Certificate of Designation of Rights of Series J Preferred Shares
Of
Aqua Vie Beverage Corporation
Pursuant to Section 151 (g) of Title 8 of the General Corporate Law of the State
of Delaware and Article V of the Articles of Incorporation, the Directors here
by designate:
The voting powers, designations, preferences, rights and qualifications,
limitations and restrictions of:
"Series J Preferred Shares"
And there is authorized to be issued 1,000 shares thereof with the following
rights, terms and preferences:
1. Dividends.
Right to Preferential Dividends. Subject to the rights and preferences
of other classes or series of Preferred Shares, the Holders of the then
outstanding Series J Preferred Shares {except when there shall have been either
a notification of election for conversion by the Holders under Section 5(a),
hereunder, or the conditions shall have been fulfilled for a conversion by the
Company as provided in Section 5(b) hereunder, whether or not notification
thereof has been made by the Company, (unless the Company shall expressly give
notice it elects not to require such conversion)} shall be entitled to receive,
if, when, and as declared by the Board, out of any funds legally available
therefor, a non-cumulative preference of 10% on cash dividends up to $80.00
maximum total accumulated dividends per Series J Preferred Share held thereby.
These dividends shall be payable, when and as declared by the Board. Dividends
on the Series J Preferred Shares shall be non-cumulative, there shall be no
minimum dividends, and no rights shall accrue to the Holders of the Series J
Preferred Shares in the event that the Company shall fail to declare or pay
dividends on the Series J Preferred Shares, whether or not the earnings of the
Company in that previous fiscal year were sufficient to pay such dividends in
whole or in part. In the event that the number of outstanding Series J Preferred
Shares is adjusted by stock split, reverse split, or other corporate action, the
preference stated herein shall be adjusted accordingly. The balance of any such
dividends so declared shall be allocated as between Series J Preferred Shares
and Common Shares as if said Series J Preferred Shares had been converted to
Common Shares based on the Conversion Ratio (as adjusted) provided herein, and
as to any other classes or series of Preferred Shares in accordance with the
rights and preferences thereof.
2. Liquidation Rights of Series J Preferred Shares.
(a) Preference. Subject to the rights and preferences of other classes
or series of Preferred Shares in the event of any liquidation, dissolution, or
winding-up of the Company, whether voluntary or involuntary, {except when there
shall have been either a notification of election for conversion by the Holders
under Section 5(a), hereunder, or the conditions shall have been fulfilled for a
conversion by the Company as provided in Section 5(b) hereunder, whether or not
notification thereof has been made by the Company, (unless the Company shall
expressly give notice it elects not to require such conversion)} the Holders of
the Series J Preferred Shares then outstanding shall be entitled to be paid out
of the assets of the Company available for distribution to its shareholders,
whether such assets are capital, surplus, or earnings, before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of the Common Stock, an amount equal to $80.00 per Series J Preferred Share held
thereby plus an amount equal to all declared and unpaid dividends thereon, less
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accumulated total dividends paid thereto (but not less than zero). If upon any
liquidation, dissolution, or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed to the Holders of the Series J
Preferred Shares shall be insufficient to permit the payment to such
shareholders of the full preferential amount aforesaid, then all of the assets
of the Company to be distributed shall be distributed ratably to the Holders of
the Series J Preferred Shares, subject to any rights or preferences of any other
classes or series of Preferred Shares, on the basis of the number of shares of
Series J Preferred Shares so held.
(b) Payments to Common Stock. After the preferred payment of $80.00 per
Series J Preferred Share is made to Holders of the Series J Preferred Shares the
Holders of the Series J Preferred Shares shall be entitled to share with Common
Shares, based on the adjusted conversion ratio of Preferred Series J Shares to
Common Shares as if converted, and as to other Classes or Series of Preferred
Shares based on the conversion ratio of said Shares to Common as if converted or
as otherwise provided in the rights and designations thereof as may from time to
time be made by the Board of Directors, all remaining assets of the Company to
be distributed.
(c) Effect of Adjustments of Shares. In the event that the number of
outstanding Series J Preferred Shares is adjusted by stock split, reverse split,
or other corporate action, the preference stated herein shall be adjusted
accordingly.
