Exhibit 10.4

 
AYTU BIOSCIENCE, INC.
 
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
 
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
 
The undersigned, Joshua R. Disbrow and David A. Green, do hereby certify that:
 
1. They are the President and Secretary, respectively, of Aytu BioScience, Inc.,
a Delaware corporation (the “Corporation”).
 
2. The Corporation is authorized to issue 50,000,000 shares of preferred stock,
[●] of which have been issued.
 
3. The following resolutions were duly adopted by the board of directors of the
Corporation (the “Board of Directors”):
 
WHEREAS, the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting of 50,000,000
shares, $0.0001 par value per share, issuable from time to time in one or more
series;
 
WHEREAS, the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms of redemption
and liquidation preferences of any wholly unissued series of preferred stock and
the number of shares constituting any series and the designation thereof, of any
of them; and
 
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority
as aforesaid, to fix the rights, preferences, restrictions and other matters
relating to a series of the preferred stock, which shall consist of up to [●]
shares of the preferred stock which the Corporation has the authority to issue,
as follows:
 
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors 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:
 
TERMS OF PREFERRED STOCK
 
Section 1. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 of the Securities
Act.
 
 

 
 
“Alternate Consideration” shall have the meaning set forth in Section 7(d).
 
“Beneficial Ownership Limitation” shall have the meaning set forth in Section
6(d).
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
“Buy-In” shall have the meaning set forth in Section 6(c)(iv).
 
“Commission” means the United States Securities and Exchange Commission.
 
“Common Stock” means the Corporation’s common stock, par value $0.0001 per
share, and stock of any other class of securities into which such securities may
hereafter be reclassified or changed.
 
“Common Stock Equivalents” means any securities of the Corporation or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
 
“Conversion Amount” means the sum of the Stated Value at issue.
 
“Conversion Date” shall have the meaning set forth in Section 6(a).
 
“Conversion Price” shall have the meaning set forth in Section 6(b).
 
“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms
hereof.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
“Fundamental Transaction” shall have the meaning set forth in Section 7(d).
 
“GAAP” means United States generally accepted accounting principles.
 
“Holder” shall have the meaning given such term in Section 2.
 
“Liquidation” shall have the meaning set forth in Section 5.
 
“New York Courts” shall have the meaning set forth in Section 8(d).
 
“Notice of Conversion” shall have the meaning set forth in Section 6(a).
 
 
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“Original Issue Date” means the date of the first issuance of any shares of the
Preferred Stock regardless of the number of transfers of any particular shares
of Preferred Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Preferred Stock” shall have the meaning set forth in Section 2.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Share Delivery Date” shall have the meaning set forth in Section 6(c).
 
“Stated Value” shall have the meaning set forth in Section 2, as the same may be
increased pursuant to Section 3.
 
“Successor Entity” shall have the meaning set forth in Section 7(d).
 
“Trading Day” means a day on which the principal Trading Market is open for
business.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market or the New York Stock Exchange (or any successors to any of the
foregoing).
 
“Transfer Agent” means Issuer Direct Corporation, the current transfer agent of
the Corporation with a mailing address of [●] and a facsimile number of [●], and
any successor transfer agent of the Corporation.
 
“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Holders of a majority in
interest of the Preferred Stock then outstanding and reasonably acceptable to
the Corporation, the fees and expenses of which shall be paid by the
Corporation.
 
 
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Section 2. Designation, Amount and Par Value. The series of preferred stock
shall be designated as Series E Convertible Preferred Stock (the “Preferred
Stock”) and the number of shares so designated shall be up to [●] (which shall
not be subject to increase without the written consent of all of the holders of
the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each
share of Preferred Stock shall have a par value of $0.0001 per share and a
stated value equal to $0.88, subject to increase set forth in Section 3 below
(the “Stated Value”). The Preferred Stock will initially be issued in book-entry
form. As between the Corporation and a beneficial owner of Preferred Stock, such
beneficial owner of Preferred Stock shall have all of the rights and remedies of
a Holder hereunder.
  
