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CERTIFICATE OF DESIGNATION OF
CLASS A CONVERTIBLE PREFERRED STOCK
OF
TOMBSTONE TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is
Tombstone Technologies, Inc., a Colorado corporation.
2. The Certificate of Incorporation of the Company and Amendments
thereto authorizes the issuance of shares of Preferred Stock, no par value per
share (herein, "Preferred Stock" or "Preferred Shares"), and expressly vests in
the Board of Directors of the Company the authority provided therein to issue
any or all of the Preferred Shares in one (1) or more series and by resolution
or resolutions to establish the designation and number and to fix the relative
rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Class A Convertible issue of Preferred Stock:
RESOLVED, that One Hundred Twenty Five Thousand (125,000) of the One
Million (1,000,000) authorized shares of Preferred Stock of the Company shall be
designated Class A Convertible Preferred Stock, no par value per share, and
shall possess the rights and preferences set forth below:
Section 1. DESIGNATION AND AMOUNT. The shares of the series of
Preferred Stock hereby and herein created shall have no par value per share and
shall be designated as Class A Convertible Preferred Stock (the "Class A
Convertible Preferred Stock") and the number of shares constituting the Class A
Convertible Preferred Stock shall be One Hundred Twenty Five Thousand (125,000).
Section 2. RANK. The Class A Convertible Preferred Stock shall rank:
(i) senior to any other class or series of outstanding Preferred Shares or
series of capital stock of the Company; (ii) prior to all of the Company's
Common Stock, no par value per share ("Common Stock"); (iii) prior to any class
or series of capital stock of the Company hereafter created not specifically
ranking by its terms senior to or on parity with any Class A Convertible
Preferred Stock of whatever subdivision (collectively, with the Common Stock and
all existing Preferred Stock, "Junior Securities"); and (iv) on parity with any
class or series of capital stock of the Company hereafter created specifically
ranking by its terms on parity with the Class A Convertible Preferred Stock
("Parity Securities") in each case as to distributions of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collectively as
"Distributions"). The Class A Convertible Preferred Stock shall have a deemed
purchase price and stated value of Ten United States Dollars ($10.00) per share.
Section 3. DIVIDENDS. The Class A Convertible Preferred Stock shall
bear no dividends.
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Section 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the holders of shares of Class A
Convertible Preferred Stock (each a "Holder" and collectively the "Holders")
shall be entitled to receive, immediately after any distributions to Senior
Securities required by the Company's Certificate of Incorporation or any
certificate of designation, and prior in preference to any distribution to
Junior Securities but in parity with any distribution to Parity Securities, an
amount per share equal to $10.00per share. If upon the occurrence of such event,
and after payment in full of the preferential amounts with respect to the Senior
Securities, the assets and funds available to be distributed among the Holders
of the Class A Convertible Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to the Holders of the Class A Convertible Preferred Stock and the
Parity Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the Holders of the
Class A Convertible Preferred Stock and the Parity Securities, pro rata, based
on the respective liquidation amounts to which each such series of stock is
entitled by the Company's Certificate of Incorporation and any certificate(s) of
designation relating thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in the Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
Section 5. CONVERSION. The record Holders of the Class A Convertible
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT. On and after date hereof, each record Holder of
Class A Convertible Preferred Stock shall be entitled (at the times and in the
amounts set forth below), at the office of the Company or any transfer agent for
the Class A Convertible Preferred Stock designated by the Company to the Holders
in writing (the "Transfer Agent"), to convert Class A Convertible Preferred
Stock in whole or in part into Common Stock (in multiples of one (1) share of
Class A Convertible Preferred Stock) as follows:
Subject to the common stock of the company having traded at an average
price of $3.00 for ten consecutive trading days, the Holders of the
Class A Convertible Preferred Stock shall, have the right to convert
each of their shares of Class A Convertible Preferred Stock for which a
conversion is elected into 208 shares of Common Stock of the Company or
after a period of Twelve Months (12) from the date of issue, which ever
occurs first.
