests of the Corporation, and (iii) directing that such amendment be submitted to and be considered by the stockholders of
the Corporation entitled to vote thereon for approval by the affirmative vote of such stockholders.
FOURTH: The Article
numbered FOURTH of the Certificate of Incorporation is hereby amended by deleting the first paragraph of said Article FOURTH in
its entirety and replacing it with the following:
“The total number of shares of stock which the
Corporation has authority to issue is One Hundred Million (100,000,000) shares, which shall consist of (i) 90,000,000 shares of
common stock, $0.001 par value per share and (ii) 10,000,000 shares of preferred stock, $0.001 par value per share (the “Preferred
Stock”). The Preferred Stock shall have attached thereto all such rights and privileges as may be determined by resolution
of the Board of Directors of the Corporation, prior to the issuance thereof and as set forth in a Certificate of Designation relating
to the Preferred Stock to be executed and filed pursuant to Section 151(g) of the General Corporation Law of the State of Delaware.”
FIFTH: That in lieu of a meeting and vote of the stockholders, the stockholders of the Corporation have given written consent to said
amendment in accordance with the provisions of Section 228 of the DGCL.
SIXTH: That
the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 228 and 242 of the DGCL.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Corporation has
caused this Certificate of Amendment to be signed by its officer thereunto duly authorized this ______ day of ____________, 201_.
|
MAGNEGAS CORPORATION
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
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Title:
|
ANNEX B
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
WHEREAS
, on May 14, 2013 MagneGas Corporation
(the “
Company
”) filed Amendment No. 1 to Certificate of Designations, Preferences and Rights of Series A Preferred
Stock (the “
Series A Amendment
”), to require the vote, or written consent, of at least 51% of the outstanding
shares of Series A Preferred Stock in order to create, issue, repeal or modify any other series of the Company’s preferred
stock;
WHEREAS
, on January 24, 2014 the Company
filed a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (the “
Series
B Amendment
”), establishing the preferences and rights of the Series B Convertible Preferred Stock;
WHEREAS
, on January 27, 2014, the Company
issued 2,141.13280 shares of the Company's Series B Convertible Preferred Stock, which were convertible into a total of 2,676,416
shares of Common Stock, to an institutional investor pursuant to that certain Securities Purchase Agreement dated January 21,
2014, which shares are putative stock;
WHEREAS
, on March 26, 2014 the Company
filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “
Series
C Amendment
”), establishing the preferences and rights of the Series C Convertible Preferred Stock;
WHEREAS
, on March 28, 2014, the Company
issued 2,100.5 shares of the Company's Series C Convertible Preferred Stock, which were convertible into a total of 1,448,276
shares of Common Stock, to an institutional investor pursuant to that certain Securities Purchase Agreement dated March 24, 2014,
which shares are putative stock;
WHEREAS
, on October 22, 2014 the Company
filed a Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock (the “
Series
D-1 Amendment
”), establishing the preferences and rights of the Series D-1 Convertible Preferred Stock;
WHEREAS
, on October 22, 2014 the Company
filed a Certificate of Designation of Preferences, Rights and Limitations of Series D-2 Convertible Preferred Stock (the “
Series
D-2 Amendment
”), establishing the preferences and rights of the Series D-2 Convertible Preferred Stock;
WHEREAS
, on October 24, 2014, the Company
issued 1,060 shares of the Company's Series D-1 Convertible Preferred Stock, which were convertible into a total of 1,060,000
shares of Common Stock, to an institutional investor pursuant to that certain Securities Purchase Agreement dated October 21,
2014, which shares are putative stock;
WHEREAS
, on October 24, 2014, the Company
issued 940 shares of the Company's Series D-2 Convertible Preferred Stock, which were convertible into a total of 940,000 shares
of Common Stock, to an institutional investor pursuant to that certain Securities Purchase Agreement dated October 21, 2014, which
shares are putative stock;
WHEREAS,
each of the Series A Amendment,
Series B Amendment, Series C Amendment, Series D-1 Amendment and Series D-2 Amendment was not approved by holders of a majority
of the aggregate voting power of all outstanding shares of capital stock of the Company entitled to vote thereon;
WHEREAS,
the Board has determined that
each of the Series A Amendment, Series B Amendment, Series C Amendment, Series D-1 Amendment and Series D-2 Amendment as so filed
is an inaccurate record of the corporate action inasmuch as each was incorrectly filed with the Secretary of State of Delaware
as a Certificate of Designation, or in the case of the Series A Amendment, an amendment to a Certificate of Designation, in accordance
with Section 151 of the General Corporation Law of the State of Delaware (the “
DGCL
”) instead of as a certificate
of amendment to the Certificate of Incorporation of the Company in accordance with Section 242 of the DGCL, and therefore each
of the Series A Amendment, Series B Amendment, Series C Amendment, Series D-1 Amendment and Series D-2 Amendment requires correction
as permitted by the DGCL;
WHEREAS, any claim that any of the potentially
defective corporate acts or putative stock referenced herein being ratified under Section 204 of the DGCL is void or voidable
due to the identified potential failure of authorization, or that the Delaware Court of Chancery should declare in its discretion
that the ratification thereof in accordance with Section 204 of the DGCL not be effective or be effective only on certain conditions
must be brought within 120 days from the relevant validation effective time; and
WHEREAS
, the Board of Directors (the
“
Board
”) believes it is in the best interest of the Company and the stockholders of the Company (each a “
Stockholder
”)
to ratify certain corporate acts in accordance with Section 204(b)(1) of the DGCL.
NOW, THEREFORE, BE IT
|
RESOLVED
:
|
That the defective corporate acts to be ratified by the
resolutions set forth below are:
|
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·
|
the signing,
filing and effectiveness of each of the Series A Amendment, Series B Amendment, Series C Amendment, Series D-1 Amendment and
Series D-2 Amendment with the Secretary of State of the State of Delaware.
|
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RESOLVED
:
|
That the date of the filing and effectiveness of (i) the
Series A Amendment was May 14, 2013 at 4:32 p.m.; (ii) the Series B Amendment was January 24, 2014 at 4:11 p.m.; (iii) the Series
C Amendment was March 26, 2014 at 11:02 a.m.; (iv) the Series D-1 Amendment was October 22, 2014 at 6:05 p.m. and (v) the Series
D-2 Amendment was October 22, 2014 at 6:12 p.m.
|
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RESOLVED
:
|
That the nature of the failure of authorization, with respect
to each of the Series A Amendment, Series B Amendment, Series C Amendment, Series D-1 Amendment and Series D-2 Amendment, is that
each of the Series A Amendment, Series B Amendment, Series C Amendment, Series D-1 Amendment and Series D-2 Amendment was not
approved by holders of a majority of the aggregate voting power of all outstanding shares of capital stock of the Company entitled
to vote.
|
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RESOLVED
:
|
That (i) the Series B Amendment involved the issuance of
141.13280 shares of the Company's Series B Convertible Preferred Stock, which were convertible into a total of 2,676,416 shares
of Common Stock, on January 27, 2014; (ii) the Series C Amendment involved the issuance of 2,100.5 shares of the Company's Series
C Convertible Preferred Stock, which were convertible into a total of 1,448,276 shares of Common Stock, on March 26, 2014; (iii)
the Series D-1 Amendment involved the issuance of 1,060 shares of the Company's Series D-1 Convertible Preferred Stock, which
were convertible into a total of 1,060,000 shares of Common Stock, on October 24, 2014; and (iv) the Series D-2 Amendment involved
the issuance of 940 shares of the Company's Series D-2 Convertible Preferred Stock, which were convertible into a total of 940,000
shares of Common Stock, on October 24, 2014, all of which shares are putative stock.
|
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RESOLVED
:
|
That the Board approves the ratification of each of the
Series A Amendment, Series B Amendment, Series C Amendment, Series D-1 Amendment and Series D-2 Amendment, and issuance of putative
stock, pursuant to Section 204 of the DGCL.
|
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RESOLVED
:
|
That, in accordance with Section 204 of the DGCL, these
ratification resolutions (the “
Ratification Resolutions
”) be submitted to the Stockholders for approval, and
the Board recommends that the Stockholders adopt these Ratification Resolutions.
|
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RESOLVED
:
|
That, subject to and following approval of the Stockholders
pursuant to Section 204 of the DGCL, the Company shall, pursuant to and in accordance with Section 204 of the DGCL, file certificates
of validation, each in the form attached hereto (each, a “
Certificate of Validation
”), in accordance with Section
103 of the DGCL, with the Secretary of State of the State of Delaware at such time as any of the officers of the Company deems
advisable.
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RESOLVED:
|
That the record date (the “
Record Date
”)
for determining the stockholders of the Company entitled to vote on these Ratification Resolutions shall be the close of business
on November 15, 2016.
|
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RESOLVED:
|
That, any time before the
validation effective time in respect of the ratification of the defective corporate acts
set forth herein, the Board may abandon such ratification, as the case may be, before
or after stockholder approval thereof, without further action by the stockholders.
|
CERTIFICATE OF VALIDATION
OF
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
MagneGas Corporation
Pursuant to Section 204 of the
General Corporation Law of the State of Delaware
MagneGas Corporation (the
“
Company
”), a corporation organized and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the “
DGCL
”), hereby certifies as follows:
1. On
November 21, 2016, the board of directors of the Company, acting by unanimous written consent in lieu of a meeting, and on November
21, 2016, the stockholders of the Company, acting by majority written consent in lieu of a meeting in accordance with the provisions
of Section 228 of the DGCL, ratified and approved resolutions in accordance with the provisions of Section 204 of the DGCL in
order to, among other things, ratify and validate certain defective corporate acts, including the signing of that certain Amendment
No. 1 to Certificate of Designations, Preferences and Rights of Series A Preferred Stock of the Company filed with the Secretary
of State of the State of Delaware on May 14, 2013 (the “Certificate of Amendment”).
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a.
|
The defective corporate act that
is the subject of this Certificate of Validation is the valid signing, filing and effectiveness
of the Certificate of Amendment.
|
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b.
|
The date of the defective corporate
act is May 14, 2013.
|
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c.
|
That the nature of the failure of
authorization, with respect to the Certificate of Amendment, is that the Certificate
of Amendment was not approved by holders of a majority of the aggregate voting power
of all outstanding shares of capital stock of the Company entitled to vote thereon.
|
2. Attached
as Exhibit A hereto is the corrected Certificate of Amendment of Certificate of Incorporation of the Company (the “Corrected
Certificate of Amendment”), which corrects Amendment No. 1 to Certificate of Designations, Preferences and Rights of Series
A Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on May 14, 2013, and which contains
all
of the information required to be included under Section 242 of the DGCL to give effect to the
defective corporate
acts described above.
3. That
effective upon the filing of this Certificate of Validation, the Corrected Certificate of Amendment be validated as of 12:01 a.m.
