Document:

Exhibit 4.2

THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR
ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ANDOVER MEDICAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

2007-D-1

WARRANT
TO PURCHASE SHARES

OF THE COMMON STOCK OF

ANDOVER MEDICAL, INC.

(Void after Expiration Date – May 8, 2012)

Issue Date: May 8, 2007

This
certifies that Vicis Capital Master Fund or its successors or assigns (“Holder”) shall be
entitled to purchase from Andover Medical,
Inc., a Delaware corporation (“Company”), having its principal place of
business at 510 Turnpike Street, Suite 204, N. Andover, MA 01845, 4,857,143 fully
paid and non-assessable shares (“Warrant
Shares”) of the Company’s common stock, par value $.001
per share (“Common Stock”),
at a price per share equal to the Exercise Price (as defined below).

This
Warrant is being issued to the Holder in connection with the offering of up to 34
units (the “Units”) at a price of $50,000 per
Unit (the “Series B Offering”), or a
maximum offering of $1,700,000 pursuant to offering documents dated the date
hereof.  Each Unit will consist of (i)
fifty shares of Series B Convertible Preferred Stock of the Corporation, par
value $.001 per share (“Series B Preferred Stock”),
with a Face Value of $1,000 per share, with each share initially convertible
into 2,857 shares, or an aggregate of 142,850 shares per Unit, of common stock,
$.001 par value (“Common Stock”)
at $0.35 per share of Common Stock (the “Offering Price”),
(ii) Class C Common Stock Purchase Warrants to purchase 142,850 shares of
Common Stock exercisable for a period of five years at $0.35 per share (the “C Warrant”), and (iii) Class D Common Stock Purchase Warrants
to purchase 142,850 shares of Common Stock exercisable for a period of five
years at a price of $0.35 per share (“this  Warrant”). This Warrant is one of several which will be identical
except for names and amounts.  Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Subscription
Agreement.

The
initial exercise price (“Exercise Price”)
of this Warrant will be equal to $0.35 per share, subject to adjustment upon
the occurrence of the events described in Section 2 of this Warrant.

This
Warrant shall be immediately exercisable into shares of Common Stock at any
time, or from time-to-time, up to and including 5:00 p.m. (Eastern Standard
time) on 

the
fifth anniversary of the Effective Date of the registration statement (the “Series B  Registration Statement”)
of the Company on Form SB-2, or another suitable form permitted by the SEC,
registering the shares of Common Stock underlying the Series B Preferred Stock
and the C and D Warrants (the “Expiration Date”);
provided, however, if such date is not a Business Day, then on the Business Day
immediately following such date). “Business Day”
means any day except a Saturday, Sunday or other day on which commercial banks
in the City of New York, New York are authorized by law to close.

This
Warrant is exercisable in whole or in part upon the surrender to the Company at
its principal place of business (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed with a form of
subscription in substantially the form attached hereto duly filled in and
signed and, if applicable, upon payment in cash or by check of the aggregate
Exercise Price for the number of shares for which this Warrant is being
exercised as determined in accordance with the provisions hereof.

1.     Exercise;
Issuance of Certificates; Payment for Shares.

1.1                               General.  This Warrant is exercisable in full, or in
part, in increments of 1,000 shares, except for the final exercise which may be
for the remainder, at the option of the Holder of record at any time or from
time to time, up to the Expiration Date for all of the shares of Common Stock
(but not for a fraction of a share) which may be purchased hereunder.  In the case of the exercise of less than all
of the Warrants represented hereby, the Company shall cancel this Warrant
Certificate upon the surrender hereof and shall execute and deliver a new  Warrant Certificate or Warrant Certificates
of like tenor for the balance of such Warrants. The Company agrees that the shares of
Common Stock purchased under this Warrant shall be and are deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which the exercise notice (attached hereto as Schedule
A or B) is delivered to the Company via facsimile; provided, however, that in
such case this Warrant shall be surrendered to the Company within three (3)
business days.  Certificates for the
shares of Common Stock so purchased, together with any other securities or
property to which the Holder is entitled upon such exercise, shall be delivered
to the Holder by the Company at the Company’s expense within a reasonable time
after the rights represented by this Warrant have been so exercised, and in any
event, within three business days of such exercise and delivery of the Exercise
Price.  The Company shall, no later than
the close of business on the first business day following the date on which the
Company receives the exercise notice by facsimile transmission issue and
deliver to the Company’s Transfer Agent irrevocable instructions to issue and
deliver or cause to be delivered to such Holder the number of Warrant Shares
exercised within two business days thereafter by either express mail or hand
delivery.  Each Common Stock certificate
so delivered shall be in such denominations of 

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1,000 or more
shares of Common Stock, in increments of 1,000, as may be requested by the
Holder hereof and shall be registered on the Company’s books in the name
designated by such Holder, provided that no Holder of this Warrant shall be
permitted to exercise any warrants to the extent that such exercise would cause
any Holder to be the beneficial owner of 5% or more of the then outstanding
Company’s Common Stock, at that given time. 
This limitation shall not be deemed to prevent any Holder from acquiring
more than an aggregate of 5% of the Common Stock, so long as such Holder does
not beneficially own, or have the right to beneficially own, 5% or more of the
Company’s Common Stock at any given time.

1.2                               Exercise
for Cash

This Warrant may be
exercised, in whole at any time or in part from time to time, prior to the
Expiration Date, by the Holder by the facsimile delivery of the exercise
notice, as attached hereto, on the date of the exercise and by surrender of this
Warrant within three (3) business days from the exercise day at the address set
forth hereof, together with proper payment of the aggregate Exercise Price payable hereunder for the Warrant Shares (“Aggregate Warrant Price”), or the
proportionate part thereof if this Warrant is exercised in part.  Payment for the Warrant Shares shall be made
by wire, or check payable to the order of the Company.  If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of the Common Stock, and
the Holder is entitled to receive a new Warrant covering the Warrant Shares
which have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares.  Upon such surrender of this Warrant, the
Company will (a) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and (b) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.

