Exhibit 3.1

 

SECOND AMENDED AND RESTATED

CERTIFICATE OF DESIGNATION,

PREFERENCES, RIGHTS AND LIMITATIONS

of

SERIES B CONVERTIBLE PREFERRED STOCK

of

TRUE DRINKS HOLDINGS, INC.

 

Pursuant to Section 78.1955 of the Nevada Revised Statutes

 

True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), in accordance with the provisions of Sections 78.195, 78.1955 and 78.2055 of the Nevada Revised Statutes (“ NRS ”), does hereby certify that, pursuant to the authority conferred upon the Board of Directors (the “ Board ”) of the Company by the Articles of Incorporation of the Company, as amended, the following resolution amending and restating the Certificate of Designation, Preferences, Rights and Limitations of the Series B Convertible Preferred Stock, was duly adopted on April 25, 2019:

 

WHEREAS , pursuant to its authority, the Board of Directors of the Company previously fixed the rights, preferences, restrictions and other matters relating to a Series B Convertible Preferred Stock, consisting of up to 2.75 million shares of the preferred stock, par value $0.001 per share (“ Preferred Stock ”), which the Company has the authority to issue, as set forth in a Certificate of Designations of Preferences, Rights and Limitations dated November 22, 2013 (the “ Certificate of Designations ”) and amended on February 18, 2015: and

 

WHEREAS , the Board of Directors wishes to amend and restate the Certificate of Designations in its entirety pursuant to Section 78.2055 of the Nevada Revised Statutes;

 

NOW, THEREFORE, BE IT RESOLVED , that the Board of Directors does hereby amend and restate the Certificate of Designations and does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:

 

 

The shares of such series shall be designated as “Series B Convertible Preferred Stock,” $0.001 par value per share (the “ Preferred Stock ”), and the number of shares constituting such series shall be 2,750,000. Each share of Preferred Stock shall have a stated value equal to $4.00 (the “ Stated Value ”).

 

 

 

 

(a)             Holders of Preferred Stock (the “ Holders ”) shall be entitled to receive, and the Company shall pay, cumulative dividends on the Preferred Stock at the rate of 5.00% of the Stated Value per annum, payable in arrears commencing on March 31, 2014 (the “ First Payment Date ”) and payable quarterly in arrears on each June 30, September 30, December 31, and March 31 thereafter, except if such date is not a trading day, in which case such dividend shall be payable on the next succeeding trading day (each, a “ Dividend Payment Date ”); provided, howeve r, in the event the Company elects to pay the cumulative dividends on the First Payment Date in the form of shares of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), as provided in Section 2(b) below (“ Dividend Shares ”), and such Dividend Shares are not covered by an effective registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), the First Payment Date shall be deemed to be June 30, 2014, and the cumulative dividends required to be paid on the date thereof shall cover the period beginning on the Original Issue Date through June 30, 2014. Dividends on the shares of Preferred Stock (i) shall be calculated on the basis of a 360-day year consisting of twelve 30-day months, (ii) shall accrue daily commencing on the Original Issue Date of the applicable shares of Preferred Stock until the date when such shares are no longer outstanding, and (iii) shall be deemed to accrue with respect to such shares from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. All dividends payable on each share of Preferred Stock shall be paid in preference and priority to the payment of any dividends on any other class or series of capital stock of the Company, including, without limitation, the Company’s Common Stock.

 

(b)             Subject to the conditions and limitations set forth in this Section 2 , the Company may pay dividends required pursuant to Section 2 (a) at each Dividend Payment Date to any Holder (i) in shares of Common Stock, (ii) in cash, or (iii) in some combination of Common Stock and cash, provided that each Holder shall receive the same combination of Common Stock and cash as all other Holders on any Dividend Payment Date. The Company must deliver written notice (the “ Dividend Notice ”) to the Holders indicating the manner in which the Company intends to pay dividends to the Holders at least 20 trading days prior to each Dividend Payment Date. Failure to timely provide such written notice shall be deemed an election by the Company to pay the dividend in cash. For purposes of determining the dividends payable to each Holder on each Dividend Payment Date, the Company shall aggregate all shares of Preferred Stock held by such Holder, in each case with fractional shares being rounded up to the nearest whole number.

 

(c)             With respect to dividends other than Conversion Dividends (as defined herein), in the event that the Company elects to pay dividends in shares of Common Stock, and is permitted to do so pursuant to Section 2 (d) hereunder, the number of shares of Common Stock to be issued to each applicable Holder as such dividend shall be (i) determined by dividing the total dividend then being paid to such Holder in shares of Common Stock by the Price Per Share (as defined below) as of the applicable Dividend Payment Date, and rounding up to the nearest whole share, and (ii) paid to such Holder in accordance with Section 6(d) below. As used herein, “ Price Per Share ” means, with respect to a share of Common Stock, (a) if such Common Stock is listed on a national securities exchange in the United States, the 20 consecutive trading day average of the daily average of the high and low sale prices per share of the Common Stock on such national securities exchange in the United States immediately preceding the relevant date, as published by the Wall Street Journal or other reliable publication, (b) if a public market exists for such shares of Common Stock but such shares are not listed on a national securities exchange in the United States, the 20 consecutive trading day average of the daily mean between the closing bid and asked quotations in the over-the-counter market for a share of such Common Stock in the United States immediately preceding the relevant date, or (c) if such Common Stock is not then listed on a national securities exchange and not traded in the over-the-counter market, the price per share of Common Stock determined in good faith by the Board in consultation with the Holders.

 

(d)             Notwithstanding any other provision herein, the Company shall not have the right to pay any dividends hereunder in Dividend Shares unless at the time of issuance of such Dividend Shares (i) the Common Stock is registered pursuant to Section 12(b) or (g) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and (ii) the Dividend Shares being issued are either (A) covered by an effective registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), which is then available for the immediate resale of the Dividend Shares being issued by the recipients thereof, and the Board of Directors believes that such effectiveness will continue uninterrupted for the foreseeable future, or (B) freely tradable without restriction under Rule 144 of the Securities Act without volume or manner-of-sale restrictions or current public information requirements, as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders.

 

 

 

(e)             If the Board declares a dividend on the outstanding shares of Common Stock (except for a dividend resulting in an adjustment to the Conversion Price (as defined) under Section 6(g) ) payable in cash or Common Stock, or other securities or rights convertible into or entitling the holders thereof to receive, directly or indirectly, additional shares of Common Stock, such dividend will be declared and paid on each outstanding share of Preferred Stock, prior and in preference to any dividends declared and paid on the Common Stock, in the form and in an amount equal to the aggregate amount of the dividend to which such share of Preferred Stock would have been entitled had such share been converted into shares of Common Stock (regardless whether a sufficient number of shares of Common Stock were authorized under the Company’s Articles of Incorporation, as amended, to effect such conversion), pursuant to the provisions hereof as of the record date for the determination of holders of Common Stock entitled to receive such dividend (or if there is no such record date, on the date of payment of such dividend). Such dividends shall be paid in addition to the dividends described in Section 2 (a) above and will otherwise be payable only when, as and if declared by the Board.

 

 

Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “ Liquidation ”), the Holders of Preferred Stock then outstanding will be entitled to be paid in cash out of the assets of the Company available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock (as defined), but before any payment may be made to the holders of shares of any Junior Stock (as defined), because of their ownership thereof, an amount equal to the Stated Value of the Preferred Stock plus any accrued but unpaid dividends (the “ Preferred Liquidation Preference ”). Notwithstanding the foregoing, upon a Liquidation, a Holder will receive the amount, if such amount is greater than the amount set forth in the preceding sentence, that such Holder would have received had such Holder converted such Holder’s shares of Preferred Stock into Common Stock immediately before a Liquidation (regardless of whether a sufficient number of shares of Common Stock were authorized under the Company’s Articles of Incorporation, as amended, to effect such conversion). If upon a Liquidation, the Company’s remaining assets available for distribution to its stockholders are insufficient to pay the Holders the full amount of the Preferred Liquidation Preference, the Holders and holders of any Parity Stock will share ratably in any distribution of the Company’s remaining assets and funds in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. After the Holders have been paid the Preferred Liquidation Preference in full in cash, any remaining assets will be distributed pro rata among each holder of Junior Stock in accordance with the terms thereof.

 

“ Senior Stock ” means, collectively, any class or series of stock of the Company ranking on Liquidation and with respect to the payment of dividends prior and in preference to the Preferred Stock.

 

“ Junior Stock ” means, collectively, Common Stock or any other shares of capital stock of the Company ranking on Liquidation and with respect to the payment of dividends junior and subordinate to the Preferred Stock, Senior Stock and Parity Stock. Any other class or series of preferred stock of the Company authorized, designated or issued after this date, except as expressly set forth and provided in the resolution or resolutions of the Board providing for authorization, designation or issuance of shares of any such other class or series of preferred stock of the Company (subject to Section 10 ), shall be “ Junior Stock .”

 

 

 

 

 

“ Parity Stock ” means any class or series of stock ranking on Liquidation and with respect to payment of dividends on a parity with the Preferred Stock.

 

 

The Preferred Stock shall rank (i) prior to the Junior Stock, (ii) on parity with the Parity Stock, and (iii) junior to the Senior Stock, with respect to dividends. The Holders shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Company) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Company legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

 

Except to the extent specifically provided herein or required by applicable law, the Holders and the holders of Common Stock will vote together on all matters as to which the approval of the stockholders may be required. The Holders will vote on an as-converted basis, and with respect to such vote, will have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock; provided, however , no Holder of Preferred Stock shall be entitled to vote on an as-converted basis to the extent that such Holder (together with such Holder’s affiliates) would control in excess of 9.99% of the voting power of the Company (but may vote that number of shares of Preferred Stock that, together with all other shares of voting securities held by such Holder, equal less than 9.99% of the voting power of the Company, excluding all others). Fractional votes will not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each Holder could be converted) will be rounded up to the nearest whole number.

 

 

(a)             Optional Conversion by the Holder . The Preferred Stock shall be convertible at the option of the Holder at any time following the earlier of (i) the expiration of the twenty (20) calendar day period set forth in Rule 14c-2(b) under the Exchange Act, such period commencing on the distribution to the Company’s stockholders in accordance with Regulation 14C promulgated under the Exchange Act of an Information Statement on Schedule 14C by the Company with the Securities and Exchange Commission relating to the issuance of Common Stock in connection with the conversion of the Preferred Stock, and (ii) such time as there are sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the conversion of all the shares of Preferred Stock into shares of Common Stock.

 

(b)             Optional Conversion by the Company . Notwithstanding any provision set forth in this Certificate of Designation to the contrary, the Preferred Stock shall be convertible at the option of the Company at any time at a Conversion Price equal to $0.25 per share of Common Stock, provided that (i) the Common Stock is registered pursuant to Section 12(b) or (g) under the Exchange Act; and (ii) there are sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the issuance of Common Stock upon the conversion of the Preferred Stock (the “ Conversion Shares ”).

 

 

 

 

 

(c)             Fractional Shares . No fractional shares of Common Stock will be issued upon conversion of the shares of Preferred Stock. In lieu of fractional shares, the Company will pay to the Holder an amount in cash equal to such fraction multiplied by the Price Per Share (as defined) of a share of Common Stock at the time of such conversion.

 

(d)             Mechanics of Conversion .

 

(i)             Upon the conversion of the Preferred Stock pursuant to this Section 6 , each share of Preferred Stock shall be converted into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value by the Conversion Price (as defined herein) in effect at the time of conversion. The conversion price (as adjusted pursuant hereto, the “ Conversion Price ”) will initially be $0.25. In addition, subject to the conditions and limitations set forth in Section 2(d) , the Company shall pay each Holder of Preferred Stock being converted pursuant to either Sections 6 (a) or 6 (b) above the amount of any accrued but unpaid dividends on such Preferred Stock (the “ Conversion Dividends ”) held by such Holder and being converted through the Conversion Date (as defined below), (i) in shares of Common Stock, (ii) in cash, or (iii) in some combination of Common Stock and cash, provided that each Holder shall receive the same proportion of Common Stock and cash as all other Holders on any Conversion Date. The number of shares of Common Stock paid in satisfaction of any Conversion Dividends shall be determined by dividing the Conversion Dividends that are so being paid by the Conversion Price. Upon a conversion, the Holder shall promptly, after notice of such conversion has been provided to such Holder or public disclosure thereof has been made pursuant to a Current Report on Form 8-K or press release, if such shares are held in certificated form, surrender the certificate or certificates for such shares of Preferred Stock at the office of the transfer agent (or at the principal office of the Company if the Company serves as its own transfer agent). Such surrender may be made by registered mail with return receipt requested, properly insured, by hand or overnight courier. If required by the Company, certificates surrendered for conversion, if applicable, will be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the Holder or his or its attorney duly authorized in writing. The date on which the Company (a) is notified of a conversion pursuant to Section 6(a) or (y) elects to convert pursuant to Section 6 (b) will be the conversion date (“ Conversion Date ”).

 

(A)             Upon conversion of the Preferred Stock or payment of dividends in shares of Common Stock, (i) if the DTC Transfer Conditions (as defined below) are satisfied, the Company shall promptly (and in any event within three business days) cause its transfer agent to electronically transmit all Conversion Shares and/or Dividend Shares by crediting the account of such Holder or its nominee with the Depository Trust Company (“ DTC ”) through its Deposit Withdrawal Agent Commission system; or (ii) if the DTC Transfer Conditions are not satisfied, the Company shall promptly (and in any event within three business days) issue and deliver, or instruct its transfer agent to issue and deliver, certificates, registered in the name of such the Holder or its nominee, physical certificates representing the Conversion Shares and/or Dividend Shares, as applicable. Even if the DTC Transfer Conditions are satisfied, any person effecting a conversion of Preferred Stock or receiving Dividend Shares may instruct the Company to deliver to such person or its nominee physical certificates representing the Conversion Shares and/or Dividend Shares, as applicable, in lieu of delivering such shares by way of DTC Transfer. “ DTC Transfer Conditions ” means that (A) the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer program and (B) the certificates for the Conversion Shares and/or Dividend Shares required to be delivered do not bear a legend and recipient is not then required to return such certificate for the placement of a legend thereon.

 

 

 

 

 

(B)             The Company warrants that no instruction other than such instructions referred to in this Section 6 (d) , and stop transfer instructions in the case of the transfer of the Conversion Shares or Dividend Shares prior to registration of the Conversion Shares or Dividend Shares under the Securities Act or without an exemption therefrom, shall be given by the Company to its transfer agent and that the Conversion Shares and Dividend Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided herein. Nothing in this Section shall affect in any way the Holders’ obligations to resell the Conversion Shares or the Dividend Shares pursuant to an effective registration statement or under an exemption from the registration requirements of applicable securities law.

 

(C)             If any Holder provides the Company and the transfer agent with an opinion of counsel, which opinion of counsel shall be in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that the Conversion Shares or the Dividend Shares to be sold or transferred may be sold or transferred pursuant to an exemption from registration, or any Holder provides the Company with reasonable assurances that such Conversion Shares or Dividend Shares may be sold under Rule 144 (which shall not be required to include an opinion of counsel), the Company shall permit the transfer and, in the case of the Conversion Shares and the Dividend Shares, promptly (and in any event within three business days) instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the Holders.