(local time in Wilmington, Delaware) on May 14, 2013.
IN WITNESS
WHEREOF
, the Company has caused this Certificate of Validation to be executed by its duly authorized officer on this __ day
of _____, 201_.
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MagneGas Corporation
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Luisa Ingargiola
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Chief Financial Officer
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Exhibit A
STATE OF DELAWARE
CORRECTED CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of Delaware (the “
Corporation
”),
does hereby certify that:
FIRST: The name of the Corporation is MagneGas Corporation.
SECOND: This Certificate of Amendment (this “
Certificate of Amendment
”) amends the provisions of the Corporation’s
Certificate of Incorporation filed with the Secretary of State on December 9, 2005, as amended to date (as amended, the “
Certificate
of Incorporation
”).
THIRD: Section 5 (Vote to Change the Terms of or Issue Series A Preferred Stock) under the heading “Series
A Preferred Stock” in Article Fourth of the Certificate of Incorporation is hereby deleted and replaced in its entirety
with the following:
“Section 5. Vote to Change the Terms
of or Issue Series A Preferred Stock. The affirmative vote at a meeting duly called for such purpose, or the written consent without
a meeting, of the holders of not less than fifty-one percent (51%) of the then outstanding shares of Series A Preferred Stock
shall be required for (i) any change to the Corporation’s Articles of Incorporation that would amend, alter, change or repeal
any of the preferences, limitations or relative rights of the Series A Preferred Stock, (ii) any issuance of additional shares
of Series A Preferred Stock or (iii) the creation, issuance, repeal or modification of any other series of preferred stock.”
CERTIFICATE OF VALIDATION
OF
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
MagneGas Corporation
Pursuant to Section 204 of the
General Corporation Law of the State of Delaware
MagneGas Corporation (the
“
Company
”), a corporation organized and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the “
DGCL
”), hereby certifies as follows:
1. On
November 21, 2016, the board of directors of the Company, acting by unanimous written consent in lieu of a meeting, and on November
21, 2016, the stockholders of the Company, acting by majority written consent in lieu of a meeting in accordance with the provisions
of Section 228 of the DGCL, ratified and approved resolutions in accordance with the provisions of Section 204 of the DGCL in
order to, among other things, ratify and validate certain defective corporate acts, including the signing of that certain Certificate
of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock of the Company filed with the Secretary
of State of the State of Delaware on January 24, 2014 (the “Certificate of Amendment”).
|
a.
|
The defective corporate act that
is the subject of this Certificate of Validation is the valid signing, filing and effectiveness
of the Certificate of Amendment.
|
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b.
|
The date of the defective corporate
act is January 24, 2014.
|
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c.
|
On January 27, 2014, the Company
issued 2,141.13280 shares of the Company's Series B Convertible Preferred Stock, which
were convertible into a total of 2,676,416 shares of Common Stock, to an institutional
investor pursuant to that certain Securities Purchase Agreement dated January 21, 2014,
which shares are putative stock.
|
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d.
|
That the nature of the failure of
authorization, with respect to the Certificate of Amendment, is that the Certificate
of Amendment was not approved by holders of a majority of the aggregate voting power
of all outstanding shares of capital stock of the Company entitled to vote thereon.
|
2. Attached
as Exhibit A hereto is the corrected Certificate of Amendment of Certificate of Incorporation of the Company (the “Corrected
Certificate of Amendment”), which corrects Certificate of Designation of Preferences, Rights and Limitations of Series B
Convertible Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on January 24, 2014, and which
contains all
of the information required to be included under Section 242 of the DGCL to give effect to the
defective
corporate acts described above.
3. That
effective upon the filing of this Certificate of Validation, the Corrected Certificate of Amendment be validated as of 12:01 a.m.
(local time in Wilmington, Delaware) on January 24, 2014.
IN WITNESS
WHEREOF
, the Company has caused this Certificate of Validation to be executed by its duly authorized officer on this __ day
of _____, 201_.
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MagneGas
Corporation
|
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Luisa Ingargiola
|
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Chief Financial Officer
|
Exhibit A
STATE OF DELAWARE
CORRECTED CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of Delaware (the “
Corporation
”),
does hereby certify that:
FIRST:
The name of the Corporation is MagneGas Corporation.
SECOND:
This Certificate of Amendment (this “
Certificate of Amendment
”) amends the provisions of the Corporation’s
Certificate of Incorporation filed with the Secretary of State on December 9, 2005 as amended to date (as amended, the “
Certificate
of Incorporation
”).
THIRD:
The Certificate of Incorporation is amended to create a new series of shares of Preferred Stock,
designated as “Series B Convertible Preferred Stock”, by adding the following additional paragraphs at the end of
Article 4 of the Certificate of Incorporation:
“
Series B Convertible Preferred Stock
:
Series B Convertible Preferred Stock is created
out of the 10,000,000 authorized shares of the capital preferred stock of the corporation, such Series B Convertible Preferred
Stock to consist of 2,142 shares, $0.001 par value per share, which shall have the following preferences, powers, designations
and other special rights:
Section 1
.
Definitions
. For
the purposes hereof, the following terms shall have the following meanings:
“
Affiliate
” means any Person
that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with
a Person, as such terms are used in and construed under Rule 405 of the Securities Act.
“
Alternate Consideration
”
shall have the meaning set forth in Section 7(e).
“
Base Conversion Price
”
shall have the meaning set forth in Section 7(b).
“
Beneficial Ownership Limitation
”
shall have the meaning set forth in Section 6(d).
“
Business Day
” means any
day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other governmental action to close.
“
Buy-In
” shall have the
meaning set forth in Section 6(c)(iv).
“
Change of Control Transaction
”
means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through
legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 33% of the voting
securities of the Corporation (other than by means of conversion or exercise of Preferred Stock and the Securities issued together
with the Preferred Stock), (b) the Corporation merges into or consolidates with any other Person, or any Person merges into or
consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately
prior to such transaction own less than 66% of the aggregate voting power of the Corporation or the successor entity of such transaction,
(c) the Corporation sells or transfers all or substantially all of its assets to another Person and the stockholders of the Corporation
immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after
the transaction, (d) a replacement at one time or within a one year period of more than one-half of the members of the Board of
Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue
Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of
Directors was approved by a majority of the members of the Board of Directors who are members on the Original Issue Date), or
(e) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing
for any of the events set forth in clauses (a) through (d) above.
“
Closing
” means the closing
of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.
“
Closing Date
” means the
Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto and all
conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the Corporation’s obligations
to deliver the Securities have been satisfied or waived.
“
Commission
” means the United
States Securities and Exchange Commission.
“
Common Stock
” means the
Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“
Common Stock Equivalents
”
means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“
Conversion Amount
” means
the sum of the Stated Value at issue.
“
Conversion Date
” shall
have the meaning set forth in Section 6(a).
“
Conversion Price
” shall
have the meaning set forth in Section 6(b).
“
Conversion Shares
” means,
collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms
hereof.
“
Conversion Shares Registration Statement
”
means a registration statement that registers the resale of all Conversion Shares of the Holders, who shall be named as “selling
stockholders” therein and meets the requirements of the Registration Rights Agreement.
“
Dilutive Issuance
” shall
have the meaning set forth in Section 7(b).
“
Dilutive Issuance Notice
”
shall have the meaning set forth in Section 7(b).
“
Effective Date
” me
ans
the earliest of the date that (a) the Registration Statement has been declared effective by the Commission, (b) all of the Registrable
Securities (as defined in the Registration Rights Agreement) have been sold pursuant to Rule 144 or may be sold pursuant to Rule
144 without the requirement for the Corporation to be in compliance with the current public information required under Rule 144
and without volume or manner-of-sale restrictions or (c) following the one year anniversary of the Closing Date provided that
a holder of Registrable Securities is not an Affiliate of the Corporation, all of the Registrable Securities may be sold pursuant
to an exemption from registration under Section 4(1) of the Securities Act without volume or manner-of-sale restrictions and Corporation
counsel has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of
the Registrable Securities pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such
holders.
“
Equity Conditions
” means,
during the period in question, (a) the Corporation shall have duly honored all conversions scheduled to occur or occurring by
virtue of one or more Notices of Conversion of the applicable Holder on or prior to the dates so requested or required, if any,
(b) the Corporation shall have paid all liquidated damages and other amounts owing to the applicable Holder in respect of the
Preferred Stock, (c)(i) there is an effective Conversion Shares Registration Statement pursuant to which the Holders are permitted
to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents
(and the Corporation believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future)
or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents may be resold pursuant to Rule 144 without
volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Corporation
as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders,
(d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed
or quoted for trading on such Trading Market (and the Corporation believes, in good faith, that trading of the Common Stock on
a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized, but
unissued and otherwise unreserved, shares of Common Stock for the issuance of all of the shares then issuable pursuant to the
Transaction Documents, (f) there is no existing Triggering Event and no existing event which, with the passage of time or the
giving of notice, would constitute a Triggering Event, (g) the issuance of the shares in question (or, in the case of a redemption,
the shares issuable upon conversion in full of the redemption amount) to the applicable Holder would not violate the limitations
set forth in Section 6(d) and Section 6(e) herein, (h) there has been no public announcement of a pending or proposed Fundamental
Transaction or Change of Control Transaction that has not been consummated, (i) the applicable Holder is not in possession of
any information provided by the Corporation that constitutes, or may constitute, material non-public information, and (j) for
at least 17 Trading Days in a period of 20 consecutive Trading Days prior to the applicable date in question, the daily dollar
trading volume for the Common Stock on the principal Trading Market exceeds (1) $350,000 or (2) $350,000 in the case of an Optional
Redemption pursuant to Section 8 herein.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance
of (a) shares of Common Stock or options to employees, officers or directors of the Corporation pursuant to any stock or option
plan duly adopted by a majority of the non-employee members of the Board of Directors of the Corporation or a majority of the
members of a committee of non-employee directors established for such purpose, (b) up to 1,000,000 shares of Common Stock (subject
to adjustment for forward and reverse stock splits and the like), in the aggregate, to professional service providers pursuant
to a written agreement, provided that such shares of Common Stock are not registered and carry no registration rights, (c) securities
upon the exercise or exchange of or conversion of any securities issued pursuant to the Purchase Agreement and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Purchase
Agreement, provided that such securities have not been amended since the date of the Purchase Agreement to increase the number
of such securities or to decrease the exercise price, exchange price or conversion price of any such securities, and (d) securities
issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Corporation,
provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its
subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Corporation and
shall provide to the Corporation additional benefits in addition to the investment of funds, but shall not include a transaction
in which the Corporation is issuing securities primarily for the purpose of raising capital or to an entity whose primary business
is investing in securities.
“
Forced Conversion Amount
”
means the sum of (a) 100% of the aggregate Stated Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated
damages and other amounts due in respect of the Preferred Stock.
