Document:

exv4w2

 

EXHIBIT 4.2

AUDITORS’ REPORT

To the Shareholders of Royal Bank of Canada

We have audited the consolidated statements of income, changes in shareholders’
equity and cash flows of Royal Bank of Canada for the year ended October 31,
2002. These consolidated financial statements are the responsibility of the
bank’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the results of the bank’s operations and its cash flows for
the year ended October 31, 2002, in accordance with Canadian generally accepted
accounting principles, including the accounting requirements of the
Superintendent of Financial Institutions Canada.

We also reported separately on November 19, 2002, to the shareholders of the
bank on our audit, conducted in accordance with Canadian generally accepted
auditing standards, where we expressed an opinion without reservation on the
October 31, 2002 consolidated financial statements, prepared in accordance with
United States generally accepted accounting principles.

	 	 	 
	“Deloitte & Touche LLP”
	 	“PricewaterhouseCoopers LLP”
	 	 	 
	Chartered Accountants
	 	Chartered Accountants
	Toronto, November 19, 2002	 	 

 

 

AUDITORS’ REPORT

To the Shareholders of Royal Bank of Canada

We have audited the consolidated statements of income, changes in shareholders’
equity and cash flows of Royal Bank of Canada for the year ended October 31,
2002. These consolidated financial statements are the responsibility of the
bank’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the results of the bank’s operations and its cash flows for
the year ended October 31, 2002, in accordance with United States generally
accepted accounting principles.

We also reported separately on November 19, 2002, to the shareholders of the
bank on our audit, conducted in accordance with Canadian generally accepted
auditing standards, where we expressed an opinion without reservation on the
October 31, 2002 consolidated financial statements, prepared in accordance with
Canadian generally accepted accounting principles, including the accounting
requirements of the Superintendent of Financial Institutions Canada.

	 	 	 
	“Deloitte & Touche LLP”
	 	“PricewaterhouseCoopers LLP”
	 	 	 
	Chartered Accountants
	 	Chartered Accountants
	Toronto, November 19, 2002EXHIBIT 4.1

               CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
                     OF SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                          OMNICORDER TECHNOLOGIES, INC.

         OmniCorder Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), by its President
and Chief Executive Officer, does hereby certify that, pursuant to authority
conferred upon the Board of Directors by the Certificate of Incorporation of the
Corporation (the "Charter") and Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation (the "Board"),
by unanimous written consent, has duly adopted resolutions providing for the
issuance of up to 6,000,000 shares of Series A Convertible Preferred Stock at
an initial issuance price of $1.00 per share (the "Original Issue Price"), and
setting forth the voting powers, designation, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, the text of which resolution is as
follows:

         RESOLVED, that pursuant to the authority vested in the Board in
accordance with the provisions of the Charter, there be, and hereby is, created
out of the class of 10,000,000 shares of preferred stock of the Corporation
authorized by Article Four of the Charter, a series of preferred stock of the
Corporation with the following voting powers, designation, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions:

         1. Designation and Number of Shares. 6,000,000 shares of preferred
stock, par value $.01 per share, are hereby designated as Series A Convertible
Preferred Stock (the "Series A Preferred Stock").

         2. Ranking; Adjustment of Rights and Preferences.

                  (a) The Series A Preferred Stock shall, with respect to
distribution rights upon Liquidation (as defined in Section 3(a)) and dividend
rights, rank: (a) senior to the Common Stock and such preferred stock of the
Corporation the terms of which expressly provide that such preferred stock will
rank junior to the Series A Preferred Stock with respect to distribution rights
upon Liquidation and dividend rights (the Common Stock and any such preferred
stock, "Junior Securities"); and (b) as applicable, junior to or on a parity
with such preferred stock of the Corporation the terms of which expressly
provide that such preferred stock will rank senior to or on a parity with the
Series A Preferred Stock with respect to distribution rights upon Liquidation
and dividend rights (as applicable, "Senior Securities" or "Parity Securities").

