PROXY
STATEMENT
FOR
THE SPECIAL MEETING OF STOCKHOLDERS
Important
Notice Regarding the Availability of Proxy Materials for the Special Stockholders
Meeting to Be Held on June 7, 2019
The
Proxy Statement is available at
www.virtualshareholdermeeting.com/INQD2019SM
.
GENERAL
INFORMATION
This
Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”)
of Indoor Harvest Corp, a Texas corporation (the “Company”), 7401 W. Slaughter Lane, #5078, Austin, Texas 78739, for
use at the Virtual Special Meeting of Stockholders to be held on June 7, 2019, at 10:00 a.m. Eastern Time. You will be able to
attend the Special Meeting, vote, and submit your questions during the meeting via the live webcast by visiting
www.virtualshareholdermeeting.com/INQD2019SM
.
To enter the Special Meeting, you must have your 16-digit control number that is shown on the proxy card accompanying this Proxy
Statement. You will not be able to attend the Special Meeting in person. This is designed to authenticate stockholders’
identities, to allow stockholders to give their voting instructions and to confirm that stockholders’ instructions have
been recorded properly. The Board urges you to promptly execute and return your proxy in the enclosed envelope, even if you plan
to attend the Virtual Special Meeting. This Proxy Statement and the enclosed proxy card are being sent to the stockholders of
the Company on or about April 19, 2019.
Any
stockholder submitting a proxy may revoke such proxy at any time prior to its exercise by notifying the Secretary of the Company,
in writing, prior to the Special Meeting. Any stockholder attending the Virtual Special Meeting may revoke his or her proxy and
vote personally by notifying the Secretary of the Company at the Special Meeting. For additional information on how to obtain
directions to be able to access the Special Meeting and vote during the Virtual Special Meeting, please write to the Company’s
Secretary at Indoor Harvest Corp, 7401 W. Slaughter Lane, #5078, Austin, Texas 78739 or call our proxy solicitor, Alliance Advisors,
LLC (“Alliance Advisors”) at (844) 885-0179. Only holders of common stock, $0.001 par value per share (the “Common
Stock”), and Series A convertible preferred stock $0.01 par value per share (the “Series A Preferred Stock”)
of record at the close of business on April 10, 2019 (the “Record Date”), will be entitled to notice of, and to vote
at, the Special Meeting or any adjournment thereof. At the close of business on the Record Date, the Company had 41,651,726 outstanding
shares of Common Stock, and 750,000 outstanding shares of Series A Preferred Stock. Each share of Common Stock entitles the holder
thereof to one vote for each share of Common Stock held of record on the Record Date on each matter that may properly come before
the Special Meeting. Each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes
for the Series A Preferred Stock in an amount equal to the number of whole shares of Common Stock into which the shares of Series
A Preferred Stock held by such holder are convertible as of the Record Date (i.e. 43.95 votes per share of Series A Preferred
Stock, or an aggregate of 32,962,500 votes). We encourage you to vote promptly, even if you plan to attend the Virtual Special
Meeting.
If
the accompanying proxy card is signed and returned, the shares represented thereby will be voted in accordance with the directions
on the proxy card. Unless a stockholder specifies otherwise therein, the proxy will be voted in accordance with the Board’s
recommendations on all proposals. The presence at the live webcast or by proxy of thirty-three and 34/100 percent (33.34%) of
the voting power represented by outstanding shares of Common Stock and Series A Preferred Stock will constitute a quorum for the
transaction of business at the Special Meeting.
Under
the default voting provisions of the Texas Business Organizations Code (the “TBOC”), the affirmative vote of holders
of at least two-thirds of the outstanding shares of Common Stock and at least two-thirds of the outstanding shares of Series A
Preferred Stock voting as separate classes are required to adopt the Charter Amendments.
A
broker, bank or other nominee is not permitted to exercise discretionary voting power with regard to the Charter Amendments proposal.
Therefore, if you are a beneficial owner and do not provide your broker, bank or other nominee with voting instructions with respect
to the Charter Amendments, it will have the same effect as a vote against the Charter Amendments.
PROXY
STATEMENT SUMMARY
VIRTUAL
SPECIAL MEETING OF STOCKHOLDERS
Date
and Time:
Friday, June 7, 2019, at 10:00 a.m. (local time)
Location:
We will not hold a physical Special Meeting. Rather, we will hold a Virtual Special Meeting of Stockholders. You may access
the Virtual Special Meeting, vote and submit a question during the Special Meeting by visiting
www.virtualshareholdermeeting.com/INQD2019SM.
You will need to provide your 16-digit control number that is on your proxy card.
Record
Date:
April 10, 2019
MEETING
AGENDA AND BOARD RECOMMENDATIONS
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Item
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Board
Recommendation
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1.
To amend and restate the Certificate of Formation to, among other items, increase the amount of shares of capital stock authorized
to be issued, to grant the Board “blank check preferred stock” authority allowing the Board to fix the terms and
issue new series of preferred stock without the approval of the holders of the Common Stock, to explicitly permit stockholders
of different classes of the Company’s capital stock to vote as a single class with regard to changes to the Certificate
Formation, and to decrease the vote required for the approval of fundamental actions and fundamental business transactions.
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FOR
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TABLE
OF CONTENTS
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING
What
is the purpose of the Special Meeting?
At
our Special Meeting, holders of our Common Stock and Series A Preferred Stock will be asked to vote on the following proposal:
To
amend and restate the Certificate of Formation to, among other items, increase the amount of shares of capital stock authorized
to be issued, to grant the Board “blank check preferred stock” authority allowing the Board to fix the terms and issue
new series of preferred stock without the approval of the holders of the Common Stock, to explicitly permit stockholders of different
classes of the Company’s capital stock to vote as a single class with regard to changes to the Certificate Formation, and
to decrease the vote required for the approval of fundamental actions and fundamental business transactions.
Will
any other business be considered at the meeting?
Our
Amended Bylaws (the “Bylaws”) provide that the only business which may be transacted at a special meeting is that
relating to the purpose or purposes set forth in the notice thereof.
Who
is entitled to attend and vote at the Special Meeting?
You
may vote if you owned shares of our Common Stock and/or Series A Preferred Stock as of the close of business on April 10, 2019,
the Record Date, which is the record date for determining who is eligible to attend and vote (at the live webcast or by proxy)
at the Special Meeting or any adjournments or postponements thereof, and your stock ownership is reflected in our record books.
