Exhibit 4.2


     


OCULUS INNOVATIVE SCIENCES, INC.


 


CERTIFICATE OF DESIGNATION
OF PREFERENCES,


RIGHTS AND LIMITATIONS


OF


SERIES A 0% CONVERTIBLE
PREFERRED STOCK


 


PURSUANT TO SECTION 151
OF THE


DELAWARE GENERAL CORPORATION
LAW


  




The undersigned, Hojabr
Alimi and Jim Schultz, do hereby certify that:


 


1.    They
are the President and Secretary, respectively, of Oculus Innovative Sciences, Inc., a Delaware corporation (the “Corporation”).


 


2.    The
Corporation is authorized to issue 5,000,000 shares of preferred stock, of which no shares have been issued.


 


3.    The
following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):


 


WHEREAS, the restated
certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting
of 5,000,000 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, except as otherwise set forth in the Securities Purchase
Agreement, dated April 22, 2012 (the “Purchase Agreement”), up to 1,000 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:


    



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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(b).


  


“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 6(d).


  


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.


 


“Buy-In”
shall have the meaning set forth in Section 6(c)(iv).


 


“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise)
of in excess of 40% of the voting securities of the Corporation (other than by means of conversion or exercise of Preferred Stock
and the Securities issued together with the Preferred Stock), (b) the Corporation merges into or consolidates with any other Person,
or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of
the Corporation immediately prior to such transaction own less than 60% of the aggregate voting power of the Corporation or the
successor entity of such transaction, (c) the Corporation sells or transfers all or substantially all of its assets to another
Person and the stockholders of the Corporation immediately prior to such transaction own less than 60% of the aggregate voting
power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within an 18 month period of
more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members
of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors
on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who
are members on the Original Issue Date), or (e) the execution by the Corporation of an agreement to which the Corporation  is
a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.


  



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“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the
Corporation’s obligations to deliver the Securities have been satisfied or waived.


 


“Commission”
means the United States Securities and Exchange Commission.


 


“Common
Stock” means the Corporation’s common stock, par value $0.0001 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.


   


“Escrow
Agent” means Signature Bank, a New York State chartered bank and having an office at 261 Madison Avenue, New York, New
York 10016.


 


“Escrow
Agreement” means the escrow agreement entered into prior to the date of the Purchase Agreement, by and among the Corporation,
the placement agent and the Escrow Agent pursuant to which the Holders shall deposit Subscription Amounts with the Escrow Agent
to be applied to the transactions contemplated hereunder.


 


“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(b).


 


“GAAP”
means United States generally accepted accounting principles.


 


“Holder”
shall have the meaning given such term in Section 2.


  



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“Junior
Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities
which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.


 


“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


 


“Liquidation”
shall have the meaning set forth in Section 5.


 


“New
York Courts” shall have the meaning set forth in Section 8(d).


 


“Notice
of Conversion” shall have the meaning set forth in Section 6(a).


 


“Original
Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred
Stock.


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


   


“Preferred
Stock” shall have the meaning set forth in Section 2.


 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the
original Holders, as amended, modified or supplemented from time to time in accordance with its terms.


 


“Securities”
means the Preferred Stock, the Warrants, the Warrant Shares and the Conversion Shares.


 


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


 


“Share
Delivery Date” shall have the meaning set forth in Section 6(c).


 


“Stated
Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.


 


“Subscription
Amount” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock purchased pursuant to
the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to
the heading “Subscription Amount,” in United States dollars and in immediately available funds.


  



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“Subsidiary”
means any subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase Agreement and shall, where applicable,
also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.


 


“Successor
Entity” shall have the meaning set forth in Section 7(b).


 


“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 AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).


 


“Transaction
Documents” means this Certificate of Designation, the Purchase Agreement, the Warrants, the Escrow Agreement, all exhibits
and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated
pursuant to the Purchase Agreement.


 


“Transfer
Agent” means Computershare Shareowner Services LLC, the current transfer agent of the Corporation, with a mailing address
of 480 Washington Blvd., Jersey City, NJ 07310, and an email address of shrrelations@bnymellon.com, 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 principal Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on
a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board
is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices
for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported,
or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected
in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation,
the fees and expenses of which shall be paid by the Corporation.