3. Merger, Consolidation.
(a) Preference. Subject to the rights and preferences of other classes
or series of Preferred Shares in the event of any merger or share exchange of
the Company, or a sale or other disposition of all or substantially all of the
assets of the Company {except when there shall have been either a notification
of election for conversion by the Holders under Section 5(a), hereunder, or the
conditions shall have been fulfilled for a conversion by the Company as provided
in Section 5(b) hereunder, whether or not notification thereof has been made by
the Company, (unless the Company shall expressly give notice it elects not to
require such conversion)} the Holders of the Series J Preferred Shares then
outstanding shall be entitled to receive, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of the Common
Stock, for each share of such Series J Preferred Stock so held, in cash or in
securities (including, without limitation, debt securities) received from the
acquiring corporation, at the closing of any such transaction, an amount equal
to $80.00 per Series J Preferred Share, plus an amount equal to all declared and
unpaid dividends thereon, less total accumulated dividends paid thereto (but not
less than zero). In the event that the number of outstanding Series J Preferred
Shares is adjusted by stock split, reverse split, or other corporate action, the
preference stated herein shall be adjusted accordingly
(b) Remaining Proceeds. Subject to the rights and preferences of other
classes or series of Preferred Shares after the payment or distribution to the
Holders of the Series J Preferred Shares of the full preferential amount, the
Holders of the Series J Preferred Shares, Holders of other Series or Classes of
Preferred Shares according to the Rights and Designations thereof and Holders of
Common Stock then outstanding shall be entitled to receive ratably, with all
Series J Preferred Shares treated as if it had been converted into Common Stock
pursuant to Section 5 hereof, all remaining proceeds of the Company to be
distributed.
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(c) Valuation of securities received pursuant to a merger, share
exchange, sale of substantially all the assets or similar transaction. In the
event that a transaction occurs pursuant to which non-cash assets are received
and to which this Section applies, the assets received for the purposes of this
Section shall be valued as follows:
(I) If the assets received are securities that are listed on
NASDAQ or an exchange, the value shall be deemed to be the 3-day high average
closing price (or average between bid/ask if OTC) on such exchange or NASDAQ
over the 30-day period prior to the closing of the transaction by which the
securities are received.
(ii) If the assets received are of readily ascertainable
market value, then that value shall be used.
(iii) If the assets are unlisted securities or other assets
that do not have a readily ascertainable value, the Board of Directors in good
faith will value said assets.
(iv) The fact that assets exist which may require a valuation
process as described herein shall not delay closing the transaction by which the
assets are being received.
(d) Notice. With respect to any transaction, which involves a merger or
exchange of shares, or a sale of substantially all the assets not in the
ordinary course of business, the Series J shareholders shall receive not less
than ten days notice of the transaction and the terms and conditions thereof.
4. Voting Rights.
(a) Each Holder of Series J Preferred Shares shall be entitled to vote
on all matters including election of the Board of Directors and, except as
otherwise expressly provided herein, shall be entitled to a vote equal to them
number of votes that equal the number of Common Shares to which said Series J
Preferred Shares could be converted at any given time.
(b) Unless otherwise required by law, Series J Preferred shareholders
and Common shareholders shall vote together on all matters upon which
shareholders are permitted to vote and not as separate classes. In those cases
where Series J Preferred Shareholders are required by law to vote as a separate
class, the vote required by said class for approval of the proposed action shall
be a simple majority of the class.
(c) Voting rights shall be adjusted in the event of adjustments in the
Conversion Ratio, except that increases or reductions that apply equally to
Series J Preferred Shares and Common Shares shall not cause an adjustment to be
made.
