EXHIBIT 4(D)
CERTIFICATE OF DESIGNATIONS, POWERS
PREFERENCES AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK
-OF-
OMNICOMM SYSTEMS, INC.
a Delaware Corporation
_________
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
__________
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors (the "Board of Directors") of OmniComm
Systems, Inc., a Delaware corporation (the "Corporation"), at a meeting held on
August 31, 2001:
RESOLVED, that there be, and hereby is, created out of the class of
10,000,000 shares of preferred stock of the Corporation, par value $.001 per
share, a series of preferred stock with the following designations, powers,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions (this instrument hereinafter
referred to as the "Designation"):
1. Designation and Number of Shares. 200,000 shares of preferred stock
--------------------------------
(the "Shares") are hereby designated as Series B Convertible Preferred Stock,
par value $.001 per share (the "Series B Preferred Stock") having a stated value
of Ten Dollars ($10) per share (the "Stated Value").
2. Rank. The Series B Preferred Stock shall rank: (i) junior to any
----
other class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms senior to the Series B Preferred Stock (the
"Senior Securities"); (ii) prior to all of the Corporation's common stock, par
value $.001 per share (the "Common Stock"), and to the Corporation's outstanding
Series A Preferred Stock; (iii) prior to any other series of preferred stock or
any class or series of capital stock of the corporation hereafter created not
specifically ranking by its terms senior to or on parity with the Series B
Preferred Stock (collectively, with the Common Stock, "Junior Securities"); and
(iv) on parity with any class or series of capital stock of the Corporation
hereafter created specifically ranking by its terms on parity with the Series B
Preferred Stock (the "Parity Securities"), in each case as to the distribution
of assets upon liquidation, dissolution or winding up of the Corporation.
3. Liquidation Preference.
----------------------
(A) Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary ("Liquidation"), the holders of record of the
shares of the Series B Preferred Stock shall be entitled to receive, before and
in preference to any distribution or payment of assets of the Corporation or the
proceeds thereof may be made or set apart for the holders of Junior Securities,
an amount in cash equal to the Stated Value per share (subject to adjustment in
the event of stock splits, combinations or similar events) plus an amount equal
to accrued and unpaid
1
dividends. If, upon such Liquidation, the assets of the Corporation available
for distribution to the holders of Series B Preferred Stock and any Parity
Securities shall be insufficient to permit payment in full to the holders of the
Series B Preferred Stock and Parity Securities, then the entire assets and funds
of the Corporation legally available for distribution to such holders and the
holders of the Parity Securities then outstanding shall be distributed ratably
among the holders of the Series B Preferred Stock and Parity Securities based
upon the proportion the total amount distributable on each share upon
Liquidation bears to the aggregate amount required to be distributed, but for
the provisions of this sentence, on all shares of the Series B Preferred Stock
and of such Parity Securities, if any.
(B) For purposes of this Section 3, (i) a merger or consolidation, (ii) a sale
of all or substantially all of the assets of the Corporation or (iii) an
acquisition of fifty (50%) percent or more of the voting power or equity
interests of the Corporation by a single person or "group" (as determined in
accordance with Section 13(d) of the Securities and Exchange Act of 1934, as
amended) shall be considered a Liquidation, provided that a transaction
described in subclause (i) above shall not be considered a Liquidation if the
holders of the Series B Preferred Stock receive securities of the surviving
corporation having substantially similar rights as the Series B Preferred Stock
and the stockholders of the Corporation immediately prior to such transaction
are holders of at least a majority of the voting securities of the surviving
Corporation immediately thereafter. Such provision may be waived in writing by
the holders of a majority of the then outstanding shares of Series B Preferred
Stock.
4. Dividends.
---------
(A) The holders of record of shares of Series B Preferred Stock shall be
entitled to receive, when and as declared and paid by the Board of Directors or
upon conversion or Liquidation of the Series B Preferred Stock, out of any funds
legally available for the declaration and payment of dividends, and in
preference to any declaration or payment of dividends and distributions on any
Junior Securities, dividends, at the rate of 8% of the Stated Value per share
per annum (subject to adjustment in the event of stock splits, combinations or
similar events). Such dividends shall accrue quarterly from the date of
issuance of the Series B Preferred Stock. Dividends per share shall be payable,
at the Corporation's option, either in cash or in shares of Common Stock valued
at the Conversion Price (as defined below) in effect on the date of declaration.