 

(D)             If the Company fails to (i) issue and deliver (or cause to be delivered) to a Holder by the time periods required in this Section 6 (each, a “ Required Delivery Date ”) a certificate representing the Conversion Shares or the Dividend Shares so delivered to the Company by such Holder that is free from all restrictive and other legends or (ii) credit the account of such Holder’s or such Holder’s nominee with DTC by the Required Delivery Date for such number of Conversion Shares or Dividend Shares so delivered to the Company, then, in addition to all other remedies available to such Holder, the Company shall pay in cash to such Holder on each day after the Required Delivery Date that the issuance or credit of such shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered or credited (as the case may be) to such Holder or such Holder’s nominee multiplied by (B) the closing price of the Common Stock on the trading day immediately preceding the Required Delivery Date. In addition to the foregoing, if the Company fails to so properly deliver such unlegended certificates or so properly credit the balance account of such Holder’s or such Holder’s nominee with DTC by the Required Delivery Date, and if on or after the Required Delivery Date such Holder (or any other Person in respect, or on behalf, of such Holder) purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that such Holder so anticipated receiving from the Company without any restrictive legend, then, in addition to all other remedies available to such Holder, the Company shall, within three (3) trading days after such Holder’s request and in such Holder’s sole discretion, either (i) pay cash to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “ Buy-In Price ”), at which point the Company’s obligation to so deliver such certificate or credit such Holder’s balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to such Holder a certificate or certificates or credit such Holder’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares or Dividend Shares (as the case may be) that the Company was required to deliver to such Holder by the Required Delivery Date multiplied by (B) the lowest closing price of the Common Stock on any trading day during the period commencing on the date of the delivery by such Holder to the Company of the applicable Conversion Shares or Dividend Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).

 

 

 

 

 

(e)             The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purposes of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Company will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, until such date as such shares of Common Stock are available and reserved for issuance upon such conversion, the Company will not issue, sell, or deliver (whether through the issuance or granting of Rights (as defined herein)), any shares of Common Stock or any shares having, among other characteristics, the economic rights thereof, until it has reserved sufficient shares of Common Stock for issuance upon such conversion as otherwise contemplated by this Section 6 . As used herein, “ Rights ” means all rights issued by the Company to acquire Common Stock directly or indirectly by exercise of a warrant, option or similar call or conversion of any instruments.

 

(f)             All shares of Preferred Stock which have been surrendered for conversion as herein provided will no longer be deemed to be outstanding and all rights with respect to such shares will immediately cease and terminate on the Conversion Date, except only the right of the Holders thereof to receive the Conversion Shares, cash in lieu of fractional shares in exchange therefor and accrued, but unpaid dividends. Any shares of Preferred Stock so converted will be deemed canceled and will not thereafter be issuable by the Company as shares of Preferred Stock, but will return to the status of authorized, but unissued shares of Preferred Stock of no designated series.

 

(g)             Adjustment for Stock Splits, Dividends, Distributions and Combinations . If, after the Original Issue Date, the Company fixes a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or Rights without payment of any consideration by such holder for the additional shares of Common Stock or Rights (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the shares of Preferred Stock will be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series will be increased in proportion to such increase of the aggregate number of shares of Common Stock outstanding and those issuable with respect to such Rights, with the number of shares issuable with respect to the Rights determined from time to time as such number may be adjusted. If, after the Original Issue Date, the Company combines the outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately before the combination will be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of Preferred Stock will be decreased in proportion to such decrease in outstanding shares. Any adjustments under this paragraph will become effective at the close of business on the date the subdivision or combination becomes effective.

 

(h)             Adjustment for Reorganization, Reclassification or Exchange . If the Common Stock issuable upon the conversion of the shares of Preferred Stock is changed into or exchanged for the same or a different number of shares of any class or classes of stock of the Company or another entity, whether by capital reorganization, merger, consolidation, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Section 6 (g) ) then and in each such event the Holders will have the right thereafter to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such capital reorganization, merger, consolidation, reclassification, or other change that holders of the number of shares of Common Stock into which such shares of Preferred Stock would have been converted immediately before such capital reorganization, merger, consolidation, reclassification, or change would have received, all subject to further adjustment as provided herein.

 

(i)             [REMOVED]

 

(j)             [REMOVED]

 

 

 

 

 

(k)             No Impairment . The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate to protect the conversion rights of the Holders against impairment.

 

(l)             Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6 , the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and will file a copy of such certificate with its corporate records. The Company will, upon the written request at any time of any Holder, furnish or cause to be furnished to such holder a similar certificate setting forth (1) such adjustments and readjustments, (2) the Conversion Price then in effect, and (3) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Preferred Stock. Despite such adjustment or readjustment, the form of each or all Preferred Stock certificates, if the same will reflect the initial or any subsequent Conversion Price, need not be changed for the adjustments or readjustments to be valued under the provisions of this Certificate of Designation, which will control.

 

 

The Company shall not permit the conversion of a Holder’s Preferred Stock to the extent that after giving effect to such conversion, such Holder (together with such Holder’s affiliates) would beneficially own in excess of 9.99% (the “ Maximum Percentage ”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate 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 exercise of such Holder’s Preferred Stock with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unconverted portion of the Holder’s Preferred Stock beneficially owned by such Holder and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Holder and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. In determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm to the 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 Company, including such Holder’s Preferred Stock, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

 

 

 

 

 

 

 

There will be no sinking fund for the payment of dividends or liquidation preferences on the shares of Preferred Stock or the redemption of any shares thereof.

 

 

So long as any shares of Preferred Stock are outstanding, the Company will not, without obtaining the approval (by vote or written consent) of the Holders of sixty six percent (66%) of the issued and outstanding shares of Preferred Stock:

 

(a)             permit the amendment, modification or repeal of the Company’s Articles of Incorporation or Bylaws that would adversely affect the Holders in any material respect, in either case whether by merger or otherwise (for the avoidance of doubt, any such amendments or modifications necessary to increase the number of authorized shares of Common Stock, or to change the name of the Company, or to effectuate a reverse stock split shall not be deemed to adversely affect the Holders in any material respect);

 

(b)             permit the amendment, modification, or repeal of this Certificate of Designation, whether by merger or otherwise;

 

(c)             [REMOVED];

 

(d)             declare or pay any dividend (other than dividends payable solely in Common Stock) or distribution on, or make any payment on account of, or set apart assets for a sinking or analogous fund to, or, purchase, redeem, defease, retire or otherwise acquire, any shares of any class of capital stock of the Company or any warrants or options to purchase any such capital stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any subsidiary of the Company (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being referred to herein as “ Restricted Payments ”); provided, however , that the Company or any subsidiary of the Company may make Restricted Payments with respect to any shares of Senior Stock or Parity Stock the issuance of which has been approved in accordance herewith;

 

(e)             permit the amendment or modification of the Certificate of Designation for any other series of preferred stock of the Company; provided, however , the Company may file a certificate of elimination or otherwise terminate any other series of preferred stock of the Company; or

 

(f)             subject the Company to any transaction that would be a Change of Control.

 

With respect to actions by the Holders upon those matters on which the Holders may vote as a separate class, such actions may be taken without a stockholders meeting by the written consent of Holders who would be entitled to vote at a meeting having voting power to cast not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all the shares of Preferred Stock is entitled to vote were present and voted. In addition, the Holders may call a special meeting of the Company’s stockholders upon the occurrence of the events described above by providing notice of the exercise of such right to the Company and the Company will take all steps necessary to hold such meeting as soon as practicable after the receipt of such notice.

 

 

 

 

 

 

Holders shall not be entitled to any preemptive, subscription or similar rights in respect to any securities of the Company under this Certificate of Designation.

 

 

No payments shall be made to Holders, nor shall redemptions of shares of Preferred Stock be made, unless the right to receive such payments or participate in such redemptions are made available to all Holders on a pro rata basis based on the number of shares of Preferred Stock such Holder holds.

 

 

The Company may deem and treat the record holder of any shares of the Preferred Stock as the true and lawful owner thereof for all purposes, and the Company shall not be affected by any notice to the contrary.

 

 

The headings of the various subdivisions hereof are for convenience of reference only and will not affect the interpretation of any of the provisions hereof.

 

 

Any notice required by the provisions hereof to be given to the Holders shall be deemed given if deposited in the United States Mail, first class postage prepaid, and addressed to each Holder at his or its address appearing on the Company’s books. Any notice required by the provisions hereof to be given to the Company shall be deemed given if deposited in the United States mail, first class postage prepaid, and addressed to the Company at 2 Park Plaza., Ste. 1200, Irvine, CA 92614, or such other address as the Company shall provide in writing to the Holders.

 

 

The rights, preferences and limitations of the shares of Preferred Stock set forth herein will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this statement of resolution, as applied to any Holder or the Company or to any circumstance, is adjudged by a governmental body or arbitrator not to be enforceable in accordance with its terms, the governmental body or arbitrator making such determination may modify (and shall modify) the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

IN WITNESS WHEREOF, True Drinks Holdings, Inc. has caused this Amended and Restated Certificate of Designation to be signed by the undersigned this 26th day of April, 2019.

 

	TRUE DRINKS HOLDINGS, INC.
	By:	/s/ Robert Van Boerum
	Name:	Robert Van Boerum
	Title:	Principal Executive and Financial Officer

 

 

Exhibit 3.2

 

FOURTH AMENDED AND RESTATED

CERTIFICATE OF DESIGNATION,

PREFERENCES, RIGHTS AND LIMITATIONS

of

SERIES C CONVERTIBLE PREFERRED STOCK

of

TRUE DRINKS HOLDINGS, INC.

 

Pursuant to Section 78.1955 of the Nevada Revised Statutes

 

True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), in accordance with the provisions of Sections 78.195, 78.1955 and 78.2055 of the Nevada Revised Statutes (“ NRS ”), does hereby certify that, pursuant to the authority conferred upon the Board of Directors (the “ Board ”) of the Company by the Articles of Incorporation of the Company, as amended, the following resolutions amending and restating the Certificate of Designation, Preferences, Rights and Limitations of the Series C Convertible Preferred Stock was duly adopted on April 25, 2019:

 

WHEREAS , pursuant to its authority, the Board of Directors of the Company previously fixed the rights, preferences, restrictions and other matters relating to a Series C Convertible Preferred Stock, originally consisting of up to 90,000 shares of the Company’s preferred stock, par value $0.001 per share (“ Preferred Stock ”), as set forth in a Certificate of Designations of Preferences, Rights and Limitations dated February 17, 2015 (the “ Certificate of Designations ”) and amended on March 26, 2015, August 12, 2015, and November 24, 2015; and

 

WHEREAS , the Board of Directors wishes to amend and restate the Certificate of Designations in its entirety pursuant to Section 78.2055 of the Nevada Revised Statutes;

 

NOW, THEREFORE, BE IT RESOLVED , that the Board of Directors does hereby amend and restate the Certificate of Designations and does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:

 

1.   Designation and Amount .

 

The shares of such series shall be designated as “Series C Convertible Preferred Stock,” $0.001 par value per share (the “ Preferred Stock ”), and the number of shares constituting such series shall be 200,000. Each share of Preferred Stock shall have a stated value equal to $100.00 (the “ Stated Value ”).

 

2.   Dividends on Shares of Common Stock .

 

If the Board declares a dividend on the outstanding shares of the Company’s common stock, $0.001 par value per share (the “ Common Stock ”) or any other Junior Stock (as defined below) (except for a dividend on Common Stock payable in shares of Common Stock), such dividend will be declared and paid on each outstanding share of Preferred Stock, prior and in preference to any dividends declared and paid on the Common Stock or other Junior Stock, in an amount equal to the aggregate amount of the dividend to which such share of Preferred Stock would have been entitled had such share been converted into shares of Common Stock (regardless whether a sufficient number of shares of Common Stock were authorized under the Company’s Articles of Incorporation, as amended, to effect such conversion), pursuant to the provisions hereof as of the record date for the determination of holders of Common Stock or other Junior Stock entitled to receive such dividend (or if there is no such record date, on the date of payment of such dividend). Such dividends will be payable only when, as and if declared by the Board and will be noncumulative.

 

 

 

3.   Liquidation, Dissolution or Winding Up .

 

Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “ Liquidation ”), the holders of record of shares of Preferred Stock (the “ Holders ”) then outstanding will be entitled to be paid in cash out of the assets of the Company available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock (as defined), but before any payment may be made to the holders of shares of any Junior Stock (as defined), because of their ownership thereof, an amount equal to the Stated Value of the Preferred Stock plus any accrued but unpaid dividends (the “ Preferred Liquidation Preference ”). Notwithstanding the foregoing, upon a Liquidation, a Holder will receive the amount, if such amount is greater than the amount set forth in the preceding sentence, that such Holder would have received had such Holder converted such Holder’s shares of Preferred Stock into Common Stock immediately before a Liquidation (regardless of whether a sufficient number of shares of Common Stock were authorized under the Company’s Articles of Incorporation, as amended, to effect such conversion). If upon a Liquidation, the Company’s remaining assets available for distribution to its stockholders are insufficient to pay the Holders the full amount of the Preferred Liquidation Preference, the Holders and holders of any Parity Stock will share ratably in any distribution of the Company’s remaining assets and funds in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. After the Holders have been paid the Preferred Liquidation Preference in full in cash, any remaining assets will be distributed pro rata among each holder of Junior Stock in accordance with the terms thereof. Unless otherwise determined by the holders of at least a majority of the then outstanding shares of Preferred Stock, voting as a separate class, for the purposes of this Section 3, a Liquidation shall be deemed to include (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, sale of all or substantially all of the shares of then outstanding capital stock, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Company’s jurisdiction of incorporation), unless the Company’s stockholders of record as constituted immediately prior to such transaction or series of related transactions will (by virtue of their pre-transaction holdings in the Company and any additional securities received by them as part of the transaction in exchange of such pre-transaction holdings), immediately after such transaction or series of related transactions continue to hold at least a majority of the voting power of the surviving or acquiring entity or (ii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.

 

“ Senior Stock ” means, collectively, any class or series of stock of the Company ranking on Liquidation and with respect to the payment of dividends prior and in preference to the Preferred Stock.

 

“ Junior Stock ” means, collectively, Common Stock or any other shares of capital stock of the Company ranking on Liquidation and with respect to the payment of dividends junior and subordinate to the Preferred Stock, Senior Stock and Parity Stock. Any other class or series of preferred stock of the Company authorized, designated or issued after this date, except as expressly set forth and provided in the resolution or resolutions of the Board providing for authorization, designation or issuance of shares of any such other class or series of preferred stock of the Company (subject to Section 8), shall be “ Junior Stock .”

 

“ Parity Stock ” means, collectively, the Series B Convertible Preferred Stock of the Company, par value $0.001 per share (the “ Series B Preferred Stock ”), or any other class or series of stock ranking on Liquidation and with respect to payment of dividends on a parity with the Preferred Stock.

 

 

 

4.   Dividends and Distributions .

 

The Preferred Stock shall rank (i) prior to the Junior Stock, (ii) on parity with the Parity Stock, and (iii) junior to the Senior Stock, with respect to dividends. The Holders shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Company) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Company legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

5.   Voting .

 

Except to the extent specifically provided herein or required by applicable law, the Holders and the holders of Common Stock will vote together on all matters as to which the approval of the stockholders may be required. The Holders will have the right to vote the Preferred Stock on an as-converted to Common Stock basis, and with respect to such vote, will have voting rights and powers equal to the voting rights and powers of the holders of Common Stock; provided , however , that no Holder shall be entitled to vote such Holder’s shares of Preferred Stock to the extent such Holder (together with any “affiliate” of such Holder (as such term is defined in Rule 144 under the Securities Act of 1933, as amended), or any person or entity deemed to be part of a “group” with such Holder (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”))) would control in excess of 50% of the total voting power of the outstanding shares of capital stock of the Company at the time of such vote (the “ Voting Power ”) (but such Holder shall be entitled to vote that number of shares of Preferred Stock that, together with all of the other outstanding shares of capital stock of the Company held by such Holder at the time of such vote, equal up to exactly 50% of the Voting Power); provided   further , that the voting limitation set forth in the preceding proviso shall terminate, in whole or in part, upon expiration of 61 days following the date on which written notice is delivered to the Company by the holders of a majority of the then-outstanding shares of Preferred Stock requesting that the voting limitation be so terminated and authorizing the Company to take such actions as are necessary to approve an amendment to this Certificate of Designation for the same purpose. Fractional votes will not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each Holder could be converted) will be rounded to the nearest whole number (with one-half being rounded upward); provided , however , in no event shall the rounding of fractional votes result in a violation of the voting limitation imposed by this Section 5.