“
Forced Conversion Date
”
shall have the meaning set forth in Section 8(a).
“
Forced Conversion Notice
”
shall have the meaning set forth in Section 8(a).
“
Forced Conversion Notice Date
”
shall have the meaning set forth in Section 8(a).
“
Fundamental Transaction
”
shall have the meaning set forth in Section 7(e).
“
GAAP
” means United States
generally accepted accounting principles.
“
Holder
” shall have the
meaning given such term in Section 2.
“
Indebtedness
” means (a)
any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Corporation’s balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business,
and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance
with GAAP.
“
Issuable Maximum
” shall
have the meaning set forth in Section 6(e).
“
Junior Securities
” means
the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior
or
pari
passu
to the Preferred Stock in dividend rights or liquidation preference.
“
Liens
” means a lien, charge,
security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“
Liquidation
” shall have
the meaning set forth in Section 5.
“
New York Courts
” shall
have the meaning set forth in Section 9(d).
“
Notice of Conversion
” shall
have the meaning set forth in Section 6(a).
“
Optional Redemption
” shall
have the meaning set forth in Section 8(b).
“
Optional Redemption Amount
”
means the sum of (a) 150% of the aggregate Stated Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated
damages and other amounts due in respect of the Preferred Stock.
“
Optional Redemption Date
”
shall have the meaning set forth in Section 8(b).
“
Optional Redemption Notice
”
shall have the meaning set forth in Section 8(b).
“
Optional Redemption Notice Date
”
shall have the meaning set forth in Section 8(b).
“
Original Issue Date
” means
the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares
of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.
“
Person
” means an individual
or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“
Preferred Stock
” shall
have the meaning set forth in Section 2.
“
Purchase Agreement
” means
the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the original Holders, as amended,
modified or supplemented from time to time in accordance with its terms.
“
Registration Rights Agreement
”
means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Corporation and the original
Holders, in the form of
Exhibit B
attached to the Purchase Agreement.
“
Registration Statement
”
means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale
of the Underlying Shares by each Holder as provided for in the Registration Rights Agreement.
“
Rule 144
” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“
Rule 424
” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“
Securities
” means the Preferred
Stock, the Warrants, the Warrant Shares and the Underlying Shares.
“
Securities Act
” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“
Share Delivery Date
” shall
have the meaning set forth in Section 6(c).
“
Shares
” means the shares
of Common Stock issued or issuable to each Purchaser pursuant to the Purchase Agreement.
“
Stated Value
” shall have
the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
“
Shareholder Approval
” means
such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity)
from the shareholders of the Corporation with respect to the transactions contemplated by the Transaction Documents, including
the issuance of all of the Conversion Shares and Shares in excess of 19.99% of the issued and outstanding Common Stock on the
Closing Date.
“
Subscription Amount
” shall
mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock, Shares and Warrants purchased pursuant to the
Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to the
heading “Subscription Amount,” in United States dollars and in immediately available funds.
“
Subsidiary
” means any subsidiary
of the Corporation as set forth on
Schedule 3.1(a)
of the Purchase Agreement and shall, where applicable, also include
any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.
“
Successor Entity
” shall
have the meaning set forth in Section 7(e).
“
Threshold Period
” shall
have the meaning set forth in Section 8(a).
“
Trading Day
” means a day
on which the principal Trading Market is open for business.
“
Trading Market
” means any
of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the
OTC Bulletin Board (or any successors to any of the foregoing).
“
Transaction Documents
”
means this Certificate of Designation, the Purchase Agreement, the Warrants, the Registration Rights Agreement, the Voting Agreement,
all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions
contemplated pursuant to the Purchase Agreement.
“
Transfer Agent
” means Corporate
Stock Transfer, the current transfer agent of the Corporation with a mailing address of 3200 Cherry Creek Dr. S Denver, CO
80207 and a facsimile number of (303)282-5800, and any successor transfer agent of the Corporation.
“
Underlying Shares
” means
the shares of Common Stock issued and issuable upon conversion or redemption of the Preferred Stock in accordance with the terms
of this Certificate of Designation and upon exercise of the Warrants.
“
Variable Rate Transaction
”
shall have the meaning ascribed to such term in Section 4.13(b) of the Purchase Agreement.
“
Voting Agreement
” means
the written agreement, in the form of
Exhibit
attached to the Purchase Agreement, of all of the officers, directors
and stockholders holding more than 5% of the issued and outstanding shares of Common Stock on the date of the Purchase Agreement
to vote all Common Stock over which such Persons have voting control as of the record date for the meeting of stockholders of
the Corporation, amounting to, in the aggregate, at least 50.1% of the issued and outstanding Common Stock.
“
VWAP
” means, for any date,
the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board,
(c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the
Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and
expenses of which shall be paid by the Corporation.
“
Warrants
” means, collectively,
the Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a) of the Purchase Agreement,
which Warrants shall be exercisable 6 months from the date of issuance and have a term of exercise equal to 5 years from the initial
exercise date, in the form of
Exhibit C
attached to the Purchase Agreement.
“
Warrant Shares
” means the
shares of Common Stock issuable upon exercise of the Warrants.
Section 2
.
Designation,
Amount and Par Value
. The series of preferred stock shall be designated as its Series B Convertible Preferred Stock (the “
Preferred
Stock
”) and the number of shares so designated shall be up to 2.142 (which shall not be subject to increase without
the written consent of all of the holders of the Preferred Stock (each, a “
Holder
” and collectively, the “
Holders
”)).
Each share of Preferred Stock shall have a par value of $____ per share and a stated value equal to $1,000, subject to increase
set forth in Section 3 below (the “
Stated Value
”).
Section 3
.
Dividends
. Except
for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to
receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis)
to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares
of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
Section 4
.
Voting Rights
.
Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However,
as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders
of 67% of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights
given to the Preferred Stock or alter or amend this Certificate of Designation or (b) enter into any agreement with respect to
any of the foregoing.
Section 5
.
Liquidation
.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “
Liquidation
”),
the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to
the Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon
under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full. The Corporation shall
mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
Section 6
.
Conversion
.
a)
Conversions
at Option of Holder
. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after
the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations
set forth in Section 6(d) and Section 6(e)) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion
Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as
Annex
A
(a “
Notice of Conversion
”). Each Notice of Conversion shall specify the number of shares of Preferred
Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of
Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date
may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date,
the “
Conversion Date
”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall
be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion
form be required.
The calculations and entries set forth in the Notice of Conversion shall control in the absence
of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required
to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred
Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of
Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock
or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.
b)
Conversion
Price
. The conversion price for the Preferred Stock shall equal
$0.80
, subject to adjustment herein (the
“
Conversion Price
”).
c)
Mechanics of Conversion
i.
Delivery
of Conversion Shares Upon Conversion
. Not later than three (3) Trading Days after each Conversion Date (the “
Share
Delivery Date
”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of
Conversion Shares being acquired upon the conversion of the Preferred Stock which, on or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase Agreement), and (B) a bank check in the amount of accrued and unpaid
dividends (if any). On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective
Date, the Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established clearing corporation performing similar functions.
ii.
Failure
to Deliver Conversion Shares
. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered
to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice
to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation and
the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion
Notice.
iii.
Obligation
Absolute; Partial Liquidated Damages
. The Corporation’s obligation to issue and deliver the Conversion Shares
upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation
of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Corporation to such Holder in connection with the issuance of such Conversion Shares;
provided
,
however
,
that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such
Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation
may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged
in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining
and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the
Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which
is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence
of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion.
If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the second Trading Day after
the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages
and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100
per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin
to accrue) for each Trading Day after such second Trading Day after the Share Delivery Date until such Conversion Shares are delivered
or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare
a Triggering Event pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period
specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall
not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
iv.
Compensation
for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion
. In addition to any other rights available to the
Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery
Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock
to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a “
Buy-In
”), then the Corporation shall (A) pay in cash to
such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s
total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by
(2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock equal to the
number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver
to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its
delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to which
the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was
a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder
$1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the
Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon
conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
v.
Reservation
of Shares Issuable Upon Conversion
. The Corporation covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock, free
from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7)
upon the conversion of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and,
if the Conversion Shares Registration Statement is then effective under the Securities Act, shall be registered for public resale
in accordance with such Conversion Shares Registration Statement (subject to such Holder’s compliance with its obligations
under the Registration Rights Agreement).
vi.
Fractional
Shares
. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred
Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion,
the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Conversion Price or round up to the next whole share.
vii.
Transfer
Taxes and Expenses
. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without
charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of
such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or
until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all
Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company
(or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion
Shares.
d)
Beneficial Ownership Limitation
. The Corporation shall not effect any conversion of the Preferred Stock,
and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to
the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and
any Persons acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess
of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable
upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the
limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation
to other securities owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible
shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder
together with any Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each
time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph
and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number
of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the
most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as
the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation
or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request
of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or
its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A
Holder, upon not less than 61 days’ prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock upon conversion of this Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue
to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to
the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained
herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of Preferred Stock.
e)
Issuance Limitations
. Notwithstanding anything herein to the contrary, if the Corporation has not
obtained Shareholder Approval, then the Corporation may not issue, upon conversion of the Preferred Stock, a number of shares
of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to
such Conversion Date (i) in connection with any conversion of Preferred Stock issued pursuant to the Purchase Agreement, (ii)
in connection with the Shares issued pursuant to the Purchase Agreement and (iii) in connection with the exercise of any warrants
issued to any registered broker-dealer as a fee in connection with the issuance of the Securities pursuant to the Purchase Agreement,
would exceed 4,649,495 shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations and
the like) (such number of shares, the “
Issuable Maximum
”). Each Holder shall be entitled to a portion
of the Issuable Maximum equal to the quotient obtained by dividing (x) the original Stated Value of such Holder’s Preferred
Stock by (y) the aggregate Stated Value of all Preferred Stock issued on the Original Issue Date to all Holders. For
avoidance of doubt, unless and until any required Shareholder Approval is obtained and effective, warrants issued to any registered
broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement as described in clause (iii)
above shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be unexercisable unless
and until such Shareholder Approval is obtained and effective.
Section 7
.