(b) MECHANICS OF CONVERSION. In order to convert Class A Convertible
Preferred Stock into full shares of Common Stock, the Holder shall (i) fax or
deliver via electronic mail, on or prior to 11:59 p.m., Dallas, Texas time (the
"Conversion Notice Deadline") on the date of conversion (the "Conversion Date"),
a copy of the fully executed notice of conversion, substantially in the form
shown on Exhibit A hereto ("Notice of Conversion") to the Company at the office
of the Company or the Transfer Agent stating that the Holder elects to convert
Class A Convertible Preferred Stock into Common Stock, which Notice of
Conversion shall specify the date of conversion, the number of shares of Class A
Convertible Preferred Stock to be converted, the applicable conversion price and
a calculation of the number of shares of Common Stock issuable upon such
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conversion (together with a copy of the front page of each certificate to be
converted) and (ii) once converted in full (but not otherwise unless
specifically requested by the Company from time to time), surrender to a common
courier for delivery to the office of the Company or the Transfer Agent, the
original certificate(s) representing the Class A Convertible Preferred Stock
being converted (the "Preferred Stock Certificates"), duly endorsed for
transfer; unless the Holder notifies the Company or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (i) below). Upon receipt by the Company of a facsimile copy of a
Notice of Conversion, Company shall immediately send, via facsimile or email, a
confirmation of receipt of the Notice of Conversion to Holder which shall
specify that the Notice of Conversion has been received and the name and
telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the Conversion. In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall promptly
issue to the Holder the number of shares of Common Stock that are not disputed
and shall submit the disputed calculations to its outside accountant via
facsimile within three (3) days of receipt of Holder's Notice of Conversion. The
Company shall cause the accountant to perform the calculations and notify the
Company and the Holder of the results no later than forty-eight (48) hours from
the time it receives the disputed calculations. Accountant's calculation shall
be deemed conclusive absent manifest error.
(i) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company
of evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Class A Convertible Preferred Stock, and (in
the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Company shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date. However, the
Company shall not be obligated to re-issue such lost or stolen Preferred Stock
Certificates if Holder contemporaneously requests the Company to convert such
Class A Convertible Preferred Stock into Common Stock.
(ii) DELIVERY OF COMMON STOCK UPON CONVERSION. The Transfer
Agent or the Company (as applicable) shall, no later than the close of business
on the third (3rd) business day (the "Deadline") after receipt by the Company or
the Transfer Agent of a facsimile copy of a Notice of Conversion and receipt by
Company or the Transfer Agent from the Holder of all necessary documentation
duly executed and in proper form required for conversion as stated in this
Section 5, issue and surrender to a common courier for either overnight or (if
delivery is outside the United States) two (2) day delivery to the Holder at the
address of the Holder as shown on the stock records of the Company a certificate
for the number of shares of Common Stock to which the Holder shall be entitled
as aforesaid. In lieu of delivering physical certificates representing Common
Stock to be received by a Holder upon conversion of Class A Convertible
Preferred Stock, the Company may, if the said Common Stock is not restricted
from transfer and does not contain a restrictive legend, utilize the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program and/or the DWAC
system to electronically credit the account of the Holder's prime broker with
DTC for the number of shares of Common Stock to be received upon such
conversion.
In any event, delivery to each Holder of Common Stock upon a properly
submitted conversion of Class A Convertible Preferred Stock shall be made within
three (3) business days after the Conversion Date. Without limiting a Holder's
other rights at law or in equity, should delivery be later than three (3)
business days after the Conversion Date, the Holder shall have the right to
either (1) rescind the conversion by facsimile notice to the Company; (2) by
giving a new Notice of Conversion, adjust the conversion price and the amount of
dividends accrued and unpaid, in which case the Company shall process the
conversion as if the latter notice were the original notice; or (3) accept the
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late delivery. The Holders shall also be entitled to the equitable remedy of
specific performance to enforce the delivery requirements upon conversion of
Class A Convertible Preferred Stock.