Dividends on the Series B Preferred Stock shall be cumulative so that if, for
any dividend accrual period, dividends in the amount specified in this Section
4(A) are not declared and paid or set aside for payment, the amount of accrued
but unpaid dividends shall accumulate and be added to the dividends payable for
subsequent dividend accrual periods.
(B) Unless full cumulative dividends on all outstanding shares of Series
B Preferred Stock for all past dividend periods have been declared and paid, or
declared and a sufficient sum for the payment thereof set apart, no dividend
whatsoever be declared or paid upon, nor shall any distribution be made upon,
any Junior Securities, nor shall any shares of Junior Securities be purchased or
redeemed by the Corporation nor shall any moneys be paid to or made available
for a sinking fund for the purchase or redemption of any Junior Securities
(other than, in each case, a distribution or payment made solely in shares of
Junior Securities), without, in each such case, the written consent of the
holders of a majority of the outstanding shares of Series B Preferred Stock,
voting together as a class.
2
5. Conversion Rights After the Conversion Date (as defined in Section
-----------------
5(A) below), shares of the Series B Preferred Stock shall convert into Common
Stock as follows:
(A) Conversion at the Option of the Holder. Subject to and upon
--------------------------------------
compliance with the provisions of this Section 5, the holder of any shares of
Series B Preferred Stock shall have the right at such holder's option, at any
time or from time to time, to convert any of such shares of Series B Preferred
Stock into the number of fully paid and nonassessable shares of Common Stock
(the "Conversion Shares") as is determined pursuant to Section (5)(D) below.
For the purposes hereof "Conversion Date" shall mean the earlier of (i) January
31, 2002 and (ii) the close of business on the date that the Corporation files
with the Secretary of State of the State of Delaware an amendment to the
Corporation's Certificate of Incorporation increasing the authorized number of
shares of Common Stock to at least 60 million shares.
(B) Automatic Conversion. Each outstanding share of Series B Preferred
--------------------
Stock shall automatically be converted into, and be deemed and treated for all
purposes to represent, without any further act of the Corporation or its
stockholders, fully paid and nonassessable Conversion Shares in accordance with
Section 5(D) below upon the closing of a public offering of the Corporation's
equity securities raising gross proceeds to the Corporation in excess of $25
million at a per share price of more than $0.75 per share, as adjusted for any
stock split, stock dividend, recapitalization or other similar transactions (a
"Qualified Offering").
(C) Conversion at the Option of the Corporation. The Corporation may, at
-------------------------------------------
its option, upon not less than 30 days written notice to the holders of the
Series B Preferred Stock (the "Mandatory Conversion Notice"), cause each
outstanding share of Series B Preferred Stock to be converted into, and to be
deemed and treated for all purposes to represent, without any further act of the
stockholders, fully paid and non-assessable Conversion Shares in accordance with
Section 5(D) below provided that (x) during a 20 consecutive trading day period
(the "Trading Period") ending not more that five trading days prior to the date
the Mandatory Conversion Notice is sent, the closing bid or sales price, as
applicable, for the Common Stock of the Corporation equaled or exceeded at least
two times the Conversion Price on each day during the Trading Period, (y) on
each day during the Trading Period the Common Stock of the Corporation was
traded on a national securities exchange or included for quotation on the NASDAQ
SmallCap Market, the National Market System or the OTC Bulletin Board and (z) on
the Conversion Date (as defined in Section 5(E)) all of the Conversion Shares
are fully registered for resale pursuant to an effective registration statement
and not subject to any lock-up provisions. The Mandatory Conversion Notice
shall be sent by first class mail, postage prepaid to all registered holders of
shares of Series B Preferred Stock and shall specify a date for conversion,
which date (the "Mandatory Conversion Date") shall be no later than the 45th day
following the last day of the Trading Period. Any notice mailed in the manner
described herein shall be conclusively deemed to have been given whether or not
received by the registered holder. Notwithstanding the foregoing, the number of
shares of Series B Preferred Stock which the Corporation may cause to be
automatically converted during any 30 day period shall be limited to the number
of shares of Series B Preferred Stock which shall convert into not more than a
number of Conversion Shares equal to ten times the average daily trading volume
of the Common Stock during the Trading Period. If, as a result of the
provisions of the previous sentence, less than all of the shares of the Series B
Preferred Stock are to automatically be converted, the shares of Series B
Preferred Stock to be converted shall be allocated by the Corporation pro rata
among the holders of the Series B Preferred Stock based on the total number of
shares of Series B Preferred Stock originally issued to each holder.