5. Conversion.
The Company and the Holders of Series J Preferred Shares shall have the
following conversion rights:
(a) Right to Convert. Each share of Series J Preferred Shares shall be
convertible, if there shall be sufficient Common Shares authorized and issuable
therefore at the option of the Holder thereof, into fully paid and non
assessable shares of Common Stock at the Conversion Rate set forth In Section
5(c) hereunder (as adjusted). In the event that Series J Preferred Shares
subject thereto shall have been transferred, the time period for conversion
shall be measured from the date of issuance to the initial Holder thereof. This
right to convert shall be subject to the following terms and conditions:
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(i) The registered Holder (or his or her successors by transfer,
action of law or otherwise) (collectively, the "Holder") shall be immediately
eligible to exchange his or her preferred shares, in whole or part, immediately
or successively in common shares of the Company subject to any limitations
contained in this subsection (a);
(ii) Until December 31, 2003, the Holder may convert only to such
Common Shares, when added to any other Common Shares directly or beneficially
held by said person, such that said person would, in the aggregate directly or
beneficially hold at any point of time not more than 4.99% of the Common stock
of the Company, and is thus subject to a "Conversion Cap". "Beneficial
Ownership" for the purpose of this subsection shall be interpreted to be those
Common Shares that may be acquired in any manner by a Holder because of rights
under these Series J Preferred Shares or any other rights or shares held thereby
from time to time at any particular time, in exchange therefore with 60 days by
the terms of any right therefore, and as more particularly defined by Regulation
240.13d-3, issued under the Securities Exchange Act of 1934, it being the
intention hereof that this limitation hereof on conversion until December 31,
2003 (and as further qualified by subsection (iii) hereunder) shall be
interpreted as a "Conversion Cap" consistent with the case, Levy v. Southbrook
International Investments, Ltd. 263 F. 3d. 10 (2001, USCA, 2d Cir); it being the
express intention hereof, that the Holder may make successive conversions
hereunder of all or part of his or her Series J Preferred Shares to Common
Shares so long as at any point of time this Conversion Cap of 4.99% is followed.
(iii) The limitation contained in subsection (ii) above shall not
apply in such cases as may arise prior to December 31, 2003, where there would
be an exchange of securities or similar corporate event such as a sale, merger
or consolidation, or an offer to purchase in conjunction with such a transaction
or a similar event; after December 31, 2003, in any event the Conversion Cap
shall not be applicable unless at least 61 days prior thereto the Holder shall
be a writing directed to the Company agree to an extension of said Conversion
Cap, in which case the date the conversion Cap shall extend to shall be such
agreed date, subject to the exception to the Conversion Cap provided in this
subsection.
(iv) The right to convert to common shares shall be subject to the
conversion rate set forth in subsection (c) hereunder, and any other adjustment
provision that may be contained in this Section 5.
(b) Automatic Conversion at Election of Company.
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(i) Each share of Series J Preferred Shares shall automatically at
the election of the Company be converted into shares of Common Stock based on
the then effective Conversion Rate set forth in Section 5(c) hereunder (as
adjusted) if any one of the following shall occur: (A) The Holders of 60% of the
Series J Preferred Shares outstanding at a given time (it being the intention
not to include successive conversions that may in the aggregate amount to more
than 60% of said shares) have given notice of Election to convert as provided
herein in Section 6; (B) The Board of Directors of the Company shall have
approved a plan of reorganization, exchange, merger or consolidation to which
the Company is a party, or an acquisition of the Company; (C) Immediately upon
the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, with
respect to the Common Stock of the Company (including shares registered by
selling Series J Preferred shareholders) where the amount of such securities
sold is $10,000,000. or more; (D) When the Company shall have a net worth of
$10,000,000 or more; (E) After the Common Shares shall have been listed on
NASDAQ for a period of not less than three months.
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(ii) Upon the occurrence of any of the events specified in
paragraph 5(b)(i) and the election (if applicable) being so made by the Company,
the outstanding shares of Series J Preferred Shares shall be converted
automatically without any further action by the Holders of such Series J
Preferred Shares and whether or not the certificates representing such Series J
Preferred Shares are surrendered to the Company or its transfer agent; provided
however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon the conversion unless the
certificates evidencing such Series J Preferred Shares are either delivered to
the Company or its transfer agent, or the Holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. The conversion
shall be deemed to have occurred immediately prior to the business day on which
the Series J certificates are to be surrendered, and the person entitled to
receive the Common shares upon such a conversion shall be deemed a Common
Shareholder of record as of that date.
(c) Conversion Rate, adjustments. Except as provided elsewhere herein
for adjustment of conversion based on share price, recapitalization or other
factors, the Conversion Rate is 10,000 Common Shares for One Series J Preferred
Share. The Conversion Rate shall be subject to adjustment from time to time as
provided below; no adjustment shall apply after a Series J Preferred Share has
been converted.