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a)
of the Purchase Agreement, which Warrants shall be exercisable 6 months following the Closing Date and have a term of exercise
thereafter equal to 2 years, in the form of Exhibit C attached to the Purchase Agreement.


 


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.


   



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Section 2.   Designation,
Amount and Par Value. The series of preferred stock shall be designated as its Series A 0% Convertible Preferred Stock (the
“Preferred Stock”) and the number of shares so designated shall be up to 1,000 (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 $1,000, subject to increase set forth in Section 3 below (the “Stated Value”).


   


Section 3.   Dividends.


 


a)   Dividends.  Holders
shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common
Stock when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock.  Other
than as set forth in the previous sentence, no other dividends shall be paid on shares of Preferred Stock; and the Corporation
shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock unless it simultaneously
complies with the previous sentence.


 


b)   Other
Securities. So long as any Preferred Stock shall remain outstanding, the Corporation shall not redeem, purchase or otherwise
acquire directly or indirectly more than a de minimis amount of any Junior Securities other than as to repurchases of Common Stock
or Common Stock Equivalents from departing officers or directors, and provided that, while any of the Preferred Stock remains outstanding,
such repurchases shall not exceed an aggregate of $100,000 in any fiscal year from all officers and directors or otherwise) of
any Junior Securities or shares pari passu with the Preferred Stock.


 


Section 4.   Voting
Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights.
However, until the date on which the Holders hold less than 10% of the shares of Preferred Stock issued on the Closing Date, 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) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a
Liquidation (as defined in Section 5) senior to, or otherwise pari passu with, the Preferred Stock, (c) amend its
certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase
the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.


      



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Section 5.   Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”),
the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon
under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full.  A Fundamental Transaction
or Change of Control Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation,
not less than 45 days prior to the payment date stated therein, to each Holder.


  


Section 6.   Conversion.


 


a)   Conversions
at Option of Holder. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the
Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations
set forth in Section 6(d)) 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”).  Notices of Conversion shall be effective upon delivery by the Holder of a duly executed copy
of the Notice of Exercise Form annexed hereto sent by facsimile or as a scanned e-mail attachment to the e-mail address provided
by the Corporation to the Holder and no notarization, medallion stamp guarantee, guarantee or other requirement shall be required
of the Holder to effect conversions of the Preferred Stock hereunder.  Each Notice of Conversion shall specify the number
of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the
number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be
effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the
Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion,
the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. 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.


   



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b)   Conversion
Price.  The conversion price for the Preferred Stock shall equal $0.90, subject to adjustment herein (the
“Conversion Price”).


 


c)   Mechanics
of Conversion


 


i.   Delivery
of Conversion Shares Upon Conversion. Not later than one (1) Trading Day after each Conversion Date (the “Share Delivery
Date”), the Corporation shall use best efforts to deliver, or cause to be delivered, to the converting Holder the number
of Conversion Shares being acquired upon the conversion of the Preferred Stock, which Conversion Shares shall be free of restrictive
legends and trading restrictions and shall be delivered by the Corporation under this Section 6 electronically through the Depository
Trust Corporation or another established clearing corporation performing similar functions.


 


ii.   Failure
to Deliver Conversion Shares.  If, in the case of any Notice of Conversion, such Conversion Shares are not delivered
to or as directed by the applicable Holder by the second (2nd) Trading Day following the Share Delivery Date, the Holder shall
be entitled to elect by written notice to the Corporation, at any time on or before its receipt of such Conversion Shares, to rescind
such Conversion, in which event the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered
to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant
to the rescinded Conversion Notice.


   


iii.   Obligation
Absolute; Partial Liquidated Damages.  The Corporation’s obligation to issue and deliver the Conversion Shares
upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation
of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder.  In
the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may not refuse
conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation
of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining
conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts
a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject to the
injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the
proceeds of which shall be payable to such Holder to the extent it obtains judgment.  In the absence of such injunction,
the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation
fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the fourth (4th)
Trading Day after the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day
(increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after
such damages begin to accrue) for each Trading Day after such fourth 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 second Trading Day
following Share Delivery Date pursuant to Section 6(c)(i), and if after such second Trading Day following the 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 Conversion
Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.