As of the close of business on the Record Date, our record book reflects that we had outstanding a total of 41,651,726 shares
of Common Stock, and 750,000 shares of Series A Preferred Stock. Each share of Common Stock entitles the holder thereof to one
vote for each share of Common Stock held of record on the Record Date on each matter that may properly come before the Special
Meeting. Each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes for the Series
A Preferred Stock in an amount equal to the number of whole shares of Common Stock into which the shares of Series A Preferred
Stock held by such holder are convertible as of the Record Date (i.e. 43.95 votes per share of Series A Preferred Stock, or an
aggregate of 32,962,500 votes). We encourage you to vote promptly, even if you plan to attend the Virtual Special Meeting.
How
many votes do I have?
You
have one vote for each share of our Common Stock that you owned on the Record Date. You have 43.95 votes for each share of Series
A Preferred Stock you owned on the Record Date. The holders of Common Stock and Series A Preferred Stock will vote as separate
classes with respect to the Charter Amendments.
How
many votes may be cast by all stockholders?
A
total of 74,614,226 votes may be cast at the Special Meeting, consisting of one vote for each share of our Common Stock outstanding
as of the Record Date (41,651,726), and 43.95 votes for each share of our Series A Preferred Stock outstanding as of the Record
Date (for a total of 32,962,500 votes).
How
many shares must be present to hold the Special Meeting?
The
presence at the live webcast or by proxy of thirty-three and 34/100 percent (33.34%) of the voting power represented by outstanding
shares of Common Stock and Series A Preferred Stock (74,614,226 votes) will constitute a quorum for the transaction of business
at the Special Meeting.
Shares
equal to thirty-three and 34/100 percent (33.34%) of the voting power of the outstanding shares of our Common Stock and Series
A Preferred Stock entitled to vote as of the Record Date must be present at the Special Meeting in order to hold the meeting and
conduct business. This is called a quorum. Your shares are counted as present at the Special Meeting if:
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you
are present and vote at the Special Meeting via the live webcast; or
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you
have properly and timely submitted your vote as described below under
“How do I vote my shares?”
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If
a quorum is not present or represented at the Special Meeting, the stockholders and proxies entitled to vote will have the power
to adjourn the Special Meeting, without notice other than an announcement at that time, until a quorum is present or represented.
What
is a proxy?
It
is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as
your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may
direct the proxy how to vote your shares. We refer to this as your “proxy vote.” Two of our executive officers have
been designated as proxies for the Special Meeting. Those executive officers are Dan Weadock and Chad Sykes.
What
is a proxy statement?
It
is a document that we are required to give you, in accordance with regulations of the Securities and Exchange Commission (the
“SEC”), when we ask you to designate proxies to vote your shares of our Common Stock and Series A Preferred Stock
at a Special Meeting of our stockholders. The Proxy Statement includes information regarding the matters to be acted upon at the
Special Meeting and certain other information required by the regulations of the SEC.
Why
am I receiving this proxy statement and a new proxy card?
This
proxy statement is being sent to you following the cancellation of our Special Meeting that was originally scheduled for January
31, 2019 (and postponed to February 5, 2019). The Special Meeting is now scheduled to occur on June 7, 2019. You are receiving
this proxy statement and a new proxy card in connection with the Charter Amendments proposal.
What
should I do if I already voted using the proxy card sent in the proxy statement that was mailed on or around December 21, 2018?
If
you previously submitted a proxy for the Special Meeting originally scheduled for January 31, 2019 (and postponed to February
5, 2019), which proxy has not subsequently been revoked, and are a holder of record on April 10, 2019, we intend to vote such
proxy at the rescheduled Special Meeting on June 7, 2019, as directed by the previously submitted proxy by you. Accordingly, if
you have already submitted a proxy, you do not need to take any action unless you want to change or revoke your proxy.
However,
if you have acquired shares after December 7, 2018, the original record date, and those shares are held by a bank, broker or other
nominee to whom you did not previously issue voting instructions with respect to the Special Meeting, those newly acquired shares
will not be voted unless you follow the instructions on your voting card or otherwise provided by your broker, bank or other nominee
for submitting a proxy with respect to those newly acquired shares. Moreover, if you held shares in “street name”
through a broker, bank, trust or other nominee on the original record date, but have acquired shares after the original record
date, and you are the stockholder of record of those newly acquired shares, then, whether or not you previously gave a voting
instruction with respect to the shares that you held on the original record date, those newly acquired shares will not be voted
unless you give a proxy with respect to those shares by completing, signing, dating and returning the enclosed proxy card, by
following the instructions on the enclosed proxy card for Internet or telephone submissions or you attend the Special Meeting
and vote in person. If you want to change or revoke your proxy, you need to submit a new proxy card, transmit additional voting
instructions by telephone or through the Internet, or attend the applicable Special Meeting and vote in person. Otherwise, you
will be considered to have voted on the proposals as indicated in the proxy card you previously provided and the proxies identified
in the proxy card will vote your shares as indicated in that previously submitted proxy card. If you are a registered holder and
you wish to change or revoke your proxy, please complete, sign, date and mail a new proxy card or submit a new proxy by telephone
or through the Internet. If your shares are held in “street name” by your broker, bank, trust or other nominee, and
you wish to change or revoke your proxy, please refer to your voting card or other information forwarded by your broker, bank,
trust or other nominee to determine whether you may submit a proxy by telephone or on the Internet and follow the instructions
on the card or other information provided by the record holder.
What
is the difference between a “stockholder of record” and a “street name” holder?
If
your shares are registered directly in your name, you are considered the “stockholder of record” with respect to those
shares. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust
or other nominee is considered to be the stockholder of record with respect to those shares, while you are considered the beneficial
owner of those shares. In that case, your shares are said to be held in “street name.” Street name holders generally
cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares
using the method described below under
“How do I vote my shares?”
.
How
do I vote my shares?
Stockholders
of Record.
If you are a stockholder of record, you may vote in the following ways:
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By
Internet before the Virtual Special Meeting
. If you have received a printed copy of the proxy materials from us by
mail, you may vote electronically via the Internet at
www.proxyvote.com
. To be valid, your vote by mail must be received
by us by 11:59 p.m., Eastern Time, on June 6, 2019.
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By
Phone.