Certain
Adjustments
.
a)
Stock
Dividends and Stock Splits
. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays
a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock
or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the
Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares
of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such
event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
b)
Subsequent
Equity Sales
. If, at any time while this Preferred Stock is outstanding, the Corporation or any Subsidiary, as
applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues
(or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling
any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such
lower price, the “
Base Conversion Price
” and such issuances, collectively, a “
Dilutive Issuance
”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance. If the Corporation enters into
a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Corporation shall be deemed to have
issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted
or exercised. The Corporation shall notify the Holders in writing, no later than the Trading Day following the issuance
of any Common Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance price,
or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “
Dilutive Issuance
Notice
”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice
pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion
Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.
c)
Subsequent
Rights Offerings
. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “
Purchase Rights
”), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s
Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership
Limitation) 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 shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such
Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the 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 the Holder until such time,
if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d)
Pro
Rata Distributions
. Subject to Section 3, during such time as this Preferred Stock is outstanding, if the Corporation declares
or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "
Distribution
"), at any time after the issuance of this Preferred Stock, then, in each
such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated
therein if the Holder had held the number of shares of Common Stock acquirable upon complete Conversion of this Preferred Stock
(without regard to any limitations on Conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in such Distribution (
provided
,
however
,
to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
e)
Fundamental
Transaction
. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the
Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer,
tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions
effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation,
directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another
Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock 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) (each a “
Fundamental Transaction
”),
then, upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion
Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without
regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional
consideration (the “
Alternate Consideration
”) receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock). For
purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation
or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions
and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right
to convert such preferred stock into Alternate Consideration. The Corporation shall cause any successor entity in a
Fundamental Transaction in which the Corporation is not the survivor (the “
Successor Entity
”) to assume in
writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents (as
defined in the Purchase Agreement) in accordance with the provisions of this Section 7(e) pursuant to written agreements in form
and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the holder of this Preferred Stock, deliver to the Holder in exchange for this Preferred
Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this
Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Preferred Stock (without regard
to any limitations on the conversion of this Preferred Stock) prior to such Fundamental Transaction, and with a conversion price
which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of
shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Preferred Stock
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance
to the Holder. Upon the occurrence of any such 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 Designation and the
other Transaction Documents referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise
every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of
Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation
herein.
f)
Calculations
. All
calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
g)
Notice
to the Holders
.
i.
Adjustment
to Conversion Price
. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the
Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
ii.
Notice
to Allow Conversion by Holder
. If (A) the Corporation shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation
is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall
cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer
or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such
notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 8
.
Forced
Conversion and Optional Redemption.
a)
Forced
Conversion
. Notwithstanding anything herein to the contrary, if after the later of the Shareholder Approval Date
(as defined in the Purchase Agreement) and 30 Trading Days following the Effective Date (i) the VWAP for each of any 20 consecutive
Trading Day period, which 20 consecutive Trading Day period shall have commenced only after the later of the Shareholder Approval
Date and the 10th day following the Effective Date (“
Threshold Period
”), exceeds $1.20 (subject to adjustment
for forward and reverse stock splits and the like) and (ii) the volume for at least 17 Trading Days during any Threshold Period
exceeds $350,000, the Corporation may, within five Trading Days after the end of any such Threshold Period, deliver a written
notice to all Holders (a “
Forced Conversion Notice
” and the date such notice is delivered to all Holders, the
“
Forced Conversion Notice Date
”) to cause each Holder to convert all or part of such Holder’s Preferred
Stock (as specified in such Forced Conversion Notice) plus all accrued but unpaid dividends thereon and all liquidated damages
and other amounts due in respect of the Preferred Stock pursuant to Section 6, it being agreed that the “Conversion Date”
for purposes of Section 6 shall be deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such
third Trading Day, the “
Forced Conversion Date
”). The Corporation may not deliver a Forced Conversion
Notice, and any Forced Conversion Notice delivered by the Corporation shall not be effective, unless all of the Equity Conditions
have been met on each Trading Day during the applicable Threshold Period through and including the later of the Forced Conversion
Date and the Trading Day after the date that the Conversion Shares issuable pursuant to such conversion are actually delivered
to the Holders pursuant to the Forced Conversion Notice. Any Forced Conversion Notices shall be applied ratably
to all of the Holders based on each Holder’s initial purchases of Preferred Stock hereunder, provided that any voluntary
conversions by a Holder shall be applied against such Holder’s
pro
rata
allocation, thereby decreasing the
aggregate amount forcibly converted hereunder if less than all shares of the Preferred Stock are forcibly converted. For
purposes of clarification, a Forced Conversion shall be subject to all of the provisions of Section 6, including, without limitation,
the provisions requiring payment of liquidated damages and limitations on conversions.
b)
Optional
Redemption at Election of Corporation
. Subject to the provisions of this Section 8, at any time after the six (6)
month anniversary date of the Closing Date until the twelve (12) month anniversary date of the Closing Date, the Corporation
may deliver a notice to the Holders (an “
Optional Redemption Notice
” and the date such notice is deemed delivered
hereunder, the “
Optional Redemption Notice Date
”) of its irrevocable election to redeem some or all of the
then outstanding Preferred Stock, for cash in an amount equal to the Optional Redemption Amount on the 5th Trading Day following
the Optional Redemption Notice Date (such date, the “
Optional Redemption Date
” and such redemption, the “
Optional
Redemption
”). The Optional Redemption Amount is payable in full on the Optional Redemption Date. The
Corporation may only effect an Optional Redemption if each of the Equity Conditions shall have been met on each Trading Day occurring
during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including
the date payment of the Optional Redemption Amount is actually made. If any of the Equity Conditions shall cease to
be satisfied at any time during the 5 Trading Day period, then a Holder may elect to nullify the Optional Redemption Notice as
to such Holder by notice to the Corporation within 3 Trading Days after the first day on which any such Equity Condition has not
been met (provided that if, by a provision of the Transaction Documents, the Corporation is obligated to notify the Holders of
the non-existence of an Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from
the Corporation) in which case the Optional Redemption Notice shall be null and void,
abinitio
. The Corporation
covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption
Notice through the date the Optional Redemption Amount is paid in full. If any portion of the cash payment for an Optional
Redemption has not been paid by the Corporation on the Optional Redemption Date, interest shall accrue thereon until such amount
is paid in full at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.
Section 9
.
Miscellaneous
.
a)
Notices
. Any
and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Corporation, at the address set forth above
Attention:
Luisa Ingargiola, facsimile number
727-934-6260, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the Holders
delivered in accordance with this Section 11. Any and all notices or other communications or deliveries to be provided
by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation,
or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such
Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
b)
Absolute
Obligation
. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the
obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest,
as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
c)
Lost
or Mutilated Preferred Stock Certificate
. If a Holder’s Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
d)
Governing
Law
. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party
hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “
New York Courts
”). Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts
are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate
of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If
any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
e)
Waiver
. Any
waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or
be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate
of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence
to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party
(or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
f)
Severability
. If
any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation
shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable
to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due
hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered
to equal the maximum rate of interest permitted under applicable law.
g)
Next
Business Day
. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.
h)
Headings
. The
headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions hereof.
i)
Status
of Converted or Redeemed Preferred Stock
. Shares of Preferred Stock may only be issued pursuant to the Purchase
Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series B Convertible
Preferred Stock.”
CERTIFICATE OF VALIDATION
OF
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
MagneGas Corporation
Pursuant to Section 204 of the
General Corporation Law of the State of Delaware
MagneGas Corporation (the
“
Company
”), a corporation organized and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the “
DGCL
”), hereby certifies as follows:
1. On November 21,
2016, the board of directors of the Company, acting by unanimous written consent in lieu of a meeting, and on November 21, 2016,
the stockholders of the Company, acting by majority written consent in lieu of a meeting in accordance with the provisions of
Section 228 of the DGCL, ratified and approved resolutions in accordance with the provisions of Section 204 of the DGCL in order
to, among other things, ratify and validate certain defective corporate acts, including the signing of that certain Certificate
of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of the Company filed with the Secretary
of State of the State of Delaware on March 26, 2014 (the “Certificate of Amendment”).
|
a.
|
The defective corporate act that
is the subject of this Certificate of Validation is the valid signing, filing and effectiveness
of the Certificate of Amendment.
|
|
b.
|
The date of the defective corporate
act is March 26, 2014.
|
|
c.
|
On March 28, 2014, the Company issued
2,100.5 shares of the Company's Series C Convertible Preferred Stock, which were convertible
into a total of 1,448,276 shares of Common Stock, to an institutional investor pursuant
to that certain Securities Purchase Agreement dated March 24, 2014, which shares are
putative stock.
|
|
d.
|
That the nature of the failure of
authorization, with respect to the Certificate of Amendment, is that the Certificate
of Amendment was not approved by holders of a majority of the aggregate voting power
of all outstanding shares of capital stock of the Company entitled to vote thereon.
|
2. Attached as Exhibit
A hereto is the corrected Certificate of Amendment of Certificate of Incorporation of the Company (the “Corrected Certificate
of Amendment”), which corrects Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible
Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on March 26, 2014, and which contains
all
of the information required to be included under Section 242 of the DGCL to give effect to the
defective corporate
acts described above.
3. That effective upon
the filing of this Certificate of Validation, the Corrected Certificate of Amendment be validated as of 12:01 a.m. (local time
in Wilmington, Delaware) on March 26, 2014.
IN WITNESS
WHEREOF
, the Company has caused this Certificate of Validation to be executed by its duly authorized officer on this __ day
of _____, 201_.
|
MagneGas
Corporation
|
|
|
|
|
|
Luisa Ingargiola
|
|
Chief Financial Officer
|
Exhibit A
STATE OF DELAWARE
CORRECTED CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of Delaware (the “
Corporation
”),
does hereby certify that:
FIRST:
The name of the Corporation is MagneGas Corporation.
SECOND:
This Certificate of Amendment (this “
Certificate of Amendment
”) amends the provisions of the Corporation’s
Certificate of Incorporation filed with the Secretary of State on December 9, 2005 as amended to date (as amended, the “
Certificate
of Incorporation
”).
THIRD:
The Certificate of Incorporation is amended to create a new series of shares of Preferred Stock,
designated as “Series C Convertible Preferred Stock”, by adding the following additional paragraphs at the end of
Article 4 of the Certificate of Incorporation:
“
Series C Convertible Preferred Stock
:
Series C Convertible Preferred Stock is created
out of the 10,000,000 authorized shares of the capital preferred stock of the corporation, such Series C Convertible Preferred
Stock to consist of 2,200 shares, $0.001 par value per share, which shall have the following preferences, powers, designations
and other special rights:
Section 1
.
Definitions
. For the purposes hereof, the following terms shall have the following meanings:
“
Affiliate
”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.
“
Alternate Consideration
”
shall have the meaning set forth in Section 7(e).
“
Beneficial Ownership
Limitation
” shall have the meaning set forth in Section 6(d).
“
Business Day
”
means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“
Buy-In
”
shall have the meaning set forth in Section 6(c)(iv).
“
Closing
”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.
“
Closing Date
”
means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto
and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the Corporation’s
obligations to deliver the Securities have been satisfied or waived.
“
Commission
”
means the United States Securities and Exchange Commission.
“
Common Stock
”
means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which
such securities may hereafter be reclassified or changed.
“
Common Stock
Equivalents
” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.
“
Conversion Amount
”
means the sum of the Stated Value at issue.
“
Conversion Date
”
shall have the meaning set forth in Section 6(a).