Section 3. Dividends. Except for stock dividends or distributions for which
adjustments are to be made pursuant to Section 7, Holders shall be entitled to
receive, and the Corporation shall pay, dividends on shares of Preferred Stock
equal (on an as-if-converted-to-Common-Stock basis, disregarding for such
purpose any conversion limitations hereunder) to and in the same form as
dividends actually paid on shares of the Common Stock when, as and if such
dividends are paid on shares of the Common Stock. No other dividends shall be
paid on shares of Preferred Stock. The Corporation shall not pay any dividends
on the Common Stock unless the Corporation simultaneously complies with this
provision.
 
Section 4. Voting Rights. Except as otherwise provided herein or as otherwise
required by law, the Preferred Stock shall have no voting rights. However, as
long as any shares of Preferred Stock are outstanding, the Corporation shall
not, without the affirmative vote of the Holders of a majority of the then
outstanding shares of the Preferred Stock, (a) alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, (b) amend its certificate of incorporation or
other charter documents in any manner that adversely affects any rights of the
Holders, (c) increase the number of authorized shares of Preferred Stock, or (d)
enter into any agreement with respect to any of the foregoing.
 
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders
shall be entitled to receive out of the assets, whether capital or surplus, of
the Corporation the same amount that a holder of Common Stock would receive if
the Preferred Stock were fully converted (disregarding for such purposes any
conversion limitations hereunder) to Common Stock which amounts shall be paid
pari passu with all holders of Common Stock. The Corporation shall mail written
notice of any such Liquidation, not less than 45 days prior to the payment date
stated therein, to each Holder.
 
 
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Section 6. Conversion.
 
a) Conversions at Option of Holder. Each share of Preferred Stock shall be
convertible, at any time and from time to time from and after the Original Issue
Date at the option of the Holder thereof, into that number of shares of Common
Stock (subject to the limitations set forth in Section 6(d)) determined by
dividing the Stated Value of such share of Preferred Stock by the Conversion
Price. Holders shall effect conversions by providing the Corporation with the
form of conversion notice attached hereto as Annex A (a “Notice of Conversion”).
Each Notice of Conversion shall specify the number of shares of Preferred Stock
to be converted, the number of shares of Preferred Stock owned prior to the
conversion at issue, the number of shares of Preferred Stock owned subsequent to
the conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by
facsimile or e-mail such Notice of Conversion to the Corporation (such date, the
“Conversion Date”). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
to the Corporation is deemed delivered hereunder. No ink-original Notice of
Conversion shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Conversion form be required. The
calculations and entries set forth in the Notice of Conversion shall control in
the absence of manifest or mathematical error. To effect conversions of shares
of Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the Corporation
unless all of the shares of Preferred Stock represented thereby are so
converted, in which case such Holder shall deliver the certificate representing
such shares of Preferred Stock promptly following the Conversion Date at issue.
Shares of Preferred Stock converted into Common Stock or redeemed in accordance
with the terms hereof shall be canceled and shall not be reissued.
 
b) Conversion Price. The conversion price for the Preferred Stock shall equal
$0.88, subject to adjustment herein (the “Conversion Price”).
 
c) Mechanics of Conversion
 
i. Delivery of Conversion Shares Upon Conversion. Not later than the earlier of
(i) two (2) Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period (as defined below) after each Conversion Date (the
“Share Delivery Date”), the Corporation shall deliver, or cause to be delivered,
to the converting Holder (A) the number of Conversion Shares being acquired upon
the conversion of the Preferred Stock, which Conversion Shares, if registered
with the Commission, shall be free of restrictive legends and trading
restrictions, and (B) a bank check in the amount of accrued and unpaid
dividends, if any. The Corporation shall use its best efforts to deliver the
Conversion Shares required to be delivered by the Corporation under this Section
6 electronically through the Depository Trust Company or another established
clearing corporation performing similar functions. As used herein, “Standard
Settlement Period” means the standard settlement period, expressed in a number
of Trading Days, on the Corporation’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of the Notice of Conversion.
Notwithstanding the foregoing, with respect to any Notice(s) of Conversion
delivered by 12:00 p.m. (New York City time) on the Original Issue Date, the
Corporation agrees to deliver the Conversion Shares subject to such notice(s) by
4:00 p.m. (New York City time) on the Original Issue Date, and the Original
Issue Date being deemed the “Share Delivery Date” with respect to any such
Notice(s) of Conversion.
 