If you have received a printed copy of the proxy materials from us by mail, you may vote by touch-tone telephone
by calling 1-800-690-6903. To be valid, your vote by mail must be received by us by 11:59 p.m., Eastern Time, on June 6, 2019.
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By
Mail.
If you have received a printed copy of the proxy materials from us by mail, you may vote by completing, signing
and dating the enclosed proxy card where indicated and by mailing or otherwise returning the proxy card in the envelope provided
to us. To be valid, your vote by mail must be received by us by 11:59 p.m., Eastern Time, June 6, 2019.
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At
the Virtual Special Meeting.
You can vote your shares during the Special Meeting via the Internet by following the
instructions at
www.virtualshareholdermeeting.com/ INQD2019SM
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Beneficial
Owners.
If you are a beneficial owner, you may vote by submitting voting instructions to your broker or other nominee
holding your shares. You should follow the voting instructions provided by your broker or nominee in order to instruct your broker
or nominee on how to vote your shares.
Your
vote is important, and we encourage you to vote promptly.
If
you need assistance in voting by telephone or over the Internet or completing your proxy card or have questions regarding the
meeting, please contact our proxy solicitor:
Alliance
Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, NJ 07003
(844) 885-0179
What
does it mean if I receive more than one proxy card?
If
you receive more than one proxy card or voting instruction form, it means that you hold shares registered in more than one account.
To ensure that all of your shares are voted, you will need to be sure to vote once for each account.
What
if I do not specify how I want my shares voted?
If
you submit a signed proxy card or submit your proxy by Internet or by phone, and do not specify how you want to vote your shares,
we will vote your shares
FOR
the amendment and restatement of the Certificate of Formation.
Note:
If you are a street name holder and fail to instruct your broker, bank, trust or other nominee how you want to vote your shares
on a particular matter, those shares are considered to be “uninstructed.” If the broker, bank, trust or other nominee
is not permitted to exercise discretion, the uninstructed shares will be referred to as “broker non-votes.”
Your
vote is very important. We urge you to vote, or to instruct your broker, bank, trust or other nominee how to vote, on all matters
to be considered at the Special Meeting.
Can
I revoke my proxy and change my vote?
Yes,
you may revoke your proxy and change your vote at any time before your proxy is voted at the Special Meeting. You may revoke your
proxy and change your vote by:
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Submitting
a later-dated and properly executed proxy card to our Corporate Secretary at the Company’s address listed above, which
must be received by us before the time of the Special Meeting;
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Submitting
a later-dated vote by telephone or on the Internet, in a timely manner;
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Delivering
a written notice of revocation to our Corporate Secretary at the Company’s address listed above, which must be received
by us before the time of the Special Meeting; or
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Attending
the Virtual Special Meeting and voting. Your attendance at the Virtual Special Meeting will not by itself revoke a proxy that
you have previously submitted.
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What
vote is required to approve each item of business included on the proxy and described in this Proxy Statement?
Under
the default voting provisions of the TBOC, the affirmative vote of holders of at least two-thirds of the outstanding shares of
Common Stock and at least two-thirds of the outstanding shares of Series A Preferred Stock voting as separate classes are required
to adopt the Charter Amendments.
How
does the Board recommend that I vote?
We
are asking for your vote to amend and restate the Certificate of Formation to, among other items, increase the amount of shares
of capital stock authorized to be issued, to grant the Board “blank check preferred stock” authority allowing the
Board to fix the terms and issue new series of preferred stock without the approval of the holders of the Common Stock, to explicitly
permit stockholders of different classes of the Company’s capital stock to vote as a single class with regard to changes
to the Certificate Formation, and to decrease the vote required for the approval of fundamental actions and fundamental business
transactions.
Our
Board recommends that you vote
FOR
the amendment and restatement of the Certificate of Formation.
Where
can I find the voting results of the Special Meeting?
We
expect to announce preliminary voting results at the Special Meeting. We plan to publish the final voting results in a Current
Report on Form 8-K (“Form 8-K”) filed within four business days of the Special Meeting. If final voting results are
not available within the four business day timeframe, we plan to file a Form 8-K disclosing preliminary voting results within
the required four business days, to be followed as soon as practicable by an amendment to the Form 8-K containing the final voting
results.
What
happens if the Special Meeting is postponed or adjourned?
If
the Special Meeting is postponed or adjourned, your proxy will remain valid and may be voted when the Special Meeting is convened
or reconvened. You may change or revoke your proxy until it is voted.
Are
members of the Board required to attend the Special Meeting?
Directors
are encouraged, but not required, to attend the Special Meeting.
Who
pays for the cost of proxy preparation and solicitation?
We
will pay all of the costs of soliciting these proxies. Our officers, directors and employees may solicit proxies in person or
by telephone, fax or email. We will pay these officers, employees and directors no additional compensation for these services.
We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals
and to obtain authority to execute proxies. We will then reimburse them for their expenses. We have engaged Alliance Advisors
to assist us in soliciting proxies for the Special Meeting. We expect to pay Alliance Advisors a solicitation fee of $25,000 plus
reimbursement of reasonable out-of-pocket expenses.
ITEM
1—AMENDMENT AND RESTATEMENT OF CERTIFICATE OF FORMATION
The
Board has approved an amendment and restatement of the Certificate of Formation in the form of
Appendix A
. The initial
filing of the Certificate of Formation in 2011 was a form document that reflected the startup nature of the Company whose operations
were just getting started. Since then, there has been one amendment to the Certificate of Formation to allow the Company to issue
preferred stock. The Board believes it is in the best interests of our stockholders to amend and restate the Certificate of Formation
in its entirety to better reflect the current complexities of the Company’s operations and ownership structure.
The
amended and restated Certificate of Formation makes the following major changes to the current Certificate of Formation:
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I.
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Increasing
the number of authorized shares of our Common Stock from 50,000,000 to 200,000,000 and the number of authorized shares of
our preferred stock from 5,000,000 to 15,000,000.
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II.
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Grant
the Board “blank check preferred stock” authority allowing the Board to fix the terms and issue new series of
preferred stock without the approval of the holders of the Common Stock.