1.3                               Cashless Exercise

If commencing on the date that is one year
following the final closing of the Series B Offering, an effective Series B Registration
Statement is not available for the resale of all of the Warrant Shares issuable
hereunder at the time an exercise notice is delivered to the Company (either
due to the inability of the Company to have the Securities and Exchange
Commission declare such Series B Registration Statement effective on or prior
to such date or to maintain the effectiveness of such Series B Registration
Statement for the duration of the period prescribed in the Series B Registration
Statement), the Holder may pay the Exercise Price through a cashless exercise
(a “Cashless Exercise”), as hereinafter 

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provided. 
The Holder may effect a Cashless Exercise by surrendering this Warrant
to the Company and noting on the exercise notice that the Holder wishes to
effect a Cashless Exercise, upon which the Company shall issue to the Holder
the number of Warrant Shares determined as follows:

X = Y x (A-B)/A

where:

X = the number of Warrant
Shares to be issued to the Holder;

Y = the number of Warrant
Shares with respect to which this Warrant is being exercised;

A = the Market Price (as
defined in Section 2.4(ii)(C) below) as of the Exercise Date; and

B = the Exercise Price.

For purposes of Rule 144, it is intended and acknowledged that the
Warrant Shares issued in a Cashless Exercise transaction shall be deemed to
have been acquired by the Holder, and the holding period for the Warrant Shares
required by Rule 144 shall be deemed to have been commenced, on the date this
Warrant was originally issued by the Company.

1.4                               SHARES TO BE FULLY PAID; RESERVATION OF SHARES.   The Company covenants and agrees that all
shares of Common Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all preemptive rights of any
shareholder and free of all taxes, liens and charges with respect to the issue
thereof.  The Company further covenants
and agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
authorized but unissued Common Stock, when and as required to provide for the
exercise of the rights represented by this Warrant.  The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of any domestic securities exchange upon which the Common
Stock or other securities may be listed; provided, however, that the Company shall
not be required to effect a registration under federal or state securities laws
with respect to such exercise other than as required by Section 7.7 herein.  The Company will not take any 

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action which
would result in any adjustment of the Exercise Price if the total number of
shares of Common Stock issuable after such action upon exercise of all
outstanding warrants, together with all shares of Common Stock then outstanding
and all shares of Common Stock then issuable upon exercise of all options and upon
the conversion of all convertible securities then outstanding, would exceed the
total number of shares of Common Stock or equity securities then authorized by
the Company’s Certificate of Incorporation, as amended (“Company Charter”).

1.5                               BUY-IN.  In addition to any other rights available to a
Holder, if the Company fails to deliver to the Holder a certificate
representing Warrant Shares by the
third Trading Day after the date on which delivery of such certificate is
required by this Warrant, and if after such third Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder on or after the Exercise Date
of the Warrant Shares that the
Holder anticipated receiving from the Company (a “Buy-In”),
then the Company shall, within three Trading Days after the Holder’s request
and in the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Price on the date of the event
giving rise to the Company’s obligation to deliver such certificate.  Notwithstanding the foregoing, the Company
shall have no liability under this subsection for the Buy-In Price if it has
compiled with the requirements of subsection 1.1 above and, notwithstanding it
using its best efforts to have its transfer agent deliver the Warrant Shares to
the Holders within three trading days of the Holder’s request, such Warrant
Shares are not delivered on a timely basis.

1.6                               TRUSTEE FOR WARRANT HOLDERS. In the event
that a bank or trust company shall have been appointed as trustee for the
Holder of the Warrants pursuant to Subsection 2.3.3, such bank or trust
company shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.

2.     DETERMINATION
OR ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.  The Exercise Price and the number of shares
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the occurrence of certain events 

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described in this Section
2.  Upon each adjustment of the Exercise
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Exercise
Price resulting from such adjustment.

2.1                               Subdivision
or Combination of Common Stock. 
In  case  the 
Company shall at any time subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock of the Company shall
be combined or reclassified into a smaller number of shares, the Exercise Price
in effect immediately prior to such combination shall be proportionately
increased.  Notwithstanding the preceding
sentence, for a 12-month period commencing on the Effective Date the Exercise
Price and the number of shares of Common Stock issuable upon the exercise of
this Warrant shall not be adjusted in the event of a reverse stock split or any
similar recapitalization of the Company.

2.2                               Dividends
in Common Stock, Other Stock, Property, Reclassification.  If at any time or from time to time the
holders of Common Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefore:

2.2.1                                 Stock,
Common Stock or any shares of capital stock or other securities which are at
any time directly or indirectly convertible into or exchangeable for Common
Stock, or any rights or options to subscribe for, purchase or otherwise acquire
any of the foregoing by way of dividend or other distribution,

2.2.2                                 Any
cash paid or payable otherwise than as a cash dividend, or

2.2.3                                 Common
Stock or additional capital stock or other securities or property (including
cash) by way of spinoff, split-up, reclassification, combination of shares or
similar corporate rearrangement, (other than shares of Common Stock issued as a
stock split or adjustments in respect of which shall be covered by the terms of
Section 2.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Common Stock or other capital stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
clause (2.2.2) above and this clause (2.2.3)) which such 

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Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.

2.3                               Reorganization,
Reclassification, Consolidation, Merger, Sale or Dissolution.

2.3.1                                                     If
any recapitalization, reclassification or reorganization of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an “Organic Change”),
then, as a condition of such Organic Change, lawful and adequate provisions
shall be made by the Company whereby the Holder hereof shall thereafter have
the right, upon exercise of this Warrant, to purchase and receive (in lieu of
the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented by this
Warrant) such shares of stock, securities or other assets or property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by this Warrant.  In
the event of any Organic Change, appropriate provision shall be made by the
Company with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect
any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such Holder appearing on the books of the Company, the
obligation to deliver to such Holder, upon Holder’s exercise of this Warrant
and payment of the 

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purchase price
in accordance with the terms hereof, such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such Holder may be entitled to
purchase.

2.3.2                                                     No
adjustment of the Exercise Price, however, shall be made in an amount less than
$.02 per Share, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall amount to $.02 per
Share or more.

2.3.3                                                     In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where applicable) receivable
by the Holder of the Warrants after the effective date of such dissolution
pursuant to this Subsection 2.3.3 to a bank or trust company (a “Trustee”) having its principal office in
New York, NY, as trustee for the Holder of the Warrants.