3
(D) Conversion Amount. Each share of the Series B Preferred Stock shall
-----------------
be convertible into that number of fully paid and non-assessable Conversion
Shares equal to the Stated Value divided by the conversion price in effect at
the time of conversion (the "Conversion Price"), determined as hereinafter
provided. The Conversion Price shall initially be $0.25 per share. The
Conversion Price shall be subject to adjustment as set forth in Section 7
hereof.
(E) Mechanics of Conversion. Before any holder of Series B Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock pursuant
to Section 5(A), such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series B Preferred Stock, and shall give written notice
("Conversion Notice") to the Corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series B Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Conversion shall be deemed to have been effected on (i) the date when delivery
of notice of an election to convert and certificates for the shares of Series B
Preferred Stock to be converted is made in the event of a conversion under
Section 5(A), (ii) the closing of a Qualified Offering, in a conversion
specified in Section 5(B) or (iii) the Mandatory Conversion Date, if the
conversion is being effected pursuant to Section 5(C), and each such date is
referred to herein as the "Conversion Date". All Common Stock which may be
issued upon conversion of the Series B Preferred Stock will, upon issuance, be
duly issued, fully paid and non-assessable and free from all taxes, liens, and
charges with respect to the issuance thereof.
(F) Authorized Shares. After the Conversion Date, at all times that any
-----------------
shares of Series B Preferred Stock are outstanding, the Corporation shall have
authorized and shall have reserved for the purpose of issuance upon conversion
into Common Stock of all shares of Series B Preferred Stock, a sufficient number
of shares of Common Stock to provide for the conversion of all outstanding
shares of Series B Preferred Stock at the then effective Conversion Price.
Without limiting the generality of the foregoing, if, at any time, the
Conversion Price is decreased, the number of shares of Common Stock authorized
and reserved for issuance upon the conversion of the Series B Preferred Stock
shall be proportionately increased.
6. Priority. The Corporation may create, authorize and issue, in the
--------
future, without the consent of holders of the Series B Preferred Stock, other
series of preferred stock which rank junior to the Series B Preferred Stock as
to dividend and/or liquidation rights. The Corporation shall not create,
authorize or issue any series of preferred stock which is senior to or pari
passu to the Series B Preferred Stock as to dividend and/or liquidation rights
without the consent of the holders of a majority of the then outstanding shares
of the Series B Preferred Stock, except that the Corporation may create,
authorize and issue a new series of preferred stock as described in the Agency
Agreement relating to the Series B Preferred Stock between the Corporation and
Commonwealth Associates, L.P. ("Commonwealth"), on a pari passu basis as to
dividend and/or liquidation rights to the Series B Preferred Stock, having terms
which are no more favorable than the Series B Preferred Stock.
7. Anti-Dilution Provisions. The Conversion Price in effect at any time
------------------------
and the number and kind of securities issuable upon the conversion of the Series
B Preferred Stock shall be subject to adjustment from time to time upon the
happening of certain events as follows:
4
(A) In case the Corporation shall hereafter (i) declare a dividend or make
a distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(B) In case the Corporation shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price on such record date (as
defined in Subsection (H) below), the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current market price
per share (as defined in Subsection (H) below) of the Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants.
(C) In case the Corporation shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (A) above) or subscription rights or warrants (excluding those
referred to in Subsection (B) above), then in each such case the Conversion
Price in effect thereafter shall be determined by multiplying the Conversion
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the current market price (as defined in Subsection (H) below) per share of
Common Stock, less the fair market value (as determined by the Corporation's
Board of Directors) of said assets or evidences of indebtedness so distributed
or of such rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such current market
price per share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
distribution.