 

6.   Conversion .

 

The Preferred Stock shall be convertible into Common Stock in accordance with the following:

 

(a)   Optional Conversion by the Holder . The Preferred Stock shall be convertible at the option of the Holder at any time, provided there are sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the conversion of all the shares of Preferred Stock into shares of Common Stock.

 

(b)   Optional Conversion by the Company . Notwithstanding any provision set forth in this Certificate of Designation to the contrary, the Preferred Stock shall be convertible at the option of the Company at any time at a Conversion Price equal to $0.025 per share of Common Stock, provided that (i) the Common Stock is registered pursuant to Section 12(b) or (g) under the Exchange Act; and (ii) there are sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the issuance of Common Stock upon the conversion of the Preferred Stock (the “ Conversion Shares ”).

 

 

 

(c)   Fractional Shares . No fractional shares of Common Stock will be issued upon conversion of the shares of Preferred Stock. In lieu of fractional shares, the Company will pay to the Holder an amount in cash equal to such fraction multiplied by the fair market value (as determined pursuant to Section 6(g)(iv) below) of a share of Common Stock at the time of such conversion.

 

(d)   Mechanics of Conversion .

 

(i)   Upon the conversion of the Preferred Stock pursuant to this Section 6 , each share of Preferred Stock shall be converted into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value by the Conversion Price (as defined) in effect at the time of conversion. The conversion price (as adjusted pursuant hereto, the “ Conversion Price ”) will initially be $0.025. Upon such conversion, the Holder shall promptly, after notice of such conversion has been provided to such Holder or public disclosure thereof has been made pursuant to a Current Report on Form 8-K or press release, if such shares are held in certificated form, surrender the certificate or certificates for such shares of Preferred Stock at the office of the transfer agent (or at the principal office of the Company if the Company serves as its own transfer agent). Such surrender may be made by registered mail with return receipt requested, properly insured, by hand or overnight courier. If required by the Company, certificates surrendered for conversion, if applicable, will be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the Holder or his or its attorney duly authorized in writing. The date on which the conditions to conversion set forth in Section 6(a) or, if later and to the extent applicable, of receipt of such certificates by the transfer agent or the Company, as the case may be, will be the conversion date (“ Conversion Date ”). The Company will, as soon as practicable after the Conversion Date, subject to the book-entry provisions set forth below, issue and deliver to such Holder, or to such Holder’s nominees, a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled, together with cash in lieu of any fraction of a share. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of the shares of Preferred Stock, provided the transfer agent for the Common Stock is participating in The Depository Trust Company’s (including its successors and assigns, the “ Depository ”) Fast Automated Securities Transfer program, upon request of the Holder, the Company shall, if in compliance with applicable securities laws and in accordance with the Company’s policies and procedures with respect to “restricted securities” as defined in Rule 144(a)(3) under the Securities Act of 1933, as amended, use its commercially reasonable efforts to cause the transfer agent to electronically transmit the shares of Common Stock issuable upon conversion by crediting the account of the Holder’s prime broker with the Depository through its Deposit Withdrawal Agent Commission system. The Company agrees to coordinate with the Depository to accomplish this objective. Such conversion of the Preferred Stock will be deemed to have been made immediately before the close of business on the Conversion Date, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion will be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

 

(ii)   All shares of Preferred Stock which have been surrendered for conversion as herein provided will no longer be deemed to be outstanding and all rights with respect to such shares will immediately cease and terminate on the Conversion Date, except only the right of the Holders thereof to receive shares of Common Stock, cash in lieu of fractional shares in exchange therefor and accrued, but unpaid dividends. Any shares of Preferred Stock so converted will be deemed canceled and will not thereafter be issuable by the Company as shares of Preferred Stock, but will return to the status of authorized, but unissued shares of Preferred Stock of no designated series.

 

 

 

(e)   Adjustment for Stock Splits, Dividends, Distributions and Combinations . If, after the date on which the first share of the Series C Preferred Stock was issued (the “ Original Issue Date ”), the Company fixes a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights without payment of any consideration by such holder for the additional shares of Common Stock or rights (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the shares of Preferred Stock will be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series will be increased in proportion to such increase of the aggregate number of shares of Common Stock outstanding and those issuable with respect to such rights, with the number of shares issuable with respect to the rights determined from time to time as such number may be adjusted. If, after the Original Issue Date, the Company combines the outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately before the combination will be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of Preferred Stock will be decreased in proportion to such decrease in outstanding shares. Any adjustments under this paragraph will become effective at the close of business on the date the subdivision or combination becomes effective.

 

(f)   Adjustment for Reorganization, Reclassification or Exchange . If the Common Stock issuable upon the conversion of the shares of Preferred Stock is changed into or exchanged for the same or a different number of shares of any class or classes of stock of the Company or another entity, whether by capital reorganization, merger, consolidation, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Section 6 (e) ) then and in each such event the Holders will have the right thereafter to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such capital reorganization, merger, consolidation, reclassification, or other change that holders of the number of shares of Common Stock into which such shares of Preferred Stock would have been converted immediately before such capital reorganization, merger, consolidation, reclassification, or change would have received, all subject to further adjustment as provided herein.

 

(g)   Adjustment Upon Issuance of Shares of Common Stock . If, at any time after the Original Issue Date, the Company issues or sells, or in accordance with this Section 6 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities (as defined in the Securities Purchase Agreement, by and between the Company and Red Beard Holdings, LLC (“ Red Beard ”), dated on or about April 11, 2016 (the “ April   Purchase Agreement ”)) issued or sold or deemed to have been issued or sold without consideration or for a consideration per share (the “ New Issuance Price ”) less than a price equal to the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Conversion Price then in effect is referred to as the “ Applicable Price ”) (the foregoing a “ Dilutive Issuance ”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price; provided that if such Dilutive Issuance was without consideration, then the Company shall be deemed to have received an aggregate of $0.001 of consideration for all such additional shares of Common Stock issued or deemed to be issued. No adjustment pursuant to this Section 6(g) shall be made if such adjustment would result in an increase of the Conversion Price then in effect. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and consideration per share under this Section 6(g)), the following shall be applicable:

 

 

 

(i)   Issuance of Options . If the Company in any manner grants or sells any Options (as defined below) and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities (as defined below) issuable upon exercise of any such Option is less than the Applicable Price, but excluding any Excluded Securities, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 6 (g) (i) , the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option. Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

 

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

 

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

 

(ii)   Issuance of Convertible Securities . If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, but excluding any Excluded Securities, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 6(g)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof. Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section 6(g)(ii), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

 

 

 

(iii)   Change in Option Price or Rate of Conversion . If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(g)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Original Issue Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease.

 

(iv)   Calculation of Consideration Received . If (i) any Option or Convertible Security is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, and (ii) all such Options or Convertible Securities (as applicable) so issued or sold are, or may become, exercisable and/or convertible for an aggregate number of shares of Common Stock that exceeds (as applicable) either (1) if Common Stock was the primary security issued or sold in such transaction, the aggregate number of shares of Common Stock so issued or sold in such transaction or (2) if an Option or Convertible Security was the primary security issued or sold in such transaction, the aggregate number of shares of Common Stock so deemed issued or sold in such transaction that underlie all Options or Convertible Securities that constituted the primary securities in such transaction, then (x) such Option or Convertible Security (as applicable) will be deemed to have been issued for consideration equal to the fair market value thereof and (y) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (I) the aggregate consideration received by the Company minus (II) the fair market value of each such Option or Convertible Security (as applicable). If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair market value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the volume-weighted average price of such security for each of the five (5) trading days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “ Valuation Event ”), the fair value of such consideration will be determined within five (5) trading days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

 

 

 

(v)   Record Date . If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(h)            Certain Adjustments. The applicable Conversion Price will not be reduced if the amount of such reduction would be an amount less than $0.001, but any such amount will be carried forward and reduction with respect thereto made at the time of and together with any subsequent reduction which, together with such amount and any other amount or amounts so carried forward, will aggregate $0.001 or more.

 

(i)             No Impairment . The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate to protect the conversion rights of the Holders against impairment.

 

(j)   Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6 , the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and will file a copy of such certificate with its corporate records. The Company will, upon the written request at any time of any Holder, furnish or cause to be furnished to such holder a similar certificate setting forth (1) such adjustments and readjustments, (2) the Conversion Price then in effect, and (3) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Preferred Stock. Despite such adjustment or readjustment, the form of each or all Preferred Stock certificates, if the same will reflect the initial or any subsequent Conversion Price, need not be changed for the adjustments or readjustments to be valued under the provisions of this Certificate of Designation, which will control.

 

7.   Sinking Fund .

 

There will be no sinking fund for the payment of any dividends or liquidation preferences on the shares of Preferred Stock or the redemption of any shares thereof.

 

8.   Protective Provisions .

 

So long as at least 4,000 shares of Preferred Stock are issued and outstanding, the Company will not, either directly or indirectly by amendment, merger, consolidation or otherwise, without obtaining the approval (by vote or written consent) of the Holders of a majority of the shares of Preferred Stock then issued and outstanding:

 

(a)   permit the amendment, modification or repeal of the Company’s Articles of Incorporation or Bylaws, except for those amendments or modifications necessary to adopt an exclusive forum bylaw provision;

 

(b)   permit the amendment, modification, or repeal of this Certificate of Designation;

 

(c)   increase or decrease the authorized number of shares of Common Stock or Series C Preferred Stock;

 

 

 

(d)   issue, sell, or deliver (whether through the issuance or granting of rights or otherwise), or authorize the issuance, sale or delivery of, (i) any shares of Senior Stock or Parity Stock or reclassify or modify any Junior Stock or Parity Stock so as to become Senior Stock or Parity Stock; or (ii) any additional shares of Common Stock or Convertible Securities; provided , however , nothing contained in this Section 8(d) shall prevent the Company from, and the Company shall be entitled to, issue Common Stock or Convertible Securities in connection with the April Purchase Agreement (and the shares of Common Stock issuable upon conversion of such Preferred Stock and exercise of such warrants), currently outstanding grants and issuances, and issuances to employees, officers, directors, or other eligible recipients under the Company’s existing equity or other incentive plans, and pursuant to equity or other incentive plans that may be adopted by the Company’s Board of Directors (including the affirmative vote of the Purchaser Designee (as such term is defined in that certain Securities Purchase Agreement, first dated February 20, 2015 (the “ February Purchase Agreement ”))) after the date hereof;

 

(e)   amend or modify the terms of any outstanding security or debt instrument of the Company outstanding as of the Original Issue Date;

 

(f)   declare or pay any dividend (other than dividends payable solely in Common Stock) or distribution on, or make any payment on account of, or set apart assets for a sinking or analogous fund to, or, purchase, redeem, defease, retire or otherwise acquire, any shares of any class of capital stock of the Company or any warrants or options to purchase any such capital stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any subsidiary of the Company (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being referred to herein as “ Restricted Payments ”); provided , however , that the Company or any subsidiary of the Company may make Restricted Payments with respect to any shares of Senior Stock or Parity Stock the issuance of which has been approved in accordance herewith, including with respect to any shares of Series B Preferred Stock;

 

(g)   adopt or effect any modification to any employee stock option plan, stock bonus plan, stock purchase plan or other management equity plan without the prior approval of the Board of Directors, including the affirmative approval of the Purchaser Designee (as defined in the February Purchase Agreement), if any;

 

(h)   permit the amendment or modification of the Certificate of Designation for any other series of preferred stock of the Company;

 

(i)   increase or decrease the authorized number of directors constituting the Board of Directors; or

 

(j)   liquidate, dissolve or wind-up the business and affairs of the Company, or effect or subject the Company to any transaction, or series of related transactions, that constitutes a Change of Control, or consent to any of the foregoing.

 

For purposes of this Section 8, “ Change of Control ” means the occurrence of any of the following events occurring after the Original Issue Date: (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule l3d-3 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the outstanding capital stock of the Company having the right to vote ordinarily on the election of directors (“ Voting Stock ”); (ii) the Company is merged with or into or consolidated with another person or entity and, immediately after giving effect to the merger or consolidation, (a) less than 50% of the total voting power of the outstanding Voting Stock of the surviving or resulting person or entity is then “beneficially owned” (within the meaning of Rule 13d-3 under the Exchange Act) in the aggregate by the stockholders of the Company immediately before such merger or consolidation or (b) any “person” or “group” (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act), has become the direct or indirect “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of the Voting Stock of the surviving or resulting person or entity; or (iii) the Company, either individually or in conjunction with one or more of its subsidiaries, sells, assigns, conveys, transfers, leases, or otherwise disposes of, or one or more of its subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including capital stock of the Company’s subsidiaries, to any person or entity (other than the Company or a wholly owned subsidiary).

 

 

 

With respect to actions by the Holders upon those matters on which the Holders may vote as a separate class, such actions may be taken without a stockholders meeting by the written consent of Holders who would be entitled to vote at a meeting having voting power to cast not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all the shares of Preferred Stock is entitled to vote were present and voted. In addition, the Holders may call a special meeting of the Company’s stockholders upon the occurrence of the events described above by providing notice of the exercise of such right to the Company and the Company will take all steps necessary to hold such meeting as soon as practicable after the receipt of such notice.

 

9.   Preemptive Rights .

 

Other than as specifically set forth in the April Purchase Agreement, February Purchase Agreement, and that certain Securities Purchase Agreement, dated November 25, 2015, by and between the Company and investors named therein, Holders shall not be entitled to any preemptive, subscription or similar rights in respect to any securities of the Company under this Certificate of Designation.

 

10.   The Company’s Dealings with Holders of the Preferred Stock .

 

No payments shall be made to Holders, nor shall redemptions of shares of Preferred Stock be made, unless the right to receive such payments or participate in such redemptions are made available to all Holders on a pro rata basis based on the number of shares of Preferred Stock such holder holds.

 

11.   Record Holders .

 

The Company may deem and treat the record holder of any shares of the Preferred Stock as the true and lawful owner thereof for all purposes, and the Company shall not be affected by any notice to the contrary.

 

12.   Headings and Subdivisions .

 

The headings of the various subdivisions hereof are for convenience of reference only and will not affect the interpretation of any of the provisions hereof.

 

13.   Notices .

 

Any notice required by the provisions hereof to be given to the Holders shall be deemed given if deposited in the United States Mail, first class postage prepaid, and addressed to each Holder at his or its address appearing on the Company’s books. Any notice required by the provisions hereof to be given to the Company shall be deemed given if deposited in the United States mail, first class postage prepaid, and addressed to the Company at 18662 MacArthur Blvd., Ste. 110, Irvine, CA 92612, or such other address as the Company shall provide in writing to the Holders.

 

14.   Severability of Provisions .

 

The rights, preferences and limitations of the shares of Preferred Stock set forth herein will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this statement of resolution, as applied to any Holder or the Company or to any circumstance, is adjudged by a governmental body or arbitrator not to be enforceable in accordance with its terms, the governmental body or arbitrator making such determination may modify (and shall modify) the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.