 
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ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of
Conversion, such Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Corporation at any time on or before its receipt
of such Conversion Shares, to rescind such Conversion, in which event the
Corporation shall promptly return to the Holder any original Preferred Stock
certificate delivered to the Corporation and the Holder shall promptly return to
the Corporation the Conversion Shares issued to such Holder pursuant to the
rescinded Notice of Conversion.
 
iii. Obligation Absolute; Partial Liquidated Damages. The Corporation’s
obligation to issue and deliver the Conversion Shares upon conversion of
Preferred Stock in accordance with the terms hereof is absolute and
unconditional, irrespective of any action or inaction by a Holder to enforce the
same, any waiver or consent with respect to any provision hereof, the recovery
of any judgment against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by such Holder or any other Person of any obligation to the
Corporation or any violation or alleged violation of law by such Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Corporation to such Holder in connection with the
issuance of such Conversion Shares; provided, however, that such delivery shall
not operate as a waiver by the Corporation of any such action that the
Corporation may have against such Holder. In the event a Holder shall elect to
convert any or all of the Stated Value of its Preferred Stock, the Corporation
may not refuse conversion based on any claim that such Holder or anyone
associated or affiliated with such Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and/or enjoining conversion of all or part of the
Preferred Stock of such Holder shall have been sought and obtained, and the
Corporation posts a surety bond for the benefit of such Holder in the amount of
150% of the Stated Value of Preferred Stock which is subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation
of the underlying dispute and the proceeds of which shall be payable to such
Holder to the extent it obtains judgment. In the absence of such injunction, the
Corporation shall issue Conversion Shares and, if applicable, cash, upon a
properly noticed conversion. If the Corporation fails to deliver to a Holder
such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date
applicable to such conversion, the Corporation shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, for each $5,000 of Stated
Value of Preferred Stock being converted, $50 per Trading Day (increasing to
$100 per Trading Day on the third Trading Day and increasing to $200 per Trading
Day on the sixth Trading Day after such damages begin to accrue) for each
Trading Day after the Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion. Nothing herein shall limit a
Holder’s right to pursue actual damages for the Corporation’s failure to deliver
Conversion Shares within the period specified herein and such Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit a Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
 
 
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iv. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon
Conversion. In addition to any other rights available to the Holder, if the
Corporation fails for any reason to deliver to a Holder the applicable
Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if
after such Share Delivery Date such Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Corporation shall (A) pay in cash to such Holder (in addition to any
other remedies available to or elected by such Holder) the amount, if any, by
which (x) such Holder’s total purchase price (including any brokerage
commissions) for the Common Stock so purchased exceeds (y) the product of (1)
the aggregate number of shares of Common Stock that such Holder was entitled to
receive from the conversion at issue multiplied by (2) the actual sale price at
which the sell order giving rise to such purchase obligation was executed
(including any brokerage commissions) and (B) at the option of such Holder,
either reissue (if surrendered) the shares of Preferred Stock equal to the
number of shares of Preferred Stock submitted for conversion (in which case,
such conversion shall be deemed rescinded) or deliver to such Holder the number
of shares of Common Stock that would have been issued if the Corporation had
timely complied with its delivery requirements under Section 6(c)(i). For
example, if a Holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted conversion of
shares of Preferred Stock with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Corporation shall be required to pay such Holder $1,000.
The Holder shall provide the Corporation written notice indicating the amounts
payable to such Holder in respect of the Buy-In and, upon request of the
Corporation, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Corporation’s failure to timely deliver
the Conversion Shares upon conversion of the shares of Preferred Stock as
required pursuant to the terms hereof.
 
