WWW.EXFILE.COM -- 13311 -- MATRITECH, INC. -- EXHIBIT 4.1


EXHIBIT
4.1



 


CERTIFICATE
OF DESIGNATIONS, PREFERENCES AND RIGHTS




OF




SERIES A
CONVERTIBLE PREFERRED STOCK




OF




MATRITECH,
INC.




(Pursuant
to Section 151 of the

Delaware
General Corporation Law)













Matritech,
Inc., a corporation organized and existing under the laws of the State of
Delaware (the “Corporation”), hereby certifies that, pursuant to authority
vested in the Board of Directors of the Corporation by Article Fourth of the
Amended and Restated Certificate of Incorporation of the Corporation, as amended
(the “Certificate of Incorporation”), the following resolution was adopted as of
March 3, 2005 by the Board of Directors of the Corporation pursuant to
Section 151 of the Delaware General Corporation Law:




“RESOLVED
that, pursuant to authority vested in the Board of Directors of the Corporation
by Article Fourth of the Corporation’s Certificate of Incorporation, out of the
total authorized number of 4,000,000 shares of its preferred stock, par value
$1.00 per share (“Preferred Stock”), there shall be designated a series of
1,426,124 shares which shall be issued in and constitute a single series to be
known as “Series A Convertible Preferred Stock” (hereinafter called the “Series
A Preferred Stock”). The shares of Series A Preferred Stock have the voting
powers, designations, preferences and other special rights, and qualifications,
limitations and restrictions thereof set forth below:




1. Certain
Definitions.




As used
in this Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of Matritech, Inc., the following terms shall have
the respective meanings set forth below:




“Affiliate”, as
applied to any Person, means any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. For the
purposes of this definition, “control” (including, with correlative meanings,
the terms “controlling”, “controlled by” and “under common control with”), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract or
otherwise.

 


 



















 


“Common
Stock” means
the common stock, $0.01 par value per share, of the Corporation, including the
stock into which the Series A Preferred Stock is convertible, and any securities
into which the Common Stock may be reclassified.




“Convertible
Debentures” means
the Corporation’s 7.5% Convertible Debentures issued March 31,
2003.




“Excluded
Stock” means
(A) capital stock, Options (as defined in Section 4D(1)) or Convertible
Securities (as defined in Section 4D(1)) issued to employees, consultants,
officers or directors of the Corporation pursuant to any stock or option plan
duly adopted by a majority of the non-employee members of the Board of Directors
of the Corporation or a majority of the members of a committee of non-employee
directors established for such purpose, (B) shares of Common Stock issued upon
the conversion or exercise of Options or Convertible Securities issued prior to
the date hereof, provided that such securities have not been amended since the
date hereof to increase the number of shares of Common Stock issuable thereunder
or to lower the exercise or conversion price thereof, (C) securities issued
pursuant to that certain Purchase Agreement dated March 4, 2005, among the
Corporation and the Investors named therein (the “Purchase Agreement”) and
securities issued upon the exercise or conversion of those securities, (D)
capital stock or Convertible Securities issued in a joint venture, strategic
partnership or licensing arrangement, the primary purpose of which is not the
raising of capital and (E) shares of Common Stock issued or issuable by reason
of a dividend, stock split or other distribution on shares of Common Stock (but
only to the extent that such a dividend, split or distribution results in an
adjustment in the Conversion Price pursuant to the other provisions of this
Series A Preferred Stock).




“Person” shall
be construed in the broadest sense and means and includes any natural person, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
other entity or governmental or quasi-governmental entity.




“Series
A Stated Value” means
$8.80.




“Subsidiary” means
any corporation, association or other business entity (i) at least 50% of the
outstanding voting securities of which are at the time owned or controlled,
directly or indirectly, by the Corporation; or (ii) with respect to which the
Corporation possesses, directly or indirectly, the power to direct or cause the
direction of the affairs or management of such person;




2. Dividends.
Dividends on the Series A Preferred Stock may be declared and paid from time to
time as determined by the Corporation’s Board of Directors out of funds legally
available therefor. The Corporation shall not declare, pay or set aside any
dividends or distributions on shares of Common Stock (other than dividends
payable solely in shares of Common Stock), unless the holders of Series A
Preferred Stock, first
receive, or simultaneously receive, a dividend or distribution on each
outstanding share of Series A Preferred Stock, equal to
the product of (i) the per share dividend or distribution to be declared, paid
or set aside for the Common Stock, multiplied by 

 

 







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(ii) the
number of shares of Common Stock into which such share of Series A Preferred
Stock is then convertible.