 

 

 

 

[Remainder of Page Intentionally Left Blank]

 

 

 

IN WITNESS WHEREOF, True Drinks Holdings, Inc. has caused this Amended and Restated Certificate of Designation to be signed by the undersigned this 26 th day of April, 2019.

 

TRUE DRINKS HOLDINGS, INC.
By:	/s/ Robert Van Boerum
Name:	Robert Van Boerum
Title:	Principal Executive and Principal Financial   Officer

 

 

Exhibit 3.3

 

FIRST AMENDED AND RESTATED

CERTIFICATE OF DESIGNATION,

PREFERENCES, RIGHTS AND LIMITATIONS

of

SERIES D CONVERTIBLE PREFERRED STOCK

of

TRUE DRINKS HOLDINGS, INC.

 

Pursuant to Section 78.1955 of the Nevada Revised Statutes

 

True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), in accordance with the provisions of Sections 78.195 and 78.1955 of the Nevada Revised Statutes (“ NRS ”), does hereby certify that, pursuant to the authority conferred upon the Board of Directors (the “ Board ”) of the Company by the Articles of Incorporation of the Company, as amended, the following resolutions amending and restating the Certificate of Designation, Preferences, Rights and Limitations of the Series D Convertible Preferred Stock was duly adopted on April 25, 2019:

 

WHEREAS , pursuant to its authority, the Board of Directors of the Company previously fixed the rights, preferences, restrictions and other matters relating to a Series D Convertible Preferred Stock, originally consisting of up to 50,000 shares of the Company’s preferred stock, par value $0.001 per share (“ Preferred Stock ”), as set forth in a Certificate of Designations of Preferences, Rights and Limitations dated January 24, 2017 (the “ Certificate of Designations ”); and

 

WHEREAS , the Board of Directors wishes to amend and restate the Certificate of Designations in its entirety pursuant to Section 78.2055 of the Nevada Revised Statutes;

 

NOW, THEREFORE, BE IT RESOLVED , that the Board of Directors does hereby amend and restate the Certificate of Designations and does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:

 

 

The shares of such series shall be designated as “Series D Convertible Preferred Stock,” $0.001 par value per share (the “ Preferred Stock ”), and the number of shares constituting such series shall be 50,000. Each share of Preferred Stock shall have a stated value equal to $100.00 (the “ Stated Value ”).

 

 

If the Board declares a dividend on the outstanding shares of the Company’s common stock, $0.001 par value per share (the “ Common Stock ”) or any other Junior Stock (as defined below) (except for a dividend on Common Stock payable in shares of Common Stock), such dividend will be declared and paid on each outstanding share of Preferred Stock, prior and in preference to any dividends declared and paid on the Common Stock or other Junior Stock, in an amount equal to the aggregate amount of the dividend to which such share of Preferred Stock would have been entitled had such share been converted into shares of Common Stock (regardless whether a sufficient number of shares of Common Stock were authorized under the Company’s Articles of Incorporation, as amended, to effect such conversion), pursuant to the provisions hereof as of the record date for the determination of holders of Common Stock or other Junior Stock entitled to receive such dividend (or if there is no such record date, on the date of payment of such dividend). Such dividends will be payable only when, as and if declared by the Board and will be noncumulative.

 

 

 

 

Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “ Liquidation ”), the holders of record of shares of Preferred Stock (the “ Holders ”) then outstanding will be entitled to be paid in cash out of the assets of the Company available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock (as defined), but before any payment may be made to the holders of shares of any Junior Stock (as defined), because of their ownership thereof, an amount equal to the Stated Value of the Preferred Stock plus any accrued but unpaid dividends (the “ Preferred Liquidation Preference ”). Notwithstanding the foregoing, upon a Liquidation, a Holder will receive the amount, if such amount is greater than the amount set forth in the preceding sentence, that such Holder would have received had such Holder converted such Holder’s shares of Preferred Stock into Common Stock immediately before a Liquidation (regardless of whether a sufficient number of shares of Common Stock were authorized under the Company’s Articles of Incorporation, as amended, to effect such conversion). If upon a Liquidation, the Company’s remaining assets available for distribution to its stockholders are insufficient to pay the Holders the full amount of the Preferred Liquidation Preference, the Holders and holders of any Parity Stock will share ratably in any distribution of the Company’s remaining assets and funds in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. After the Holders have been paid the Preferred Liquidation Preference in full in cash, any remaining assets will be distributed pro rata among each holder of Junior Stock in accordance with the terms thereof. Unless otherwise determined by the holders of at least two-thirds of the then outstanding shares of Preferred Stock, voting as a separate class, for the purposes of this Section 3, a Liquidation shall be deemed to include (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, sale of all or substantially all of the shares of then outstanding capital stock, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Company’s jurisdiction of incorporation), unless the Company’s stockholders of record as constituted immediately prior to such transaction or series of related transactions will (by virtue of their pre-transaction holdings in the Company and any additional securities received by them as part of the transaction in exchange of such pre-transaction holdings), immediately after such transaction or series of related transactions continue to hold at least a majority of the voting power of the surviving or acquiring entity or (ii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.

 

“ Senior Stock ” means, collectively, any class or series of stock of the Company ranking on Liquidation and with respect to the payment of dividends prior and in preference to the Preferred Stock.

 

“ Junior Stock ” means, collectively, Common Stock or any other shares of capital stock of the Company ranking on Liquidation and with respect to the payment of dividends junior and subordinate to the Preferred Stock, Senior Stock and Parity Stock. Any other class or series of preferred stock of the Company authorized, designated or issued after this date, except as expressly set forth and provided in the resolution or resolutions of the Board providing for authorization, designation or issuance of shares of any such other class or series of preferred stock of the Company (subject to Section 9 ), shall be “ Junior Stock .”

 

 

 

“ Parity Stock ” means, collectively, the Series B Convertible Preferred Stock of the Company, par value $0.001 per share (the “ Series B Preferred Stock ”), Series C Convertible Preferred Stock, par value $0.001 per share (the “ Series C Preferred Stock ”) or any other class or series of stock ranking on Liquidation and with respect to payment of dividends on a parity with the Preferred Stock.

 

 

The Preferred Stock shall rank (i) prior to the Junior Stock, (ii) on parity with the Parity Stock, and (iii) junior to the Senior Stock, with respect to dividends. The Holders shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Company) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Company legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

 

Except to the extent specifically provided herein or required by applicable law, the Holders and the holders of Common Stock will vote together on all matters as to which the approval of the stockholders may be required. The Holders will vote on an as-converted basis, and with respect to such vote, will have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock. Fractional votes will not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each Holder could be converted) will be rounded to the nearest whole number (with one-half being rounded upward).

 

 

The Preferred Stock shall be convertible into Common Stock in accordance with the following:

 

(a)             Optional Conversion by the Holder . The Preferred Stock shall be convertible at the option of the Holder at any time following the earlier of (i) the expiration of the twenty (20) calendar day period set forth in Rule 14c-2(b) under the Securities Exchange Act of 1934, as amended (“ Exchange Act ”), such period commencing on the distribution to the Company’s stockholders in accordance with Regulation 14C promulgated under the Exchange Act of an Information Statement on Schedule 14C by the Company with the Securities and Exchange Commission relating to the issuance of Common Stock in connection with the conversion of the Preferred Stock, and (ii) such time as there are sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the conversion of all the shares of Preferred Stock into shares of Common Stock.

 

(b)             Optional Conversion by the Company . Notwithstanding any provision set forth in this Certificate of Designation to the contrary, the Preferred Stock shall be convertible at the option of the Company at any time at a Conversion Price equal to $0.025 per share of Common Stock, provided that (i) the Common Stock is registered pursuant to Section 12(b) or (g) under the Exchange Act; and (ii) there are sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the issuance of Common Stock upon the conversion of the Preferred Stock (the “ Conversion Shares ”).  

 

(c)             Fractional Shares . No fractional shares of Common Stock will be issued upon conversion of the shares of Preferred Stock. In lieu of fractional shares, the Company will pay to the Holder an amount in cash equal to such fraction multiplied by the fair market value (as determined pursuant to Section 6(g)(iv) below) of a share of Common Stock at the time of such conversion.

 

 

(d)             Mechanics of Conversion .

 

(i)             Upon the conversion of the Preferred Stock pursuant to this Section 6 , each share of Preferred Stock shall be converted into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value by the Conversion Price (as defined) in effect at the time of conversion. The conversion price (as adjusted pursuant hereto, the “ Conversion Price ”) will initially be $0.025. Upon such conversion, the Holder shall promptly, after notice of such conversion has been provided to such Holder or public disclosure thereof has been made pursuant to a Current Report on Form 8-K or press release, if such shares are held in certificated form, surrender the certificate or certificates for such shares of Preferred Stock at the office of the transfer agent (or at the principal office of the Company if the Company serves as its own transfer agent). Such surrender may be made by registered mail with return receipt requested, properly insured, by hand or overnight courier. If required by the Company, certificates surrendered for conversion, if applicable, will be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the Holder or his or its attorney duly authorized in writing. The date on which the conditions to conversion set forth in Section 6(a) or, if later and to the extent applicable, of receipt of such certificates by the transfer agent or the Company, as the case may be, will be the conversion date (“ Conversion Date ”). The Company will, as soon as practicable after the Conversion Date, subject to the book-entry provisions set forth below, issue and deliver to such Holder, or to such Holder’s nominees, a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled, together with cash in lieu of any fraction of a share. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of the shares of Preferred Stock, provided the transfer agent for the Common Stock is participating in The Depository Trust Company’s (including its successors and assigns, the “ Depository ”) Fast Automated Securities Transfer program, upon request of the Holder, the Company shall, if in compliance with applicable securities laws and in accordance with the Company’s policies and procedures with respect to “restricted securities” as defined in Rule 144(a)(3) under the Securities Act of 1933, as amended, use its commercially reasonable efforts to cause the transfer agent to electronically transmit the shares of Common Stock issuable upon conversion by crediting the account of the Holder’s prime broker with the Depository through its Deposit Withdrawal Agent Commission system. The Company agrees to coordinate with the Depository to accomplish this objective. Such conversion of the Preferred Stock will be deemed to have been made immediately before the close of business on the Conversion Date, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion will be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

 

(ii)             All shares of Preferred Stock which have been surrendered for conversion as herein provided will no longer be deemed to be outstanding and all rights with respect to such shares will immediately cease and terminate on the Conversion Date, except only the right of the Holders thereof to receive shares of Common Stock, cash in lieu of fractional shares in exchange therefor and accrued, but unpaid dividends. Any shares of Preferred Stock so converted will be deemed canceled and will not thereafter be issuable by the Company as shares of Preferred Stock, but will return to the status of authorized, but unissued shares of Preferred Stock of no designated series.

 

(e)             Adjustment for Stock Splits, Dividends, Distributions and Combinations . If, after the date on which the first share of Preferred Stock is issued (the “ Original Issue Date ”), the Company fixes a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights without payment of any consideration by such holder for the additional shares of Common Stock or rights (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the shares of Preferred Stock will be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series will be increased in proportion to such increase of the aggregate number of shares of Common Stock outstanding and those issuable with respect to such rights, with the number of shares issuable with respect to the rights determined from time to time as such number may be adjusted. If, after the Original Issue Date, the Company combines the outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately before the combination will be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of Preferred Stock will be decreased in proportion to such decrease in outstanding shares. Any adjustments under this paragraph will become effective at the close of business on the date the subdivision or combination becomes effective.

 

 

(f)             Adjustment for Reorganization, Reclassification or Exchange . If the Common Stock issuable upon the conversion of the shares of Preferred Stock is changed into or exchanged for the same or a different number of shares of any class or classes of stock of the Company or another entity, whether by capital reorganization, merger, consolidation, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Section 6 (e) , or resulting in a Mandatory Redemption under Section 7 ) then and in each such event the Holders will have the right thereafter to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such capital reorganization, merger, consolidation, reclassification, or other change that holders of the number of shares of Common Stock into which such shares of Preferred Stock would have been converted immediately before such capital reorganization, merger, consolidation, reclassification, or change would have received, all subject to further adjustment as provided herein.

 

(g)             Adjustment Upon Issuance of Shares of Common Stock . If the Company issues or sells, or in accordance with this Section 6 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities (as defined in the Securities Purchase Agreement, dated on or about January __, 2017, by and between the Company and the Purchasers party thereto (the “ Purchase Agreement ”)) issued or sold or deemed to have been issued or sold without consideration or for a consideration per share (the “ New Issuance Price ”) less than a price equal to the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Conversion Price then in effect is referred to as the “ Applicable Price ”) (the foregoing a “ Dilutive Issuance ”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price; provided that if such Dilutive Issuance was without consideration, then the Company shall be deemed to have received an aggregate of $0.001 of consideration for all such additional shares of Common Stock issued or deemed to be issued. No adjustment pursuant to this Section 6(g) shall be made if such adjustment would result in an increase of the Conversion Price then in effect. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and consideration per share under this Section 6(g)), the following shall be applicable:

 

(i)             Issuance of Options . If the Company in any manner grants or sells any Options (as defined below) and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities (as defined below) issuable upon exercise of any such Option is less than the Applicable Price, but excluding any Excluded Securities, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 6 (g) (i) , the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option. Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

 

 

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

 

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

 

(ii)             Issuance of Convertible Securities . If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, but excluding any Excluded Securities, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 6(g)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof. Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section 6(g)(ii), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

 

(iii)             Change in Option Price or Rate of Conversion . If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(g)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Original Issue Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease.

 

 

(iv)             Calculation of Consideration Received . If (i) any Option or Convertible Security is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, and (ii) all such Options or Convertible Securities (as applicable) so issued or sold are, or may become, exercisable and/or convertible for an aggregate number of shares of Common Stock that exceeds (as applicable) either (1) if Common Stock was the primary security issued or sold in such transaction, the aggregate number of shares of Common Stock so issued or sold in such transaction or (2) if an Option or Convertible Security was the primary security issued or sold in such transaction, the aggregate number of shares of Common Stock so deemed issued or sold in such transaction that underlie all Options or Convertible Securities that constituted the primary securities in such transaction, then (x) such Option or Convertible Security (as applicable) will be deemed to have been issued for consideration equal to the fair market value thereof and (y) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (I) the aggregate consideration received by the Company minus (II) the fair market value of each such Option or Convertible Security (as applicable). If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair market value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the volume-weighted average price of such security for each of the five (5) trading days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “ Valuation Event ”), the fair value of such consideration will be determined within five (5) trading days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

 

(v)             Record Date . If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(h)            Certain Adjustments. The applicable Conversion Price will not be reduced if the amount of such reduction would be an amount less than $0.001, but any such amount will be carried forward and reduction with respect thereto made at the time of and together with any subsequent reduction which, together with such amount and any other amount or amounts so carried forward, will aggregate $0.001 or more.

 

(i)             No Impairment . The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate to protect the conversion rights of the Holders against impairment.

 

(j)          Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6 , the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and will file a copy of such certificate with its corporate records. The Company will, upon the written request at any time of any Holder, furnish or cause to be furnished to such holder a similar certificate setting forth (1) such adjustments and readjustments, (2) the Conversion Price then in effect, and (3) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Preferred Stock. Despite such adjustment or readjustment, the form of each or all Preferred Stock certificates, if the same will reflect the initial or any subsequent Conversion Price, need not be changed for the adjustments or readjustments to be valued under the provisions of this Certificate of Designation, which will control.