(iii) NO FRACTIONAL SHARES. If any conversion of the Class A
Convertible Preferred Stock would create a fractional share of Common Stock or a
right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon
conversion, in the aggregate, shall be rounded to the nearest whole share.
(iv) DATE OF CONVERSION. The date on which conversion occurs
(the "Conversion Date") shall be deemed to be the date set forth in such Notice
of Conversion, provided that the advance copy of the Notice of Conversion is
faxed to the Company before 11:59 p.m., Dallas, Texas time, on the Conversion
Date. The person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
Holder or Holders of such shares of Common Stock on the Conversion.
(c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available or make provision to increase, reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the Class A Convertible Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all then outstanding Class A Convertible
Preferred Stock into Common 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 Class A Convertible 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 purpose.
(d) ADJUSTMENT TO CONVERSION RATE.
(i) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, prior to
the conversion of all Class A Convertible Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization, or
other similar event, as a result of which shares of Common Stock of the Company
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities of the Company or another entity
or there is a sale of all or substantially all the Company's assets, then the
Holders of Class A Convertible Preferred Stock shall thereafter have the right
to receive upon conversion of Class A Convertible Preferred Stock, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities and/or other assets ("New Assets") which the Holder would have
been entitled to receive in such transaction had the Class A Convertible
Preferred Stock been convertible into New Assets from the date hereof, at the
market price of such New Assets on the date of conversion, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Class A Convertible Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the conversion price and of the number of shares of Common Stock issuable or
New Assets deliverable upon conversion of the Class A Convertible Preferred
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities thereafter deliverable upon the exercise hereof.
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(iii) NO FRACTIONAL SHARES. If any adjustment under this
Section 5(d) would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon conversion
shall be rounded to the nearest whole share.
(e) CONVERSION LIMITATIONS. Notwithstanding anything to the contrary
set forth herein, in no event shall any Holder be entitled to convert Class A
Convertible Preferred Stock in excess of such portion of the stated value of the
Class A Convertible Preferred Stock that, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially owned by
the Holder and its affiliates to exceed 4.99% of the outstanding shares of
Common Stock following such conversion. For purposes of the foregoing provision,
the aggregate number of shares of Common Stock beneficially owned by the Holder
and its affiliates shall include the number of shares of Common Stock issuable
upon the specific conversion of the Class A Convertible Preferred Stock with
respect to which the determination of such proviso is made. Except as set forth
in the preceding sentence, for purposes of this section, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. The limitations of this Section 5(e) shall no longer
apply, and the Holder may convert its Class A Convertible Preferred Stock
irrespective of the Holder's beneficial ownership of Common Stock, should any of
the following events occur: (1) the Company shall either become insolvent, admit
in writing its inability to pay its debts generally or as they come due, make an
assignment for the benefit of creditors or commence proceedings for its
dissolution, or apply for, or consent to the appointment of, a trustee,
liquidator, or receiver for its or for a material part of its property or
business; or (2) a trustee, liquidator or receiver shall be appointed for the
Company or for a material portion of its property or business without the
Company's consent and such appointment is not discharged within sixty (60) days
thereafter; or (3) any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or a substantial portion of the properties or assets of the
Company and shall not be dismissed within sixty (60) days thereafter; or (4)
bankruptcy, reorganization, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Company and, if instituted against
the Company, shall not be dismissed within sixty (60) days after such
institution or the Company by any answer, action or omission to act approve of,
or default in, answering a petition filed in, such proceeding.
Section 6. The Company shall have no right of redemption.
Section 7. VOTING RIGHTS. The record Holders of the Class A Convertible
Preferred Stock shall have the right to vote on any matter with holders of
Common Stock or any vote required to approve any action, which Colorado law
provides may or must be approved by vote or consent of the holders of other
series of voting preferred shares and the holders of common shares or the
holders of other securities entitled to vote, if any. At any such vote, 1 share
of the Class A Convertible Preferred Stock will be equal to 208 votes of the
Company's common stock.
The record Holders of the Class A Convertible Preferred Stock shall be
entitled to the same notice of any regular or special meeting of the
shareholders of the Company as may or shall be given to holders of any other
series of preferred shares and the holders of common shares entitled to vote at
such meetings.