3. Liquidation. Upon
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of the shares of Series A Preferred Stock shall be
entitled, before any distributions shall be made to the holders of the Common
Stock, or any other class or series of capital stock of the Corporation ranking
junior to the Series A Preferred Stock, as to
such distributions, to be paid an amount per share equal to the Series A Stated
Value plus any declared and unpaid Series A Preferred Dividends (the
“Liquidation Preference”). If upon such liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of the Series A Preferred Stock and any class or
series of capital stock ranking on a parity with the Series A Preferred Stock as
to such distributions shall be insufficient to permit payment to the holders of
the Series A Preferred Stock and any such class or series of capital stock of
their respective liquidation amount, then the entire assets of the Corporation
to be distributed shall be distributed pro rata to the holders of Series A
Preferred Stock and the holders of such class or series of capital stock ranking
on a parity with the Series A Preferred Stock as to such distributions according
to the preferential amounts due thereon. A consolidation or merger of the
Corporation into or with any other entity or entities, a share exchange, a sale
of Common Stock or the sale or transfer by the Corporation of all or
substantially all of its assets, in each case under circumstances in which the
holders of all of the voting power of the outstanding capital stock of the
Corporation, immediately prior to such a merger, consolidation, share exchange
or sale, own less than a majority in voting power of the outstanding capital
stock of the corporation or the surviving or resulting corporation or acquirer,
as the case may be, immediately following such a merger, consolidation, share
exchange or sale (each such transaction being hereinafter referred to as a
“Corporate Transaction”) shall be deemed to be a liquidation within the meaning
of this Section 3.




4. Conversion.




4A. Right
to Convert.




(a) Subject
to the terms and conditions of this paragraph 4A, the holder of any share or
shares of Series A Preferred Stock shall have the right, at its option at any
time, to convert any such shares of Series A Preferred Stock into such number of
fully paid and nonassessable whole shares of Common Stock as is obtained by
multiplying the number of shares of Series A Preferred Stock so to be converted
by the Liquidation Preference per share and dividing the result by the
conversion price of $0.88 per share or, if there has been an adjustment of the
conversion price, by the conversion price as last adjusted and in effect at the
date any share or shares of Series A Preferred Stock are surrendered for
conversion (such price, or such price as last adjusted, being referred to herein
as the “Conversion Price”). Such rights of conversion shall be exercised by the
holder thereof by surrender of a certificate or certificates for the shares to
be converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Series A Preferred Stock) at any time during its
usual business hours on the date set forth in such notice, together with a
properly completed notice of conversion in the form attached to the Series A
Preferred Stock certificate with a statement 

 

 







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of the
name or names (with address), subject to compliance with applicable laws to the
extent such designation shall involve a transfer, in which the certificate or
certificates for shares of Common Stock, shall be issued. Such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation and the certificate or certificates for such
shares shall have been surrendered as aforesaid.

 

(b) Beneficial
Ownership Limitation. The
Corporation shall not effect any conversion of the Preferred Stock, and the
holder shall not have the right to convert any portion of the Preferred Stock to
the extent that after giving effect to such conversion, the holder (together
with the holder’s affiliates), as set forth on the applicable notice of
conversion, would beneficially own in excess of 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to such
conversion.  For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by the holder and its affiliates shall
include the number of shares of Common Stock issuable upon conversion of the
Preferred Stock with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of Common Stock which would
be issuable upon (A) conversion of the remaining, nonconverted Stated Value of
Preferred Stock beneficially owned by the holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Corporation (including the Warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the holder or any of its affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 4A(b),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
1934 Act. To the extent that the limitation contained in this Section 4A(b)
applies, the determination of whether the Preferred Stock are convertible (in
relation to other securities owned by the holder together with any affiliates)
and of which shares of Preferred Stock is convertible shall be in the sole
discretion of such holder, and the submission of a notice of conversion shall be
deemed to be such holder’s determination of whether the shares of Preferred
Stock may be converted (in relation to other securities owned by such holder)
and which shares of the Preferred Stock are convertible, in each case subject to
such aggregate percentage limitations. To ensure compliance with this
restriction, the holder will be deemed to represent to the Corporation each time
it delivers a notice of conversion that such notice of conversion has not
violated the restrictions set forth in this paragraph and the Corporation shall
have no obligation to verify or confirm the accuracy of such determination. For
purposes of this Section 4A(b), in determining the number of outstanding shares
of Common Stock, the holder may rely on the number of outstanding shares of
Common Stock as reflected in the most recent of the following: (A) the
Corporation’s most recent Form 10-Q or Form 10-K, as the case may be, (B) a more
recent public announcement by the Corporation or (C) any other notice by the
Corporation or the Corporation’s transfer agent setting forth the number of
shares of Common Stock outstanding.  Upon the written or oral request of
the holder, the Corporation shall within two trading days confirm orally and in
writing to the holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Corporation, including the Preferred Stock, by the