“
Conversion Price
”
shall have the meaning set forth in Section 6(b).
“
Conversion Shares
”
means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the
terms hereof.
“
Exchange Act
”
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“
Fundamental
Transaction
” shall have the meaning set forth in Section 7(e).
“
GAAP
”
means United States generally accepted accounting principles.
“
Holder
”
shall have the meaning given such term in Section 2.
“
Junior Securities
”
means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly
senior or
pari
passu
to the Preferred Stock in dividend rights or liquidation preference.
“
Liquidation
”
shall have the meaning set forth in Section 5.
“
New York Courts
”
shall have the meaning set forth in Section 9(d).
“
Notice of Conversion
”
shall have the meaning set forth in Section 6(a).
“
Original Issue
Date
” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such
Preferred Stock.
“
Person
”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“
Preferred Stock
”
shall have the meaning set forth in Section 2.
“
Purchase Agreement
”
means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.
“
Rule 424
”
means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect
as such Rule.
“
Securities
” means the Shares,
the Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares.
“
Securities
Act
” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“
Share Delivery
Date
” shall have the meaning set forth in Section 6(c).
“
Shares
”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to the Purchase Agreement.
“
Stated Value
”
shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
“
Subscription
Amount
” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock, Shares and Warrants purchased
pursuant to the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement
and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“
Subsidiary
”
means any subsidiary of the Corporation as set forth on
Schedule 3.1(a)
of the Purchase Agreement and shall, where applicable,
also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.
“
Successor
Entity
” shall have the meaning set forth in Section 7(e).
“
Trading Day
”
means a day on which the principal Trading Market is open for business.
“
Trading Market
”
means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question:
the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange
or the OTC Bulletin Board (or any successors to any of the foregoing).
“
Transaction
Documents
” means this Certificate of Designation, the Purchase Agreement, the Warrants, all exhibits and schedules thereto
and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase
Agreement.
“
Transfer
Agent
” means Corporate Stock Transfer, the current transfer agent of the Corporation with a mailing address of 3200 Cherry
Creek Drive S, Denver, Colorado 80207 and a facsimile number of (303) 282-5800, and any successor transfer agent of the Corporation.
“
Warrants
”
means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a)
of the Purchase Agreement, which Warrants shall be exercisable 6 months from the date of issuance and have a term of exercise equal
to 5 years from the initial exercise date, in the form of
Exhibit C
attached to the Purchase Agreement.
“
Warrant Shares
”
means the shares of Common Stock issuable upon exercise of the Warrants.
Section 2
.
Designation,
Amount and Par Value
. The series of preferred stock shall be designated as its Series C Convertible Preferred Stock (the “
Preferred
Stock
”) and the number of shares so designated shall be up to 2,200 (which shall not be subject to increase without the
written consent of all of the holders of the Preferred Stock (each, a “
Holder
” and collectively, the “
Holders
”)).
Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $1,000, subject to increase
set forth in Section 3 below (the “
Stated Value
”).
Section 3
.
Dividends
. Except
for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to receive,
and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and
in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of
the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
Section 4
.
Voting
Rights
. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights.
However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the
Holders of 67% of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or
rights given to the Preferred Stock or alter or amend this Certificate of Designation or (b) enter into any agreement with respect
to any of the foregoing.
Section 5
.
Liquidation
.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “
Liquidation
”),
the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon
under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full. The Corporation shall
mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
Section 6
.
Conversion
.
a)
Conversions at Option of Holder
. Each share of Preferred Stock shall be convertible, at any time and from time to time from
and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d) and Section 6(e)) determined by dividing the Stated Value of such share of Preferred Stock
by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached
hereto as
Annex A
(a “
Notice of Conversion
”). Each Notice of Conversion shall specify the number of shares
of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number
of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation
(such date, the “
Conversion Date
”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice
of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required.
The calculations and entries set forth in the Notice of Conversion shall control in the
absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be
required to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares
of Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such
shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into
Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.
b)
Conversion Price
. The conversion price for the Preferred Stock shall equal
$1.45
, subject to adjustment
herein (the “
Conversion Price
”).
c)
Mechanics of Conversion
i.
Delivery of Conversion Shares Upon Conversion
. Not later than three (3) Trading Days after each Conversion Date (the “
Share
Delivery Date
”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion
Shares being acquired upon the conversion of the Preferred Stock which shall be free of restrictive legends and trading restrictions
The Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established clearing corporation performing similar functions.
ii.
Failure to Deliver Conversion Shares
. If, in the case of any Notice of Conversion, such Conversion Shares are
not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written
notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which
event the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation
and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion
Notice.
iii.
Obligation Absolute; Partial Liquidated Damages
. The Corporation’s obligation to issue and deliver the
Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery
of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares;
provided
,
however
,
that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such
Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation
may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged
in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining
and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation
posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject
to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction,
the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation
fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the second Trading Day after the Share Delivery
Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on
the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each
Trading Day after such second Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds
such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare a Triggering
Event pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified
herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit
a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
iv.
Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion
. In addition to any other rights
available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the
Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “
Buy-In
”), then the Corporation shall (A)
pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which
(x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y)
the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including
any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock
equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded)
or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied
with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to
which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder
$1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the
Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon
conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
v.
Reservation of Shares Issuable Upon Conversion
. The Corporation covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions
set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion
of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
vi.
Fractional Shares
. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the
Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such
conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
vii.
Transfer Taxes and Expenses
. The issuance of Conversion Shares on conversion of this Preferred Stock shall be
made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery
of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the
Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares
unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax
or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall
pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company
(or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion
Shares.
d)
Beneficial Ownership Limitation
.
The Corporation shall not effect any conversion of the Preferred Stock, and
a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any
Persons acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess
of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the
limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation
to other securities owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible
shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together
with any Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it
delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and
the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination
as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder
.
For purposes of this Section 6(d), in determining the number
of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case
may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the
Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder,
the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates since
the date as of which such number of outstanding shares of Common Stock was reported. The “
Beneficial Ownership Limitation
”
shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon not less than
61 days’ prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this
Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any
such increase or decrease will not be effective until the 61st day after such notice is delivered to the Corporation and shall
only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of Preferred Stock.
Section 7
.
Certain
Adjustments
.
a)
Stock Dividends and Stock Splits
. If the Corporation, at any time while this Preferred Stock is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common
Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued
by the Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares
of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event,
and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
b)
[RESERVED]
c)
Subsequent Rights Offerings
. In addition to any adjustments pursuant to Section 7(a) above, if at any time the
Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the “
Purchase Rights
”), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s
Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
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 shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase
Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the 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 the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d)
Pro Rata Distributions
. Subject to Section 3, during such time as this Preferred Stock is outstanding, if the Corporation
declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar
transaction) (a "
Distribution
"), at any time after the issuance of this Preferred Stock, then, in each such case,
the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein
if the Holder had held the number of shares of Common Stock acquirable upon complete Conversion of this Preferred Stock (without
regard to any limitations on Conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in such Distribution (
provided
,
however
,
to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall
be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
e)
Fundamental Transaction
. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly
or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another
Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the
Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock 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) (each a “
Fundamental Transaction
”),
then, upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without
regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock), the number of shares of Common
Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration
(the “
Alternate Consideration
”) receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock). For purposes of
any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction. To
the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental
Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred
stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate
Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation
is not the survivor (the “
Successor Entity
”) to assume in writing all of the obligations of the Corporation
under this Certificate of Designation and the other Transaction Documents (as defined in the Purchase Agreement) in accordance
with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder
and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder
of this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock)
prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares
of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction
and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose
of protecting the economic value of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such 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 Designation and the other Transaction Documents referring to the “Corporation”
shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of
the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Corporation herein.
f)
Calculations
. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued
and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the
Corporation) issued and outstanding.
g)
Notice to the Holders
.
i.
Adjustment to Conversion Price
. Whenever the Conversion Price is adjusted pursuant to any provision of this Section
7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Conversion by Holder
. If (A) the Corporation shall declare a dividend (or any other distribution
in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of
the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which
the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory
share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize
the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the
Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock,
and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation,
at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if
a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such
notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 8
. [RESERVED].
Section 9
.
Miscellaneous
.
a)
Notices
. Any
and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Corporation, at the address set forth above
Attention:
Luisa Ingargiola, facsimile number
(727) 934-6260, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the Holders
delivered in accordance with this Section 11. Any and all notices or other communications or deliveries to be provided
by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation,
or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder,
as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after
the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this
Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given.
b)
Absolute Obligation
. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or
impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and
accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein
prescribed.
c)
Lost or Mutilated Preferred Stock Certificate
. If a Holder’s Preferred Stock certificate shall be mutilated,
lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the
shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
d)
Governing Law
. All questions concerning the construction, validity, enforcement and interpretation of this Certificate
of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “
New York Courts
”). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement
of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If
any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
e)
Waiver
. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation
shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision
of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist
upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver
or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term
of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
f)
Severability
. If
any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation
shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable
to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder
violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal
the maximum rate of interest permitted under applicable law.
g)
Next Business Day
. Whenever any payment or other obligation hereunder shall be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day.
h)
Headings
. The
headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be
deemed to limit or affect any of the provisions hereof.
i)
Status of Converted or Redeemed Preferred Stock
. Shares of Preferred Stock may only be issued pursuant to the
Purchase Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation,
such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series
C Convertible Preferred Stock.
CERTIFICATE OF VALIDATION
OF
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
MagneGas Corporation
Pursuant to Section 204 of the
General Corporation Law of the State of Delaware
MagneGas Corporation
(the “
Company
”), a corporation organized and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the “
DGCL
”), hereby certifies as follows:
1.
On November 21,
2016, the board of directors of the Company, acting by unanimous written consent in lieu of a meeting, and on November 21, 2016,
the stockholders of the Company, acting by majority written consent in lieu of a meeting in accordance with the provisions of Section
228 of the DGCL, ratified and approved resolutions in accordance with the provisions of Section 204 of the DGCL in order to, among
other things, ratify and validate certain defective corporate acts, including the signing of that certain Certificate of Designation
of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock of the Company filed with the Secretary of State
of the State of Delaware on October 22, 2014 (the “Certificate of Amendment”).
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a.
|
The defective corporate act that is the subject of this Certificate of Validation is the valid
signing, filing and effectiveness of the Certificate of Amendment.
|
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b.
|
The date of the defective corporate act is October 22, 2014.
|
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c.
|
On October 24, 2014, the Company issued 1,060 shares of the Company's Series D-1 Convertible Preferred
Stock, which were convertible into a total of 1,060,000 shares of Common Stock, to an institutional investor pursuant to that certain
Securities Purchase Agreement dated October 21, 2014, which shares are putative stock.