(D) In case the Corporation shall hereafter issue shares of its Common
Stock (excluding shares issued (i) in any of the transactions described in
Subsection (A) above, (ii) upon exercise of options granted to the Corporation's
officers, directors, employees and consultants under a plan or plans adopted by
the Corporation's Board of Directors or a committee thereof and approved by its
shareholders, if such shares would otherwise be included in this Subsection (D)
(but only to the
5
extent that the aggregate number of shares excluded by this Subsection (D)(ii)
does not exceed 15% of the Corporation's Common Stock outstanding, on a fully
diluted basis, at the time of any issuance), (iii) upon exercise of options,
warrants, convertible securities and convertible debentures outstanding as of
the final closing of the Initial Financing (as defined in the Agency Agreement),
(iv) to shareholders of any corporation which merges into the Corporation in
proportion to their stock holdings of such corporation immediately prior to such
merger, upon such merger, (v) in a private placement where the Offering Price
(as defined below) is at least 75% of the current market price, (vi) in a bona
fide public offering pursuant to a firm commitment underwriting, or (vii) in
connection with an acquisition of a business or technology which has been
approved by a majority of the Corporation's outside directors but only if no
adjustment is required pursuant to any other specific subsection of this Section
7 (without regard to Subsection (I) below) with respect to the transaction
giving rise to such rights) for a consideration per share (the "Offering Price")
less than the current market price on the date of such issuance (as defined in
Subsection (H) below), the Conversion Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate consideration received for
the issuance of such additional shares would purchase at such current market
price per share of Common Stock, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively whenever such
an issuance is made.
(E) In case the Corporation shall hereafter issue any securities
convertible into or exchangeable for its Common Stock (excluding securities
issued in transactions described in Subsections (B), (C) and (D)(i) through
(vii) above) for a consideration per share of Common Stock (the "Exchange
Price") initially deliverable upon conversion or exchange of such securities
(determined as provided in Subsection (G) below) less than the current market
price on the date of such issuance (as defined in Subsection (H) below), the
Conversion Price shall be adjusted immediately thereafter so that it shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such securities and the number of shares of Common Stock which the aggregate
consideration received for such securities would purchase at such current market
price per share of Common Stock, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares of Common Stock of the Corporation
deliverable upon conversion of or in exchange for such securities at the initial
conversion or exchange price or rate. Such adjustment shall be made
successively whenever such an issuance is made.
(F) Whenever the Conversion Price is adjusted pursuant to Subsections (A),
(B), (C), (D) or (E) above or (J) below, the number of Conversion Shares
issuable upon conversion of a share of Series B Preferred Stock shall
simultaneously be adjusted by multiplying the number of Conversion Shares
initially issuable upon conversion of such shares of Series B Preferred Stock by
the Conversion Price in effect on the date hereof and dividing the product so
obtained by the Conversion Price, as adjusted.
(G) For purposes of any computation respecting consideration received
pursuant to Subsections (D) and (E) above and (J) below, the following shall
apply:
6
(i) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Corporation for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors of the Corporation (irrespective of the accounting
treatment thereof), whose determination shall be conclusive; and
(iii) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of
such securities plus the additional minimum consideration, if
any, to be received by the Corporation upon the conversion or
exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (A) and (B)
of this Subsection (G)). Upon the expiration or termination of
any such securities convertible into or exchangeable for shares
of Common Stock, the Conversion Price shall be automatically
readjusted to the Conversion Price that would have been obtained
had such convertible or exchangeable securities not been issued.
(H) For the purpose of any computation under any Subsection above, the
current market price per share of Common Stock at any date shall be determined
as follows:
(i) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or
listed for trading on the NASDAQ National Market System, the
current market price per share of Common Stock at any date shall
be the higher of (a) the average of the last reported sales
prices of the Common Stock on such exchange for the 20
consecutive trading days before such date and (b) the last
reported sales price on the trading day immediately preceding
such date; provided that if no such sale is made on a day within
such period or no closing sale price is quoted, that day's
market price shall be the average of the closing bid and asked
prices for such day on such exchange or system; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the NASDAQ Small Cap
Market, the current market price per share of Common Stock on
any date shall be the higher of (a) the average of the closing
bid and asked prices for the 20 consecutive trading days before
such date on such market and (b) the last reported bid price on
the trading day immediately preceding such date on such market,
and if the Common Stock is not so traded, the current market
price per share of Common Stock on any date shall be the higher
of (x) the mean of the last reported bid and asked prices
reported by the NASD Over the Counter Bulletin Board for the 20
consecutive trading days before such date and (y) the last
reported bid price on the trading day immediately preceding such
date as reported by the NASD Over the Counter Bulletin Board; or
7
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so
reported, the current market price per share of Common Stock on
any date shall be an amount determined in a reasonable manner
by the Board of Directors of the Corporation.