 

 







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holder or
its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section 4A(b) may be waived by
the holder upon, at the election of the holder, upon not less than 61 days’
prior notice to the Corporation, and the provisions of this Section 4A(b) shall
continue to apply until such 61st day (or
such later date, as determined by the holder, as may be specified in such notice
of waiver).




4B. Issuance
of Certificates; Time Conversion Effected.
Promptly after the conversion of the Series A Preferred Stock and surrender of
the certificate or certificates for the share or shares of the Series A
Preferred Stock being converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, subject to compliance with applicable laws to
the extent such designation shall involve a transfer, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such share or shares of Series A Preferred Stock. Upon the
effective date of any such conversion, the rights of the holder of the shares of
Series A Preferred Stock being converted shall cease, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby.




4C. Fractional
Shares; Dividends. No
fractional shares shall be issued upon conversion of the Series A Preferred
Stock into Common Stock. In lieu of any fractional share interest, the
Corporation shall pay to the converting holder an amount equal to such
fractional interest multiplied by the Market Price of a share of Common Stock on
the date such conversion is deemed to be effective..




4D. Adjustment
of Conversion Price. If the
Corporation shall issue or sell, or is, in accordance with subsections 4D(1)
through 4D(8) below, deemed to have issued or sold, any additional shares of
Common Stock, other than Excluded Stock (the “New
Issuance Shares”),
without consideration or for a consideration per share less than the Conversion
Price in effect immediately prior to the time of such issue or sale (the lowest
price at which such shares of Common Stock are issued or deemed to be issued
hereunder is hereinafter referred to as the “New
Issuance Price”), then
and in each such case (a “Trigger
Issuance”) the
then-existing Conversion Price, shall be reduced, as of the close of business on
the effective date of the Trigger Issuance, to a price determined in accordance
with the immediately succeeding paragraphs.




Prior to
stockholder approval of the Proposal (as defined in the Purchase Agreement), the
Conversion Price shall be reduced to the higher of (i) the New Issuance Price or
(ii) $0.70 (appropriately adjusted for any stock split, reverse stock split,
stock dividend or other reclassification or combination of the Common Stock
occurring after the date hereof) (the “Full-Ratchet
Floor Price”). From
and after the date of stockholder approval of the Proposal, if any, the
Conversion Price shall be reduced to the New Issuance Price; provided, however,
that in the event that such New Issuance Price shall be less than the
Full-Ratchet Floor Price; the Conversion Price shall first be lowered to the
Full-Ratchet Floor Price (to the extent it has 

 

 







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not
already been so lowered) and shall then be further adjusted as
follows:




Adjusted
Conversion Price = (A x
B) + D

 A+C




where




“A”
equals the number of shares of Common Stock outstanding immediately preceding
such Trigger Issuance, (including shares of Common Stock issuable upon the
conversion of (i) the Convertible Debentures and (ii) the outstanding Series A
Preferred Stock);




“B”
equals the lesser of (i) the Full-Ratchet Floor Price or (ii) Conversion Price
in effect immediately preceding such Trigger Issuance;




“C”
equals the number of New Issuance Shares issued or deemed issued hereunder as a
result of the Trigger Issuance (but excluding any additional shares of Common
Stock issuable hereunder as a result of adjustments made pursuant to this
Section 4(D)); and




“D”
equals the aggregate consideration, if any, received or deemed to be received by
the Corporation upon such Trigger Issuance;




provided,
however, that in no event shall the Conversion Price after giving effect to such
Trigger Issuance be greater than the Conversion Price in effect prior to such
Trigger Issuance.