v. Reservation of Shares Issuable Upon Conversion. The Corporation covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Preferred Stock as herein provided, free from preemptive rights or any
other actual contingent purchase rights of Persons other than the Holder (and
the other holders of the Preferred Stock), not less than such aggregate number
of shares of the Common Stock as shall be issuable (taking into account the
adjustments and restrictions of Section 7) upon the conversion of the then
outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.
 
 
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vi. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of the Preferred Stock. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Corporation shall round up to the next whole share.
Notwithstanding anything to the contrary contained herein, but consistent with
the provisions of this subsection with respect to fractional Conversion Shares,
nothing shall prevent any Holder from converting fractional shares of Preferred
Stock.
 
vii. Transfer Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Preferred Stock shall be made without charge to any Holder
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such Conversion Shares, provided that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares upon
conversion in a name other than that of the Holders of such shares of Preferred
Stock and the Corporation shall not be required to issue or deliver such
Conversion Shares unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
The Corporation shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion and all fees to the Depository Trust
Company (or another established clearing corporation performing similar
functions) required for same-day electronic delivery of the Conversion Shares.
 
 
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d) Beneficial Ownership Limitation. The Corporation shall not effect any
conversion of the Preferred Stock, and a Holder shall not have the right to
convert any portion of the Preferred Stock, to the extent that, after giving
effect to the conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any Persons acting as a
group together with such Holder or any of such Holder’s Affiliates (such
Persons, “Attribution Parties”)) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates and Attribution Parties shall include the number
of shares of Common Stock issuable upon conversion of the Preferred Stock with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially owned by
such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Corporation subject to a limitation on conversion or exercise analogous to
the limitation contained herein (including, without limitation, the Preferred
Stock) beneficially owned by such Holder or any of its Affiliates or Attribution
Parties.  Except as set forth in the preceding sentence, for purposes of this
Section 6(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this Section 6(d)
applies, the determination of whether the Preferred Stock is convertible (in
relation to other securities owned by such Holder together with any Affiliates
and Attribution Parties) and of how many shares of Preferred Stock are
convertible shall be in the sole discretion of such Holder, and the submission
of a Notice of Conversion shall be deemed to be such Holder’s determination of
whether the shares of Preferred Stock may be converted (in relation to other
securities owned by such Holder together with any Affiliates and Attribution
Parties) and how many shares of the Preferred Stock are convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, each Holder will be deemed to represent to the Corporation
each time it delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and the Corporation
shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 6(d), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as
stated in the most recent of the following: (i) the Corporation’s most recent
periodic or annual report filed with the Commission, as the case may be, (ii) a
more recent public announcement by the Corporation or (iii) a more recent
written notice by the Corporation or the Transfer Agent setting forth the number
of shares of Common Stock outstanding.  Upon the written or oral request (which
may be via email) of a Holder, the Corporation shall within one Trading Day
confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Corporation, including the Preferred Stock, by such Holder or
its Affiliates or Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 40% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock
issuable upon conversion of Preferred Stock held by the applicable Holder. A
Holder, upon notice to the Corporation, may decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its Preferred Stock.
The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 6(d) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of Preferred Stock.
 