2.4          Dilutive Issuances.

(i)                                          Adjustment
Upon Dilutive Issuance.  If, at any time prior to the Expiration Date,
the Company issues or sells any shares of Common Stock or any equity or equity
equivalent securities (including any equity, debt or other instrument that is
at any time over the life thereof convertible into or exchangeable for Common
Stock or other securities which are so convertible or exchangeable)
(collectively, “Common Stock Equivalents”) for per
share consideration less than the Exercise Price on the date of such issuance
or sale, (a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalent so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which is issued in connection with
such issuance, be entitled to receive shares of Common Stock at a price per
share which is less than the Offering Price, such issuance shall be deemed to
have occurred for less than the Offering Price) then the Exercise Price shall
be adjusted to 128% of the adjusted Offering Price equal to the price paid for
the shares of Common Stock (or Common Stock Equivalents) so as to equal the
consideration received or receivable by the Company (on a per share basis) for
the additional shares of Common Stock or Common Stock Equivalents so issued,
sold or deemed issued or sold in such Dilutive Issuance (which, in the case of
a deemed issuance or sale, shall be calculated in accordance with subparagraph
(ii) below).  Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are issued.

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(ii)           Effect On
Exercise Price Of Certain Events. 
For purposes of determining the adjusted Exercise Price under
subparagraph (i) of this paragraph 2.4, the following will be applicable:

(A)          Issuance of Common
Stock Equivalents.  If the Company
issues or sells any Common Stock Equivalents, whether or not immediately
convertible, exercisable or exchangeable, and the price per share for which
Common Stock is issuable upon such conversion, exercise or exchange is less
than the Offering Price in effect on the date of issuance or sale of such
Common Stock Equivalents, then the maximum total number of shares of Common
Stock issuable upon the conversion, exercise or exchange of all such Common
Stock Equivalents shall, as of the date of the issuance or sale of such Common
Stock Equivalents, be deemed to be outstanding and to have been issued and sold
by the Company for such price per share. 

(B)           Change in
Conversion Rate.  If, following an
adjustment to the Exercise Price upon the issuance of Common Stock Equivalents
pursuant to a Dilutive Issuance, there is a change at any time in (y) the
amount of additional consideration, if any, payable to the Company upon the
conversion, exercise or exchange of any Common Stock Equivalents; or (z) the
rate at which any Common Stock Equivalents are convertible into or exercisable
or exchangeable for Common Stock (in each such case, other than under or by
reason of provisions designed to protect against dilution), then in any such
case, the Exercise Price in effect at the time of such change shall be
readjusted to the Exercise Price which would have been in effect at such time
had such Common Stock Equivalents still outstanding provided for such changed
additional consideration or changed conversion, exercise or exchange rate, as
the case may be, at the time initially issued or sold.

(C)           Calculation of
Consideration Received.  If any
Common Stock or Common Stock Equivalents are issued or sold for cash, the
consideration received therefor will be the amount received by the Company
therefor.  In case any Common Stock or
Common Stock Equivalents are issued or sold for a consideration part or all of
which shall be other than cash, including in the case of a strategic or similar
arrangement in which the other entity will provide services to the Company,
purchase services from the Company or otherwise provide intangible
consideration to the Company, the amount of the consideration other than cash
received by the Company (including the net present value of the consideration
other than cash expected by the Company for the provided or purchased services)
shall be the fair market value of such consideration, except where such consideration
consists of publicly traded securities, in which case the amount of
consideration received by the Company will be the Market Price thereof on the
date of receipt. The term “Market Price”
means, as of a particular date, the average of the high and low price of the
Common Stock for the ten (10) consecutive Trading Days occurring immediately
prior to (but not including) any given date, as reported in the principal market
where the Company’s securities are traded. 
In case any Common Stock or 

 9
 

Common
Stock Equivalents are issued in connection with any merger or consolidation in
which the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair market value of such portion of the net
assets and business of the non-surviving corporation as is attributable to such
Common Stock or Common Stock Equivalents. The independent members of the
Company’s Board of Directors shall calculate reasonably and in good faith,
using standard commercial valuation methods appropriate for valuing such
assets, the fair market value of any consideration other than cash or
securities.

(D)          Issuances Without
Consideration Pursuant to Existing Securities.  If the Company issues (or becomes obligated
to issue) shares of Common Stock pursuant to any anti-dilution or similar
adjustments (other than as a result of stock splits, stock dividends and the
like) contained in any Common Stock Equivalents outstanding as of the date
hereof, then all shares of Common Stock so issued shall be deemed to have been
issued for no consideration.

(iii)          Exceptions To Adjustment Of Exercise Price.  Notwithstanding the foregoing, no adjustment
to the Exercise Price shall be made pursuant to this paragraph (c) upon the
issuance of any Excluded Securities.  For
purposes hereof, “Excluded Securities”
means (i) the issuance of shares of Common Stock upon the conversion of Series
A Preferred Stock and the A and B Warrants; (ii) the issuance of shares of
Common Stock upon the conversion of Series B Preferred Stock and the C and D
Warrants issued in the Series B Offering; (iii) the issuance of shares of
Common Stock, Convertible Securities or Rights to the Corporation’s management
team as compensation, or the issuance of shares of Common Stock upon exercise
of Convertible Securities or Rights, or issuance of Convertible Securities or
Rights to the officers, employees, directors, consultants or advisors to the
Corporation pursuant to any stock option plan, stock purchase plan, or other
arrangement approved by the Board;  (iv)
the issuance of shares of Common Stock, convertible securities or rights in a
merger or acquisition by the Corporation approved by the Board; (v) the
issuance of shares of Common Stock, convertible securities or rights to
financial institutions or lessors, pursuant to a commercial credit arrangement,
equipment financing transaction, or a similar transaction, or in connection
with a strategic partnership approved by the Board; (vi) the issuance of
securities in a registered public offering; (vii) the issuance of securities
pursuant to the exercise of currently outstanding options, warrants, notes or
other rights to acquire Common Stock of the Corporation; or (viii) the issuance
of shares of Common Stock, convertible securities or rights approved by the Corporation’s
shareholders.