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Our
Board believes it is in the best interests of our stockholders to increase the number of authorized shares of capital stock and
to allow the Board to issue preferred stock and to fix its terms without further approval of the holders of Common Stock in order
to give us greater flexibility in considering and planning for future corporate needs, including, but not limited to, stock dividends,
grants under equity compensation plans, stock splits, financings, potential strategic transactions, including mergers, acquisitions
and business combinations, as well as other general corporate transactions. The Board believes that additional authorized shares
and the ability to issue preferred stock will enable us to take timely advantage of market conditions and favorable financing
and acquisition opportunities that become available to us. Except as otherwise required by law, the newly authorized shares of
capital stock will be available for issuance at the discretion of our Board (without further action by the stockholders) for various
future corporate needs, including those outlined above. While adoption of these changes would not have any immediate dilutive
effect on the proportionate voting power or other rights of existing stockholders, any future issuance of additional authorized
shares of our Common Stock or may, among other things, substantially dilute the earnings per share of our Common Stock and the
equity and voting rights of those holding Common Stock at the time the additional shares are issued. We do not have any definitive
plans, arrangements, understandings or agreements regarding the issuance of the additional shares of capital stock that will result
from our adoption of these changes.
Any
newly authorized shares of Common Stock will be identical to the shares of Common Stock now authorized and outstanding. The proposed
amendment will not affect the rights of current holders of our Common Stock, none of whom have preemptive or similar rights to
acquire the newly authorized shares. Any newly authorized shares of preferred stock will have the terms fixed by the Board in
its sole discretion.
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III.
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Explicitly
permit stockholders of different classes of the Company’s capital stock to vote as a single class with regard to all
matters with respect to which a vote of the stockholders of the Company is required or permitted under applicable law, the
Certificate of Formation or the Bylaws. Currently, the Certificate of Formation does not explicitly permit stockholders of
different classes of the Company’s capital stock to vote as a single class with regard to all matters with respect to
which a vote of the stockholders of the Company is required or permitted. The power of the holders of shares of Series A Preferred
Stock to vote as a single class with holders of Common Stock was intended to be given when such preferred stock was issued
to enable the Company to, as quickly as possible, take advantage of certain financing opportunities that might be advantageous
to us and our stockholders. Our Board determined that it is in our stockholders’ best interests to have the Certificate
of Formation explicitly state that such voting is permitted.
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IV.
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Reduce
the vote required for the approval of fundamental actions and fundamental business transactions from two-thirds of the outstanding
shares of the Company entitled to vote to a majority of the outstanding shares of the Company entitled to vote. The default
voting provisions of TBOC Sections 21.364 and 21.457 requires a vote of the holders of at least two-thirds of all outstanding
shares of capital stock to amend any provision of our Certificate of Formation, to conduct a voluntary winding up (or revocation
of such a decision), to cancel an event requiring winding up, for the Company to be reinstated following a termination, or
to engage in a fundamental business transaction as detailed in Subchapter J of TBOC Title 2 Chapter 21. TBOC Section 21.365
allows the Company to specify in its Certificate of Formation that the vote required is a majority of the outstanding shares
of the Company entitled to vote. The Board believes that this change will more easily allow the Company to take action in
order to take advantage of certain financing, acquisition, and merger opportunities that might be advantageous to us and our
stockholders by reducing the number of votes required for approval of such actions.
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Potential
Anti-Takeover Effects of Proposed Changes
Some
of the Charter Amendments may have the effect of discouraging a tender offer, proxy contest or other attempt to obtain control
of the Company. The Company is not aware of any present or threatened third-party plans to gain control of the Company, and the
proposed changes are not being recommended in response to any such plan or threat. Rather, the Board is recommending the changes
as part of its review of the Company’s key governance documents. The Board has no present intention of soliciting a stockholder
vote on any other proposals relating to a possible takeover of the Company. Aspects of the proposed changes with potential anti-takeover
implications are as follows:
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The
increase in the capital stock of the Company would have the effect of increasing the Board’s flexibility in raising
equity capital in the future. The Board could use this flexibility to resist a possible hostile takeover attempt in the future,
for example, by issuing shares to a third party who the Board expects to vote in a manner consistent with the Board’s
recommendations.
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Granting
the Board “blank check preferred stock” authority and explicitly permitting stockholders of different classes
of the Company’s capital stock to vote as a single class with regard to all matters with respect to which a vote of
the stockholders of the Company is required or permitted under applicable law could have anti-takeover effects in that it
can prevent a potential hostile acquirer from obtaining voting control of the Company without the cooperation of the Board,
even if the potential acquirer acquires a majority of the Common Stock. The Board will be able to quickly issue preferred
stock with many votes per share without further action by any stockholders of the Company. This would allow the holders of
that particular series of preferred stock to control any stockholder votes required.
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For
these reasons, the proposed changes contemplated by Charter Amendments could discourage certain takeover attempts, possibly including
some takeovers that holders of a majority of the Common Stock may feel would be in their best interests. Although these changes
could make it more difficult for a hostile bidder to acquire control over the Company, the Board believes that by forcing potential
bidders to negotiate with the Board for a change of control transaction, the Board will be better able to maximize stockholder
value in any change of control transaction.
If
the Company’s stockholders approve the Charter Amendments, we expect that the amended and restated Certificate of Formation
will be effective on or about June 10, 2019. Our Board retains the authority to abandon the Charter Amendments for any reason
at any time prior to the time that the amended and restated Certificate of Formation is filed with and accepted by the Texas Secretary
of State.
The
form of the proposed amended and restated Certificate of Formation is attached hereto as
Appendix A
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Board
Recommendation
The
Board recommends a vote FOR the Charter Amendments.
“HOUSEHOLDING”
OF PROXY MATERIALS
The
SEC has adopted rules that permit companies and intermediaries (e.g. brokers) to satisfy the delivery requirements for proxy statements
and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and
annual report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially
means extra convenience for stockholders and cost savings for companies.
A
number of brokers with accountholders who are stockholders will be householding our proxy materials. As indicated in the notice
previously provided by these brokers to stockholders, a single proxy statement and annual report will be delivered to multiple
stockholders sharing an address unless contrary instructions have been received from an affected stockholder. Once you have received
notice from your broker or us that they will be householding communications to your address, householding will continue until
you are notified otherwise.
Stockholders
who currently receive multiple copies of the proxy materials at their address and would like to request householding of their
communications should contact their broker or, if a stockholder is a direct holder of shares of our Common Stock, they should
submit a written request to our transfer agent, VStock Transfer LLC. VStock Transfer LLC’s telephone number is (212) 828-8436.