For
purposes of this subsection 4D, the following paragraphs 4D(1) to 4D(8) shall
also be applicable:




4D(1)
Issuance
of Rights or Options. In case
at any time the Corporation shall in any manner grant (directly and not by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called “Options” and such convertible or
exchangeable stock or securities being called “Convertible Securities”) whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the sum
(which sum shall constitute the applicable consideration) of (x) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus (y) the aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus (z), in the case of such Options which relate to Convertible Securities,
the aggregate amount of additional consideration, if any, payable upon the issue
or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the 

 

 







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exercise
of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such
Options, then the total number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total amount of
such Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Conversion
Price. Except as otherwise provided in subsection 4D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.




4D(2)
Issuance
of Convertible Securities. In case
the Corporation shall in any manner issue (directly and not by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus (y) the aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Conversion Price in effect immediately prior to the time of such
issue or sale, then the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall be deemed
to have been issued for such price per share as of the date of the issue or sale
of such Convertible Securities and thereafter shall be deemed to be outstanding
for purposes of adjusting the Conversion Price, provided that (a) except as
otherwise provided in subsection 4D(3), no adjustment of the Conversion Price
shall be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities and (b) no further adjustment of the
Conversion Price shall be made by reason of the issue or sale of Convertible
Securities upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Conversion Price have been made pursuant
to the other provisions of subsection 4D.

 

4D(3)
Change
in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subsection 4D(l) hereof, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 4D(l) or 4D(2), or the rate at
which Convertible Securities referred to in subsections 4D(l) or 4D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price in effect at the
time of such event shall forthwith be readjusted to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional 

 

 







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consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold. On the termination of any Option for which any adjustment was made
pursuant to this subsection 4(D) or any right to convert or exchange Convertible
Securities for which any adjustment was made pursuant to this subsection 4(D)
(including without limitation upon the redemption or purchase for consideration
of such Convertible Securities by the Corporation), the Conversion Price then in
effect hereunder shall forthwith be changed to the Conversion Price which would
have been in effect at the time of such termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
termination, never been issued.




4D(4)
Stock
Dividends. Subject
to the provisions of this subsection 4D, in case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation (other
than the Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.




4D(5)
Subdivision
or Combination of Stock. In case
the Corporation shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares or shall declare or pay a dividend on its
outstanding shares of Common Stock payable in shares of Common Stock, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock of the Corporation shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.




4D(6)
Consideration
for Stock. In case
any shares of Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for nominal
consideration. If Common Stock, Options or Convertible Securities shall be
issued or sold by the Corporation and, in connection therewith, other Options or
Convertible Securities (the “Additional Rights”) are issued without any specific
consideration allocated to such Additional Rights, then the consideration
received or deemed to be received by the Corporation for such Additional Rights
shall be deemed to be nominal.




4D(7)
Record
Date. In case
the Corporation shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date 

 

 







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shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.




4D(8)
Treasury
Shares. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Corporation or any of its
wholly-owned subsidiaries, and the disposition of any such shares (other than
the cancellation or retirement thereof) shall be considered an issue or sale of
Common Stock for the purpose of this Section 4D.




4E Stock
Splits and Dividends. If the
Corporation shall, at any time or from time to time while the Series A Preferred
Stock is outstanding, pay a dividend or make a distribution on its Common Stock
in shares of Common Stock, subdivide its outstanding shares of Common Stock into
a greater number of shares or combine its outstanding shares of Common Stock
into a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing corporation), then the Conversion Price in effect
immediately prior to the date upon which such change shall become effective
shall be adjusted by the Corporation so that the holder thereafter converting
its shares of Series A Preferred Stock shall be entitled to receive the number
of shares of Common Stock or other capital stock which the such holder would
have received if the shares of Series A Preferred Stock had been converted
immediately prior to such event. Such adjustments shall be made successively
whenever any event listed above shall occur.