 

 

Notwithstanding anything to the contrary set forth in Section 6 of this Certificate of Designation, at no time may any Holder convert shares of Preferred Stock into Conversion Shares if the number of Conversion Shares to be issued would, when aggregated with all other shares of Common Stock owned by such Holder at such time, result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act) more than 4.99% of all of the Common Stock outstanding at such time; provided , however , that a Holder may waive this restriction by providing the Company with sixty-one (61) days written notice (pursuant to Section 14 hereof) of such Holder’s intent to waive Section 7 of this Certificate of Designation with regard to any or all Conversion Shares issuable upon conversion of their shares of Preferred Stock (a “ Waiver Notice ”). In the event the Company receives a Waiver Notice from a Holder, this Section 7 shall be of no force or effect with regard to those shares of Preferred Stock referenced in the Waiver Notice.

 

 

There will be no sinking fund for the payment of any dividends or liquidation preferences on the shares of Preferred Stock or the redemption of any shares thereof.

 

 

 

 

The Company will not, either directly or indirectly by amendment, merger, consolidation or otherwise, without obtaining the approval (by vote or written consent) of the Holders of at least two-thirds of the shares of Preferred Stock then issued and outstanding:

 

(a)             permit the amendment, modification or repeal of the Company’s Articles of Incorporation or Bylaws, except for those amendments or modifications required to comply with, or otherwise contemplated by, the Purchase Agreement, or necessary to adopt an exclusive forum bylaw provision;

 

(b)             permit the amendment, modification, or repeal of this Certificate of Designation;

 

(c)             increase or decrease the authorized number of shares of Common Stock or Preferred Stock, except for those increases of authorized number of shares of Common Stock required to comply with, or otherwise contemplated by, the Purchase Agreement;

 

(d)             issue, sell, or deliver (whether through the issuance or granting of rights or otherwise), or authorize the issuance, sale or delivery of, (i) any shares of Senior Stock or Parity Stock or reclassify or modify any Junior Stock or Parity Stock so as to become Senior Stock or Parity Stock; or (ii) any additional shares of Common Stock or Convertible Securities; provided, however , nothing contained in this Section 9(d) shall prevent the Company from, and the Company shall be entitled to, issue Common Stock or Convertible Securities in connection with currently outstanding grants and issuances, and issuances to employees, officers, directors, or other eligible recipients under the Company’s existing equity or other incentive plans, and pursuant to equity or other incentive plans that may be adopted by the Company’s Board of Directors after the date hereof;

 

(e)             amend or modify the terms of any outstanding security or debt instrument of the Company outstanding as of the Original Issue Date;

 

(f)             declare or pay any dividend (other than dividends payable solely in Common Stock) or distribution on, or make any payment on account of, or set apart assets for a sinking or analogous fund to, or, purchase, redeem, defease, retire or otherwise acquire, any shares of any class of capital stock of the Company or any warrants or options to purchase any such capital stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any subsidiary of the Company (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being referred to herein as “ Restricted Payments ”); provided, however , that the Company or any subsidiary of the Company may make Restricted Payments with respect to any shares of Senior Stock or Parity Stock the issuance of which has been approved in accordance herewith, including with respect to any shares of Series B Preferred Stock and/or Series C Preferred;

 

(g)             adopt or effect any modification to any employee stock option plan, stock bonus plan, stock purchase plan or other management equity plan without the prior approval of the Board of Directors;

 

 

 

(h)             permit the amendment or modification of the Certificate of Designation for any other series of preferred stock of the Company; provided, however , the Company may file a certificate of elimination or otherwise terminate any other series of preferred stock of the Company;

 

(i)             increase or decrease the authorized number of directors constituting the Board of Directors; or

 

(j)             liquidate, dissolve or wind-up the business and affairs of the Company, subject the Company to any transaction, or series of related transactions following the Original Issuance Date, that constitutes a Change of Control, or consent to any of the foregoing.

 

For purposes of this Section 9, “ Change of Control ” means the occurrence of any of the following events occurring after the Original Issue Date: (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule l3d-3 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the outstanding capital stock of the Company having the right to vote ordinarily on the election of directors (“ Voting Stock ”); (ii) the Company is merged with or into or consolidated with another person or entity and, immediately after giving effect to the merger or consolidation, (a) less than 50% of the total voting power of the outstanding Voting Stock of the surviving or resulting person or entity is then “beneficially owned” (within the meaning of Rule 13d-3 under the Exchange Act) in the aggregate by the stockholders of the Company immediately before such merger or consolidation or (b) any “person” or “group” (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act), has become the direct or indirect “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of the Voting Stock of the surviving or resulting person or entity; or (iii) the Company, either individually or in conjunction with one or more of its subsidiaries, sells, assigns, conveys, transfers, leases, or otherwise disposes of, or one or more of its subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including capital stock of the Company’s subsidiaries, to any person or entity (other than the Company or a wholly owned subsidiary).

 

With respect to actions by the Holders upon those matters on which the Holders may vote as a separate class, such actions may be taken without a stockholders meeting by the written consent of Holders who would be entitled to vote at a meeting having voting power to cast not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all the shares of Preferred Stock is entitled to vote were present and voted. In addition, the Holders may call a special meeting of the Company’s stockholders upon the occurrence of the events described above by providing notice of the exercise of such right to the Company and the Company will take all steps necessary to hold such meeting as soon as practicable after the receipt of such notice.

 

 

 

 

Other than as specifically set forth in the Purchase Agreement, Holders shall not be entitled to any preemptive, subscription or similar rights in respect to any securities of the Company under this Certificate of Designation.

 

 

No payments shall be made to Holders, nor shall redemptions of shares of Preferred Stock be made, unless the right to receive such payments or participate in such redemptions are made available to all Holders on a pro rata basis based on the number of shares of Preferred Stock such holder holds.

 

 

The Company may deem and treat the record holder of any shares of the Preferred Stock as the true and lawful owner thereof for all purposes, and the Company shall not be affected by any notice to the contrary.

 

 

The headings of the various subdivisions hereof are for convenience of reference only and will not affect the interpretation of any of the provisions hereof.

 

 

Any notice required by the provisions hereof to be given to the Holders shall be deemed given if deposited in the United States Mail, first class postage prepaid, and addressed to each Holder at his or its address appearing on the Company’s books. Any notice required by the provisions hereof to be given to the Company shall be deemed given if deposited in the United States mail, first class postage prepaid, and addressed to the Company at 18662 MacArthur Blvd., Ste. 110, Irvine, CA 92612, or such other address as the Company shall provide in writing to the Holders.

 

 

The rights, preferences and limitations of the shares of Preferred Stock set forth herein will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this statement of resolution, as applied to any Holder or the Company or to any circumstance, is adjudged by a governmental body or arbitrator not to be enforceable in accordance with its terms, the governmental body or arbitrator making such determination may modify (and shall modify) the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.

 

IN WITNESS WHEREOF, True Drinks Holdings, Inc. has caused this Amended and Restated Certificate of Designation to be signed by the undersigned this 26th day of April, 2019.

 

	TRUE DRINKS HOLDINGS, INC.
	By:	/s/ Robert Van Boerum
	Name:	Robert Van Boerum
	Title:	Principal Executive and Principal Financial Officer

 

 

  Exhibit 3.4

  

 

 

Exhibit 3.6

  

Exhibit 3.7

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE

SERIES A CONVERTIBLE PREFERRED STOCK OF

TRUE DRINKS HOLDINGS, INC.

 

I, Robert Van Boerum, hereby certify that I am the Chief Executive Officer of True Drinks Holdings, Inc. (the “ Corporation ”), a corporation incorporated and existing under the Nevada Revised Statutes (the “ NRS ”) and further do hereby certify:

 

That pursuant to the authority expressly conferred upon the Board of Directors of the Corporation (the “ Board ”) by the Corporation’s Certificate of Incorporation, as amended and restated (the “ Certificate of Incorporation ”), and 78.195, 78.1955 and 78.2055   of the NRS, the Board on April 19, 2019 adopted the following resolution determining it desirable and in the best interests of the Corporation and its stockholders for the Corporation to create a series of shares of preferred stock designated as “ Series A Convertible Preferred Stock ”, none of which shares have been issued:

 

RESOLVED, that pursuant to the authority vested in the Board, in accordance with the provisions of the Certificate of Incorporation, a series of preferred stock, par value $0.001 per share, of the Corporation be and hereby is created, and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows:

 

TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK

 

1. Designation and Number of Shares . There shall hereby be created and established a series of preferred stock of the Corporation designated as “Series A Convertible Preferred Stock” (the “ Preferred Shares ”). The authorized number of Preferred Shares shall be Three Hundred Thousand (300,000) shares. Each Preferred Share shall have a par value of $0.001. Capitalized terms not defined herein shall have the meaning as set forth in Section 30 below.

 

2. Ranking . Except to the extent that the holders of at least a majority of the outstanding Preferred Shares (the “ Required Holders ”) expressly consent to the creation of Parity Stock (as defined below) or Senior Preferred Stock (as defined below) in accordance with Section 14, all shares of capital stock of the Corporation, including the Series B Preferred shall be junior in rank to all Preferred Shares with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (such junior stock is referred to herein collectively as “ Junior Stock ”). The rights of all such shares of capital stock of the Corporation shall be subject to the rights, powers, preferences and privileges of the Preferred Shares. Without limiting any other provision of this Certificate of Designations, without the prior express consent of the Required Holders, voting separate as a single class, the Corporation shall not hereafter authorize or issue any additional or other shares of capital stock that is (i) of senior rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, the “ Senior Preferred Stock ”), or (ii) of pari passu rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, the “ Parity Stock ”). In the event of the merger or consolidation of the Corporation with or into another corporation, the Preferred Shares shall maintain their relative rights, powers, designations, privileges and preferences provided for herein and no such merger or consolidation shall result inconsistent therewith.

 

3. Dividends . Subject to applicable law, holders of Preferred Shares (each, a “ Holder ” and collectively, the “ Holders ”) shall be entitled to receive, and the Corporation shall pay a one-time dividend equal to eight percent (8%) of the Stated Value (the “ Dividend Amount ”), which Dividend Amount shall be paid upon the earlier of (i) when declared by the Corporation, (ii) the one-year anniversary of the date hereof (the “ Anniversary Date ”), or (iii) when such Preferred Shares are converted in accordance with the terms hereof (in either event, the “ Dividend Payment Date ”).

 

 

 

(a)   The Corporation will pay such Dividend Amount on the Dividend Payment Date in (i) cash, or (ii) duly authorized, validly issued, fully paid and non-assessable shares of Common Stock. Notwithstanding the foregoing, the Corporation may not elect to pay the Dividend Amount in shares of Common Stock unless the Equity Conditions, as such term is defined below, are satisfied (or waived in writing by the applicable Holder). In the event the Equity Conditions are satisfied, and the Corporation elects to pay the Dividend Amount in shares of Common Stock, the number of shares of Common Stock to be issued to each Holder shall be determined by dividing the Dividend Amount payable to each Holder on the applicable payment date as set forth above, and rounding up to the nearest whole share, by the Dividend Conversion Price. The term Dividend Conversion Price shall mean 90% of the VWAP of the Corporation’s Common Stock for the five (5) Trading Days prior to the Dividend Payment Date, as adjusted for any stock dividend, stock split, stock combination or other similar transaction during such five (5) Trading Day period. “Equity Conditions” means that each of the following conditions is satisfied: (i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance; (ii) such shares of Common Stock are registered for resale by the Holders and may be sold by the Holders pursuant to an effective registration statement or all such shares may be sold without volume restrictions pursuant to Rule 144 under the 1933 Act; (iii) the Common Stock is listed or quoted (and is not suspended from trading) on an Eligible Market; (iv) the average daily dollar value of shares of Common Stock traded on the Eligible Market for the ten (10) Trading Days prior to the Dividend Payment Date is greater than $500,000; and (v) such issuance would be permitted in full without violation Section 4(e) below or the rules or regulations of any Eligible Market.

 

  (b)           The Corporation shall give notice to the Holders on or before ten (10) Business Days prior to paying the Dividend Amount and the form in which the Dividend Amount will be paid. If the Corporation seeks to pay the Dividend Amount in cash and there are sufficient shares of Common Stock available to pay such Dividend Amount in shares, Holders shall be provided with the option to have the Dividend Amount paid in shares of Common Stock, with such number of shares determined in accordance with provisions of Section 3(a) above. Holders of Preferred Shares shall be entitled to participate on a pari passu, pro rata, as-converted-to-Common Stock basis in any and all dividends or other distributions paid by the Corporation on the Common Stock (other than dividends paid in shares of Common Stock). The Corporation shall pay no dividends on shares of its Common Stock unless it simultaneously complies with the requirement set forth in this Section 3.   The Corporation shall pay no dividends in Common Stock on shares of the Common Stock prior to paying the Dividend Amount to the Holders.

 

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

 

(a) Optional Conversion . Subject to the provisions of Section 4(e), upon the effectiveness of a Capital Increase, each Holder shall be entitled to convert any portion of the outstanding Preferred Shares held by such Holder (including any fractional Preferred Shares) into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined below). The Corporation shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Corporation shall round such fraction of a share of Common Stock up to the nearest whole share. The Corporation shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent (as defined below)) that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Preferred Shares.

 

(b) Automatic Conversion . Subject to the provisions of Section 4(e), upon the occurrence of (i) the Corporation’s Common Stock being listed on the Nasdaq Global Select Market, Nasdaq Global Market, or the Nasdaq Capital Market, and (ii) the Dividend Amount has been paid to each Holder in full, then each of the issued and outstanding Preferred Shares shall automatically, and without further action required on behalf of the Holder, convert into the number of shares of Common Stock at the Conversion Rate then in effect (“ Automatic Conversion ”). In the event of an Automatic Conversion, the Corporation shall provide each Holder with notice of such Automatic Conversion within five (5) Business Days prior to the date thereof (“ Automatic Conversion Notice ”). Following receipt by the Holder of an Automatic Conversion Notice, the Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Corporation the original certificates, if any, representing the Preferred Share Certificate, as such term is defined in Section 4(d)(i), so converted as aforesaid (or an indemnification undertaking with respect to the Preferred Shares in the case of its loss, theft or destruction as contemplated by Section 17(b)). On or before the second (2nd) Trading Day following Share Delivery Deadline, as defined in Section 4(d)(i), the Corporation shall (1), provided that the Transfer Agent is participating in The Depository Trust Company’s (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating

 

 

 

in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the address as specified in such Automatic Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. In the event upon an Automatic Conversion a Holder would be issued shares of Common Stock in excess of the Maximum Percentage, in lieu of issuing all of the shares upon such conversion, the Corporation will issue share up to the Maximum Percentage and subject to the terms and conditions set forth herein, from time to time, the Corporation shall be obligated to issue and the Holder shall have the right to the issuance of up to the balance of the shares that would automatically have been issued upon such conversion, subject to adjustment hereunder (the “Reserved Shares” and such right of the Holder, the “Right”). The exercise of the Right may be made, in whole or in part, at any time or times on or after the date hereof by delivery to the Corporation (or such other office or agency of the Corporation as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Corporation) of a notice (the “Notice of Issuance”). The exercise of the Right will be subject to the Maximum Percentage and delivery of shares of Common Stock shall be made in accordance with the terms of this Certificate as if it had been a Conversion of Preferred Shares.

 

(c) Conversion Rate . The number of shares of Common Stock issuable upon conversion of any Preferred Share pursuant to Section 4(a) shall be determined by dividing (x) the Conversion Amount of such Preferred Share by (y) the Conversion Price (the “ Conversion Rate ”):

 

(i) “ Conversion Amount ” means, with respect to each Preferred Share, as of the applicable date of determination, the sum of (1) the Stated Value thereof plus (2) any accrued and unpaid Dividends, if any, with respect to such Stated Value and any accrued and unpaid Dividends, if any, as of such date of determination.