                  (b) In case the Corporation shall, on or prior to December
31, 2007, issue shares of capital stock in connection with a rights offering to
its shareholders having rights or preferences (other than with respect to the
issue price thereof) superior to those provided herein, the Corporation shall
promptly take such action as may be necessary to amend this Certificate of
Designation, Preferences and Rights so as to provide the Series A Preferred
Stock with the benefit of such superior rights or preferences.

         3. Liquidation.

                  (a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of
record of the Series A Preferred Stock (the "Series A Holders") shall be
entitled to receive, immediately after any distribution or payment of assets of
the Corporation or the proceeds thereof are made or set apart in respect of any
Senior Securities, contemporaneous and on equal priority with the making or
setting aside of any distribution or payment of assets of the Corporation or the
proceeds thereof with respect to any Parity Securities, and before any
distribution or payment of assets of the Corporation or the proceeds thereof may
be made or set apart with respect to any Junior Securities, an amount in cash
with respect to each share of Series A Preferred Stock equal to the Original
Issue Price per share (subject to adjustment in the event of stock splits,
combinations or similar events) plus all accrued and unpaid dividends on such
share as of the date of Liquidation. If, upon such Liquidation, the assets of
the Corporation available for distribution to the Series A Holders and the
holders of any Parity Securities shall be insufficient to permit payment in full
to the Series A Holders and such holders of Parity Securities, then the entire
assets and funds of the Corporation legally available

<PAGE>

for distribution to the Series A Holders and such holders of Parity Securities
then outstanding shall be distributed ratably among the Series A Holders and
such holders of Parity Securities based upon the proportion the total amount
distributable on each share upon liquidation bears to the aggregate amount
available for distribution on all shares of the Series A Preferred Stock and all
such Parity Securities, if any.

                  (b) Upon the completion of the distributions required by
paragraph (a) of this Section 3, if assets remain in the Corporation, they shall
be distributed to holders of Junior Securities in accordance with the Charter.

                  (c) For purposes of this Section 3, a merger or consolidation
or a sale of all or substantially all of the assets of the Corporation shall be
considered a Liquidation except in the event that in such a transaction, the
holders of the Series A Preferred Stock receive securities of the surviving
corporation having substantially similar rights and preferences as those of the
Series A Preferred Stock.

         4. Dividends.

                  (a) Subject to the rights of any other series of Preferred
Stock that may from time to time come into existence, the Series A Holders shall
be entitled to receive, out of any assets legally available therefor, annual
cumulative dividends in an amount equal to four percent of the Original Issue
Price on each share of Series A Preferred Stock, which dividends shall be
payable in cash or additional shares of Series A Preferred Stock (valued as
determined below) as determined by the Board in its sole discretion. The first
such dividend shall be paid on December 31, 2005 or, if such a day is not a
business day, the nearest preceding business day. The amount of such initial
dividend, and any other dividend payable on the Series A Preferred Stock for any
partial dividend period, shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends will be payable to holders of
record as they appear in the stockholder records of the Corporation at the close
of business on the applicable record date, which shall be the 15th day of
December of each year (the "Dividend Record Date") or on such other date
designated by the Board for the payment of dividends that is not more than 30
nor less than 10 days prior to the Dividend Record Date. With respect to any
given year, no dividends (other than a dividend payable solely in Common Stock,
par value $.001 per share, of the Corporation ("Common Stock")), shall be paid
upon, or declared and set apart for, any Junior Securities if the Board shall
have failed duly and lawfully to declare and pay in full a cash dividend to the
Series A Holders with respect to such year in the amount described above. If
such dividends on the Series A Preferred Stock shall not have been paid or set
apart in full for the Series A Preferred Stock, the aggregate deficiency shall
be cumulative and shall be fully paid or set apart for payment prior to the
payment of any dividend by the Corporation (other than a dividend payable solely
in Common Stock) with respect to any Junior Securities. Accumulations of
dividends on the Series A Preferred Stock shall not bear interest. For purposes
of the first sentence of this Section 4(a) only, shares of Series A Preferred
Stock issued as dividends shall be valued at the product of: (i) the 10-day
volume-weighted average price of the Common Stock on the principal stock
exchange on which it is traded, including the American Stock Exchange or NASDAQ
SmallCap Market, or if not traded on such exchange, on the National Association
of Securities Dealers, Inc. OTC Bulletin Board (such exchange or market, the
"Reference Exchange"), or, if, in the reasonable judgment of the Board, there
exists no Reference Exchange, then as reasonably determined by the Board; and
(ii) the number of shares of Common Stock into which the Series A Preferred
Stock is then convertible.