(iv)          Adjustments; Additional Shares, Securities or Assets.  In the event that at any time, as a result of
an adjustment made pursuant to this Section 2.4, each Holder shall, upon
conversion of such Holder’s Warrants, become entitled to receive securities or
assets (other than Common Stock) then, wherever appropriate, all references
herein to shares of Common Stock shall be deemed to refer to and include such
shares and/or other securities or assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to adjustment from
time to time in a 

 10
 

manner and upon terms as nearly equivalent as practicable to the
provisions of this Section  2.4.

2.5          Certain Events.  If any change in the outstanding Common Stock
of the Company or any other event occurs as to which the other provisions of
this Section 2 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Exercise Price or the application of such provisions, so as to protect such
purchase rights as aforesaid.  The adjustment
shall be such as will give the Holder of the 
Warrant upon exercise for the same aggregate Exercise Price the total
number, and kind of shares as he would have owned had the  Warrant been exercised prior to the event and
had he continued to hold such shares until after the event requiring
adjustment.

2.6          Notices of Change.

2.6.1                        Upon
any determination or adjustment in the number or class of shares subject to this
Warrant and of the Exercise Price, the Company shall give written notice
thereof to the Holder, setting forth in reasonable detail and certifying the
calculation of such determination or adjustment.

2.6.2                        The
Company shall give written notice to the Holder at least 20 business days prior
to the date on which the Company closes its books or takes a record for
determining rights to receive any dividends or distributions.

2.6.3                        The
Company shall also give written notice to the Holder at least 20 days prior to
the date on which an Organic Change shall take place.

3.     ISSUE
TAX.  The
issuance of certificates for shares of Common Stock upon the exercise of the Warrant
shall be made without charge to the Holder of the Warrant for any issue tax
(other than any applicable income taxes) in respect thereof; provided, however,
that the Company shall not be required to pay any tax 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 then Holder of the Warrant being
exercised.

4.     CLOSING
OF BOOKS.  The
Company will at no time close its transfer books against the transfer of any
warrant or of any shares of stock issued or issuable upon the exercise of any
warrant in any manner which interferes with the timely exercise of this Warrant.

5.     NO VOTING OR
DIVIDEND RIGHTS; LIMITATION OF LIABILITY.  Nothing contained in this Warrant shall be
construed as conferring upon the Holder hereof the right to vote as a
shareholder of the Company.  No dividends
or interest shall be payable or accrued in respect of this Warrant, the
interest represented hereby, or the shares purchasable 

 11
 

hereunder until, and only
to the extent that, this Warrant shall have been exercised, subject to the
Holder’s rights under Section 2 of this Warrant.  The Holder of this Warrant shall receive all
notices as if a shareholder of the Company. 
No provisions hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such Holder for the Exercise Price or as a shareholder of the Company, whether
such liability is asserted by the Company or by its creditors.

6.     RIGHTS
AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.  The rights and obligations of the Company, of
the Holder of this Warrant and of the holder of shares of Common Stock issued
upon exercise of this Warrant, shall survive the exercise of this Warrant.

7.     Further Representations, Warranties and
Covenants of the Company.

7.1                               Articles
and Bylaws.  The Company has made
available to the Holder true, complete and correct copies of the Company’s
Charter and Bylaws, as amended, through the date hereof.

7.2                               Due
Authority.  The execution and
delivery by the Company of this Warrant and the performance of all obligations
of the Company hereunder, including the issuance to Holder of the right to
acquire the shares of Common Stock, have been duly authorized by all necessary
corporate action on the part of the Company, and the Warrant is not
inconsistent with the Company Charter or Bylaws and constitutes a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.

7.3                               Consents
and Approvals.  No consent or
approval of, giving of notice to, registration with, or taking of any other
action in respect of any state, federal or other governmental authority or
agency is required with respect to the execution, delivery and performance by
the Company of its obligations under this Warrant, except for any filing
required by applicable federal and state securities laws, which filing will be
effective by the time required thereby.

7.4                               Issued
Securities.  All issued and
outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable.  All outstanding shares of capital stock were
issued in full compliance with all federal and state securities laws.

7.5                               Exempt
Transaction.  Subject to the accuracy
of the Holders’ representations in Section 8 hereof, the issuance of the Common
Stock upon exercise of this Warrant will constitute a transaction exempt from
(i) the registration requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, or upon the
applicable exemption under Regulation 

 12
 

D, and (ii)
the qualification requirements of the applicable state securities laws.

7.6                               Compliance
with Rule 144.  At the written
request of the Holder, who proposes to sell Common Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 promulgated by the SEC, the
Company shall furnish to the Holder, within five (5) days after receipt of such
request, a written statement confirming the Company’s compliance with the
filing requirements of the SEC as set forth in such Rule, as such Rule may be
amended from time to time.

7.7                               Registration.  Within 30 days following the final closing of
this Series B Offering (the “Scheduled Filing
Date”), the Company shall file with the Securities and Exchange
Commission the Series B Registration Statement under the Securities Act,
covering, inter alia, the resale of the shares of Common Stock underlying the
Warrants.  In the event the Series B Registration
Statement is not filed on or before the Scheduled Filing Date or declared
effective within six (6) months from the effective date of the Company’s registration
statement concerning the offering of Series A Preferred Stock (the “Series A
Registration Statement”), the number of shares of Common Stock issuable upon
exercise of this Warrant shall be increased to twice the original amount.  The Company agrees to keep the Series B Registration
Statement effective until expiration of the Warrants.

7.8                               Maximum Exercise. The Holder shall not be
entitled to exercise this Warrant on an exercise date in connection with that
number of shares of Common Stock which would be in excess of the sum of
(i) the number of shares of Common Stock beneficially owned by the Holder
and its affiliates on an exercise date, and (ii) the number of shares of
Common Stock issuable upon the exercise of this Warrant with respect to which
the determination of this limitation is being made on an exercise date, which
would result in beneficial ownership by the Holder and its affiliates of more
than 9.99% of the outstanding shares of Common Stock on such date.  For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 promulgated thereunder. 
Subject to the foregoing, the Holder shall not be limited to aggregate
exercises which would result in the issuance of more than 9.99%.  The restriction described in this
paragraph may be revoked upon seventy-five (75) days prior notice from the
Holder to the Company.  The Holder may
allocate which of the equity of the Company deemed beneficially owned by the
Subscriber shall be included in the 9.99% amount described above and which
shall be allocated to the excess above 9.99%.