4F. Reorganization
or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way (including, without limitation, by
way of consolidation or merger) that holders of Common Stock but not holders of
Series A Preferred Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock then, as a condition of
such reorganization or reclassification, lawful and adequate provision shall be
made whereby each holder of a share or shares of Series A Preferred Stock shall
thereafter have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the conversion of such share
or shares of the Series A Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such reorganization or
reclassification not taken place and in any such case appropriate provision
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the Conversion Price) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights (including an immediate
adjustment, by reason of such reorganization or reclassification, of the
Conversion Price to the value for the Common Stock 

 

 







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reflected
by the terms of such reorganization or reclassification if the value so
reflected is less than the Conversion Price in effect immediately prior to such
reorganization or reclassification). In the event of a merger or consolidation
of the Corporation as a result of which a greater or lesser number of shares of
common stock of the surviving corporation are issuable to holders of the Common
Stock of the Corporation outstanding immediately prior to such merger or
consolidation, the Conversion Price in effect immediately prior to such merger
or consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock of the
Corporation.




4G. Distributions. In case
the Corporation shall fix a payment date for the making of a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Corporation is the continuing
corporation) of evidences of indebtedness or assets (other than cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions referred to in Section 4E), or subscription rights or
warrants, the Conversion Price to be in effect after such payment date shall be
determined by multiplying the Conversion Price in effect immediately prior to
such payment date by a fraction, the numerator of which shall be the total
number of shares of Common Stock outstanding multiplied by the Market Price (as
defined below) per share of Common Stock immediately prior to such payment date,
less the fair market value (as determined by the Corporation’s Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such Market Price per share of Common Stock immediately prior to such payment
date. “Market Price” as of a particular date (the “Valuation Date”) shall mean
the following: (a) if the Common Stock is then listed on a national stock
exchange, the closing sale price of one share of Common Stock on such exchange
on the last trading day prior to the Valuation Date; (b) if the Common Stock is
then quoted on The Nasdaq Stock Market, Inc. (“Nasdaq”), the National
Association of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin
Board”) or such similar exchange or association, the closing sale price of one
share of Common Stock on Nasdaq, the Bulletin Board or such other exchange or
association on the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and the low asked
price quoted thereon on the last trading day prior to the Valuation Date; or (c)
if the Common Stock is not then listed on a national stock exchange or quoted on
Nasdaq, the Bulletin Board or such other exchange or association, the fair
market value of one share of Common Stock as of the Valuation Date, shall be
determined in good faith by the Board of Directors of the Corporation and the
holders of at least a majority of the outstanding Series A Preferred Stock. If
the Common Stock is not then listed on a national securities exchange, the
Bulletin Board or such other exchange or association, the Board of Directors of
the Corporation shall respond promptly, in writing, to an inquiry by a holder of
Series A Preferred Stock prior to the exercise hereunder as to the fair market
value of a share of Common Stock as determined by the Board of Directors of the
Corporation. In the event that the Board of Directors of the Corporation and the
holders of at least a majority of the 

 

 







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outstanding
Series A Preferred Stock are unable to agree upon the fair market value in
respect of subpart (c) hereof, the Corporation and the holders of at least a
majority of the outstanding Series A Preferred Stock shall jointly select an
appraiser, who is experienced in such matters. The decision of such appraiser
shall be final and conclusive, and the cost of such appraiser shall be borne
equally by the Corporation and such holders. Such adjustment shall be made
successively whenever such a payment date is fixed.




4H. Effective
Date of Adjustment. An
adjustment to the Conversion Price shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an
adjustment.




4I. Subsequent
Adjustments. In the
event that, as a result of an adjustment made pursuant to this Section 4,
holders of Series A Preferred Stock shall become entitled to receive any shares
of capital stock of the Corporation other than shares of Common Stock, the
number of such other shares so receivable upon the conversion of the Series A
Preferred Stock shall be subject thereafter to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Conversion Shares contained herein.




4J. Notice
of Adjustment. Upon
any adjustment of the Conversion Price, then, and in each such case the
Corporation shall give written notice thereof by first class mail, postage
prepaid, addressed to each holder of shares of Series A Preferred Stock at the
address of such holder as shown on the books of the Corporation, which notice
shall state the Conversion Price resulting from such adjustment, setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based.




4K. Other
Notices. In case
at any time:




(1) the
Corporation shall declare any dividend upon its Common Stock payable in cash or
stock or make any other distribution to the holders of its Common
Stock;




(2) the
Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of such stock of any class or
other rights;




(3) there
shall be any capital reorganization or reclassification of the capital stock of
the Corporation, or a consolidation or merger of the Corporation with, or a sale
of all or substantially all its assets to, another corporation; or




(4) there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;




then, in
any one or more of said cases, the Corporation shall give, by first class mail,
postage prepaid, addressed to each holder of any shares of Series A Preferred
Stock at the address of such holder as shown on the books of the Corporation,
(a) at least 15 days prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in


 

 







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respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 15 days prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.