(I) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($0.05)
in such price; provided, however, that any adjustments which by reason of this
Subsection (I) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 7 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section
7 to the contrary notwithstanding, the Corporation shall be entitled, but shall
not be required, to make such changes in the Conversion Price, in addition to
those required by this Section 7, as it shall determine, in its sole discretion,
to be advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock,
hereafter made by the Corporation shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into Common
Stock.
(J) Notwithstanding the other provisions of this Section 7, (a) in the
event that the Corporation shall at any time issue securities under Subsections
(B), (D) or (E) (other than securities issued in transactions of the type
described in subsection (D)(i) through (vii) above) having an Offering Price,
Subscription Price or Exchange Price less than the Conversion Price, then the
Conversion Price shall be immediately reset to equal such lower Offering Price,
Subscription Price or Exchange Price and (b) no adjustment under Subsections
(B), (D) or (E) shall be required for issuances below the current market price
if (i) the Offering Price, Subscription Price or Exchange Price, as applicable,
is at least 300% of the Conversion Price then in effect and (ii) a registration
statement covering the Conversion Shares is in effect and remains in effect for
the 90 days after such issuance or Rule 144(k) under the Securities Act of 1933,
as amended (the "Act") is available for resale of all of the Conversion Shares.
(K) Whenever the Conversion Price is adjusted, as herein provided, the
Corporation shall promptly cause a notice setting forth the adjusted Conversion
Price and adjusted number of Conversion Shares issuable upon conversion of each
share of Series B Preferred Stock, and, if requested, information describing the
transactions giving rise to such adjustments, to be mailed to the holders at
their last address appearing on the books and records of the Corporation
maintained for such purpose, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Corporation may retain a firm of
independent certified public accountants selected by the Board of Directors (who
may be the regular accountants employed by the Corporation) to make any
computation required by this Section 7, and a certificate signed by such firm
shall be conclusive evidence of the correctness of such adjustment, absent
manifest error.
(L) In the event that at any time, as a result of an adjustment made
pursuant to this Section 7, the holders of the Series B Preferred Stock
thereafter shall become entitled to receive any securities, other than Common
Stock, thereafter the number of such other securities so receivable upon
conversion of the Series B Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Subsections (A) to (J),
inclusive above.
8
(M) In case of any reorganization, reclassification or change of the
Common Stock (including any such reorganization, reclassification or change in
connection with a consolidation or merger in which the Corporation is the
continuing entity), or any consolidation of the Corporation with, or merger of
the Corporation with or into, any other entity (other than a consolidation or
merger in which the Corporation is the continuing entity), or of any sale of the
properties and assets of the Corporation as, or substantially as, an entirety to
any other person or entity, each share of Series B Preferred Stock then
outstanding shall thereafter be convertible into the kind and amount of stock or
other securities or property receivable upon such reorganization,
reclassification, change, consolidation, merger or sale by a holder of the
number of shares of Common Stock into which such shares of Series B Preferred
Stock would have been converted prior to such transaction. The provisions of
this Paragraph (M) shall similarly apply to successive reorganizations,
reclassifications, changes, consolidations, mergers or sales immediately prior
to such reorganization, reclassification, change, consolidation, merger or sale.
8. Voting Rights.
-------------
(A) In addition to any other rights provided for herein or by law, the
holders of Series B Preferred Stock shall be entitled to vote, together with the
holders of Common Stock, on all matters as to which holders of Common Stock
shall be entitled to vote, in the same manner and with the same effect (subject
to the provisions of the last sentence of this Section 8(A)) as such Common
Stock holders. With respect to all matters as to which the holders of Common
Stock shall be entitled to vote as a class, the holders of the Series B
Preferred Stock shall be entitled to vote, together with the holders of Common
Stock as one class, in the same manner and with the same effect (subject to the
provisions of the next sentence) as such Common Stock holders, except as
otherwise required by law. In any such vote each share of Series B Preferred
Stock shall entitle the holder thereof to a number of votes equal to the number
of whole shares of Common Stock which the holder of such share of Series B
Preferred Stock would be entitled to vote if the share of Series B Preferred
Stock was converted into Common Stock immediately prior to such vote without
regard to whether or not (x) such vote is taken prior to the Conversion Date,
(y) the Corporation has sufficient available Common Stock to effect the
conversion and (z) the Series B Preferred Stock for any other reason could not
be converted at such time into Common Stock.