 

(ii) “ Conversion Price ” means, with respect to each Preferred Share, as of any Conversion Date or other date of determination, $0.0044313, subject to adjustment as provided herein.

 

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

 

(i) Optional Conversion . To convert a Preferred Share into shares of Common Stock on any date (a “ Conversion Date ”), a Holder shall deliver (via facsimile, electronic mail or otherwise), on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of the share(s) of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I (the “ Conversion Notice ”) to the Corporation. If required by Section 4(c)(iii), within five (5) Trading Days following a conversion of any such Preferred Shares as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Corporation the original certificates, if any, representing the Preferred Shares (the “ Preferred Share Certificates ”) so converted as aforesaid (or an indemnification undertaking with respect to the Preferred Shares in the case of its loss, theft or destruction as contemplated by Section 17(b)). No ink-original Conversion Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Conversion Notice be required. On or before the first (1 st ) Trading Day following the date of delivery of a Conversion Notice, the Corporation shall transmit by facsimile or electronic mail an acknowledgment of confirmation, in the form attached hereto as Exhibit II , of receipt of such Conversion Notice to such Holder and the Corporation’s transfer agent (the “ Transfer Agent ”), which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of delivery of a Conversion Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the applicable Conversion Date of such shares of Common Stock issuable pursuant to such Conversion Notice) (the “ Share Delivery Deadline ”), the Corporation shall (1) provided that the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(iii) is greater than the number of Preferred Shares being converted, then the Corporation shall, as soon as practicable and in no event later than three (3) Trading Days after receipt of the Preferred Share Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate (in accordance with Section 17(d)) representing the number of Preferred Shares not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

 

 

(ii) Corporation’s Failure to Timely Convert . If the Corporation shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, to issue to such Holder a certificate for the number of shares of Common Stock to which such Holder is entitled and register such shares of Common Stock on the Corporation’s share register or to credit such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion of any Conversion Amount (as the case may be) (a “ Conversion Failure ”), and if on or after such Share Delivery Deadline such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion that such Holder so anticipated receiving from the Corporation, then, in addition to all other remedies available to such Holder, the Corporation shall, within three (3) Business Days after delivery of such Holder’s request and in such Holder’s discretion, either: (I) pay cash to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of such Holder) (the “ Buy-In Price ”), at which point the Corporation’s obligation to so issue and deliver such certificate or credit such Holder’s balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to such Holder a certificate or certificates representing such shares of Common Stock or credit such Holder’s balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II). If the Corporation fails to deliver to a Holder such shares of Common Stock pursuant to Section 4(c)(i) by the Share Delivery Deadline 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, $10 per Trading Day (increasing to $25 per Trading Day on the third Trading Day and increasing to $50 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after the Share Delivery Deadline until such shares of Common Stock are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver shares of Common Stock 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.

 

(iii) Registration; Book-Entry . At the time of issuance of any Preferred Shares hereunder, the applicable Holder may, by written request (including by electronic-mail) to the Corporation, elect to receive such Preferred Shares in the form of one or more Preferred Share Certificates or in Book-Entry form. The Corporation (or the Transfer Agent, as custodian for the Preferred Shares) shall maintain a register (the “ Register ”) for the recordation of the names and addresses of the Holders of each Preferred Share and the Stated Value of the Preferred Shares and whether the Preferred Shares are held by such Holder in Preferred Share Certificates or in Book-Entry form (the “ Registered Preferred Shares ”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Corporation and each Holder of the Preferred Shares shall treat each Person whose name is recorded in the Register as the owner of a Preferred Share for all purposes (including, without limitation, the right to receive payments and Dividends hereunder) notwithstanding notice to the contrary. A Registered Preferred Share may be assigned, transferred or sold only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell one or more Registered Preferred Shares by such Holder thereof, the Corporation shall record the information contained therein in the Register and issue one or more new Registered Preferred Shares in the same aggregate Stated Value as the Stated Value of the surrendered Registered Preferred Shares to the designated assignee or transferee pursuant to Section 16, provided that if the Corporation does not so record an assignment, transfer or sale (as the case may be) of such Registered Preferred Shares within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this Section 4, following conversion of any Preferred Shares in accordance with the terms hereof, the applicable Holder shall not be required to physically surrender such Preferred Shares held in the form of a Preferred Share Certificate to the Corporation unless (A) the full

 

 

 

or remaining number of Preferred Shares represented by the applicable Preferred Share Certificate are being converted (in which event such certificate(s) shall be delivered to the Corporation as contemplated by this Section 4(c)(iii)) or (B) such Holder has provided the Corporation with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of the applicable Preferred Share Certificate. Each Holder and the Corporation shall maintain records showing the Stated Value and Dividends converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to such Holder and the Corporation, so as not to require physical surrender of a Preferred Share Certificate upon conversion. If the Corporation does not update the Register to record such Stated Value and Dividends converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence. In the event of any dispute or discrepancy, such records of the Corporation establishing the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if the number of Preferred Shares set forth on the face of a Preferred Share Certificate is greater than the number of Preferred Shares then outstanding under such Preferred Share Certificate, the applicable Holder may not transfer such Preferred Share Certificate into the name of any other Person (other than an Affiliate of such Holder) unless such Holder first physically surrenders such Preferred Share Certificate to the Corporation pursuant to Section 17 below (or delivers a lost certificate affidavit to the Corporation, if applicable, pursuant to Section 17(b) below), whereupon the Corporation will forthwith issue and deliver to such Holder (or to such other Person as designated by such Holder to the Corporation in writing) a new Preferred Share Certificate of like tenor, representing, in the aggregate, the remaining number of Preferred Shares outstanding under such Preferred Share Certificate. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on the face thereof. Each Preferred Share Certificate shall bear the following legend:

 

“[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIESAND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIESACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

 

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

 

 

 

(e)             Limitation on Beneficial Ownership . The Corporation shall not effect the conversion of any of the Preferred Shares held by a Holder, and such Holder shall not have the right to convert any of the Preferred Shares held by such Holder pursuant to the terms and conditions of this Certificate of Designations and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (or upon the election by a Holder prior to the issuance of any Preferred Shares, 9.99%) (the “ Maximum Percentage ”) of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and the other Attribution Parties shall include the number of shares of Common Stock held by such Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of the Preferred Shares with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted Preferred Shares beneficially owned by such Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Corporation (including, without limitation, any convertible notes, convertible preferred stock or warrants) beneficially owned by such Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 4(d). For purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock a Holder may acquire upon the conversion of such Preferred Shares without exceeding the Maximum Percentage, such Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Corporation’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Corporation or (z) any other written notice by the Corporation or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “ Reported Outstanding Share Number ”). If the Corporation receives a Conversion Notice from a Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Corporation shall notify such Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause such Holder’s beneficial ownership, as determined pursuant to this Section 4(d), to exceed the Maximum Percentage, such Holder must notify the Corporation of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written or oral request of any Holder, the Corporation shall within one (1) Business Day confirm orally and in writing or by electronic mail 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 such Preferred Shares, by such Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to a Holder upon conversion of such Preferred Shares results in such Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which such Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “ Excess Shares ”) shall be deemed null and void and shall be cancelled ab initio, and such Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Corporation, any Holder may from time to time increase (with such increase not effective until the sixty-first (61 st ) day after delivery of such notice) or decrease the Maximum Percentage of such Holder to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Corporation and (ii) any such increase or decrease will apply only to such Holder and the other Attribution Parties and not to any other Holder. For purposes of clarity, the shares of Common Stock issuable to a Holder pursuant to the terms of this Certificate of Designations in excess of the Maximum Percentage shall not be deemed to be beneficially owned by such Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert such Preferred Shares pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 4(d) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of such Preferred Shares.

 

 

 

5. Rights Upon Fundamental Transactions . The Corporation shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Corporation under this Certificate of Designations in accordance with the provisions of this Section 5 pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a stated value and dividend rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and satisfactory to the Required Holders. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designations 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 Designations with the same effect as if such Successor Entity had been named as the Corporation herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation that there shall be issued upon conversion or redemption of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 6(a) and 13, which shall continue to be receivable thereafter)) issuable upon the conversion or redemption of the Preferred Shares prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations), as adjusted in accordance with the provisions of this Certificate of Designations. Notwithstanding the foregoing, such Holder may elect, at its sole option, by delivery of written notice to the Corporation to waive this Section 5 to permit the Fundamental Transaction without the assumption of the Preferred Shares. The provisions of this Section 5 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares.

 

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

 

(a) Purchase Rights . In addition to any adjustments pursuant to Section 7 below, if at any time the Corporation grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “ Purchase Rights ”), then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares) held by such Holder immediately prior to 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 such Holder’s right to participate in any such Purchase Right would result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent shall be held in abeyance for such Holder until such time or times, if ever, as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage), at which time or times such Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right to be held similarly in abeyance) to the same extent as if there had been no such limitation.

 

 

   

(b) Other Corporate Events . In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Corporation shall make appropriate provision to insure that each Holder will thereafter have the right to receive upon a conversion of all the Preferred Shares held by such Holder (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which such Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by such Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares contained in this Certificate of Designations) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as such Holder would have been entitled to receive had the Preferred Shares held by such Holder initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant the proceeding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 6 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares contained in this Certificate of Designations.

 

7. Rights Upon Issuance of Other Securities .

 

(a)                 Adjustment of Conversion Price upon Securities Issuances . If, at any time while Preferred Shares are outstanding, the Corporation issues (or is deemed to issue) additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any person to acquire shares of Common Stock (collectively, “ Common Stock Equivalents ”) at an effective net price to the Corporation per share of Common Stock (the “ Effective Price ”) less than the Conversion Price (as adjusted hereunder to such date), then the Conversion Price shall be reduced to equal the product of (A) the Conversion Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock issued (or deemed to be issued) at the Conversion Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of this paragraph, in connection with any issuance of any Common Stock Equivalents, (A) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the “ Deemed Number ”) shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (B) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Corporation to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock (net of any discounts, fees, commissions and other expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the Conversion Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents.

 

  (b)                 Adjustment of Conversion Price upon Subdivision or Combination of Common Stock . Without limiting any provision of Section 6 or Section 13, if the Corporation at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 6 or Section 13, if the Corporation at any time on or after the Issuance Date combines (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7(b) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7(b) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

 

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

 

 

 

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

 

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

 

10. Authorized Shares .

 

  (a) Reservation . After a Capital Increase, so long as any Preferred Shares remain outstanding, the Corporation shall at all times reserve at least 108% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Preferred Shares then outstanding (without regard to any limitations on conversions) (the “ Required Reserve Amount ”). The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the Holders based on the number of the Preferred Shares held by each Holder on the Issuance Date or increase in the number of reserved shares, as the case may be (the “ Authorized Share Allocation ”). In the event that a Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based on the number of the Preferred Shares then held by the Holders.

 

(b) Insufficient Authorized Shares . If, notwithstanding Section 10(a) and not in limitation thereof, while any of the Preferred Shares remain outstanding and after a Capital Increase, the Corporation does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal to the Required Reserve Amount (an “ Authorized Share Failure ”), then the Corporation shall immediately take all action necessary to increase the Corporation’s authorized shares of Common Stock to an amount sufficient to allow the Corporation to reserve the Required Reserve Amount for the Preferred Shares then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Corporation shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Corporation shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the event that the Corporation is prohibited from issuing shares of Common Stock to a Holder upon any conversion due to the failure by the Corporation to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “ Authorized Failure Shares ”), in lieu of delivering such Authorized Failure Shares to such Holder, the Corporation shall pay cash in exchange for the redemption of such portion of the Conversion Amount convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the greatest Closing Sale Price

 

 

 

of the Common Stock on any Trading Day during the period commencing on the date such Holder delivers the applicable Conversion Notice with respect to such Authorized Failure Shares to the Corporation and ending on the date of such issuance and payment under this Section 10(b); and (ii) to the extent such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of Authorized Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of such Holder incurred in connection therewith. All calculations to be made pursuant to this Certificate of Designations on an as-converted-to Common Stock, including those for dividends, distributions, voting and liquidation, shall be made regardless of whether there are enough authorized but unissued and unreserved shares of Common Stock to permit such conversion.

 

11. Voting Rights .

 

(a) Each Holder shall be entitled to the whole number of votes equal to the number of shares of Common Stock equal to the Conversion Amount of the Preferred Shares then held by such Holder, divided by the Conversion Price in effect at the time of such vote, provided however that the amount of votes held through any voting securities of the Corporation, including the Series A Preferred Stock, by any Holder, together with such Holder’s Attribution Parties, shall not exceed 9.99% of the voting power of the Corporation.

 

(b) Each Holder shall be entitled to receive the same prior notice of any stockholders’ meeting as is provided to the holders of Common Stock as well as prior notice of all stockholder actions to be taken by legally available means in lieu of a meeting (and copies of proxy materials, consent solicitation statements and other information sent to stockholders in connection therewith), all in accordance with the Bylaws and the NRS, and shall be entitled to vote or, if applicable, provide consent, together with the holders of Common Stock as if they were a single class of securities upon any matter submitted to a vote of stockholders, except as otherwise expressly required by law and except as required by the terms hereof to be submitted to a series vote of the applicable Holders, in which case each Holder only shall vote as a separate series.

 

(c) For so long as 25% of the Preferred Shares remain outstanding: (i) the holders of the Preferred Shares voting as a class, other than the Direct Investors, shall have the right to appoint two (2) members to the Corporation’s Board of Directors; and (ii) the Board of Directors shall consist of no more than five (5) members which shall not increase without the prior express consent of the Required Holders, other than the Direct Investors .

 

12. Liquidation, Dissolution, Winding-Up . In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Corporation, whether from capital or from earnings available for distribution to its stockholders (the “ Liquidation Funds ”), before any amount shall be paid to the holders of any of shares of Junior Stock, but pari passu with any Parity Stock then outstanding, an amount per Preferred Share equal to the Conversion Amount thereof on the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of Parity Stock, then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such Holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Preferred Shares and all holders of shares of Parity Stock. To the extent necessary, the Corporation shall cause such actions to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in accordance with this Section 12. All the preferential amounts to be paid to the Holders under this Section 12 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of Junior Stock in connection with a Liquidation Event as to which this Section 12 applies.

 

 

 

13. Distribution of Assets . In addition to any adjustments pursuant to Section 7, if the Corporation shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all 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) (the “ Distributions ”), then each Holder, as holders of Preferred Shares, will be entitled to such Distributions as if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions ( provided , however , that to the extent that such Holder’s right to participate in any such Distribution would result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for such Holder until such time or times as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times, if any, such Holder shall be granted such rights (and any rights under this Section 13 on such initial rights or on any subsequent such rights to be held similarly in abeyance) to the same extent as if there had been no such limitation).

 

14. Vote to Change the Terms of or Issue Preferred Shares . In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Certificate of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders, voting together as a single class, the Corporation shall not: (a) amend or repeal any provision of, or add any provision to, its Certificate of Incorporation or bylaws, or file any certificate of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit of the Preferred Shares hereunder, regardless of whether any such action shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise; (b) increase or decrease (other than by conversion) the authorized number of Preferred Shares; (c) without limiting any provision of Section 2, create or authorize (by reclassification or otherwise) any new class or series of Senior Preferred Stock or Parity Stock; (d) purchase, repurchase or redeem any shares of Junior Stock (other than pursuant to the terms of the Corporation’s equity incentive plans and options and other equity awards granted under such plans (that have in good faith been approved by the Board)); (e) without limiting any provision of Section 2, pay dividends or make any other distribution on any shares of any Junior Stock or Parity Stock.