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d.
|
That the nature of the failure of authorization, with respect to the Certificate of Amendment,
is that the Certificate of Amendment was not approved by holders of a majority of the aggregate voting power of all outstanding
shares of capital stock of the Company entitled to vote thereon.
|
2.
Attached as Exhibit
A hereto is the corrected Certificate of Amendment of Certificate of Incorporation of the Company (the “Corrected Certificate
of Amendment”), which corrects Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible
Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on October 22, 2014, and which contains
all
of the information required to be included under Section 242 of the DGCL to give effect to the
defective corporate
acts described above.
3.
That effective
upon the filing of this Certificate of Validation, the Corrected Certificate of Amendment be validated as of 12:01 a.m. (local
time in Wilmington, Delaware) on October 22, 2014.
IN WITNESS
WHEREOF
, the Company has caused this Certificate of Validation to be executed by its duly authorized officer on this __ day
of _____, 201_.
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MagneGas Corporation
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Luisa Ingargiola
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Chief Financial Officer
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Exhibit A
STATE OF DELAWARE
CORRECTED CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of Delaware (the “
Corporation
”),
does hereby certify that:
FIRST:
The name of the Corporation is MagneGas Corporation.
SECOND:
This Certificate of Amendment (this “
Certificate of Amendment
”) amends the provisions of the Corporation’s
Certificate of Incorporation filed with the Secretary of State on December 9, 2005 as amended to date (as amended, the “
Certificate
of Incorporation
”).
THIRD:
The Certificate of Incorporation is amended to create a new series of shares of Preferred Stock,
designated as “Series D-1 Convertible Preferred Stock”, by adding the following additional paragraphs at the end of
Article 4 of the Certificate of Incorporation:
“
Series D-1 Convertible Preferred
Stock
:
Series D-1 Convertible Preferred Stock is
created out of the 10,000,000 authorized shares of the capital preferred stock of the corporation, such Series D-1 Convertible
Preferred Stock to consist of 1,060 shares, $0.001 par value per share, which shall have the following preferences, powers, designations
and other special rights:
Section 1
.
Definitions
.
For the purposes hereof, the following terms shall have the following meanings:
“
Affiliate
”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.
“
Alternate
Consideration
” shall have the meaning set forth in Section 7(e).
“
Beneficial
Ownership Limitation
” shall have the meaning set forth in Section 6(d).
“
Business
Day
” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“
Buy-In
”
shall have the meaning set forth in Section 6(c)(iv).
“
Closing
”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.
“
Closing
Date
” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the
Corporation’s obligations to deliver the Securities have been satisfied or waived.
“
Commission
”
means the United States Securities and Exchange Commission.
“
Common
Stock
” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities
into which such securities may hereafter be reclassified or changed.
“
Common
Stock Equivalents
” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
“
Conversion
Amount
” means the sum of the Stated Value at issue.
“
Conversion
Date
” shall have the meaning set forth in Section 6(a).
“
Conversion
Price
” shall have the meaning set forth in Section 6(b).
“
Conversion
Shares
” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in
accordance with the terms hereof.
“
Exchange
Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“
Fundamental
Transaction
” shall have the meaning set forth in Section 7(e).
“
GAAP
”
means United States generally accepted accounting principles.
“
Holder
”
shall have the meaning given such term in Section 2.
“
Issuable
Maximum
” shall have the meaning set forth in Section 6(e).
“
Junior
Securities
” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities
which are explicitly senior or
pari
passu
to the Preferred Stock in dividend rights or liquidation preference.
“
Liquidation
”
shall have the meaning set forth in Section 5.
“
New
York Courts
” shall have the meaning set forth in Section 9(d).
“
Notice
of Conversion
” shall have the meaning set forth in Section 6(a).
“
Original
Issue Date
” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred
Stock.
“
Person
”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“
Preferred
Stock
” shall have the meaning set forth in Section 2.
“
Purchase
Agreement
” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the
original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“
Registration
Rights Agreement
” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the
Corporation and the original holders of the Series D-2 Preferred Stock, in the form of
Exhibit B
attached to the Purchase
Agreement
“
Rule
424
” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“
Securities
”
means the Shares, the Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares.
“
Securities
Act
” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“
Series
D-2 Certificate of Designation
” means the Series D-2 Certificate of Designation filed by the Corporation with the Secretary
of the State of Delaware.
“
Series
D-2 Preferred Stock
” means the Series D-2 Convertible Preferred Stock issued pursuant to the Purchase Agreement.
“
Share
Delivery Date
” shall have the meaning set forth in Section 6(c).
“
Shareholder
Approval
” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or
any successor entity) from the shareholders of the Corporation with respect to the transactions contemplated by the Transaction
Documents, including the issuance of all of the Shares, the Conversion Shares and the shares of Common Stock underlying the Series
D-2 Preferred Stock in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.
“
Shares
”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to the Purchase Agreement.
“
Stated
Value
” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
“
Subscription
Amount
” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock, Shares and Warrants purchased
pursuant to the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement
and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“
Subsidiary
”
means any subsidiary of the Corporation as set forth on
Schedule 3.1(a)
of the Purchase Agreement and shall, where applicable,
also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.
“
Successor
Entity
” shall have the meaning set forth in Section 7(e).
“
Trading
Day
” means a day on which the principal Trading Market is open for business.
“
Trading
Market
” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
“
Transaction
Documents
” means this Certificate of Designation, the Series D-2 Certificate of Designation, the Purchase Agreement,
the Warrants, the Registration Rights Agreement, the Voting Agreement, all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.
“
Transfer
Agent
” means Corporate Stock Transfer, the current transfer agent of the Corporation, with a mailing address of 3200
Cherry Creek Drive South, Suite 430, Denver, CO 80209 and any successor transfer agent of the Corporation.
“
Voting
Agreement
” means the written agreement, in the form of
Exhibit E
attached to the Purchase Agreement, of all of
the officers, directors and stockholders holding more than 10% of the issued and outstanding shares of Common Stock on the date
of the Purchase Agreement to vote all Common Stock over which such Persons have voting control as of the record date for the meeting
of stockholders of the Corporation, amounting to, in the aggregate, at least 50.1% of the issued and outstanding Common Stock.
“
Warrants
”
means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a)
of the Purchase Agreement, which Warrants shall be exercisable 6 months from the date of issuance and have a term of exercise equal
to 5 years from the initial exercise date, in the form of
Exhibit C
attached to the Purchase Agreement.
“
Warrant
Shares
” means the shares of Common Stock issuable upon exercise of the Warrants.
Section 2
.
Designation,
Amount and Par Value
. The series of preferred stock shall be designated as its Series D-1 Convertible Preferred Stock (the
“
Preferred Stock
”) and the number of shares so designated shall be up to 1,060 (which shall not be subject to
increase without the written consent of all of the holders of the Preferred Stock (each, a “
Holder
” and collectively,
the “
Holders
”)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value
equal to $1,000, subject to increase set forth in Section 3 below (the “
Stated Value
”).
Section 3
.
Dividends
.
Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled
to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid
on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
Section 4
.
Voting
Rights
. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights.
However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the
Holders of 67% of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or
rights given to the Preferred Stock or alter or amend this Certificate of Designation or (b) enter into any agreement with respect
to any of the foregoing.
Section 5
.
Liquidation
.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “
Liquidation
”),
the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon
under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders shall be ratably distributed among the Holders and the holders of the Series
D-2 Preferred Stock in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment
date stated therein, to each Holder.
Section 6
.
Conversion
.
a)
Conversions at Option of Holder
. Each share of Preferred Stock shall be convertible, at any time and from time to time from
and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d) and Section 6(e)) determined by dividing the Stated Value of such share of Preferred Stock
by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached
hereto as
Annex A
(a “
Notice of Conversion
”). Each Notice of Conversion shall specify the number of shares
of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number
of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation
(such date, the “
Conversion Date
”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice
of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required.
The calculations and entries set forth in the Notice of Conversion shall control in the absence
of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender
the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly
following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the
terms hereof shall be canceled and shall not be reissued.
b)
Conversion Price
. The conversion price for the Preferred Stock shall equal
$1.00
, subject to adjustment herein (the
“
Conversion Price
”).
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c)
|
Mechanics of Conversion
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i.
Delivery of Conversion Shares Upon Conversion
. Not later than three (3) Trading Days after each Conversion Date (the “
Share
Delivery Date
”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion
Shares being acquired upon the conversion of the Preferred Stock which shall be free of restrictive legends and trading restrictions
The Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established clearing corporation performing similar functions.
ii.
Failure to Deliver Conversion Shares
. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered
to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice
to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the
Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation and the Holder
shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.
iii.
Obligation Absolute; Partial Liquidated Damages
. The Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares;
provided
,
however
,
that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such
Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may
not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged
in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining
and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation
posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject
to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the
Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails
to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the second Trading Day after the Share Delivery Date
applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for
each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the
third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each
Trading Day after such second Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds
such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare a Triggering Event pursuant
to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such
Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking
to enforce damages pursuant to any other Section hereof or under applicable law.
iv.
Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion
. In addition to any other rights
available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the
Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “
Buy-In
”), then the Corporation shall (A)
pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which
(x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y)
the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including
any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock
equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded)
or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied
with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to
which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder
$1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the
Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon
conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
v.
Reservation of Shares Issuable Upon Conversion
. The Corporation covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions
set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion
of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
vi.
Fractional Shares
. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the
Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the
Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.
vii.
Transfer Taxes and Expenses
. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without
charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of
such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until
the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established
to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required
for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
d)
Beneficial Ownership Limitation
. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall
not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set
forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting
as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Preferred
Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are
issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or
any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the
Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without
limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained
in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities
owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible shall be in the sole
discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination
of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any
Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation.
To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a
Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation
shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s
most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by
the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within two Trading Days
confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the
Corporation, including the Preferred Stock, by such Holder or its Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion
of Preferred Stock held by the applicable Holder. A Holder, upon not less than 61 days’ prior notice to the Corporation,
may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock
provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holder
and the provisions of this Section 6(d) shall continue to apply. Any such increase or decrease will not be effective until the
61
st
day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder.
The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms
of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.
e)
Issuance Limitations
. Notwithstanding anything herein to the contrary, if the Corporation has not obtained Shareholder Approval,
then the Corporation may not issue, upon conversion of the Preferred Stock, a number of shares of Common Stock which, when aggregated
with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date (i) in connection
with any conversion of Preferred Stock issued pursuant to the Purchase Agreement, (ii) with any conversion of Series D-2 Preferred
Stock issued pursuant to the Purchase Agreement, (iii) in connection with the Shares issued pursuant to the Purchase Agreement,
and (iv) in connection with the exercise of any warrants issued to any registered broker-dealer as a fee in connection with the
issuance of the Securities pursuant to the Purchase Agreement, would exceed 6,712,993 shares of Common Stock (subject to adjustment
for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “
Issuable Maximum
”).
Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the original
Stated Value of such Holder’s Preferred Stock by (y) the aggregate Stated Value of all Preferred Stock issued on the Original
Issue Date to all Holders. In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum among Preferred Stock
and Series D-2 Preferred Stock held by it in its sole discretion. Such portion shall be adjusted upward ratably in the event a
Holder no longer holds any Preferred Stock or Series D-2 Preferred Stock and the amount of shares issued to such Holder pursuant
to such Holder’s Preferred Stock and Series D-2 Preferred Stock was less than such Holder’s pro-rata share of the Issuable
Maximum. For avoidance of doubt, unless and until any required Shareholder Approval is obtained and effective, warrants issued
to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement as described
in clause (iii) above shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be
unexercisable unless and until such Shareholder Approval is obtained and effective.
Section 7
.
Certain
Adjustments
.
a)
Stock Dividends and Stock Splits
. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a
stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or
any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation
upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital
stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of
which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made
pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b)
[Reserved].
c)
Subsequent Rights Offerings
. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “
Purchase Rights
”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s
Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
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 shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase
Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the 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 the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d)
Pro Rata Distributions
. Subject to Section 3, during such time as this Preferred Stock is outstanding, if the Corporation
declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar
transaction) (a "
Distribution
"), at any time after the issuance of this Preferred Stock, then, in each such case,
the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein
if the Holder had held the number of shares of Common Stock acquirable upon complete Conversion of this Preferred Stock (without
regard to any limitations on Conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in such Distribution (
provided
,
however
,
to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall
be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
e)
Fundamental Transaction
. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the
Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer,
tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions
effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation,
directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock 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) (each a “
Fundamental Transaction
”), then,
upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard
to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock), the number of shares of Common Stock
of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration
(the “
Alternate Consideration
”) receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental
Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred
stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate
Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the
survivor (the “
Successor Entity
”) to assume in writing all of the obligations of the Corporation under this
Certificate of Designation and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions
of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by
the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred
Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of
capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable
upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to
such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the
value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of
protecting the economic value of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such 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 Designation and the other Transaction Documents referring to the “Corporation”
shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of
the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Corporation herein.
f)
Calculations
. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued
and outstanding.
g)
Notice to the Holders
.
i.
Adjustment to Conversion Price
. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the
Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Conversion by Holder
. If (A) the Corporation shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation
is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall
cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or
any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.
Section 8
. [RESERVED].
Section 9
.
Miscellaneous
.
a)
Notices
. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at the address set forth above
Attention: Luisa Ingargiola
, facsimile
number 727-934-6260, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the
Holders delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by
the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation,
or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder,
as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not
a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
b)
Absolute Obligation
. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or
impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and
accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein
prescribed.
c)
Lost or Mutilated Preferred Stock Certificate
. If a Holder’s Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of
such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
d)
Governing Law
. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “
New York Courts
”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Certificate of Designation or the transactions contemplated hereby. If any party shall commence an action
or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
e)
Waiver
. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall
not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of
this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
f)
Severability
. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this
Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically
be lowered to equal the maximum rate of interest permitted under applicable law.
g)
Next Business Day
. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day.
h)
Headings
. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation
and shall not be deemed to limit or affect any of the provisions hereof.
i)
Status of Converted or Redeemed Preferred Stock
. Shares of Preferred Stock may only be issued pursuant to the Purchase Agreement.
If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status
of authorized but unissued shares of preferred stock and shall no longer be designated as Series D-1 Convertible Preferred Stock.
CERTIFICATE OF VALIDATION
OF
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
MagneGas Corporation
Pursuant to Section 204 of the
General Corporation Law of the State of Delaware
MagneGas Corporation
(the “
Company
”), a corporation organized and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the “
DGCL
”), hereby certifies as follows:
1. On November 21,
2016, the board of directors of the Company, acting by unanimous written consent in lieu of a meeting, and on November 21, 2016,
the stockholders of the Company, acting by majority written consent in lieu of a meeting in accordance with the provisions of Section
228 of the DGCL, ratified and approved resolutions in accordance with the provisions of Section 204 of the DGCL in order to, among
other things, ratify and validate certain defective corporate acts, including the signing of that certain Certificate of Designation
of Preferences, Rights and Limitations of Series D-2 Convertible Preferred Stock of the Company filed with the Secretary of State
of the State of Delaware on October 22, 2014 (the “Certificate of Amendment”).
|
a.
|
The defective corporate act that is the subject of this Certificate of Validation is the valid
signing, filing and effectiveness of the Certificate of Amendment.
|
|
b.
|
The date of the defective corporate act is October 22, 2014.
|
|
c.
|
On October 24, 2014, the Company issued 940 shares of the Company's Series D-2 Convertible Preferred
Stock, which were convertible into a total of 940,000 shares of Common Stock, to an institutional investor pursuant to that certain
Securities Purchase Agreement dated October 21, 2014, which shares are putative stock.
|
|
d.
|
That the nature of the failure of authorization, with respect to the Certificate of Amendment,
is that the Certificate of Amendment was not approved by holders of a majority of the aggregate voting power of all outstanding
shares of capital stock of the Company entitled to vote thereon.
|
2. Attached as Exhibit
A hereto is the corrected Certificate of Amendment of Certificate of Incorporation of the Company (the “Corrected Certificate
of Amendment”), which corrects Certificate of Designation of Preferences, Rights and Limitations of Series D-2 Convertible
Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on October 22, 2014, and which contains
all
of the information required to be included under Section 242 of the DGCL to give effect to the
defective corporate
acts described above.
3. That effective
upon the filing of this Certificate of Validation, the Corrected Certificate of Amendment be validated as of 12:01 a.m. (local
time in Wilmington, Delaware) on October 22, 2014.
IN WITNESS
WHEREOF
, the Company has caused this Certificate of Validation to be executed by its duly authorized officer on this __ day
of _____, 201_.
|
MagneGas Corporation
|
|
|
|
|
|
Luisa Ingargiola
|
|
Chief Financial Officer
|
Exhibit A
STATE OF DELAWARE
CORRECTED CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of Delaware (the “
Corporation
”),
does hereby certify that:
FIRST:
The name of the Corporation is MagneGas Corporation.
SECOND:
This Certificate of Amendment (this “
Certificate of Amendment
”) amends the provisions of the Corporation’s
Certificate of Incorporation filed with the Secretary of State on December 9, 2005 as amended to date (as amended, the “
Certificate
of Incorporation
”).
THIRD:
The Certificate of Incorporation is amended to create a new series of shares of Preferred Stock,
designated as “Series D-2 Convertible Preferred Stock”, by adding the following additional paragraphs at the end of
Article 4 of the Certificate of Incorporation:
“
Series D-2 Convertible Preferred
Stock
:
Series D-2 Convertible Preferred Stock is
created out of the 10,000,000 authorized shares of the capital preferred stock of the corporation, such Series D-2 Convertible
Preferred Stock to consist of 940 shares, $0.001 par value per share, which shall have the following preferences, powers, designations
and other special rights:
Section 1
.
Definitions
.
For the purposes hereof, the following terms shall have the following meanings:
“
Affiliate
”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.
“
Alternate
Consideration
” shall have the meaning set forth in Section 7(e).
“
Beneficial
Ownership Limitation
” shall have the meaning set forth in Section 6(d).
“
Business
Day
” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“
Buy-In
”
shall have the meaning set forth in Section 6(c)(iv).
“
Closing
”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.
“
Closing
Date
” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the
Corporation’s obligations to deliver the Securities have been satisfied or waived.
“
Commission
”
means the United States Securities and Exchange Commission.
“
Common
Stock
” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities
into which such securities may hereafter be reclassified or changed.
“
Common
Stock Equivalents
” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
“
Conversion
Amount
” means the sum of the Stated Value at issue.
“
Conversion
Date
” shall have the meaning set forth in Section 6(a).
“
Conversion
Price
” shall have the meaning set forth in Section 6(b).
“
Conversion
Shares
” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in
accordance with the terms hereof.
“
Conversion
Shares Registration Statement
” means a registration statement that registers the resale of all Conversion Shares of the
Holders, who shall be named as “selling stockholders” therein and meets the requirements of the Registration Rights
Agreement.
“
Effective
Date
” means the date that the Conversion Shares Registration Statement filed by the Corporation pursuant to the Registration
Rights Agreement is first declared effective by the Commission.
“
Exchange
Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“
Exempt
Issuance
” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Corporation
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee directors established for such purpose, (b) up to 1,000,000 shares
of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations and the like), in the aggregate,
to professional service providers pursuant to a written agreement, provided that such shares of Common Stock are not registered
and carry no registration rights, (c) securities upon the exercise or exchange of or conversion of any securities issued pursuant
to the Purchase Agreement and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued
and outstanding on the date of the Purchase Agreement, provided that such securities have not been amended since the date of the
Purchase Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price
of any such securities, and (d) securities issued pursuant to acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Corporation, provided that any such issuance shall only be to a Person (or to the equityholders
of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic
with the business of the Corporation and shall provide to the Corporation additional benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities.
“
Fundamental
Transaction
” shall have the meaning set forth in Section 7(e).
“
GAAP
”
means United States generally accepted accounting principles.
“
Holder
”
shall have the meaning given such term in Section 2.
“
Issuable
Maximum
” shall have the meaning set forth in Section 6(e).
“
Junior
Securities
” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities
which are explicitly senior or
pari
passu
to the Preferred Stock in dividend rights or liquidation preference.
“
Liquidation
”
shall have the meaning set forth in Section 5.
“
New
York Courts
” shall have the meaning set forth in Section 9(d).
“
Notice
of Conversion
” shall have the meaning set forth in Section 6(a).
“
Original
Issue Date
” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred
Stock.
“
Person
”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“
Preferred
Stock
” shall have the meaning set forth in Section 2.
“
Purchase
Agreement
” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the
original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“
Registration
Rights Agreement
” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the
Corporation and the original Holders, in the form of
Exhibit B
attached to the Purchase Agreement.
“
Registration
Statement
” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Holder as provided for in the Registration Rights Agreement.
“
Rule
144
” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“
Rule
424
” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule. “
Securities
” means the Shares, the Preferred Stock, the Conversion Shares, the Warrants
and the Warrant Shares.
“
Securities
Act
” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“
Series
D-1 Certificate of Designation
” means the Series D-1 Certificate of Designation filed by the Corporation with the Secretary
of the State of Delaware.
“
Series
D-1 Preferred Stock
” means the Series D-1 Convertible Preferred Stock issued pursuant to the Purchase Agreement.
“
Share
Delivery Date
” shall have the meaning set forth in Section 6(c).