To
delist yourself from householding in the future you may write the Company at Indoor Harvest Corp, Attention: Corporate Secretary,
7401 W. Slaughter Lane, #5078, Austin, Texas 78739 or call (978) 822-0650. Upon written or oral request directed to the Company
at the address or phone number listed above, we will deliver promptly a separate copy of the proxy materials.
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By Order of the Board,
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Daniel Weadock
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Chief Executive Officer
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April
15, 2019
Austin,
Texas
APPENDIX
A
AMENDED
AND RESTATED
CERTIFICATE
OF FORMATION
OF
INDOOR
HARVEST CORP
Pursuant
to the provisions of the Texas Business Organizations Code (the “TBOC”), Indoor Harvest Corp, a Texas for-profit corporation
(the “Corporation”), hereby adopts this Amended and Restated Certificate of Formation (the “Amended and Restated
Certificate”), which accurately copies the Certificate of Formation and all amendments thereto that are in effect to date
and as further amended by this Amended and Restated Certificate as hereinafter set forth.
1.
The name of the Corporation is Indoor Harvest Corp. The file number issued to the Corporation by the Secretary of State is 801511675.
The date of formation of the Corporation was November 23, 2011.
2.
Each such amendment made by this Amended and Restated Certificate has been made in accordance with the provisions of the TBOC.
3.
Articles I, II, III, IV, and V of the Certificate of Formation (as amended) are each amended and restated in their entirety to
read as set forth in Articles I, II, III, IV, and V of this Amended and Restated Certificate.
4.
This Amended and Restated Certificate adds new Articles VI, VII, VIII, IX, X, XI, XII, XIII, and XIV.
5.
This Amended and Restated Certificate was adopted, approved and effected in conformity with the provisions of the TBOC and the
constituent documents of the Corporation.
6.
This Amended and Restated Certificate shall become effective upon filing with the Secretary of State of the State of Texas.
7.
This Amended and Restated Certificate of Formation amends and restates the Certificate of Formation (as amended) to read in its
entirety as follows:
ARTICLE
I
NAME
The
name of the Corporation is Indoor Harvest Corp (the “Corporation”).
ARTICLE
II
TYPE
OF ENTITY
The
Corporation is a for-profit corporation.
ARTICLE
III
PURPOSE
The
purpose or purposes for which the Corporation is formed are all lawful purposes for which for-profit corporations may be formed
under the Texas Business Organizations Code (“TBOC”).
ARTICLE
IV
AUTHORIZED
SHARES
A.
The Corporation is authorized to issue two (2) classes of shares designated “Common” and “Preferred.”
The aggregate number of shares of all classes which the Corporation is authorized to issue is Two Hundred Fifteen Million (215,000,000),
consisting of (i) Two Hundred Million (200,000,000) Common shares, having a par value of $0.001 per share (“Common Shares”),
and (ii) Fifteen Million (15,000,000) Preferred shares, having a par value of $0.01 per share (“Preferred Shares”).
B.
The Board of Directors is hereby expressly authorized, by resolution or resolutions from time to time adopted, without further
action of the shareholders, to provide, out of the unissued Preferred Shares, for the issuance of one or more series of Preferred
Shares. Before any shares of any such series are issued, the Board of Directors shall fix and state, and hereby is expressly empowered
to fix, by resolution or resolutions, the relative rights and preferences of the shares of each such series, and the qualifications,
limitations, or restrictions thereon, including, but not limited to, determination of any of the following:
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(i)
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the
designation of such series, and the number of shares to constitute such series;
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(ii)
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whether
the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms
of such voting rights, which may be full or limited;
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(iii)
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the
dividends, if any, payable on such series, and at what rates, whether any such dividends shall be cumulative, and if so, from
what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends
shall bear to the dividends payable on any shares of stock of any other class or any other series of this class;
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(iv)
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whether
the shares of such series shall be subject to redemption by the Corporation, and, if so, the times, prices and other terms
and conditions of such redemption;
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(v)
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the
amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary
or involuntary liquidation, dissolution or winding up of the Corporation;
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(vi)
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whether
the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series
for retirement or other corporate purposes and the terms and provisions relative to the operation thereof;
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(vii)
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whether
the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other
series of this class or any other class or classes of securities and, if so, the price or prices or the rate or rates of conversion
or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange;
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(viii)
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the
limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation
of, the Common Shares or shares of stock of any other class or any other series of this class;
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(ix)
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the
conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other series of this class or of any other class; and
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(x)
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any
other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations
and restrictions thereof.
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C.
The relative rights and preferences of each series of Preferred Shares, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series of Preferred Shares at any time outstanding;
provided
, that all
shares of any one series of Preferred Shares shall be identical in all respects with all other shares of such series. Any of the
designations, preferences, limitations, or relative rights, including the voting rights, of any series of shares may be dependent
upon facts ascertainable outside the Certificate of Formation,
provided
that the manner in which such facts operate upon
the designations, preferences, and relative rights, including the voting rights, of such series of shares is clearly set forth
in the Certificate of Formation. The Board of Directors may increase the number of Preferred Shares designated for any existing
series by a resolution adding to such series authorized and unissued Preferred Shares not designated for any other series. The
Board of Directors may decrease the number of Preferred Shares designated for any existing series by a resolution subtracting
from such series unissued Preferred Shares designated for such series, and the shares so subtracted shall become authorized, unissued,
and undesignated Preferred Shares.
D.
Each holder of Common Shares shall be entitled to one (1) vote for each Common Share held of record on all matters on which shareholders
generally are entitled to vote. Subject to applicable law and the rights of the Preferred Shares and any other class or series
of stock having a preference as to dividends over the Common Shares then outstanding, dividends may be paid on the Common Shares
out of assets legally available for dividends, but only at such times and in such amounts as the Board of Directors shall determine
and declare. Subject to applicable law, upon the dissolution, liquidation or winding up of the Corporation, after any preferential
amounts to be distributed to the holders of the Preferred Shares and any other class or series of stock having a preference over
the Common Shares then outstanding have been paid or declared and set apart for payment, the holders of the Common Shares shall
be entitled to receive all the remaining assets of the Corporation available for distribution to its shareholders ratably in proportion
to the number of shares held by them, respectively.
E.