 13
 

8.             Representations
and Covenants of the Holder.

8.1                               This
Warrant has been entered into by the Company in reliance upon the following
representations and covenants of the Holder:

8.1.1                                      Investment
Purpose.  The Warrant or the Common
Stock issuable upon exercise of the Warrant will be acquired for investment and
not with a view to the sale or distribution of any part thereof, and the Holder
has no present intention of selling or engaging in any public distribution of
the same except pursuant to a registration or exemption.

8.1.2                                      Private
Issue.  The Holder understands (i)
that the Warrant and the Common Stock issuable upon exercise of this Warrant
are not registered under the 1933 Act or qualified under applicable state securities
laws on the ground that the issuance contemplated by this Warrant will be
exempt from the registration and qualifications requirements thereof, and (ii)
that the Company’s reliance on such exemption is predicated on the
representations set forth in this Section 8.

8.1.3                                      Disposition
of Holders Rights.  In no event will
the Holder make a disposition of the Warrant or the Common Stock issuable upon
exercise of the Warrant unless and until (i) it shall have notified the Company
of the proposed disposition, and (ii) if requested by the Company, it shall
have furnished the Company with an opinion of counsel (which counsel may either
be inside or outside counsel to the Holder) satisfactory to the Company and its
counsel to the effect that (A) appropriate action necessary for compliance with
the 1933 Act has been taken, or (B) an exemption from the registration
requirements of the 1933 Act is available. 
Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Common Stock issuable on the
exercise of such rights do not apply to transfers from the beneficial owner of
any of the aforementioned securities to its nominee or from such nominee to its
beneficial owner, and shall terminate as to any particular share of stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the Holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Holder at its
request by the staff of the SEC or a ruling shall have been issued to the
Holder at its request by the SEC stating that no action shall be recommended by
such staff or taken by the SEC, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the conditions

 14
 

set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. 
Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Holder or holder of a share of stock then outstanding
as to which such restrictions have terminated shall be entitled to receive from
the Company, without expense to such Holder, one or more new certificates for
the  Warrant or for such shares of stock
not bearing any restrictive legend.

8.1.4                                      Financial
Risk.  The Holder has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment, and has the ability to bear the
economic risks of its investment.

8.1.5                                      Risk
of No Registration.  The Holder
understands that if the Company does not file reports pursuant to Section 15(d)
and/or Section 12(g), of the Securities Exchange Act of 1934 (“1934 Act”), or if
a registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the 
Warrant, or (ii) the Common Stock issuable upon exercise of the  Warrant, it may be required to hold such
securities for an indefinite period.  The
Holder also understands that any sale of the Warrant or the Common Stock
issuable upon exercise of the  Warrant
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.

8.1.6                                      Accredited
Investor.   The Holder is an “accredited investor” within
the meaning of Regulation D promulgated under the 1933 Act.

9.             MODIFICATION AND WAIVER.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by (a) the party against which enforcement of the same is sought or (b)
the Company and the holders of at least a majority of the number of shares into
which the  Warrants are exercisable
(without regard to any limitation contained herein on such exercise), it being
understood that upon the satisfaction of the conditions described in (a) and
(b) above, each Warrant (including any Warrant held by the Holder who did not
execute the agreement specified in (b) above) shall be deemed to incorporate
any amendment, modification, change or waiver effected thereby as of the
effective date thereof.  Notwithstanding
the foregoing, no modification to this Section 9 will be effective against any
Holder without his consent.

10.          Transfer of this Warrant. 
The Holder may sell, transfer, assign, pledge or otherwise dispose of this
Warrant, in whole or in part, as long as such sale or other disposition is made
pursuant to an effective registration statement or an exemption from the
registration requirements of the 1933 Act. 
Upon such transfer or other disposition 

 15
 

(other than a pledge), the
Holder shall deliver this Warrant to the Company together with a written notice
to the Company, substantially in the form of the Transfer Notice attached
hereto as Exhibit B (the “Transfer Notice”),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred, the number of Warrant Shares
to be covered by the part of this Warrant to be transferred to each such
person. Within three (3) Business Days of receiving a Transfer Notice and the
original of this Warrant, the Company shall deliver to the each transferee
designated by the Holder another Warrant(s) of like tenor and terms for the
appropriate number of Warrant Shares and, if less than all this Warrant is
transferred, shall deliver to the Holder another Warrant for the remaining
number of Warrant Shares.

11.          NOTICES.   Any notice required or permitted hereunder
shall be given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon (i) personal delivery, against written receipt thereof,
(ii) delivery via facsimile or e-mail as set forth below (iii) two business
days after deposit with Federal Express or another nationally recognized
overnight courier service, or (iv) five business days after being forwarded,
postage paid, via certified or registered mail, return receipt requested,
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days
advance written notice.

12.          BINDING EFFECT ON SUCCESSORS; BENEFIT.
 As provided in Section
2.3 above, this Warrant shall be binding upon any corporation succeeding the
Company by merger, consolidation or acquisition of all or substantially all of
the Company’s assets.  All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant.  All of the covenants and
agreements of the Company shall inure to the benefit of the successors and
assigns of the Holder hereof.  This
Warrant shall be for the sole and exclusive benefit of the Holder and nothing
in this Warrant shall be construed to confer upon any person other than the
Holder any legal or equitable right, remedy or claim hereunder.

13.          DESCRIPTIVE HEADINGS AND GOVERNING LAW.
 The description headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.  This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by the laws
of the State of Delaware.

14.          LOST WARRANTS.  The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated  Warrant.

15.          FRACTIONAL SHARES.  No fractional shares shall be issued upon
exercise of this Warrant.  The Company
shall, in lieu of issuing any fractional share, pay the Holder 

 16
 

entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Exercise Price.

IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its officers, thereunto duly authorized this 8th day of May, 2007.