 

15.   Issuance of Indebtedness, Prohibited Equity Securities and Capital Increase .

 

(a)           So long as Preferred Shares representing at least twenty-five percent (25%) of the total number of Preferred Shares remain issued and outstanding, the Corporation shall not, without obtaining the approval (by vote or written consent) of the Required Holders, (i) create, or authorize the creation of, or incur, or authorize the incurrence of, any Indebtedness, other than Permitted Indebtedness, or permit any subsidiary to take any such action, (ii) issue any shares of Common Stock, or Convertible Securities, other than Permitted Issuances, or permit any subsidiary to take any such action at a price per share less than one and a half (1.5) times the then in effect Conversion Price, or (iii), issue anyvariable priced equity, variable priced equity linked securities or securities with similar floating provisions for the conversion or exercise of such securities; provided, however , the prohibited issuances set forth in clause (ii) above shall terminate upon the sooner of (i) 180 days following the effective date of the registration statement registering all of the shares of Common Stock (x) issued contemporaneously with the issuance of the Preferred Shares, (y) issuable upon conversion of the Preferred Shares under the 1933 Act, and (z) issuable upon exercise of the warrants issued contemporaneously with the Preferred Shares (“ Warrants ”); or (ii) the Anniversary Date.

 

 

(b)           For a period ending on the sooner to occur of (i) the Anniversary Date or (ii) the date on which only twenty percent (20%) of the originally issued Preferred Shares remain outstanding, the Corporation shall not issue Options or other securities under any equity incentive plan of the Corporation, other than Permitted Issuances, to the extent such issuances would total in excess of five percent (5%) of the issued and outstanding securities of the Corporation, which total shall include the shares of Common Stock issuable upon conversion of the Preferred Shares, shares of Common Stock issuable upon conversion of the Series B Preferred, and any shares of Common Stock actually issued upon conversion of the Warrants.

 

(c)            As soon as practicable following the Issuance Date, the Corporation shall hold a special meeting of stockholders to approve the Capital Increase, or shall seek the written consent of stockholders to such Capital Increase in liue of a special meeting to approve the same (“ Authorized Share Approval ”). The Corporation shall use its best efforts to obtain Authorized Share Approval of such Capital Increase and shall cause the Board of Directors of the Corporation to recommend to the stockholder that they approve such Capital Increase. If, despite the Corporation’s best efforts the Authorized Share Approval is not obtained on or prior to May 31, 2019, the Corporation shall cause an additional stockholder meeting to be held every three months thereafter until such Authorized Share Approval is obtained.

 

16. Transfer of Preferred Shares . A Holder may transfer some or all of its Preferred Shares without the consent of the Corporation.

 

17. Reissuance of Preferred Share Certificates and Book Entries .

 

(a) Transfer . If any Preferred Shares are to be transferred, the applicable Holder shall surrender the applicable Preferred Share Certificate to the Corporation (or, if the Preferred Shares are held in Book-Entry form, a written instruction letter to the Corporation), whereupon the Corporation will forthwith issue and deliver upon the order of such Holder a new Preferred Share Certificate (in accordance with Section 17(d)) (or evidence of the transfer of such Book-Entry), registered as such Holder may request, representing the outstanding number of Preferred Shares being transferred by such Holder and, if less than the entire outstanding number of Preferred Shares is being transferred, a new Preferred Share Certificate (in accordance with Section 17(d)) to such Holder representing the outstanding number of Preferred Shares not being transferred (or evidence of such remaining Preferred Shares in a Book-Entry for such Holder). Such Holder and any assignee, by acceptance of the Preferred Share Certificate or evidence of Book-Entry issuance, as applicable, acknowledge and agree that, by reason of the provisions of Section 4(c)(i) following conversion or redemption of any of the Preferred Shares, the outstanding number of Preferred Shares represented by the Preferred Shares may be less than the number of Preferred Shares stated on the face of the Preferred Shares.

 

  (b) Lost, Stolen or Mutilated Preferred Share Certificate . Upon receipt by the Corporation of evidence reasonably satisfactory to the Corporation of the loss, theft, destruction or mutilation of a Preferred Share Certificate (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the applicable Holder to the Corporation in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of such Preferred Share Certificate, the Corporation shall execute and deliver to such Holder a new Preferred Share Certificate (in accordance with Section 17(d)) representing the applicable outstanding number of Preferred Shares.

 

  (c) Preferred Share Certificate and Book-Entries Exchangeable for Different Denominations and Forms . Each Preferred Share Certificate is exchangeable, upon the surrender hereof by the applicable Holder at the principal office of the Corporation, for a new Preferred Share Certificate or Preferred Share Certificate(s) or new Book-Entry (in accordance with Section 17(d)) representing, in the aggregate, the outstanding number of the Preferred Shares in the original Preferred Share Certificate, and each such new Preferred Share Certificate and/or new Book-Entry, as applicable, will represent such portion of such outstanding number of Preferred Shares from the original Preferred Share Certificate as is designated in writing by such Holder at the time of such surrender. Each Book-Entry may be exchanged into one or more new Preferred Share Certificates or split by the applicable Holder by delivery of a written notice to the Corporation into two or more new Book-Entries (in accordance with Section 17(d)) representing, in the aggregate, the outstanding number of the Preferred Shares in the original Book-Entry, and each such new Book-Entry and/or new Preferred Share Certificate, as applicable, will represent such portion of such outstanding number of Preferred Shares from the original Book-Entry as is designated in writing by such Holder at the time of such surrender.

 

 

(d) Issuance of New Preferred Share Certificate or Book-Entry . Whenever the Corporation is required to issue a new Preferred Share Certificate or a new Book-Entry pursuant to the terms of this Certificate of Designations, such new Preferred Share Certificate or new Book-Entry (i) shall represent, as indicated on the face of such Preferred Share Certificate or in such Book-Entry, as applicable, the number of Preferred Shares remaining outstanding (or in the case of a new Preferred Share Certificate or new Book-Entry being issued pursuant to Section 17(a) or Section 17(c), the number of Preferred Shares designated by such Holder) which, when added to the number of Preferred Shares represented by the other new Preferred Share Certificates or other new Book-Entry, as applicable, issued in connection with such issuance, does not exceed the number of Preferred Shares remaining outstanding under the original Preferred Share Certificate or original Book-Entry, as applicable, immediately prior to such issuance of new Preferred Share Certificate or new Book-Entry, as applicable, and (ii) shall have an issuance date, as indicated on the face of such new Preferred Share Certificate or in such new Book-Entry, as applicable, which is the same as the issuance date of the original Preferred Share Certificate or in such original Book-Entry, as applicable.

 

18. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief . The remedies provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate of Designations, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure by the Corporation to comply with the terms of this Certificate of Designations. The Corporation covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Corporation shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Corporation’s compliance with the terms and conditions of this Certificate of Designations.

 

18. Payment of Collection, Enforcement and Other Costs . If (a) any Preferred Shares are placed in the hands of an attorney for collection or enforcement or are collected or enforced through any legal proceeding or a Holder otherwise takes action to collect amounts due under this Certificate of Designations with respect to the Preferred Shares or to enforce the provisions of this Certificate of Designations or (b) there occurs any bankruptcy, reorganization, receivership of the Corporation or other proceedings affecting Corporation creditors’ rights and involving a claim under this Certificate of Designations, then the Corporation shall pay the costs incurred by such Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.

 

20. Construction; Headings . This Certificate of Designations shall be deemed to be jointly drafted by the Corporation and the Holders and shall not be construed against any such Person as the drafter hereof. The headings of this Certificate of Designations are for convenience of reference and shall not form part of, or affect the interpretation of, this Certificate of Designations. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Certificate of Designations instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Certificate of Designations.

 

21. Failure or Indulgence Not Waiver . No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. This Certificate of Designations shall be deemed to be jointly drafted by the Corporation and all Holders and shall not be construed against any Person as the drafter hereof. Notwithstanding the foregoing, nothing contained in this Section 21 shall permit any waiver of any provision of Section 4(d).

 

22. Dispute Resolution .

 

 

(a) Submission to Dispute Resolution .

 

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

 

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

 

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

 

(b) Miscellaneous . The Corporation and each Holder each, severally and not jointly, expressly acknowledges and agrees that (i) this Section 22 constitutes an agreement to arbitrate between the Corporation and such Holder (and constitutes an arbitration agreement), and that any Holder is authorized to apply for an order to compel arbitration in order to compel compliance with this Section 22, (ii) the terms of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Certificate of Designations, (iii) the Corporation and such applicable Holder (but only such Holder with respect to disputes solely relating to such Holder) shall each have the right to submit any dispute described in this Section 22 to any state or federal court sitting in the New York County, New York in lieu of utilizing the procedures set forth in this Section 22 and (iv) nothing in this Section 22 shall limit such Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 22).

 

 

 

23. Notices; Currency; Payments .

 

(a) Notices . The Corporation shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon delivery, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or by electronic mail (provided that a automatically generated notice indicating a delivery failure has not been sent to the sending party); (iii) upon delivery when sent by email so long as an automatically generated delivery failure is not received by the sender;or (iv) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or e-mail containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively. The Corporation shall provide each Holder with prompt written notice of all actions taken pursuant to this Certificate of Designations, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Corporation shall give written notice to each Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Corporation closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock, or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such Holder.

 

(b) Currency . All dollar amounts referred to in this Certificate of Designations are in United States Dollars (“ U.S. Dollars ”), and all amounts owing under this Certificate of Designations shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “ Exchange Rate ” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Certificate of Designations, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period of time).

 

(c) Payments . Whenever any payment of cash is to be made by the Corporation to any Person pursuant to this Certificate of Designations, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Corporation, provided that such Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Corporation with prior written notice setting out such request and such Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Certificate of Designations is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.

 

24. Waiver of Notice . To the extent permitted by law, the Corporation hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Certificate of Designations.

 

25. Governing Law . This Certificate of Designations shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Certificate of Designations shall be governed by, the internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Nevada or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Nevada. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude any Holder from bringing suit or taking other legal action against the Corporation in any other jurisdiction to collect on the Corporation’s obligations to such Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of such Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 22. THE CORPORATION HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS CERTIFICATE OF DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 

 

26. Judgment Currency .

 

(a) If for the purpose of obtaining or enforcing judgment against the Corporation in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 26 referred to as the “ Judgment Currency ”) an amount due in U.S. dollars under this Certificate of Designations, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:

 

(i) the date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or

 

(ii) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 26(a)(ii) being hereinafter referred to as the “ Judgment Conversion Date ”).

 

(b) If in the case of any proceeding in the court of any jurisdiction referred to in Section 26(a) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

 

(c) Any amount due from the Corporation under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Certificate of Designations.

 

27. Severability . If any provision of this Certificate of Designations is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Certificate of Designations so long as this Certificate of Designations as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

28. Maximum Payments . Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Corporation to the applicable Holder and thus refunded to the Corporation.

 

29. Stockholder Matters; Amendment .

 

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

 

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

 

 

 

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

 

(a)   “ 1933 Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

(b)   “ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)   “ Affiliate ” or “ Affiliated ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(d)   “ Attribution Parties ” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by a Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of such Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with such Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Corporation’s Common Stock would or could be aggregated with such Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively such Holder and all other Attribution Parties to the Maximum Percentage.

 

(e)   “ Bankruptcy Event ” means any of the following events: (a) the Corporation commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation, (b) there is commenced against the Corporation any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Corporation is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Corporation suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Corporation makes a general assignment for the benefit of creditors, (f) the Corporation calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Corporation admits in writing that it is generally unable to pay its debts as they become due, (h) the Corporation, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

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

 

(g)   “ Book-Entry ” means each entry on the Register evidencing one or more Preferred Shares held by a Holder in lieu of a Preferred Share Certificate issuable hereunder.

 

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

 

(i)   “ Capital Increase ” means an increase of the number of authorized but unissued shares of Common Stock, either via reverse split or increase in the number of shares authorized, in excess of 300% of number of shares of Common Stock necessary to convert all the Preferred Shares, Series B Preferred and Warrants issued contemporaneously with the Preferred Shares.

 

 

 

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

 

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

 

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

 

(m)   “ Current Subsidiary ” means any Person in which the Corporation on the Issuance Date, directly or indirectly, (i) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, “ Current Subsidiaries ”.

 

(n)   “Direct Investors” means any Holder acquiring Preferred Shares directly from the Corporation on the Issuance Date other than pursuant to an exchange of securities of Charlie's Chalk Dust, LLC.

 

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

 

(p)   “ Fundamental Transaction ” means (A) that the Corporation shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Corporation is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Corporation or any of its “significant subsidiaries “ (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Corporation to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3

 

 

 

under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Corporation shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Certificate of Designations calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Corporation sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Corporation to surrender their shares of Common Stock without approval of the stockholders of the Corporation or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

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

 

(r)   “ Group ” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(s)   “ Holder ” shall have the meaning set forth in Section 2.

 

(t)   “ Holder Pro Rata Amount ” means, with respect to any Holder, a fraction (i) the numerator of which is the number of Preferred Shares issued to such Holder on the Issuance Date and (ii) the denominator of which is the number of Preferred Shares issued to all Holders on the Issuance Date.

 

(u)   “Indebtedness” means (x) any liabilities for borrowed money or amounts owed (other than trade accounts payable incurred in the ordinary course of business) and (y) 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 consolidated 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.

 

(v)      “ Issuance Date ” means the date Preferred Stock is first issued by the Corporation.

 

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

 

(x)   “ New Subsidiary ” means, as of any date of determination, any Person in which the Corporation after the Issuance Date, directly or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, “ New Subsidiaries .”

 

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

 

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

 

 

(a)   “Permitted Indebtedness” means (x) all indebtedness of the Corporation outstanding on the Issuance Date or thereafter that does not constitute Indebtedness, provided that the terms thereof have not been amended or modified on or after the Issuance Date. and (y) monies borrowed in an amount not to exceed $2,500,000.

 

( b )     “Permitted Issuances” means (x) any shares of Common Stock, Options or Convertible Securities, issued or issuable by the Corporation on or before the date hereof, and (y) any shares of Common Stock, Options or Convertible Securities issued or issuable under any equity incentive plan of the Corporation that has in good faith been approved by the Board.

 

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

 

(d)   “ Principal Market ” means the OTC Markets.

 

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

 

(f)   “ Series B Preferred ” means the Series B Convertible Preferred Stock issued together with the Preferred Stock.

 

(g)   “ Stated Value ” shall mean $100.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the Issuance Date with respect to the Preferred Shares.

 

(h)   “Subject Entity ” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

  (i)   “ Subsidiaries ” means, as of any date of determination, collectively, all Current Subsidiaries and all New Subsidiaries, and each of the foregoing, individually, a “ Subsidiary .”

 

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

 

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

 

(l)   Intentionally left blank.

 

 

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

 

30. Disclosure . Upon receipt or delivery by the Corporation of any notice in accordance with the terms of this Certificate of Designations, unless the Corporation has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Corporation or any of its Subsidiaries, the Corporation shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Corporation believes that a notice contains material, non-public information relating to the Corporation or any of its Subsidiaries, the Corporation so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, such Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Corporation or any of its Subsidiaries. If the Corporation or any of its Subsidiaries provides material non-public information to a Holder that is not simultaneously filed in a Current Report on Form 8-K and such Holder has not agreed to receive such material non-public information, the Corporation hereby covenants and agrees that such Holder shall not have any duty of confidentiality to the Corporation, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information.