 
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Section 7. Certain Adjustments.
 
a) Stock Dividends and Stock Splits. If the Corporation, at any time while this
Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any other Common Stock Equivalents (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Corporation
upon conversion of, or payment of a dividend on, this Preferred Stock), (ii)
subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Corporation, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Corporation) outstanding immediately before such event,
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this
Section 7(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
 
b) Subsequent Rights Offerings. In addition to any adjustments pursuant to
Section 7(a) above, if at any time the Corporation grants, issues or sells any
Common Stock Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of such Holder’s Preferred
Stock (without regard to any limitations on exercise hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights (provided, however, to the extent that the Holder’s right to
participate in any such Purchase Right would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
 
 
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c) Pro Rata Distributions. During such time as this Preferred Stock is
outstanding, if the Corporation declares or makes any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
“Distribution”), at any time after the issuance of this Preferred Stock, then,
in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein
if the Holder had held the number of shares of Common Stock acquirable upon
complete conversion of this Preferred Stock (without regard to any limitations
on conversion hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distribution would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be entitled to
participate in such Distribution to such extent (or in the beneficial ownership
of any shares of Common Stock as a result of such Distribution to such extent)
and the portion of such Distribution shall be held in abeyance for the benefit
of the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Beneficial Ownership Limitation).
 
 
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d) Fundamental Transaction. If, at any time while this Preferred Stock is
outstanding, (i) the Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation with or into
another Person, (ii) the Corporation, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, or (v) the Corporation,
directly or indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent conversion of this Preferred Stock, the
Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction (without regard to any limitation in Section 6(d)
on the conversion of this Preferred Stock), the number of shares of Common Stock
of the successor or acquiring corporation or of the Corporation, if it is the
surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a
holder of the number of shares of Common Stock for which this Preferred Stock is
convertible immediately prior to such Fundamental Transaction (without regard to
any limitation in Section 6(d) on the conversion of this Preferred Stock). For
purposes of any such conversion, the determination of the Conversion Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Corporation shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Preferred Stock following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Corporation or surviving entity in such Fundamental Transaction
shall file a new Certificate of Designation with the same terms and conditions
and issue to the Holders new preferred stock consistent with the foregoing
provisions and evidencing the Holders’ right to convert such preferred stock
into Alternate Consideration. The Corporation shall cause any successor entity
in a Fundamental Transaction in which the Corporation is not the survivor (the
“Successor Entity”) to assume in writing all of the obligations of the
Corporation under this Certificate of Designation in accordance with the
provisions of this Section 7(d) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at
the option of the Holder, deliver to the Holder in exchange for this Preferred
Stock a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Preferred Stock which is
convertible for a corresponding number of shares of capital stock of such
Successor Entity (or its parent entity) equivalent to the shares of Common Stock
acquirable and receivable upon conversion of this Preferred Stock (without
regard to any limitations on the conversion of this Preferred Stock) prior to
such Fundamental Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock and, such
number of shares of capital stock and such conversion price being for the
purpose of protecting the economic value of this Preferred Stock immediately
prior to the consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon the occurrence
of any such Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Certificate of Designation referring to the
“Corporation” shall refer instead to the Successor Entity), and may exercise
every right and power of the Corporation and shall assume all of the obligations
of the Corporation under this Certificate of Designation with the same effect as
if such Successor Entity had been named as the Corporation herein.
 
 
12

 
 
e) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 7, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Corporation) issued and
outstanding.
 
f)  Notice to the Holders.
 
i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted
pursuant to any provision of this Section 7, the Corporation shall promptly
deliver to each Holder by facsimile or email a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
 
ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Corporation is a party, any sale or transfer of all or substantially
all of the assets of the Corporation, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (E) the
Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then, in each case,
the Corporation shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Preferred Stock, and shall cause to be
delivered by facsimile or email to each Holder at its last facsimile number or
email address as it shall appear upon the stock books of the Corporation, at
least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public
information regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. The Holder shall remain entitled to convert the
Conversion Amount of this Preferred Stock (or any part hereof) during the 20-day
period commencing on the date of such notice through the effective date of the
event triggering such notice except as may otherwise be expressly set forth
herein.
 