	
   

  	
   

  	
  Andover Medical, Inc., 

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:   Edwin A. Reilly 

  
	
   

  	
   

  	
   

  	
  Title:     Chief Executive
  Officer 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address: 

  
	
   

  	
   

  	
   

  	
  Andover Medical, Inc. 

  
	
   

  	
   

  	
   

  	
  510 Turnpike Street, Suite 204 

  
	
   

  	
   

  	
   

  	
  N. Andover, MA 01845 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Phone: (978) 557-1001 

  
	
   

  	
   

  	
   

  	
  Fax:     (978) 557-1004 

  
	
   

  	
   

  	
   

  	
  E-mail: ereilly@andovermedical.com

  

 

 17

SCHEDULE  A

SUBSCRIPTION
FORM

Date:                    ,
        

Andover Medical, Inc. - Attn:  President

Ladies and Gentlemen:

The
undersigned hereby elects to exercise the Class D Warrant issued to it by Andover
Medical, Inc.  (“Company”) and dated May
8, 2007. (“Warrant”)
and to purchase thereunder                                                              
shares of the Common Stock of the Company (“Shares”) at a purchase price of                    
($.35) per Share or an aggregate purchase price of                                              
Dollars ($               )
(“Exercise Price”).

Pursuant
to the terms of the Warrant, the undersigned has delivered the Exercise Price
herewith in full in cash or by certified check or wire transfer.

The
undersigned is an accredited investor as such term is defined in Regulation D
under the Securities Act of 1933, as amended (the “1933 Act”).
 The undersigned represents and warrants
that all offers and sales by the undersigned of the securities issuable upon
exercise of the Warrant shall be made pursuant to registration of the Common
Stock under the 1933 Act or pursuant to an exemption from registration under
the 1933 Act.

Very
truly yours,

ASSIGNMENT

To Be Executed by the Holder

in Order to Assign Class D Warrants

FOR
VALUE RECEIVED,                                                                                                                       
hereby sells, assigns and transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

 

 

 

[please print or type name and address]

                                                      of
the Class D Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints                                                                                
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.

	
  Dated:

  	
   

  	
   

  	
  x

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Signature Guaranteed

  

 

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST
CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER,
AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM
OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE
OR MIDWEST STOCK EXCHANGE.Exhibit 4.3

CERTIFICATE
OF DESIGNATION,

PREFERENCES
AND

RIGHTS
OF SERIES B PREFERRED STOCK

OF

ANDOVER MEDICAL, INC.

(Pursuant to Section 151 of
the Delaware General Corporation Law)

Andover Medical, Inc.
(the “Corporation”), a corporation organized and existing under the Delaware
General Corporation Law (the “DGCL”), hereby certifies that the following
resolutions were first adopted by the board of directors of the Corporation
(the “Board of Directors”) on April 16, 2007, pursuant to authority of the
Board of Directors as required by Section 151(g)  of the DGCL:

RESOLVED,
that pursuant to the authority granted to and vested in the Board of Directors
in connection with the offering of up to 34 units (the “Units”) at a
price of $50,000 per Unit (the “Series B Offering”), up to a maximum Offering
of $1,700,000, pursuant to  the
Subscription Agreement and Registration Rights Agreement dated April 16, 2007
(the “Offering Documents”), with each Unit consisting of (i) fifty shares of
Series B Convertible Preferred Stock of the Corporation, par value $.001 per
share (“Series B Preferred Stock”), with a face value of $1,000 per share, with
each share initially convertible into 2,857 shares, or an aggregate of 142,850
shares per Unit, of common stock, $.001 par value (“Common Stock”) at $0.35 per
share, (ii) Class C Common Stock Purchase Warrants to purchase 142,850 shares
of Common Stock exercisable for a period of five years from the effective date (the
“Effective Date”) of the registration statement pertaining to the Series B
Preferred Stock (the “Series B Registration Statement”) covering all of the
Common Stock issuable in the Offering, exercisable at $0.35 per share (“C
Warrant”), and (iii) Class D Common Stock Purchase Warrants to purchase 142,850
shares of Common Stock exercisable for a period of five years from the
Effective Date, at a price of $0.35 per share (“D Warrant”, together with C
Warrant, collectively referred to herein as the “C and D Warrants”); and in accordance with the provisions of Article
Fourth of the Certificate of Incorporation of the Corporation (the “Certificate
of Incorporation”), which created and authorized 1,000,000  shares
of preferred stock of the Corporation, par value of $.001 per share (the “Preferred
Stock”), of which 5,613 shares of Series A Preferred Stock are currently issued
and outstanding, so that 994,387 shares of Preferred Stock have the status of
authorized but unissued shares and are available for issuance, the Board of
Directors hereby establishes a new series of Preferred Stock, the Series B
Preferred Stock, to consist of 1,700 shares, and hereby fixes the powers,
designation, preferences, relative, participating, optional and other rights of
such series of Series B Preferred Stock, and the qualifications, limitations
and restrictions thereof, in addition to those set forth in said Article
Fourth, as follows:

“Series B Preferred Stock.”

1.             Number
Authorized and Designation.  Of the 1,000,000
shares of Preferred Stock authorized under Article Fourth of the Certificate of
Incorporation, the Corporation shall have the authority to issue 1,700 shares
designated as 6% Series B Convertible Preferred Stock, $1,000, Face Value, $.001 par value per share (“Series B Preferred
Stock”), upon the terms, conditions, rights, preferences and limitations set
forth herein.

2.             Rights,
Preferences and Limitations.  The
relative rights, preferences and limitations of Series B Preferred Stock are as
follows:

(a)           Rank.  The Series B Preferred Stock shall rank (i)
senior to all of the Common Stock, par value $.001 per share (“Common Stock”);
(ii) prior to any class or series of capital stock of the Corporation hereafter
created specifically ranking by its terms junior to any Series B Preferred
Stock of whatever subdivision (collectively, with the Common Stock, “Junior
Securities”); (iii) on parity with the Series A Preferred Stock and any class
or series of capital stock of the Corporation created specifically ranking by
its terms on parity with the Series B Preferred Stock (“Parity Securities”), in
each case, as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntarily or involuntarily (all such
distributions being referred to collectively as “Distributions”).