4L. Stock
to be Reserved.




(1) The
Corporation will at all times reserve and keep available out of its authorized
but unissued Common Stock solely for the purpose of issuance upon the conversion
of the Series A Preferred Stock as herein provided, such number of shares of
Common Stock as shall then be issuable upon the conversion of all outstanding
shares of Series A Preferred Stock. All shares of Common Stock which shall be so
issued shall be duly and validly issued and fully paid and nonassessable and
free from all liens, duties and charges arising out of or by reason of the issue
thereof (including, without limitation, in respect of taxes) and, without
limiting the generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be requisite to assure that the
par value per share of the Common Stock is at all times equal to or less than
the effective Conversion Price. The Corporation will take all such action within
its control as may be necessary on its part to assure that all such shares of
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities exchange upon
which the Common Stock of the Corporation may be listed. The Corporation will
not take any action which results in any adjustment of the Conversion Price if
after such action the total number of shares of Common Stock issued and
outstanding and thereafter issuable upon exercise of all options and conversion
of Convertible Securities, including upon conversion of the Series A Preferred
Stock, would exceed the total number of shares of such class of Common Stock
then authorized by the Corporation's Certificate of Incorporation.




(2) The
Corporation will at all times reserve and keep available out of its authorized
Series A Preferred Stock such number of shares of Series A Preferred Stock as is
equal to the number of shares of Series A Preferred Stock then outstanding. All
shares of Series A Preferred Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all liens, duties
and charges arising out of or by reason of the issue thereof (including, without
limitation, in respect of taxes).




4M. No
Reissuance of Series A Preferred Stock. Shares
of Series A Preferred Stock that are converted into shares of Common Stock as
provided herein shall be retired and may not be reissued as Series A Preferred
Stock but may be reissued as all or part of another series of Preferred
Stock.

 


 







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4N. Issue
Tax. The
issuance of certificates for shares of Common Stock upon conversion of the
Series A Preferred Stock shall be made without charge to the holders thereof for
any issuance tax, stamp tax, transfer tax, duty or charge in respect thereof,
provided that the Corporation shall not be required to pay any tax, duty or
charge which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than that of the holder of the
Series A Preferred Stock which is being converted.




4O. Closing
of Books. The
Corporation will at no time close its transfer books against the transfer of any
Series A Preferred Stock or of any shares of Common Stock issued or issuable
upon the conversion of any shares of Series A Preferred Stock in any manner
which interferes with the timely conversion of such Series A Preferred Stock;
provided,
however, nothing
herein shall be construed to prevent the Corporation from setting record dates
for the holders of its securities.




4P. Mandatory
Conversion.
Simultaneously with the consummation of a Corporate Transaction, the Series A
Preferred Stock may automatically be converted into Common Stock at the then
applicable Conversion Price upon the receipt of the written notice of holders of
seventy-five percent (75%) of the then-outstanding shares of Series A Preferred
Stock of their election to cause an automatic conversion pursuant to this
subparagraph 4P. Any such conversion shall only be effective upon consummation
of the Corporate Transaction giving rise to such conversion.




5. Voting
- Series A Preferred Stock. In
addition to any class voting rights provided by law and this Certificate of
Designation, the holders of Series A Preferred Stock shall have the right to
vote together with the holders of Common Stock as a single class on any matter
on which the holders of Common Stock are entitled to vote (including the
election of directors). With respect to the voting rights of the holders of the
Series A Preferred Stock pursuant to the preceding sentence, each holder of
Series A Preferred Stock shall be entitled to a number of votes for each share
of Series A Preferred Stock held by such holder on the record date for the
determination of shareholders entitled to vote equal to the quotient obtained by
dividing the Conversion Price in effect on the relevant record date by $1.34
(appropriately adjusted for any stock split, reverse stock split, stock dividend
or other reclassification or combination of the Common Stock occurring after the
date hereof).