“
Shareholder
Approval
” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or
any successor entity) from the shareholders of the Corporation with respect to the transactions contemplated by the Transaction
Documents, including the issuance of all of the Shares, the Conversion Shares, and the shares of Common Stock underlying the Series
D-1 Preferred Stock in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.
“
Shares
”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to the Purchase Agreement.
“
Stated
Value
” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
“
Subscription
Amount
” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock, Shares and Warrants purchased
pursuant to the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement
and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“
Subsidiary
”
means any subsidiary of the Corporation as set forth on
Schedule 3.1(a)
of the Purchase Agreement and shall, where applicable,
also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.
“
Successor
Entity
” shall have the meaning set forth in Section 7(e).
“
Trading
Day
” means a day on which the principal Trading Market is open for business.
“
Trading
Market
” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
“
Transaction
Documents
” means this Certificate of Designation, the Series D-1 Certificate of Designation, the Purchase Agreement,
the Registration Rights Agreement, the Warrants, the Voting Agreement, all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.
“
Transfer
Agent
” means Corporate Stock Transfer, the current transfer agent of the Corporation, with a mailing address of 3200
Cherry Creek Drive South, Suite 430, Denver, CO 80209 and any successor transfer agent of the Corporation.
“
Voting
Agreement
” means the written agreement, in the form of
Exhibit E
attached to the Purchase Agreement, of all of
the officers, directors and stockholders holding more than 10% of the issued and outstanding shares of Common Stock on the date
of the Purchase Agreement to vote all Common Stock over which such Persons have voting control as of the record date for the meeting
of stockholders of the Corporation, amounting to, in the aggregate, at least 50.1% of the issued and outstanding Common Stock.
“
Warrants
”
means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a)
of the Purchase Agreement, which Warrants shall be exercisable 6 months from the date of issuance and have a term of exercise equal
to 5 years from the initial exercise date, in the form of
Exhibit C
attached to the Purchase Agreement.
“
Warrant
Shares
” means the shares of Common Stock issuable upon exercise of the Warrants.
Section 2
.
Designation,
Amount and Par Value
. The series of preferred stock shall be designated as its Series D-2 Convertible Preferred Stock (the
“
Preferred Stock
”) and the number of shares so designated shall be up to 940 (which shall not be subject to
increase without the written consent of all of the holders of the Preferred Stock (each, a “
Holder
” and collectively,
the “
Holders
”)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value
equal to $1,000, subject to increase set forth in Section 3 below (the “
Stated Value
”).
Section 3
.
Dividends
.
Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled
to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid
on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
Section 4
.
Voting
Rights
. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights.
However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the
Holders of 67% of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or
rights given to the Preferred Stock or alter or amend this Certificate of Designation or (b) enter into any agreement with respect
to any of the foregoing.
Section 5
.
Liquidation
.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “
Liquidation
”),
the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon
under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders shall be ratably distributed among the Holders and the holders of the Series
D-1 Preferred Stock in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment
date stated therein, to each Holder.
Section 6
.
Conversion
.
a)
Conversions at Option of Holder
. Each share of Preferred Stock shall be convertible, at any time and from time to time from
and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d) and Section 6(e)) determined by dividing the Stated Value of such share of Preferred Stock
by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached
hereto as
Annex A
(a “
Notice of Conversion
”). Each Notice of Conversion shall specify the number of shares
of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number
of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation
(such date, the “
Conversion Date
”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice
of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required.
The calculations and entries set forth in the Notice of Conversion shall control in the absence
of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender
the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly
following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the
terms hereof shall be canceled and shall not be reissued.
b)
Conversion Price
. The conversion price for the Preferred Stock shall equal
$1.00
, subject to adjustment herein (the
“
Conversion Price
”).
c)
Mechanics of Conversion
i.
Delivery of Conversion Shares Upon Conversion
. Not later than three (3) Trading Days after each Conversion Date (the “
Share
Delivery Date
”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion
Shares being acquired upon the conversion of the Preferred Stock, which, on or after the earlier of (i) the six month anniversary
of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions. On or after
the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Corporation shall deliver
the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust
Company or another established clearing corporation performing similar functions.
ii.
Failure to Deliver Conversion Shares
. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered
to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice
to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the
Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation and the Holder
shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.
iii.
Obligation Absolute; Partial Liquidated Damages
. The Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares;
provided
,
however
,
that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such
Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may
not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged
in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining
and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation
posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject
to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the
Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails
to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the second Trading Day after the Share Delivery Date
applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for
each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the
third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each
Trading Day after such second Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds
such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare a Triggering Event pursuant
to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such
Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking
to enforce damages pursuant to any other Section hereof or under applicable law.
iv.
Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion
. In addition to any other rights
available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the
Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “
Buy-In
”), then the Corporation shall (A)
pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which
(x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y)
the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including
any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock
equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded)
or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied
with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to
which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder
$1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the
Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon
conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
v.
Reservation of Shares Issuable Upon Conversion
. The Corporation covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions
set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion
of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Conversion Shares Registration
Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Conversion
Shares Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).
vi.
Fractional Shares
. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the
Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the
Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.
vii.
Transfer Taxes and Expenses
. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without
charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of
such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until
the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established
to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required
for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
d)
Beneficial Ownership Limitation
.
The Corporation shall not effect any conversion of the Preferred Stock, and
a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any
Persons acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess
of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein
(including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation
contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities
owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible shall be in the sole
discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination
of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any
Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation.
To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a
Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation
shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder
.
For purposes of this Section 6(d), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case
may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the
Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder,
the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates since
the date as of which such number of outstanding shares of Common Stock was reported. The “
Beneficial Ownership Limitation
”
shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon not less than 61 days’
prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable
to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred
Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase or decrease will not
be effective until the 61
st
day after such notice is delivered to the Corporation and shall only apply to such Holder
and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.
e)
Issuance Limitations
. Notwithstanding anything herein to the contrary, if the Corporation has not obtained Shareholder Approval,
then the Corporation may not issue, upon conversion of the Preferred Stock, a number of shares of Common Stock which, when aggregated
with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date (i) in connection
with any conversion of Preferred Stock issued pursuant to the Purchase Agreement, (ii) with any conversion of Series D-1 Preferred
Stock issued pursuant to the Purchase Agreement, (iii) in connection with the Shares issued pursuant to the Purchase Agreement,
and (iv) in connection with the exercise of any warrants issued to any registered broker-dealer as a fee in connection with the
issuance of the Securities pursuant to the Purchase Agreement, would exceed 6,712,993 shares of Common Stock (subject to adjustment
for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “
Issuable Maximum
”).
Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the original
Stated Value of such Holder’s Preferred Stock by (y) the aggregate Stated Value of all Preferred Stock issued on the Original
Issue Date to all Holders. In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum among Preferred Stock
and Series D-1 Preferred Stock held by it in its sole discretion. Such portion shall be adjusted upward ratably in the event a
Holder no longer holds any Preferred Stock or Series D-1 Preferred Stock and the amount of shares issued to such Holder pursuant
to such Holder’s Preferred Stock and Series D-1 Preferred Stock was less than such Holder’s pro-rata share of the Issuable
Maximum. For avoidance of doubt, unless and until any required Shareholder Approval is obtained and effective, warrants issued
to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement as described
in clause (iii) above shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be
unexercisable unless and until such Shareholder Approval is obtained and effective.
Section 7
.
Certain
Adjustments
.
a)
Stock Dividends and Stock Splits
. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a
stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or
any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation
upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital
stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of
which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made
pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b)
Subsequent Equity Sales
. From the date hereof until such date immediately following the 20 consecutive Trading Days wherein
(i) the VWAP for each Trading Day during such 20 consecutive Trading Day period exceeds $1.50 (subject to adjustment for forward
and reverse stock splits and the like) and (iii) there is an effective registration statement (including the Registration Statement)
of the Corporation that permits the Holder to resell all of the Conversion Shares thereunder, if, at any time while this Preferred
Stock is outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants
any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition),
any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share
that is lower than the then Conversion Price (such lower price, the “
Base Conversion Price
” and such issuances,
collectively, a “
Dilutive Issuance
”) (if the holder of the Common Stock or Common Stock Equivalents so issued
shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled
to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall
be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price
shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance.
If the Corporation enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Corporation
shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities
may be converted or exercised. The Corporation shall notify the Holders in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “
Dilutive
Issuance Notice
”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice
pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion
Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.
c)
Subsequent Rights Offerings
. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “
Purchase Rights
”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s
Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
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 shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase
Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the 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 the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d)
Pro Rata Distributions
. Subject to Section 3, during such time as this Preferred Stock is outstanding, if the Corporation
declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar
transaction) (a "
Distribution
"), at any time after the issuance of this Preferred Stock, then, in each such case,
the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein
if the Holder had held the number of shares of Common Stock acquirable upon complete Conversion of this Preferred Stock (without
regard to any limitations on Conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in such Distribution (
provided
,
however
,
to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall
be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
e)
Fundamental Transaction
. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the
Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer,
tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions
effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation,
directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock 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) (each a “
Fundamental Transaction
”), then,
upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard
to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock), the number of shares of Common Stock
of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration
(the “
Alternate Consideration
”) receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental
Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred
stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate
Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the
survivor (the “
Successor Entity
”) to assume in writing all of the obligations of the Corporation under this
Certificate of Designation and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions
of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by
the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred
Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of
capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable
upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to
such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the
value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of
protecting the economic value of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such 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 Designation and the other Transaction Documents referring to the “Corporation”
shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of
the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Corporation herein.
f)
Calculations
. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued
and outstanding.
g)
Notice to the Holders
.
i.
Adjustment to Conversion Price
. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the
Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Conversion by Holder
. If (A) the Corporation shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation
is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall
cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or
any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.
Section
8
. [RESERVED].
Section
9
.
Miscellaneous
.
a)
Notices
. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at the address set forth above
Attention: Luisa Ingargiola
, facsimile
number 727-934-6260, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the
Holders delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by
the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation,
or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder,
as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not
a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
b)
Absolute Obligation
. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or
impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and
accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein
prescribed.
c)
Lost or Mutilated Preferred Stock Certificate
. If a Holder’s Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of
such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
d)
Governing Law
. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “
New York Courts
”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Certificate of Designation or the transactions contemplated hereby. If any party shall commence an action
or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
e)
Waiver
. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall
not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of
this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
f)
Severability
. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this
Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically
be lowered to equal the maximum rate of interest permitted under applicable law.
g)
Next Business Day
. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day.
h)
Headings
. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation
and shall not be deemed to limit or affect any of the provisions hereof.
i)
Status of Converted or Redeemed Preferred Stock
. Shares of Preferred Stock may only be issued pursuant to the Purchase Agreement.
If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status
of authorized but unissued shares of preferred stock and shall no longer be designated as Series D-2 Convertible Preferred Stock.