Common use of Governance Rights Clause in Contracts

Governance Rights. (1) For a period of three years, the Company shall, acting through the Board, consistent with and subject to its duties under Nevada law, take all actions necessary allow the Purchaser to elect three (3) of the five (5) Board members. If there is an amendment to the Articles of Incorporation or Bylaws of Company to increase the number of board seats greater than 5, the Company will increase the number of Board members to be elected by Purchaser sufficient that the number of directors appointed by Purchaser shall be a majority of Board seats. Of the three members designated by Purchaser for election to the Board of Directors, at least one shall qualify as “independent” in accordance with the applicable listing standards of the NYSE or any other national or regional securities exchange or system of automated dissemination of securities prices in the United States on which the common shares are then traded or quoted, each as amended from time to time at least one of the three directors and will also qualify as a “financial expert” under Section 407 of Sxxxxxxx-Xxxxx and SEC Rules (17 CFR § 229.401). Notwithstanding the foregoing, if after three (3) years after the Effective Date of this Agreement, Purchaser does not hold Convertible Preferred Shares, Series B (or, if converted into common shares common shares from such conversion) as shown below, Purchaser shall obtain the required number of resignations from members of the Board of Directors that Purchaser has elected in accordance with the following: # of Convertible/Common Shares Held Number of Directors To Be Appointed by Purchaser 0 - 1,500 Convertible Preferred Shares, Series B or 10,000,000 Common Shares 0 1,501 - 3,500 Convertible Preferred Shares, Series B or 15,000,001 - 20,000,000 Common Shares 1 3,501 – 6,250 Convertible Preferred Shares, Series B or 20,000,001 – 25,000,000 Common Shares 2 6,251+ Convertible Preferred Shares, Series B or 25,000,001+ Common Shares 3