 
13

 
 
Section 8. Miscellaneous.
 
a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile or
e-mail, or sent by a nationally recognized overnight courier service, addressed
to the Corporation, at the address set forth above Attention: Controller,
facsimile number (720) 437-6527, e-mail address ecreason@aytubio.com, or such
other facsimile number, e-mail address or address as the Corporation may specify
for such purposes by notice to the Holders delivered in accordance with this
Section 8. Any and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and delivered
personally, by facsimile, e-mail, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number, e-mail address
or address of such Holder appearing on the books of the Corporation. Any notice
or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number or e-mail at
the e-mail address set forth in this Section 8 prior to 5:30 p.m. (New York City
time) on any date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
or e-mail at the e-mail address set forth in this Section on a day that is not a
Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day,
(iii) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
 
b) Absolute Obligation. Except as expressly provided herein, no provision of
this Certificate of Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated damages, and
accrued dividends, as applicable, on the shares of Preferred Stock at the time,
place, and rate, and in the coin or currency, herein prescribed.
 
c) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock
certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated certificate, or in lieu of or in substitution for a lost, stolen or
destroyed certificate, a new certificate for the shares of Preferred Stock so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the ownership hereof
reasonably satisfactory to the Corporation.
 
 
14

 
 
d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware without regard to the principles of conflict of laws
thereof. All legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by this Certificate of Designation
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). The Corporation and each Holder hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. The Corporation and each
Holder hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. The Corporation and each Holder hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Certificate of Designation or the transactions contemplated
hereby. If the Corporation or any Holder shall commence an action or proceeding
to enforce any provisions of this Certificate of Designation, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.
 
e) Waiver. Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a waiver by any
other Holders. The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more
occasions shall not be considered a waiver or deprive that party (or any other
Holder) of the right thereafter to insist upon strict adherence to that term or
any other term of this Certificate of Designation on any other occasion. Any
waiver by the Corporation or a Holder must be in writing.
 
f) Severability. If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any Person or
circumstance, it shall nevertheless remain applicable to all other Persons and
circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law.
 
 
15

 
 
g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
 
h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to
limit or affect any of the provisions hereof.
 
i) Status of Converted or Redeemed Preferred Stock. If any shares of Preferred
Stock shall be converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of preferred stock and
shall no longer be designated as Series E Convertible Preferred Stock.
 
*********************
 
RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and
the secretary or any assistant secretary, of the Corporation be and they hereby
are authorized and directed to prepare and file this Certificate of Designation
of Preferences, Rights and Limitations in accordance with the foregoing
resolution and the provisions of Delaware law.
 
 
16

 
 
IN WITNESS WHEREOF, the undersigned have executed this Certificate this [●] day
of [●], 2019.
 
 
 
 
 
Name:
 
Name:
Title:
 
Title:

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
ANNEX A
 
NOTICE OF CONVERSION
 
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED
STOCK)
 
The undersigned hereby elects to convert the number of shares of Series E
Convertible Preferred Stock indicated below into shares of common stock, par
value $0.0001 per share (the “Common Stock”), of Aytu BioScience, Inc., a
Delaware corporation (the “Corporation”), according to the conditions hereof, as
of the date written below. If shares of Common Stock are to be issued in the
name of a Person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
Holders for any conversion, except for any such transfer taxes.
 
Conversion calculations:
 
 
Date to Effect Conversion: _____________________________________________
 
 
 
Number of shares of Preferred Stock owned prior to Conversion: _______________
 
 
 
Number of shares of Preferred Stock to be Converted: ________________________
 
 
 
Stated Value of shares of Preferred Stock to be Converted: ____________________
 
 
 
Number of shares of Common Stock to be Issued: ___________________________
 
 
 
Applicable Conversion Price:____________________________________________
 
 
 
Number of shares of Preferred Stock subsequent to Conversion: ________________
 
 
 
Address for Delivery: ______________________
 
or
 
DWAC Instructions:
 
Broker no: _________
 
Account no: ___________

 
 
[HOLDER]
 
 
 
By:
                            
 
Name:
 
 
Title:
 

 
 
A-1