         5. Conversion Rights Each Series A Holder shall have the right to
convert all or any part of its Series A Preferred Stock into Common Stock as
follows:

                  (a) Optional Conversion. Subject to and upon compliance with
the provisions of this Section 5, a Series A Holder shall have the right at such
Series A Holder's option, at any time or from time to time, to convert any of
its shares of Series A Preferred Stock into such number of fully paid and
non-assessable shares of Common Stock as is determined by dividing: (i) the
Original Issue Price of such share of Series A Preferred Stock; by (ii) the
Conversion Price (as hereinafter defined) in effect on the Conversion Date (as
defined in Section 5(c) below) upon the terms hereinafter set forth. The
"Conversion Price" shall initially be equal to $1.10 and shall be subject to
adjustment pursuant to Section 6.

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<PAGE>

                  (b) Automatic Conversion.

                           (i) Each outstanding share of Series A Preferred
         Stock shall automatically be converted, without any further act of the
         Corporation or its stockholders, into such number of fully paid and
         non-assessable shares of Common Stock as would be determined pursuant
         to Section 5(a) were such conversion being effected at the option of
         the Series A Holders, upon the conclusion of the 20th consecutive
         trading day on which the closing bid price for the Common Stock on the
         Reference Exchange was at least $2.20 per share.

                           (ii) Each outstanding share of Series A Preferred
         Stock shall automatically be converted on a one-for-one basis, without
         any further act of the Corporation or its stockholders, into such
         number of fully paid and non-assessable shares of Senior Securities as
         may be issued by the Corporation on or prior to December 31, 2005, in
         connection with a rights offering to its shareholders (any such
         offering, a "Rights Offering") as described in the Corporation's
         Private Placement Term Sheet and Exhibits, dated December 6, 2004 (the
         "Term Sheet").

                  (c) Mechanics of Conversion. Subject to Section 5(b), before
any Series A Holder shall be entitled to convert the same into shares of Common
Stock, 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 A Preferred Stock, and shall give written 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 Series A
Holder, 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
the date when delivery of notice of an election to convert and certificates for
shares is made or on the date of the occurrence of the event specified in
Section 5(b) as the case may be, and such date is referred to herein as the
"Conversion Date." All Common Stock which may be issued upon conversion of the
Series A 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.

         6. Anti-Dilution Provisions. The Conversion Price in effect at any time
shall be subject to adjustment from time to time upon the happening of certain
events as follows:

                  (a) Consolidation, Merger or Sale. If any consolidation or
merger of the Corporation with another person, or the sale, transfer or lease of
all or substantially all of its assets to another person shall be effected in
such a way that holders of shares of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for their shares of
Common Stock, then provision shall be made, in accordance with this Section
6(a), whereby each Series A Holder shall thereafter have the right to receive
such securities or assets as would have been issued or payable with respect to
or in exchange for the shares of Common Stock into which the shares of Series A
Preferred Stock held by such holder were convertible immediately prior to the
closing of such merger, sale, transfer or lease, as applicable. The Corporation
will not effect any such consolidation, merger, sale, transfer or lease unless
prior to the consummation thereof the successor entity (if other than the
Corporation) resulting from such consolidation or merger or the entity
purchasing or leasing such assets shall assume by written instrument: (i) the
obligation to deliver to the Series A Holders such securities or assets as, in
accordance with the foregoing provisions, such Series A Holders may be entitled
to receive; and (ii) all other obligations of the Corporation hereunder. The
provisions of this Section 6(a) shall similarly apply to successive mergers,
sales, transfers or leases.