(d) Mechanics of Conversion. Each Holder of Series J Preferred Shares
who desires to convert the same into shares of Common Stock shall surrender the
certificate, duly endorsed, at the office of the Company or of any transfer
agent for the Series J Preferred Shares or Common Stock, and shall give written
notice to the Company at such office that such Holder elects to convert the same
and shall state therein the number of shares of Series J Preferred Shares being
converted. Thereupon the Company shall promptly issue and deliver to such Holder
a certificate or certificates for the number of shares of Common Stock to which
such Holder is entitled. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
certificate representing the Series J Preferred Shares to be converted, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record Holder of such shares
of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the Company at any
time or from time to time effects a subdivision of the outstanding Common Stock,
the Conversion Rate then in effect immediately before that subdivision shall be
proportionately increased, and conversely, if the Company at any time or from
time to time combines the outstanding shares of Common Stock into a smaller
number of shares, the Conversion Rate then in effect immediately before the
combination shall be proportionately decreased. Any adjustment under this
subsection (e) shall become effective at the close of business on the date the
subdivision or combination becomes effective. Subdivisions or combinations of
Series J Preferred Shares shall be similarly considered to compute the final
adjustment to the Conversion Rate to reflect stock splits and combinations.
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(f) Adjustments for Reclassification, Exchange and Substitution. In the
event that at any time or from time to time, the Common Stock issuable upon the
conversion of the Series J Preferred Shares is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger, exchange of
shares, or sale of assets, provided for elsewhere in this Section), then and in
any such event each Holder of Series J Preferred Shares shall have the right
thereafter to convert such stock into the kind and the maximum amount of stock
and other securities and property receivable upon such recapitalization,
reclassification or other change, by Holders of shares of Common Stock into
which such shares of Series J Preferred Shares could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustment as provided herein.
(g) Reorganizations, Mergers, Consolidations or Sales of Assets. If at
any time or from time to time there is a capital reorganization of the Common
Stock (other than a recapitalization, subdivision, combination, reclassification
or exchange of shares provided for elsewhere in this Section) or a merger or
exchange of shares of the Company with or into another corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person, then as a part of such reorganization, merger, consolidation or sale,
provision shall be made so that the Holders of the Series J Preferred Shares
shall have the right thereafter to convert such stock into the number of shares
of stock or other securities or property to which a Holder of the number of
shares of Common Stock deliverable upon conversion would have been entitled on
such capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section with respect to the right of the Holders of the Series J Preferred
Shares after the reorganization, merger, consolidation or sale to the end that
the provisions of this Section (including adjustment of the Conversion Rate then
in effect and the number of shares receivable upon conversion of the Series J
Preferred Shares) shall be applicable after that event and be as nearly
equivalent as may be practicable.
(h) Fractional Shares. Series J Preferred Shares may be issued in
fractional amounts.
(i) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series J Shares, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series J Preferred Shares that shall be convertible at
that time; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series J Preferred Shares, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose. Should this action require the affirmative
vote of the Holders of Series J Preferred Shares, whether as a Class or voted
with Common Shares, said Holders of Series J Preferred Shares shall be deemed
solely for this purpose to have consented thereto, and shall be deemed to
irrevocably constituted management of the Company as their proxy and attorney in
fact solely for this purpose to execute such documents as may be required to
effect this consent.
6. Effect of Issuance of other Series of Preferred Shares
(a) Nothing contained in this designation of rights shall limit the
ability of the Company to authorize and issue other Series of Preferred Shares
or other classes of Preferred Shares with rights or preferences that are senior
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to these Series J Preferred Shares or that limit or reduce the rights or
preferences of these Series J Preferred Shares. In the event that other Series
or Classes of Preferred Shares are authorized and issued, unless otherwise
provided in the designation of rights of said other Series or Classes, these
Series J Preferred Shares shall vote on all matters based on the conversion
rates adjusted into common shares provided herein, and said such other preferred
shares shall have such voting rights as is provided in the designation thereof;
thus, if there were 100 Series J Preferred Shares Issued, they would have the
voting rights of 1,000,000 shares of Common Stock (unless adjusted as provided
in Section 5), and if 1000 other preferred shares had voting rights of
100,000,000 shares of Common Stock, and there were 300,000,000 shares of Common
Stock issued and outstanding, then in all votes for the Board of Directors, or
any other matters in which shareholders may vote, all Common Shareholders, and
all Preferred Shareholders shall vote together, and Preferred Shares would have
the weight based on their conversion into common. There shall be no class votes
of these Series J Preferred Shares unless said vote is non-waivable and is
required by law.
(b) Unless otherwise provided in the designation of rights and preferences
of other preferred shares, any preferences of these Series J Preferred Shares
shall be ratable with other series or classes of Preferred Shares that may have
been or be hereafter designated.
Dated this 27th day of June, 2003
By:/s/ Thomas Gillespie
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Thomas Gillespie, President
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