Section 8. PROTECTIVE PROVISION. So long as shares of Class A
Convertible Preferred Stock are outstanding, the Company shall not without first
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obtaining the approval (by vote or written consent, as provided by Colorado Law)
of the Holders of at least seventy-five percent (75%) of the then outstanding
shares of Class A Convertible Preferred Stock, and at least seventy-five percent
(75%) of the then outstanding Holders:
(a) alter or change the rights, preferences or privileges of
the Class A Convertible Preferred Stock so as to affect adversely the Class A
Convertible Preferred Stock.
(b) create any new class or series of stock having a
preference over the Class A Convertible Preferred Stock with respect to
Distributions (as defined in Section 2 above) or increase the size of the
authorized number of Class A Convertible Preferred Stock.
In the event Holders of at least seventy-five percent (75%) of the then
outstanding shares of Class A Convertible Preferred Stock and at least
seventy-five percent (75%) of the then outstanding Holders agree to allow the
Company to alter or change the rights, preferences or privileges of the shares
of Class A Convertible Preferred Stock, pursuant to subsection (a) above, so as
to affect the Class A Convertible Preferred Stock, then the Company will deliver
notice of such approved change to the Holders of the Class A Convertible
Preferred Stock that did not agree to such alteration or change (the "Dissenting
Holders") and the Dissenting Holders shall have the right for a period of thirty
(30) business days to convert pursuant to the terms of this Certificate of
Designation as they exist prior to such alteration or change or continue to hold
their shares of Class A Convertible Preferred Stock.
Section 9. STATUS OF CONVERTED STOCK. In the event any shares of Class
A Convertible Preferred Stock shall be converted pursuant to Section 5 hereof,
the shares so converted shall be canceled, shall return to the status of
authorized but unissued Preferred Stock of no designated series, and shall not
be issuable by the Company as Class A Convertible Preferred Stock.
Section 10. PREFERENCE RIGHTS. Nothing contained herein shall be
construed to prevent the Board of Directors of the Company from issuing one (1)
or more series of Preferred Stock with dividend and/or liquidation preferences
junior to the dividend and liquidation preferences of the Class A Convertible
Preferred Stock.
Section 11. LIMITED PREEMPTIVE RIGHt: For any equity or equity linked
private financing consummated within 12 months after the Closing, the Holders of
the Series A Convertible Preferred Shares shall have a pro-rata right to
purchase all or part of the private financing. The Holders shall have ten (10)
trading days to respond in writing to a signed and accepted term sheet by the
Company. A carve out of this provision will be granted to the Issuer for the
issuance of stock for situations involving strategic partnerships, acquisition
candidates and public offerings.
Signed October 29, 2010
Tombstone Technologies, Inc.
By: /s/ John Harris
----------------------------
John Harris, President
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EXHIBIT A
NOTICE OF CONVERSION
To be Executed by the Holder of the Class A Convertible Preferred
Stock if such Holder Desires to Exercise the Class A
Convertible Preferred Stock in Whole or in Part:
To: Tombstone Technologies, Inc. (the "Company")
The undersigned ___________________________ (Social Security number
_____________or taxpayer identification number of Holder:
_________________________) hereby irrevocably elects to exercise the right of
purchase represented by this Certificate of Class A Convertible Preferred Stock
for, and to purchase thereunder, ____________ shares of the Common Stock (the
"Common Stock") provided for therein and tenders payment herewith to the order
of the Company in the amount of $______________, such payment being made as
provided on the face of this Certificate.
The undersigned requests that certificates for such shares of Common Stock be
issued as follows:
Name: __________________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
Deliver to: ____________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Certificate for the balance
remaining of the shares of Common Stock purchasable under these be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: ______________________
Signature:
____________________________________________
Note: The signature on this Conversion
Notice must correspond with the name as
written upon the face of the Preferred Stock
Certificates in every particular, without
alteration or enlargement or any change
whatever