6. Certain
Restrictions. In
addition to any other vote of the holders of Series A Preferred Stock required
by law or by the Certificate of Incorporation, without the prior consent of the
holders of at least 75% of the outstanding Series A Preferred Stock, given in
person or by proxy, either in writing or at a special meeting called for that
purpose, at which meeting the holders of the shares of such Series A Preferred
Stock shall vote together as a class, the Corporation will not:




(a) authorize,
create, designate, establish or issue (whether by merger or otherwise) (i) an
increased number of shares of Series A Preferred Stock, or (ii) any other class
or series of capital stock ranking senior to or on parity with the Series A
Preferred 

 

 







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Stock as
to dividends or upon liquidation or reclassify any shares of Common Stock into
shares having any preference or priority as to dividends or upon liquidation
superior to or on parity with any such preference or priority of Series A
Preferred Stock;




(b) enter
into or consummate any Corporate Transaction;




(c) incur,
assume or suffer to exist any indebtedness for borrowed money in excess of
$2,000,000 in the aggregate, other than indebtedness incurred pursuant to a
receivable or equipment lease financing;




(d) amend,
alter or repeal, whether by merger, consolidation or otherwise, the Certificate
of Incorporation or By-laws of the Corporation or the Resolutions contained in
this Certificate of Designations of the Series A Preferred Stock and the powers,
preferences, privileges, relative, participating, optional and other special
rights and qualifications, limitations and restrictions thereof, which would
adversely affect any right, preference, privilege or voting power of the Series
A Preferred Stock, or which would increase or decrease the amount of authorized
shares of the Series A Preferred Stock or of any other series of preferred stock
ranking senior to the Series A Preferred Stock, with respect to the payment of
dividends (whether or not such series of preferred stock is cumulative or
noncumulative as to payment of dividends) or upon liquidation; provided,
however, that an increase in the authorized shares of Common Stock shall be
deemed not to adversely affect the Series A Preferred Stock;




(e) directly
or indirectly, declare or pay any dividend (other than dividends permitted
pursuant to Section 2 and dividends payable in shares of Common Stock but only
to the extent that such stock dividend results in an adjustment of the
Conversion Price pursuant to Section 4(D)(4)) or directly or indirectly
purchase, redeem, repurchase or otherwise acquire or permit any Subsidiary to
redeem, purchase, repurchase or otherwise acquire (or make any payment to a
sinking fund for such redemption, purchase, repurchase or other acquisition) any
share of Common Stock or any other class or series of the Corporation’s capital
stock (except for shares of Common Stock repurchased from current of former
employees, consultants, or directors upon termination of service in accordance
with plans approved by the Corporation’s Board of Directors) whether in cash,
securities or property or in obligations of the Corporation or any Subsidiary;
or




(f) agree to
do any of the foregoing.




7. No
Waiver. Except
as otherwise modified or provided for herein, the holders of Series A Preferred
Stock shall also be entitled to, and shall not be deemed to have waived, any
other applicable rights granted to such holders under the Delaware General
Corporation Law.




8. No
Impairment. The
Corporation will not, through any reorganization, transfer of assets, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation but will at all time in good faith
assist in the carrying out of all the 

 

 







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provisions
of this Article Fourth and in the taking of all such action as may be necessary
or appropriate in order to protect the conversion rights and liquidation
preferences granted hereunder of the holders of the Series A Preferred Stock
against impairment.




9. Amendment;
Waiver. Any
term of the Series A Preferred Stock may be amended or waived (including the
adjustment provisions included in Section 4(D) hereof) upon the written consent
of the Corporation and the holders of at least 75% of the Series A Preferred
Stock then outstanding, voting together as a single class; provided,
however that the
number of Conversion Shares issuable hereunder and the Conversion Price may not
be amended, and the right to convert the Series A Preferred Stock may not be
altered or waived, without the written consent of the holders of all of the
Series A Preferred Stock then outstanding.




10. Action
By Holders. Any
action or consent to be taken or given by the holders of the Series A Preferred
Stock may be given either at a meeting of the holders of the Series A Preferred
Stock called and held for such purpose or by written consent. 




[Execution
Page Follows]








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IN
WITNESS WHEREOF, the undersigned has executed Certificate of Designations,
Preferences and Rights this 4th day of March, 2005.








	 	 	 
	 	MATRITECH, INC.
	 
 	 
 	 
 
		By:  	/s/ Stephen D. Chubb
	 	
      


      Name:
      Stephen D. Chubb

	 	
      Title:
      Chief Executive Officer














 

 









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