  


v.   Reservation
of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock, free from
preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the
Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions
set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion
of the then outstanding shares of Preferred Stock and payment of dividends hereunder.  The Corporation covenants that
all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.


  


vi.   Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock.   As
to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall
at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole share.


  



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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.


 


d)   Beneficial
Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall
not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set
forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting
as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Preferred
Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are
issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or
any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the
Corporation  subject to a limitation on conversion or exercise analogous to the limitation contained herein (including,
without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  To the extent that the
limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation
to other securities owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible
shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder
together with any Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each
time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph
and the Corporation shall have no obligation to verify or confirm the accuracy of such determination.  In
addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining
the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated
in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission,
as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation
or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of
a Holder, the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect
to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to
the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder.  A
Holder, upon not less than 61 days’ prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock upon conversion of this Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue
to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered
to the Corporation and shall only apply to such Holder and no other Holder.  The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained
herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.


  



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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)   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 and the
other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 7(b) pursuant
to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable
delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred Stock, deliver to the Holder
in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of capital stock of such
Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this
Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to such Fundamental Transaction,
and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account
the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital
stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value
of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory
in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate
of Designation and the other Transaction Documents referring to the “Corporation” shall refer instead to the Successor
Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under
this Certificate of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Corporation herein.


   



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c)   Subsequent
Rights Offerings.  In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder of will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s
Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase
Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right
to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).


  


d)   Pro
Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by
way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Preferred Stock, then, in each such case, the Holder shall be entitled
to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the
number of shares of Common Stock acquirable upon complete Conversion of this Preferred Stock (without regard to any limitations
on Conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a
record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance
for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).


  


e)   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 a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.


      



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


 


Section 8.   Miscellaneous.


 


a)   Notices.  Any
and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Corporation, at 1129 N. McDowell Blvd., Petaluma, California 94954, Attention: Chief Financial
Officer, facsimile number (707) 283-0551, or such other facsimile number or address as the Corporation may specify for such purposes
by notice to the Holders delivered in accordance with this Section 11.  Any and all notices or other communications or
deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing
on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal
place of business of such Holder, as set forth in the Purchase Agreement.  Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date,
(ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be given.


   



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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 interest, as applicable,
on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.


 


c)   Lost
or Mutilated Preferred Stock Certificate.  If a Holder’s Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of
such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.


 


d)   Governing
Law.  All questions concerning the construction, validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement
of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or
inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation
and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained
herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby.  If
any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.


   



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e)   Waiver.  Any
waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation
or a waiver by any other Holders.  The failure of the Corporation or a Holder to insist upon strict adherence to any
term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any
other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation
on any other occasion.  Any waiver by the Corporation or a Holder must be in writing.


 


f)   Severability.  If
any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation
shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable
to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder
violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal
the maximum rate of interest permitted under applicable law.


 


g)   Next
Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.


 


h)   Headings.  The
headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be
deemed to limit or affect any of the provisions hereof.


 


i)   Status
of Converted or Redeemed Preferred Stock.  Shares of Preferred Stock may only be issued pursuant to the Purchase
Agreement.  If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A 0% Convertible
Preferred Stock.


 


 


*********************


 



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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.


 




IN WITNESS WHEREOF,
the undersigned have executed this Certificate this 23rd day of April 2012.


 




	
        /s/ Hojabr Alimi                              

        Name: Hojabr Alimi

        Title:  President and Chief Executive Officer
	
        /s/ Jim Schultz                              

        Name:  Jim Schultz

        Title:  Secretary



 


 


 


  

  



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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 A 0% Convertible Preferred Stock indicated below into shares of common stock,
par value $0.0001 per share (the “Common Stock”), of Oculus Innovative Sciences, 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 and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the
Purchase Agreement. 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:



 


 






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