(b)           Dividends.  The holders of record of Series B Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, dividends paid in cash or fractional shares of Common Stock, at the
option of the Corporation, unless earlier converted.  Stock dividends shall be payable at the
annual rate of six (6%) percent, or $60.00 per share (i.e., 3/50th of one share). 
The initial dividend paid after the date of original issuance of any
shares or fractions of a share of Common Stock shall accrue from such date of
issuance on a pro rata basis.  Dividends
shall be payable to holders of record, as they appear on the stock books of the
Corporation on such record dates as may be declared by the Board of Directors,
not more than sixty (60) days, nor less than ten (10) days preceding the
payment dates of such dividends.  If the
dividend on the Series B Preferred Stock, shall not have been paid or set apart
in full for the Series B Preferred Stock when payable, the aggregate deficiency
shall be cumulative and shall be fully paid or set apart for payment before any
dividends shall be paid upon or set apart for, or any other distributions paid
made on, or any payments made on account of the purchase, redemption or
retirement of, the Common Stock or any other series of Preferred Stock of the
Corporation ranking, as to dividends or distributions of assets on liquidation,
dissolution or winding up of Corporation, junior to the Series B Preferred
Stock other than, in the case of dividends or distributions, dividends or
distributions paid in shares of Common Stock or such other junior ranking
stock.  When dividends are not paid in
full upon the shares or fractions of a share of Series B Preferred Stock,
Series A Preferred Stock, and any other Preferred Stock ranking on a parity as
to payment of dividends with this Series B Preferred Stock, all dividends
declared upon this series and any other Preferred Stock ranking on a parity as
to dividends with this series shall be declared, pro rata, so that the amount
of dividends declared per share or fraction of a share on this Series B
Preferred Stock, Series A Preferred Stock, and such other Preferred Stock shall
in all cases bear to each other the same rates that accrued dividends per share
on the shares of Series B Preferred Stock, Series A Preferred Stock, and such
other Preferred Stock bear to each other. 
Accumulations of dividends on the Series B Preferred Stock shall not
bear interest.

(c)           (i)            Conversion.  Upon the election of an investor (“Investor”)
at any time after the last closing of the Offering, each share of Series B
Preferred Stock is convertible, subject to adjustment as described below, into
2,857 shares of Common Stock (the “Conversion Rate”) at a price equal to $0.35
per share of Common Stock (the “Conversion Price”).  If the Corporation issues or sells any shares
of its Common Stock (or equivalent thereof) following the closing of this
Offering, then the Conversion Rate will be that number of shares of Common
Stock equal to $1,000 divided by the price per share at which the Corporation issues
or sells such 

 2
 

shares of Common Stock.  The Conversion Price in effect on the
conversion date for the Series B Preferred Stock shall be in accordance with
the provisions of subsection (iii) below, subject to adjustment whenever there
shall occur a stock split, stock dividend, combination, recapitalization,
reclassification or other similar event involving a change in the Common Stock.

(ii)           Conversion by the
Corporation.  Each share of Series
B Preferred Stock shall be convertible, at the Corporation’s option, into
Common Stock following the Effective Date of the Series B Registration
Statement (to be filed by the Corporation with the Securities and Exchange
Commission in connection with the Offering) if the Common Stock trades above
500% of the Conversion Price (initially $.35 per share) for a period of 30
consecutive trading days.  The
Corporation will continue paying dividends on shares of Series B Preferred
Stock through the conversion date.

(iii)          Mechanics of Conversion.  No fractional shares of Common Stock shall be
issued upon conversion of the Preferred Stock. 
In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then fair market value of the Common Stock as determined by the Board of
Directors in good faith.  Before any
holder of Preferred Stock shall be entitled to receive certificates
representing shares of Com­mon Stock issuable upon conversion of the Preferred
Stock, he shall surrender the certificate or certificates therefore, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Preferred Stock, and shall give five (5) days’ prior written notice to the
Corporation at such office that he elects to convert the same, and shall state
therein his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable after receipt of the certificate(s)
representing Preferred Stock, issue and deliver at such office to such holder
of Preferred Stock, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid.  Conversions shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.

(iv)          Adjustment to Conversion
Price for Stock Dividends, Stock Splits and Combinations.  In the event the Corporation shall at any
time or from time to time effect a subdivision of the outstanding Common Stock,
the Conversion Price then in effect immediately before that subdivision shall
be proportionately decreased, and, conversely, in the event the Corporation
shall at any time or from time to time combine the outstanding shares of Common
Stock, the Conversion Price then in effect immediately before the combination
shall be proportionately increased.  Any
adjustment pursuant to this subsection shall become effective at the close of
business on the date the subdivision or combination becomes effective.

(v)           Reservation of Shares.  The Corporation shall at all times reserve
out its authorized but unissued shares of Common Stock such number of shares of
Common Stock as shall from time to time be sufficient to permit the conversion
of all of the Series B Preferred Stock then outstanding, and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series B
Preferred Stock, the Corporation shall take such action as may be necessary to
increase 

 3
 

its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.  All shares of Common Stock issued upon due
conversion of shares of Series B Preferred Stock shall be validly issued, fully
paid and non-assessable.

(vi)          Rights Upon Conversion.  All shares of Series B Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer
be deemed to be outstanding and all rights with respect to such shares,
including the rights, if any, to receive notices and to vote, shall forthwith
cease and terminate except only the right of the holder thereof to receive
shares of Common Stock in exchange therefore and payment of any accrued and
unpaid dividends thereon.

(d)           Voting
Rights.  The shares of Series
B Preferred Stock shall entitle the holder to vote on an as if converted basis
together with the holders of the Common Stock.

The Corporation shall not
amend, alter, change or repeal the preferences, privileges, special rights or
other powers of the Series B Preferred Stock so as to adversely affect the Series
B Preferred Stock, without the written consent or affirmative vote of the
holders of at least a majority of the then outstanding aggregate number of
shares of such affected Series B Preferred Stock, given in writing or by vote
at a meeting, consenting or voting (as the case may be) separately as a class; provided,
however; the Corporation may at any time without the vote or consent of
the stockholders of the Series B Preferred Stock or any other stockholder amend
the Series B Certificate of Designation to increase or reduce the number of
shares designated thereunder so long as any reduction does not result in the
designation of less Series B Preferred Stock than is issued and outstanding at
the time of the reduction.