                  (b) Common Stock Dividends, Subdivisions, Combinations, etc.
In case the Corporation shall hereafter: (i) declare a dividend or make a
distribution on its outstanding shares of capital stock (other than the Series A
Preferred Stock) in shares of Common Stock or in securities, options or other
rights directly or indirectly exchangeable, exercisable or convertible for or
into Common Stock for no material consideration (collectively, "Derivative
Securities"); (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

                                       3
<PAGE>

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 numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action (assuming the full conversion or exercise for or into Common Stock of any
Derivative Securities outstanding prior to any dividend or distribution of the
type referenced in clause (i)), and the denominator of which shall be the number
of shares of Common Stock outstanding after giving effect to such action
(assuming the full conversion or exercise for or into Common Stock of any
Derivative Securities outstanding after giving effect to any dividend or
distribution of the type referenced in clause (i)). Such adjustment shall be
made successively whenever any event listed above shall occur. Notwithstanding
the foregoing, in the event that any Derivative Securities that are issued in
connection with a dividend or distribution of the type described in clause (i)
expire prior to their exchange, exercise or conversion, in whole or in part, for
or into Common Stock, the Conversion Price shall be adjusted to equal the
Conversion Price that would have been obtained using the above formula had the
unexercised or unconverted portion of such Derivative Securities never been
issued or distributed.

                  (c) In-Kind Dividends. In case the Corporation shall hereafter
declare an in-kind dividend or make an in-kind distribution on its outstanding
shares of capital stock (other than the Series A Preferred Stock) in the form an
asset other than Derivative Securities, then provision shall be made whereby
each Series A Holder shall thereafter have the right to receive, upon conversion
into Common Stock of such Series A Holder's Series A Preferred Stock: (i) such
securities or assets as would have been issued or distributed to such Series A
Holder had such Series A Preferred Stock been converted into Common Stock
immediately prior to such in-kind dividend or distribution and (ii) all other
cash or assets paid or issued as a dividend or distribution in respect of such
asset between the date of such dividend or distribution and the Conversion Date
of such Series A Preferred Stock. Such provision shall be made successively
whenever any event listed above shall occur. The rights of the Series A Holders
pursuant to this Section 6(c) shall be in addition to, and not in lieu of, their
rights to receive Common Stock upon conversion of their Series A Preferred Stock
pursuant to Section 5 and this Section 6.

                  (d) Rights Offering. In case the Corporation shall, on or
prior to December 31, 2005, issue shares of Series A Preferred Stock in
connection with a Rights Offering, the Conversion Price shall be adjusted so
that it shall equal such lower price.

                  (e) Discounted Stock. In case the Corporation shall, on or
prior to the 36-month anniversary of the final closing of the sale of Series A
Preferred Stock pursuant to the Term Sheet, issue Covered Securities (as
hereinafter defined) for consideration per share, or, in the case of Derivative
Securities, for an implicit price per share of Common Stock (the "Discount
Price"), that is less than the 30-day volume-weighted average price of the
Common Stock on the Reference Exchange (the "Reference Price"), the Conversion
Price shall be adjusted immediately thereafter so that it shall equal the price
determined by multiplying: (i) the Conversion Price in effect immediately prior
thereto; by (ii) a fraction, (A) the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such Covered Securities and the number of shares of Common Stock which the
aggregate consideration received for the issuance of such Covered Securities
would purchase at the Reference Price and (B) the denominator of which shall be
the number of shares of Common Stock outstanding immediately after the issuance
of such Covered Securities (assuming the conversion to Common Stock of all such
Covered Securities that are Derivative Securities). Notwithstanding the
foregoing, in the event that any such Covered Securities are Derivative
Securities and such Derivative Securities expire prior to their exchange,
exercise or conversion, in whole or in part, for or into Common Stock, the
Conversion Price shall be further adjusted to equal the Conversion Price that
would have been obtained using the above formula had the unexercised or
unconverted portion of such Covered Securities never been issued. As used
herein, the term "Covered Securities" shall mean any Common Stock or Derivative
Securities other than securities: (1) whose issuance would trigger an adjustment
to the Conversion Price pursuant to any of Sections 6(a) through 6(d) above; (2)
issued upon conversion of any Derivative Securities; (3) issued to employees,
officers, directors, consultants or other persons performing services for the
Corporation pursuant to a stock option or stock ownership plan of the
Corporation approved by the Board; (4) issued in connection with an acquisition
or merger by the Corporation; (5) issued in connection with the exercise of
options or warrants outstanding on the date hereof; (6) issued in connection
with collaborative agreements or to a strategic investor in the Corporation
approved by the Board; or (7) issued as additional consideration to a lessor or
creditor of the Corporation in connection with a leasing or debt financing
transaction.

