Certificate of Designation Amending Articles of Incorporation

Exhibit 10.3

ACCENTIA BIOPHARMACEUTICALS, INC.

CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS

OF

SERIES A-1 CONVERTIBLE PREFERRED STOCK

PURSUANT TO SECTION 607.0602 OF THE

FLORIDA BUSINESS CORPORATION ACT The undersigned, Francis E. O' Donnell, Jr. and Samuel S. Duffey, Esq., do hereby certify that: 1. They are the Chairman and CEO and General Counsel, respectively, of Accentia Biopharmaceuticals, Inc., a Florida corporation (the " Corporation" ).

2. The Corporation is authorized to issue 150 million shares of preferred stock, 125 million of which have been issued.

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

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of 150 million shares, $1.00 par value per share, issuable from time to time in one or more series;

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement, up to 8,950 shares of the preferred stock which the Corporation has the authority to issue, as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:


1

TERMS OF PREFERRED STOCK Section 1 . Definitions . Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings:

" Alternate Consideration" shall have the meaning set forth in Section 7(e).

" Bankruptcy Event" means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof; (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing. " Base Conversion Price" shall have the meaning set forth in Section 7(b). " Buy-In" shall have the meaning set forth in Section 6(d)(iii). " Change of Control Transaction" means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual, legal entity or " group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 50% of the voting securities of the Corporation (other than by means of conversion or exercise of Preferred Stock and the Securities issued together with the Preferred Stock), or (ii) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 66% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the


2

Corporation sells or transfers all or substantially all of its assets to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a one year period of more than one-half of the members of the Corporation' s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof) unless approved by the shareholders of the Corporation, or (v) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above.

" Closing Date" means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto and all conditions precedent to (i) each Holder' s obligations to pay the Subscription Amount and (ii) the Corporation' s obligations to deliver the Securities have been satisfied or waived. " Commission" means the Securities and Exchange Commission. " Common Stock" means the Corporation' s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.

" Common Stock Equivalents" means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

" Conversion Amount" means the sum of the Stated Value at issue.

" Conversion Date" shall have the meaning set forth in Section 6(a).

" Conversion Price" shall have the meaning set forth in Section 6(b).

" Conversion Shares" means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.

" Conversion Shares Registration Statement" means a registration statement that registers the resale of all Conversion Shares of the Holders, who shall be named as a " selling stockholder" therein and meets the requirements of the Registration Rights Agreement.

" Dilutive Issuance" shall have the meaning set forth in Section 7(b).


3

" Dilutive Issuance Notice" shall have the meaning set forth in Section 7(b).

" Effective Date" means the date that the Conversion Shares Registration Statement is declared effective by the Commission.

" Equity Conditions" means, during the period in question, (i) the Corporation shall have duly honored all conversions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the applicable Holder on or prior to the dates so requested or required, if any, (ii) the Corporation shall have paid all liquidated damages and other amounts owing to the applicable Holder in respect of the Preferred Stock, (iii) there is an effective Conversion Shares Registration Statement pursuant to which the Holders are permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable upon conversion of all the Preferred Stock outstanding (and the Corporation believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or all such Preferred Stock Outstanding is otherwise freely saleable pursuant to Rule 144, (iv) the Common Stock is trading on the Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed for trading on such Trading Market (and the Corporation believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized, but unissued and otherwise unreserved, shares of Common Stock for the issuance of all of the shares of Common Stock issuable pursuant to the Transaction Documents, (vi) there is no existing Triggering Event or no existing event which, with the passage of time or the giving of notice, would constitute a Triggering Event, (vii) the issuance of the shares in question (or, in the case of a redemption, the shares issuable upon conversion in full of the redemption amount) to the applicable Holder would not violate the limitations set forth in Section 6(c), (viii) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (ix) the applicable Holder is not in possession of any information that constitutes, or may constitute, material non-public information, and (x) for each Trading Day in a period of 20 consecutive Trading Days prior to the applicable date in question, the daily trading volume for the Common Stock on the principal Trading Market exceeds (1) 75,000 shares per Trading Day (subject to adjustment for forward and reverse stock splits and the like).

" Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

" Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers, consultants or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or


4

exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with, or complementary to, the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

" February Debenture" means 8% Secured Convertible Debentures due February 28, 2011 issued by the Company.