Except as otherwise required by the specific terms of any class or series of Preferred Shares as set forth in the Preferred Shares
designation with respect to such class or series, with respect to all matters, including all matters for which the affirmative
vote of the holders of a specified portion of the shares entitled to vote is required by the TBOC, the vote required for approval
by the shareholders is the affirmative vote of the holders of a majority of the voting power of all then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
F.
The Board of Directors created a series of Preferred Shares designated as Series A Convertible Preferred Stock (the “Series
A Preferred Stock”), by filing a certificate of designations of preferences, right and limitations of the Series A Preferred
Stock with the Secretary of State of the State of Texas on August 10, 2015, and the voting powers, designations, preferences and
relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the
Series A Preferred Stock, as amended since August 10, 2015, are set forth in
Appendix A
hereto and are incorporated herein
by reference.
ARTICLE
V
INTERESTED
PARTIES
Except
as may be otherwise provided in the TBOC, no contract, act or transaction of the Corporation with any corporation, person or persons,
firm, trust or association, or any other organization will be affected or invalidated by the fact that any director, officer or
shareholder of this Corporation is a party to, or is interested in, such contract, act or transaction, or in any way connected
with any such person or persons, firm, trust or association, or is a director, officer or shareholder of, or otherwise interested
in, any such other corporation, nor will any duty to pay damages on account to this Corporation be imposed upon such director,
officer or shareholder of this Corporation solely by reason of such fact, regardless of whether the vote, action or presence of
any such director, officer or shareholder may be, or may have been, necessary to obligate this Corporation on, or in connection
with, such contract, act or transaction, but if such vote, action or presence is, or was, necessary, such interest or connection
(other than an interest as a noncontrolling shareholder of any such other corporation) be known or disclosed to the Board of Directors.
Common
or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE
VI
LIABILITY
OF DIRECTORS
No
director of the Corporation will have any personal liability to the Corporation or its shareholders for monetary damages for any
act or omission by the director in the director’s capacity as a director of the Corporation, except that this provision
does not eliminate or limit the liability of a director to the extent the director is found liable under applicable law for:
A.
a breach of the director’s duty of loyalty to the Corporation or its shareholders;
B.
an act or omission not in good faith that constitutes a breach of duty of the director to the Corporation or that involves intentional
misconduct or a knowing violation of the law;
C.
a transaction from which the director received an improper benefit, regardless of whether the benefit resulted from an action
taken within the scope of the director’s duties; or
D.
an act or omission for which the liability of the director is expressly provided for by an applicable statute.
If
the TBOC is amended to authorize action further eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the TBOC as so amended. Any
repeal or modification of this Article VI shall not adversely affect any right of protection of a director of the Corporation
existing at the time of such repeal or modification.
ARTICLE
VII
INDEMNIFICATION
The
Corporation may indemnify, and advance expenses to, to the fullest extent permitted by law, any person who was or is a party to
or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that the person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE
VIII
WRITTEN
CONSENT OF SHAREHOLDERS
Except
as otherwise required by the specific terms of any class or series of Preferred Shares as set forth in the Preferred Shares designation
with respect to such class or series, any action required or permitted to be taken at any annual or special meeting of shareholders
may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock entitled to vote on such action having not less than the
minimum number of votes that would be necessary to authorize or take such action at a meeting at which the required shares entitled
to vote thereon were present and voted.
ARTICLE
IX
CUMULATIVE
VOTING
The
right to accumulate votes in the election of directors and/or cumulative voting by any shareholder is hereby expressly denied.
ARTICLE
X
PREEMPTIVE
RIGHTS
No
shareholder of this Corporation shall, by reason of his holding shares of any class of stock of this Corporation, have any preemptive
or preferential right to purchase or subscribe for any shares of any class of stock of this Corporation, now or hereafter to be
authorized, or any notes, debentures, bonds or other securities convertible into or carrying options, warrants or rights to purchase
shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, debentures,
bonds or other securities would adversely affect the dividend or voting rights of any such shareholder, other than such rights,
if any, as the Board of Directors, at its discretion, from time to time may grant, and at such price as the Board of Directors
at its discretion may fix; and the Board of Directors may issue shares of any class of stock of this Corporation or any notes,
debentures, bonds or other securities convertible into or carrying options, or warrants or rights to purchase shares of any class
without offering any such shares of any class of such notes, debentures, bonds or other securities, either in whole or in part,
to the existing shareholders of any class.
ARTICLE
XI
REGISTERED
OFFICE AND AGENT
The
address of the registered office of the Corporation is c/o Registered Agents Inc., 700 Lavaca Street, Suite 1401, Austin, TX 78701
and the name of its registered agent at such address is Registered Agents Inc.
ARTICLE
XII
DIRECTORS
A.
Powers
. The property, business and affairs of the Corporation and all corporate powers shall be managed by the Board of
Directors, subject to any limitation imposed by statute, this Amended and Restated Certificate of Formation or the Bylaws.
B.
Number and Classes of Directors
. The number of directors, other than those who may be elected by the holders of one or
more series of Preferred Shares voting separately by class or series, shall be fixed from time to time exclusively by the Board
of Directors pursuant to a resolution adopted by a majority of the full Board of Directors,
provided
that any decrease
in the number of directors does not shorten the time of any incumbent director. Directors need not be residents of the State of
Texas. The number of directors currently constituting the Board of Directors is three (3).
C.
Resignation
. A director may resign at any time on written notice to the Board of Directors or to the Chairman of the Board.
A director’s resignation is effective when the notice is delivered unless the notice specifies a later effective date.
D.
Election of Directors
. Directors shall be elected by a plurality of the voting power of all then outstanding shares of
capital stock of the Corporation entitled to vote on the election of directors, voting together as a single class, who are present,
in person or by proxy, at any such meeting.
E.
Vacancies and Removal
. Subject to applicable law, unless the Board of Directors otherwise determines, vacancies resulting
from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting
from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, and in the event that there is only one (1) director remaining
in office, by such sole remaining director, and directors so chosen shall hold office for a term expiring at the annual meeting
of shareholders at which the term of office of the class to which they have been appointed expires and until such director’s
successor shall have been duly elected and qualified.
Any
director, or the entire Board of Directors, may be removed from office at any time but only for cause by the affirmative vote
of the holders of at least a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally
in the election of directors voting together as a single class.