 

* * * * *

 

 

 

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations of Series A Convertible Preferred Stock to be signed by its Chief Executive Officer on this 25 day of April, 2019.

 

 

TRUE DRINKS HOLDINGS, INC.
By:		/s/ Robert Van Boerum
		Name: Robert Van Boerum
		Title: Chief Executive Officer

 

 

 

  

EXHIBIT I

 

TRUE DRINKS HOLDINGS, INC.

 

CONVERSION NOTICE

 

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

Date of Conversion:

 

Aggregate number of Preferred Shares to be converted
Aggregate Stated Value of such Preferred Shares to be converted:
Aggregate accrued and unpaid Dividends with respect to such Preferred Sharesand such Aggregate Dividends to be converted:
AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:

Please confirm the following information:

 

Conversion Price:

 

Number of shares of Common Stock to be issued:
Please issue the Common Stock into which the applicable Preferred Shares are being converted to Holder, or for its benefit, as follows:   ☐ Check here if requesting delivery as a certificate to the following name and to the following address:

Issue to:

 

 

 

 

☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

 

		DTC Participant:
		DTC Number:
		Account Number:

 

Date:  _________________,   Name of Registered Holder

 

By:		_______________________
		Name:
		Title:
		Tax ID:
		Facsimile:
E-mail Address:

 

 

 

  EXHIBIT II

 

  ACKNOWLEDGMENT

 

The Corporation hereby acknowledges this Conversion Notice and hereby directs to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated , 20 from the Corporation and acknowledged and agreed to by .

 

 

TRUE DRINKS HOLDINGS, INC.
By:		________________________
		Name:
		Title:

 

 

 

 

 

Exhibit 3.8

 

CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE

SERIES B CONVERTIBLE PREFERRED STOCK   OF

TRUE DRINKS HOLDINGS, INC.

 

Pursuant to Section 78.1955 of the Nevada Revised Statutes

 

True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), in accordance with the provisions of Sections 78.195 and 78.1955 of the Nevada Revised Statutes (“ NRS ”), does hereby certify that, pursuant to the authority conferred upon the Board of Directors (the “ Board ”) of the Company by the Articles of Incorporation of the Company, as amended, the following resolution creating a series of Series B Convertible Preferred Stock, was duly adopted on April 19,  2019.

 

RESOLVED, that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Articles of Incorporation of the Company, as amended, a series of Preferred Stock of the Company be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations, and restrictions thereof are as follows:

 

TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK

 

1.   Designation and Rank . The designation of such series of the Preferred Stock shall be the Series B Convertible Preferred Stock, par value $.001 per share (the " Series B Preferred ").   The maximum number of shares of Series B Preferred shall be One Million, Five Hundred Thousand (1,500,000) shares. The Series B Preferred shall rank prior to the common stock, par value $0.001 per share (the " Common Stock "),   junior to the Company’s Series A Convertible Preferred Stock, and senior to all other classes and series of equity securities of the Company that by their terms do not rank senior to the Series B Preferred (" Junior Stock "). The Series B Preferred will be held in book entry with Company or its transfer agent.

 

2.   Dividends . Whenever the Board of Directors declares a dividend on the Common Stock each holder of record of a share of Series B Preferred, or any fraction of a share of Series B Preferred, on the date set by the Board of Directors to determine the owners of the Common Stock of record entitled to receive such dividend (the " Record Date ")   shall be entitled to receive out of any assets at the time legally available therefore, an amount equal to such dividend declared on one share of Common Stock multiplied by the number of shares of Common Stock into which such share, or such fraction of a share, of Series B Preferred could be converted on the Record Date.

 

3.   Voting Rights .

 

(a)   Class Voting Rights . The Series B Preferred shall have the following class voting rights. So long as any shares of the Series B Preferred remain outstanding, the Company shall not, without the affirmative vote or consent of the holders of at least fifty percent (50%) of the shares of the Series B Preferred outstanding at the time, given in person or by proxy, either in writing or at a meeting, in which the holders of the Series B Preferred vote separately as a class: (i) amend, alter or repeal the provisions of the Series B Preferred so as to adversely affect any right, preference, privilege or voting power of the Series B Preferred; (ii) increase the authorized number of shares of Series B Preferred; or (iii) effect any distribution with respect to Junior Stock except that the Company may effect a distribution on the Common Stock if the Company makes a like kind distribution on each share, or fraction of a share, of Series B Preferred in an amount equal to the distribution on one share of Common Stock multiplied by the number of shares of Common Stock into which such one share, or such fraction of a share, of Series B Preferred can be converted at the time of such distribution.

 

(b)   General Voting Rights . Except with respect to transactions upon which the Series B Preferred shall be entitled to vote separately as a class pursuant to Section 3(a) above, the Series B Preferred shall vote on an as converted basis.

 

 

 

4.   Liquidation Preference .

 

(a) In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company, the holders of shares of the Series B Preferred shall pari passu with the Company's Common Stock.

 

(b) A consolidation or merger of the Company with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Company, or other acquisition type transaction shall be, at the election of a majority of the holders of the Series B Preferred, deemed to be a liquidation, dissolution, or winding up within the meaning of this Section 4. In the event of the merger or consolidation of the Company with or into another corporation that is not treated as a liquidation pursuant to this Section 4(b), the Series B Preferred shall maintain its relative powers, designations and preferences provided for herein and no merger shall result inconsistent therewith.

 

(c) Written notice of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, stating a payment date and the place where the distributable amounts shall be payable, shall be given by mail, postage prepaid, no less than forty-five (45) days prior to the payment date stated therein, to the holders of record of the Series B Preferred at their respective addresses as the same shall appear on the books of the Company.

 

5.   Conversion .

 

(a)   Mandatory Conversion . Upon a Capital Increase, each share of Series B Preferred shall automatically be converted into Ten Thousand (10,000) shares of fully paid and nonassessable shares of Common Stock on the date the Company delivers a Mandatory Conversion Notice, as defined in Section 5(c) below (“ Mandatory Conversion ”) (the “ Conversion Rate ”). The shares of Common Stock issuable to each Holder following a Mandatory Conversion are hereinafter referred to as “ Conversion Shares ”. A capital increase (“ Capital Increase ”) shall be deemed to have occurred as soon as the Company has sufficient authorized but unissued shares (which have not otherwise been reserved or committed for issuance) to permit the issuance of Conversion Shares. 

 

(b)   Mechanics of Conversion .

 

(i)   Mandatory Conversion Notice. In the event of a Mandatory Conversion pursuant to Section 5(a) above, the Company shall give written notice (the “ Mandatory Conversion Notice ”) to all holders of the Series B Preferred of its intention to require the conversion of all shares of Series B Preferred. The Mandatory Conversion Notice shall set forth the number of Series B Preferred being converted (which shall be all, and not less than all, issued and outstanding shares of Series B Preferred), the date on which such conversion shall be effective (the “ Mandatory Conversion Date ”), and shall be given to the holders of the Series B Preferred not less than fifteen (15) days prior to the Mandatory Conversion Date. The Mandatory Conversion Notice shall be delivered to each holder at its address as it appears on the stock transfer books of the Company. Upon the Mandatory Conversion Date, such converted Series B Preferred shall no longer be deemed to be outstanding, and all rights of the holder with respect to such shares shall immediately terminate, except the right to receive the Conversion Shares into which the shares of Series B Preferred are convertible pursuant to Section 5(a).

 

(ii)   Company's Response. Upon giving a Mandatory Conversion Notice, the Company or its designated transfer agent (the “ Transfer Agent ”), as applicable, shall within five (5) business days following the Mandatory Conversion Date, issue and deliver to the Depository Trust Company (“ DTC ”) account on each applicable holder's behalf via the Deposit Withdrawal Agent Commission System (“ DWAC ”) as provided to the Company or the Transfer Agent by (or on behalf of) a holder, registered in the name of each such holder or its designee, for the number of Conversion Shares to which such holder shall be entitled. Notwithstanding the foregoing to the contrary, the Company or its Transfer Agent shall only be required to issue and deliver the Conversion Shares to DTC on a holder's behalf via DWAC if (i) the Conversion Shares may be issued without restrictive legends and (ii) the Company and the Transfer Agent are participating in DTC through the DWAC system. If any of the conditions set forth in clauses (i) and (ii) above are not satisfied, the Company shall deliver physical certificates to each such holder or its designee.

 

 

 

(iii)   Record Holder. The person or persons entitled to receive Conversion Shares shall be treated for all purposes as the record holder or holders of such Conversion Shares as of the close of business on the Mandatory Conversion Date.

 

(c)   Adjustments of Conversion Rate .

 

(i)   Adjustments for Stock Splits and Combinations . If the Company shall at any time or from time to time after the Issuance Date, effect a stock split of the outstanding Common Stock, the Conversion Rate shall be proportionately increased. If the Company shall at any time or from time to time after the Issuance Date, combine the outstanding shares of Common Stock, the Conversion Rate shall be proportionately decreased. Any adjustments under this Section 5(c)(i) shall be effective at the close of business on the date the stock split or combination occurs.

 

(ii)   Adjustments for Certain Dividends and Distributions . If the Company shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, then, and in each event, the Conversion Rate shall be increased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of business on such record date, by multiplying, as applicable, the Conversion Rate then in effect by a fraction:

 

(1)   the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately after such issuance on the close of business on such record date; and

 

(2)   the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance on the close of business on such record date.

 

(iii)   Adjustment for Other Dividends and Distributions . If the Company shall, at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in securities of the Company other than shares of Common Stock, then, and in each event, an appropriate revision to the applicable Conversion Rate shall be made and provision shall be made (by adjustments of the Conversion Rate or otherwise) so that the holders of Series B Preferred shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the number of securities of the Company which they would have received had their Series B Preferred been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the Mandatory Conversion Date, retained such securities (together with any distributions payable thereon during such period), giving application to all adjustments called for during such period under this Section 5(c)(iii) with respect to the rights of the holders of the Series B Preferred.

 

(iv)   Adjustments for Reclassification, Exchange or Substitution . If the Common Stock issuable upon conversion of the Series B Preferred at any time or from time to time after the Issuance Date shall be changed to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Sections 5(c)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of assets provided for in Section 5(c)(v)), then, and in each event, an appropriate revision to the Conversion Rate shall be made and provisions shall be made so that the holder of each share of Series B Preferred shall have the right thereafter to convert such share of Series B Preferred into the kind and amount of shares of stock and other securities receivable upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock into which such share of Series B Preferred might have been converted immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.

 

 

 

(v)   Adjustments for Reorganization, Merger, Consolidation or Sales of Assets . If at any time or from time to time after the Issuance Date there shall be a capital reorganization of the Company (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 5(c)(i), (ii) and (iii), or a reclassification, exchange or substitution of shares provided for in Section 5(c)(iv)), or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company's properties or assets to any other person (an " Organic Change "),   then as a part of such Organic Change an appropriate revision to the Conversion Rate shall be made and provision shall be made so that the holder of each share of Series B Preferred shall have the right thereafter to convert such share of Series B Preferred into the kind and amount of shares of stock and other securities or property of the Company or any successor corporation resulting from the Organic Change which the holder of such share of Series B Preferred would have received if such share of Series B Preferred had been converted prior to such Organic Change.

 

(vi)   Record Date . In case the Company shall take record of the holders of its Common Stock or any other Preferred Stock for the purpose of entitling them to subscribe for or purchase Common Stock or Convertible Securities, then the date of the issue or sale of the shares of Common Stock shall be deemed to be such record date.

 

(f)   No Impairment . The Company shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Preferred against impairment. In the event a holder shall elect to convert any shares of Series B Preferred as provided herein, the Company cannot 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, unless an injunction from a court, on notice, restraining and/or adjoining conversion of all or of such shares of Series B Preferred shall have been issued.

 

(g)   Certificates as to Adjustments . Upon occurrence of each adjustment or readjustment of the Conversion Rate or number of shares of Common Stock issuable upon conversion of the Series B Preferred pursuant to this Section 5, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such Series B Preferred a certificate setting forth such adjustment and readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon written request of the holder of such affected Series B Preferred, at any time, furnish or cause to be furnished to such holder a like certificate setting forth such adjustments and readjustments, the Conversion Rate in effect at the time, and the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon the conversion of a share of such Series B Preferred. Notwithstanding the foregoing, the Company shall not be obligated to deliver a certificate unless such certificate would reflect an increase or decrease of at least one percent of such adjusted amount.

 

(h)   Issue Taxes . The Company shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of Series B Preferred pursuant hereto; provided, however , that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.

 

(i)   Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile, electronic mail or three (3) business days following (A) being mailed by certified or registered mail, postage prepaid, return-receipt requested, or (B) delivered to an express mail delivery service such as Federal Express, with written receipt by the addressee required, in either case addressed to the holder of record at its address appearing on the books of the Company. The Company will give written notice to each holder of Series B Preferred at least twenty (20) days prior to the date on which the Company closes its books or takes a record (z) with respect to any dividend or distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to holders of Common Stock or (x) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up and in no event shall such notice be provided to such holder prior to such information being made known to the public. The Company will also give written notice to each holder of Series B Preferred at least twenty (20) days prior to the date on which any Organic Change, dissolution, liquidation or winding-up will take place and in no event shall such notice be provided to such holder prior to such information being made known to the public.

 

 

 

(j)            Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of the Series B Preferred. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company, at its option, shall (A) pay cash equal to the product of such fraction multiplied by the average of the closing bid prices of the Common Stock for the five (5) consecutive trading immediately preceding the Mandatory Conversion Date, or (B) issue one whole share of Common Stock to the holder.

 

(k)             Retirement of Series B Preferred . Conversion of Series B Preferred shall be deemed to have been effected on the Mandatory Conversion Date.

 

(l)             Regulatory Compliance . If any shares of Common Stock to be reserved for the purpose of conversion of Series B Preferred require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Company shall, at its sole cost and expense, in good faith and as expeditiously as possible, endeavor to secure such registration, listing or approval, as the case may be.

 

6.   No Preemptive or Redemption Rights . No holder of the Series B Preferred shall be entitled to rights to subscribe for, purchase or receive any part of any new or additional shares of any class, whether now or hereafter authorized, or of bonds or debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any class, but all such new or additional shares of any class, or any bond, debentures or other evidences of indebtedness convertible into or exchangeable for shares, may be issued and disposed of by the Board of Directors on such terms and for such consideration (to the extent permitted by law), and to such person or persons as the Board of Directors in their absolute discretion may deem advisable.

 

7.     Vote to Change the Terms of or Issue 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 percent (50%) of the then outstanding shares of Series B Preferred, shall be required for any change to this Certificate of Designation or the Company's Certificate of Incorporation which would amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series B Preferred.

 

9.   Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief . The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation. Amounts set forth or provided for herein with respect to conversion and the like (and the computation thereof) shall be the amounts to be received by the holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of the Series B Preferred and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holders of the Series B Preferred shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

10.   Specific Shall Not Limit General; Construction . No specific provision contained in this Certificate of Designation shall limit or modify any more general provision contained herein.

 

11.   Failure or Indulgence Not Waiver . No failure or delay on the part of a holder of Series B Preferred in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

 

 

 

 

 

[ Remainder of Page Intentionally Left Blank ]

 

 

 

 

IN WITNESS WHEREOF, this Certificate of Designation is executed on Company this 26 day of April, 2019.

 

 

 

TRUE DRINKS HOLDINGS, INC.

 

 

By: /s/ Robert Van Boerum

Name: Robert Van Boerum

Title: Chief Executive Officer