                                       4
<PAGE>

                  (f) Notice of Adjustment. 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 shares of
Common Stock issuable upon exercise of each share of Series A Preferred Stock,
and, if requested, information describing the transactions giving rise to such
adjustments, to be mailed to the Series A Holders at their last addresses
appearing in the Corporation's Share Register, 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 (who may
be the regular accountants employed by the Corporation) to make any computation
required by this Section 6, and a certificate signed by such firm shall be
conclusive evidence of the correctness of such adjustment.

                  (g) Receipt of Securities Other than Common Stock. In the
event that at any time, as a result of an adjustment made pursuant to Section
6(a) above, the Holders of the Series A Preferred Stock thereafter shall become
entitled to receive any shares of the Corporation, other than Common Stock,
thereafter the number of such other shares so receivable upon conversion of the
Series A 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 Sections 6(a) through 6(f), inclusive,
above.

         7. Voting Rights. Except as expressly provided to the contrary herein
or pursuant to applicable law, the Series A Holders shall be entitled to vote,
together with the holders of Common Stock and other voting securities as a
single class, on all matters as to which holders of Common Stock shall be
entitled to vote, in the same manner and with the same effect as such Common
Stock holders. In any such vote, each share of Series A Preferred Stock shall
entitle the holder thereof to the number of votes per share that equals the
number of whole shares of Common Stock into which each such share of Series A
Preferred Stock is then convertible.

         8. Reservation of Shares. The Corporation shall at all times reserve
and keep available and free of preemptive rights out of its authorized but
unissued Common Stock, solely for the purpose of effecting the conversion of the
Series A Preferred Stock pursuant to the terms hereof, such number of its shares
of Common Stock (or other shares or securities as may be required) as shall from
time to time be sufficient to effect the conversion of all outstanding Series A
Preferred Stock pursuant to the terms hereof. If at any time the number of
authorized but unissued shares of Common Stock (or such other shares or
securities) shall not be sufficient to affect the conversion of all then
outstanding Series A Preferred Stock, the Corporation shall promptly take such
action as may be necessary to increase its authorized but unissued Common Stock
(or such other shares or securities) to such number of shares as shall be
sufficient for such purpose.

         9. Miscellaneous.

                  (a) The Series A Preferred Stock may not be redeemed by the
Corporation or the Series A Holders at any time. There is no sinking fund with
respect to the Series A Preferred Stock.

                  (b) The shares of the Series A 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 Certificate of
Designation, Preferences and Rights and in the Charter.

                  (c) The holders of the Series A Preferred Stock shall be
entitled to receive all communications sent by the Corporation to the holders of
the Common Stock.

                  [Remainder of page intentionally left blank]

                                       5
<PAGE>

                  IN WITNESS WHEREOF, OmniCorder Technologies, Inc. has caused
this Certificate to be signed by its Controller, on
this 14th day of December 2004, and such person hereby affirms under penalty of
perjury that this Certificate is the act and deed of OmniCorder Technologies,
Inc. and that the facts stated herein are true and correct.

                                       OMNICORDER TECHNOLOGIES, INC.

                                       By:/s/Celia Schiffner
                                          -------------------------------------
                                          Celia Schiffner
                                          Controller

                                       6

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