Notwithstanding
the foregoing, whenever the holders of any class or series of shares are entitled to elect one (1) or more directors by the provisions
of this Amended and Restated Certificate of Formation or any Preferred Share designation, only the holders of shares of that class
or series shall be entitled to vote for or against the removal of any director elected by the holders of shares of that class
or series; and any vacancies in such directorships and any newly created directorships of such class or series to be filled by
reason of an increase in the number of such directors may be filled by the affirmative vote of a majority of the directors elected
by such class or series then in office or by a sole remaining director so elected, and such directorships shall not in any case
be filled by the vote of the remaining directors unless otherwise provided in this Amended and Restated Certificate of Formation
or any Preferred Share designation.
ARTICLE
XIII
SPECIAL
MEETINGS
Special
meetings of the shareholders for any purpose or purposes may be called by (a) the Chairman of the Board or (b) a majority of the
entire Board of Directors. In addition, a special meeting of the shareholders shall be called at the request in writing of shareholders
owning not less than fifty percent (50%) of the issued and outstanding shares of the Corporation entitled to vote at such meeting
by the Chairman of the Board or the Secretary. Such request for a special meeting shall state the purpose or purposes of the proposed
meeting, which purpose or purposes shall be stated in the notice of the meeting. Business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice. Notwithstanding anything set forth in this Amended and Restated
Certificate of Formation to the contrary, at a special meeting requested by the shareholders of the Corporation, only the Corporation
and the shareholders who participated in the written meeting request may propose any item for consideration or nominate directors
for election at such meeting.
ARTICLE
XIV
AMENDMENT
OF CERTIFICATE OF FORMATION
The
Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in
this Amended and Restated Certificate of Formation (including any Preferred Share designation), and any other provisions authorized
by the laws of the State of Texas at the time in force may be added or inserted, in the manner now or hereafter prescribed by
this Certificate of Formation, the Bylaws or the TBOC; and, except as set forth in Article VI, all rights, preferences and privileges
herein conferred upon stockholders, directors or any other persons by and pursuant to this Certificate of Formation in its present
form or as hereafter amended are granted subject to the right reserved in this Article; provided, however, that, notwithstanding
any other provision of this Amended and Restated Certificate of Formation, and in addition to any other vote that may be required
by law or any Preferred Share designation, the affirmative vote of the holders of a majority of the voting power of all then outstanding
shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single
class, shall be required to amend, alter or repeal, or adopt any provision as part of this Amended and Restated Certificate of
Formation.
ARTICLE
XV
AMENDMENT
OF BYLAWS
Bylaws
of the Corporation may be adopted, amended or repealed by vote of the holders of the shares at the time entitled to vote in the
election of any directors. Bylaws may also be adopted, amended or repealed by the Board of Directors, but any bylaws adopted by
the Board may be amended or repealed by the shareholders entitled to vote thereon as herein above provided.
If
any bylaw regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall
be set forth in the notice of the next meeting of shareholders for the election of directors the bylaw so adopted, amended or
repealed, together with a concise statement of the changes made.
IN
WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Formation to be executed by a duly authorized
officer this [ ] day of [ ], 2019.
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INDOOR
HARVEST CORP
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By:
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/s/
Dan Weadock
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Dan
Weadock
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Chief
Executive Officer
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Appendix
A
CERTIFICATE
OF DESIGNATION,
PREFERENCES
AND RIGHTS
of
SERIES
A CONVERTIBLE PREFERRED STOCK
Indoor
Harvest Corp, a corporation organized and existing under the laws of the State of Texas (the “Corporation”), hereby
certifies that the Board of Directors of the Corporation (the “Board of Directors” or the “Board”), pursuant
to authority of the Board of Directors as required by applicable corporate law, and in accordance with the provisions of its Certificate
of Incorporation and Bylaws, has and hereby authorizes a series of the Corporation’s newly authorized Preferred Stock, par
value $.01 per share (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the
rights, preferences, privileges, powers and restrictions thereof, as follows:
SERIES
A PREFERRED STOCK DESIGNATION AND AMOUNT
5,000,000
shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series A Convertible Preferred
Stock” with the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.
1.
Stated Value
. The stated value of each issued share of Series A Convertible Preferred Stock shall be deemed to be $0.40
(the “Stated Value”), as the same may be equitably adjusted whenever there may occur a stock dividend, stock split,
combination, reclassification or similar event affecting the Series A Convertible Preferred Stock.
2.
Dividends
. There are no dividends payable on the Series A Convertible Preferred Stock. As to dividends on common stock
if and after conversion, currently the Corporation does not have a dividend policy. Should the Corporation offer dividends in
the future, holders of shares of Series A Preferred Stock would receive dividends alongside common stockholders on an as-converted
basis.
3.
Voting
.
a.
Number of Votes
. On any matter presented to the stockholders of the Corporation for their action or consideration at any
meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of a meeting), each holder of outstanding
shares of Series A Convertible Preferred Stock shall be entitled to cast the number of votes for the Series A Convertible Preferred
Stock in an amount equal to the number of whole shares of Common Stock into which the shares of Series A Convertible Preferred
Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.
Holders of Series A Convertible Preferred Stock shall vote together with the holders of Common Stock, and with the holders of
any other series of Preferred Stock the terms of which so provide, together as a single class.
4.
Liquidation, Dissolution, or Winding-Up.
Upon
any liquidation, dissolution or winding-up of the Corporation under Texas law, whether voluntary or involuntary, the holders of
the shares of Series A Convertible Preferred Stock shall be paid an amount equal to the aggregate Stated Value of their shares
of Series A Convertible Preferred Stock (“Series A Preferred Liquidation Payment”), before any payment shall be paid
to the holders of Common Stock, or any other stock ranking on liquidation junior to the Series A Convertible Preferred Stock (the
“Junior Stock”), an amount for each share of Series A Convertible Preferred Stock held by such holder equal to the
sum of the Stated Value thereof. If, upon such liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of shares of Series A Convertible Preferred Stock shall be insufficient
to permit payment to the holders of Series A Convertible Preferred Stock of an aggregate amount equal to the aggregate Series
A Liquidation Preference Payment, then the entire assets of the Corporation to be so distributed shall be distributed ratably
among the holders of Series A Convertible Preferred Stock (based on the Individual Series A Preferred Liquidation Preference Payments
due to the respective holders of Series A Convertible Preferred Stock).
5.
Optional Conversion
. The holders of shares of Series A Convertible Preferred Stock shall have the conversion rights as
follows (the “Conversion Rights”).