" Forced Conversion Amount" means the sum of (i) 110% of the aggregate Stated Value then outstanding and (ii) all liquidated damages and other amounts due in respect of the Preferred Stock. " Forced Conversion Date" shall have the meaning set forth in Section 8(a). " Forced Conversion Notice" shall have the meaning set forth in Section 8(a). " Forced Conversion Notice Date" shall have the meaning set forth in Section 8(a). " Fundamental Transaction" shall have the meaning set forth in Section 7(e). " Holder" shall have the meaning given such term in Section 2. " Junior Securities" means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.

" Liquidation" shall have the meaning set forth in Section 5.

" New York Courts" shall have the meaning set forth in Section 11(d).

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

" Optional Redemption" shall have the meaning set forth in Section 8(b).

" Optional Redemption Amount" means the sum of (i) 130% of the aggregate Stated Value then outstanding and (ii) all liquidated damages and other amounts due in respect of the Preferred Stock.

" Optional Redemption Date" shall have the meaning set forth in Section 8(b).


5

" Optional Redemption Notice" shall have the meaning set forth in Section 8(b).

" Optional Redemption Notice Date" shall have the meaning set forth in Section 8(b).

" Original Issue Date" means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock. " Preferred Stock" shall have the meaning set forth in Section 2. " Purchase Agreement" means the Securities Purchase Agreement, dated as of January , 2008, to which the Corporation and the original Holders are parties, as amended, modified or supplemented from time to time in accordance with its terms.

" Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, to which the Corporation and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.

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

" September Debenture" means the 8% Secured Convertible Debentures due September 29, 2010 issued by the Company.

" Share Delivery Date" shall have the meaning set forth in Section 6(e).

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

" Subscription Amount" means, as to each Purchaser, the amount in United States Dollars and in immediately available funds to be paid for the Preferred Stock purchased pursuant to the Purchase Agreement as specified below such Purchaser' s name on the signature page of the Purchase Agreement and next to the heading " Subscription Amount."

" Subsidiary" shall have the meaning set forth in the Purchase Agreement.

" Threshold Period" shall have the meaning set forth in Section 8(a).

" Trading Day" means a day on which the principal Trading Market is open for business.


6

" Trading Market" means The NASDAQ Global Market. " Transaction Documents" shall have the meaning set forth in the Purchase Agreement. " Triggering Event" shall have the meaning set forth in Section 9(a). " Triggering Redemption Amount" means, for each share of Preferred Stock, the sum of (i) the greater of (A) 130% of the Stated Value and (B) the product of (a) the average VWAP for ten Trading Day immediately preceding the date of the Triggering Event and (b) the Stated Value divided by the then Conversion Price and (ii) all liquidated damages and other costs, expenses or amounts due in respect of the Preferred Stock.

" Triggering Redemption Payment Date" shall have the meaning set forth in Section 9(c).

" VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the " Pink Sheets" published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.

Section 2 . Designation, Amount and Par Value . The series of preferred stock shall be designated as its Series A-1 Convertible Preferred Stock (the " Preferred Stock" ) and the number of shares so designated shall be up to 8,950 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a " Holder" and collectively, the " Holders" )). Each share of Preferred Stock shall have a par value of $1.00 per share and a stated value equal to $1,000 (the " Stated Value" ).


7

Section 3 . Dividends . a) No Dividends in Cash or in Kind . Holders shall be not be entitled to receive, dividends on the Preferred Stock. b) Prohibition on Redemption of Junior Stock . So long as any Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities except as expressly permitted by Section 9(b)(ix). So long as any Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall directly or indirectly pay or declare any dividend or make any distribution upon, nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Preferred Stock.

c) Corporate Capital . The Corporation acknowledges and agrees that the capital of the Corporation (as such term is used in Section 607.0602 of the Florida Business Corporation Act) in respect of the Preferred Stock and any future issuances of the Corporation' s capital stock shall be equal to the aggregate par value of such Preferred Stock or capital stock, as the case may be, and that, on or after the date of the Purchase Agreement, it shall not increase the capital of the Corporation with respect to any shares of the Corporation' s capital stock issued and outstanding on such date. The Corporation also acknowledges and agrees that it shall not create any special reserves under Section 607.0602 of the Florida Business Corporation Act without the prior written consent of each Holder.

Section 4 . Voting Rights . Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock amend this certificate to (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to or otherwise pari passu with the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing. Section 5 . Liquidation . Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a " Liquidation" ), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A Fundamental Transaction or


8

Change of Control Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.

Section 6 . Conversion . a) Conversions at Option of Holder . Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(c) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a " Notice of Conversion" ). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the " Conversion Date" ). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing such shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be ...