(B) In the event the holders of the Series B Preferred Stock are required
to vote as a class, the affirmative vote of holders of not less than a majority
of the then outstanding shares of Series B Preferred Stock shall be required to
approve each such matter to be voted upon and if any matter is approved by such
requisite percentage of holders of Series B Preferred Stock, such approval shall
bind all holders of Series B Preferred Stock.
(C) The terms of the Series B Preferred Stock may be amended, modified or
waived only with the consent of the holders of a majority of the then
outstanding Series B Preferred Stock, voting as one class, either expressed in
writing or at a meeting called for that purpose.
(D) Each share of the Series B Preferred Stock shall entitle the holder
thereof to one vote on all matters to be voted on by the holders of the Series B
Preferred Stock as a class.
9. Redemption Default.
------------------
(A) If the Corporation shall fail to hold an annual or special meeting of
its stockholders on or before January 31, 2002 and obtain at such meeting the
approval of the stockholders of the Corporation (the "Shareholder Approval") to
the increase in the number of authorized shares of
9
capital stock of the Corporation to a number of authorized shares sufficient to
issue the securities contemplated to be issued pursuant to the Initial Financing
and Second Financing (as such terms are defined in the Agency Agreement) and any
securities issuable upon conversion or exercise of such securities and to file
with the Secretary of State of the State of Delaware on or before January 31,
2002 an amendment to the Certificate of Incorporation of the Corporation
reflecting such increase, then the holders of a majority of the then outstanding
Series B Preferred Stock ("Majority Holders") may, by delivery of written notice
to the Corporation, elect to cause the Corporation to redeem any or all of the
shares of the Series B Preferred Stock in accordance with the provisions set
forth below, at a redemption price equal to Twenty Dollars $20 per share of
Series B Preferred Stock ("Redemption Price");
(B) Redemption Notice. At least ten (10) days but not more than twenty
-----------------
(20) days prior to the date fixed for redemption ("Redemption Date"), written
notice (a "Redemption Notice") shall be delivered to the Corporation by the
Majority Holders seeking to cause the Corporation to redeem shares of Series B
Preferred Stock on the Redemption Date. The Redemption Notice shall state the
number of shares of Series B Preferred Stock to be redeemed from the Holders and
the Redemption Date.
(C) Deliveries of Stock Certificates. Each holder of Series B Preferred
--------------------------------
Stock shall surrender the certificate or certificates representing such shares
of Series B Preferred Stock to be redeemed to the Corporation, duly endorsed to
the principal executive office of the Corporation or any transfer agent for the
Series B Preferred Stock, and the full Redemption Price for such shares shall be
payable in cash on the Redemption Date to each such holder or to the nominee or
nominees of such holder in the manner and at the place designated in the
Redemption Notice, and each surrendered certificate shall be canceled and
retired. In the event that less than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
10. Miscellaneous.
-------------
(A) There is no sinking fund with respect to the Series B Preferred Stock.
(B) The shares of the Series B Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Designation and in the
Certificate of Incorporation of the Corporation.
(C) The holders of the Series B Preferred Stock shall be entitled to
receive all communications sent by the Corporation to the holders of the Common
Stock.
10
IN WITNESS WHEREOF, the Corporation has caused this Designation to be
signed by its Chief Executive Officer, on this 31st day of August, 2001, and
such person hereby affirms under penalty of perjury that this Designation is the
act and deed of the Corporation and that the facts stated herein are true and
correct.
OMNICOMM SYSTEMS, INC.
By: /s/ David Ginsberg, D.O.
------------------------
Name: David Ginsberg, D.O.
Title: CEO & President
Attest:
__________________________________
Name:
Title:
11