(a)
Right to Convert
. Each share of Series A Convertible Preferred Stock shall be convertible, at the option of the holder
thereof, at any time and without the payment of additional consideration by the holder thereof, into a number of shares of common
stock equal to the Stated Value divided by the Conversion Price.
(i)
Initial Conversion Price.
The initial Conversion Price on the date of issuance of Series A Convertible Preferred Stock
shall be the Stated Value.
(ii)
Revised Conversion Price Upon the issuance of Additional Shares of Common Stock.
If the Corporation shall at any time after
the date of issuance of Series A Convertible Preferred Stock issue any additional shares of common stock except Exempted Securities
as provided in Section 6 below (collectively “Additional Shares of Common Stock”), without cash consideration or for
a cash consideration per share less than the Conversion Price in effect immediately prior to such issue, then the Conversion Price
shall be adjusted by being reduced, concurrently with such issue, to a price equal to the sale price of the Additional Shares
of Common Stock. If the Corporation issues securities convertible into shares of Common Stock rather than Common Stock, the adjustment
herein shall be based upon the conversion price of the convertible securities so issued.
Example:
The Corporation
sells Common Stock for $.20 per share or securities convertible into Common Stock at a conversion price of $.20 per share in the
future. The new Conversion Price for Series A Convertible Preferred Stock shall be reduced to $.20. Thus, the holder of a share
of Series A Convertible Preferred Stock will obtain upon conversion of the Series A Convertible Preferred Stock a number of shares
of Common Stock equal to the Stated Value ($0.40) divided by the new Conversion Price ($.20 in this example), or two shares of
Common Stock upon conversion of each share of Series A Convertible Preferred Stock.
(iii)
Circumstances Requiring No Adjustment of Conversion Price
. No adjustment in the Conversion Price shall be made as the result
of the issuance of Additional Shares of Common Stock if the cash price per share of Common Stock, or conversion price into shares
of Common Stock if the issuance involves convertible securities, for such Additional Shares of Common Stock as set forth above
issued or deemed to be issued by the Corporation is equal to or greater than the applicable Conversion Price in effect immediately
prior to the issuance or deemed issuance of such Additional Shares of Common Stock.
(b)
Fractional Shares
. No fractional shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred
Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal
to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors,
or round-up to the next whole number of shares, at the Corporation’s option. Whether or not fractional shares would be issuable
upon such conversion shall be determined on the basis of the total number of shares of Series A Convertible Preferred Stock the
holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
(c)
Mechanics of Conversion
.
(i)
For a holder of Series A Convertible Preferred Stock to voluntarily convert shares of Series A Convertible Preferred Stock into
shares of Common Stock, that holder shall surrender the certificate or certificates for such shares of Series A Convertible Preferred
Stock (or, if the registered holder alleges that such certificate has been lost, stolen, or destroyed, a lost certificate affidavit
and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against
the Corporation on account of the alleged loss, theft, or destruction of such certificate), at the office of the transfer agent
for the Series A Convertible Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own
transfer agent), together with written notice that the holder elects to convert all or any number of the shares of the Series
A Convertible Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion
is contingent. The notice shall state the holder’s name or the names of the nominees in which the holder wishes the certificate
or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his, her, or its attorney duly authorized in writing. The close of business on the date
of receipt by the transfer agent of such certificates (or lost certificate affidavit and agreement) and notice (or by the Corporation
if the Corporation serves as its own transfer agent) shall be the time of conversion (the “Conversion Time”), and
the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding
of record as of that date. The Corporation shall, as soon as practicable after the Conversion Time, issue and deliver at such
office to the holder of Series A Convertible Preferred Stock, or to his, her, or its nominee(s), a certificate or certificates
for the number of shares of Common Stock to which the holder(s) shall be entitled, together with cash in lieu of any fraction
of a share.
(ii)
The Corporation shall at all times while the Series A Convertible Preferred Stock is outstanding, reserve and keep available out
of its authorized but unissued stock, for the purpose of effecting the conversion of the Series A Convertible Preferred Stock,
such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of
all outstanding Series A Convertible Preferred Stock; and if, at any time, the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then-outstanding shares of the Series A Convertible Preferred Stock,
the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts
to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.
(iii)
All shares of Series A Convertible Preferred Stock that shall have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding, and all rights with respect to such shares, including the rights, if any, to receive notices,
to vote, and to receive payment of any dividends accrued or declared but unpaid thereon, shall immediately cease and terminate
at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor. Any
shares of Series A Convertible Preferred Stock so converted shall be retired and cancelled and shall not be reissued as shares
of such series, and the Corporation (without the need for stockholder action) may from time to time take such appropriate action
as may be necessary to reduce the authorized number of shares of Series A Convertible Preferred Stock accordingly.
(iv)
Upon any such conversion, no adjustment to the Conversion Price shall be made for any accrued or declared but unpaid dividends
on the Series A Convertible Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
6.
Excluded Shares From Conversion Price Adjustment per Section 5(a)(ii) above
.
Notwithstanding
any provision of this Certificate of Rights and Preferences to the contrary, there shall be no adjustment to the Conversion Price
upon the issuance of any of the following securities (collectively “Exempted Securities”):
(i)
shares of Common Stock issued or deemed issued to employees or directors of, or consultants to, the Corporation or any of its
Subsidiaries for services rendered pursuant to a plan, agreement, or arrangement approved by the Board of Directors.
(ii)
shares of Common Stock issued or deemed issued in connection with a bona fide joint venture or business acquisition of or by the
Corporation, whether by merger, consolidation, sale of assets, sale or exchange of stock, or otherwise;
provided that
any
such issuance is approved by the Board of Directors, and, at the time of such issuance, the aggregate of that issuance and similar
issuances in the preceding twelve (12) month period shall not exceed twenty percent (20%) of the then-outstanding Common Stock
(assuming full conversion and exercise of all convertible and exercisable securities).
7.
SEC Stock Ownership Reporting
. The Corporation shall report in its SEC filings concerning stock ownership all shares of
Common Stock and/or all shares of Series A Convertible Preferred Stock for which any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be
a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Person”) is deemed the beneficial
owner as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended.
8.
Waiver
. Any of the rights, powers, or preferences of the holders of Series A Convertible Preferred Stock set forth herein
may be waived by the affirmative consent or vote of the holders of at least a majority of the shares of Series A Convertible Preferred
Stock then outstanding.