So long as shares of Series
B Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series B
Preferred Stock of Series A Preferred Stock voting together as a single class:
(i) create any new class or series of stock having a preference over the Series
B Preferred Stock with respect to Distributions, (ii) dissolve the Corporation
or effectuate a liquidation, or (iii) enter into any agreement for, or
consummate, any merger, recapitalization, reclassification, sale of all or
substantially all of the assets of the Corporation, or any acquisition of the
stock or assets of another entity.

(e)           Preemptive
Rights.  Holders of Series B
Preferred Stock shall have no preemptive rights.

(f)            Liquidation
Rights.  Upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
each holder of shares of Series B Preferred Stock shall be entitled to receive,
immediately after any distribution of securities required by the  Certificate of Incorporation, in preference
to any distributions of any of the assets or surplus funds of the Corporation
to the holders of the Common Stock and pari passu with any distribution of Parity
Securities, an amount equal to $1,000 per share of Series B Preferred Stock,
plus an additional amount equal to any dividends declared but unpaid on such
shares before any payments shall be made or any assets distributed to holders
of any class of Common Stock.  If, upon
any such liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation shall be insufficient to pay the holders of shares of the Series
B Preferred Stock the 

 4
 

amount required under the preceding sentence,
then all remaining assets of the Corporation shall be distributed ratably to
holders of the shares of the Series B Preferred Stock.  An amount equal to $1,000 per share, plus an
additional amount equal to any dividend declared but unpaid on such Common
Stock, shall then be paid ratably to the holders of the Common Stock.  All assets remaining thereafter shall then be
distributed, pari passu, to all the holders of the Series B Preferred Stock (on
the basis as if all outstanding shares of Series B Preferred Stock had been
converted into Common Stock), Series A Preferred Stock (on the basis as if all
outstanding shares of Series A Preferred Stock had been converted into Common
Stock), and Common Stock.

(g)           Anti-Dilution.

(i)            Adjustment for Dividends, Stock Splits and
Combinations.  If outstanding shares
of the Common Stock shall be subdivided into a greater number of shares, or a
dividend in Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock (in which latter event the number of
shares of Common Stock issuable upon the conversion or exchange of such
securities shall be deemed to have been distributed) shall be paid in respect
of the Common Stock, then the Conversion Price in effect immediately prior to
such subdivision or at the record date of such dividend shall, simultaneously
with the effectiveness of such subdivision or immediately after the record date
of such dividend, be proportionately reduced, and conversely, if outstanding
shares of the 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 simultaneously with the effectiveness of such combination, be
proportionately increased.  Any such
adjustment to the Conversion Price shall become effective at the close of
business on the date the subdivision or combination referred to herein becomes
effective.  Notwithstanding the preceding two
sentences, for a 12-month period commencing on December 31, 2006, the
Conversion Price and the number of shares of Common Stock issuable upon
conversion of Series B Preferred Stock shall not be adjusted in the event of a
reverse stock split or any similar recapitalization of the Company.

(ii)           Adjustments for Other Dividends.  If the Corporation at any time, or from time
to time, shall make or issue, or fix a record date for the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock or securities convertible into or exchangeable for Common Stock,
then and in each such event, provision shall be made so that the holders of Series
B Preferred Stock shall receive upon conversion thereof, in addition to the
number of shares of Common Stock receivable thereupon, the amount of securities
of the Corporation which they would have received had their Series B Preferred
Stock been converted into Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and including the
date of conversion, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments called for during
such period with respect to the rights of the holders of Series B Preferred
Stock.

(iii)          Reorganizations, Mergers, Consolidations or
Reclassifications.  In the event of
any capital reorganization, any reclassification of the Common Stock (other
than a change in par value), or the consolidation or merger of the Corporation
with or into another person, the holders of Series B Preferred Stock shall
thereafter be entitled to receive, and provision shall be made 

 5
 

therefore in any agreement relating thereto,
cash in the amount of the face value of the Series B Preferred Stock plus
accrued dividends payable in cash equal to the number of shares of Series B
Preferred Stock issued as dividends multiplied by the Conversion Price.

(iv)          Sale of Additional Shares.

(i)            If at any time or from time to time
the Corporation shall elect to issue or sell Additional Shares of Common Stock
(as hereinafter defined), or is deemed to have issued or sold Additional Shares
of Common Stock, other than as a dividend or other distribution on any class of
stock as provided in Section (g)(i) above and other than as a subdivision
or combination of shares of Common Stock as provided in Section (g)(i) above,
for a consideration per share less than the then existing Conversion Price,
then, and in each such case, the Conversion Rate will be that number of shares
of Common Stock equal to $1,000 divided by the price per share at which the
Company issues or sells such shares of Common Stock.

(ii)           For the purpose of determining
whether any proposed issuance is of less than the Conversion Price any
adjustment in the Conversion Price or number of shares of Common Stock issuable
upon conversion of Series B Preferred Stock, as provided above, the
consideration received by the Corporation for any issuance or sale of
securities shall:

(A)          to the extent it consists of cash, be
computed at the gross amount of cash received by the Corporation before
deduction of any expenses payable directly or indirectly by the Corporation and
any underwriting or similar commissions, compensations, discounts or
concessions paid or allowed by the Corporation in connection with such issuance
or sale;

(B)           to the extent it consists of property
other than cash, the consideration other than cash shall be computed at the
fair market value thereof as determined in good faith by the Board, at or about
(but in either case as of) the date of the adoption of the resolution
specifically authorizing such issuance or sale, irrespective of any accounting
treatment thereof; provided, however, that such fair market value
as determined by the Board, when added to any cash consideration received in
connection with such issuance or sale, shall not exceed the aggregate market
price of the Additional Shares of Common Stock being issued, as of the date of
the adoption of such resolution; and

(C)           if Additional Shares of Common Stock,
Convertible Securities (as defined below) or rights or options to purchase
either Additional Shares of Common Stock or Convertible Securities are issued
or sold together with other stock or securities or other assets of the
Corporation for consideration which covers both, then the consideration
received for the Additional Shares of Common Stock, Convertible Securities or
rights or options shall be computed as that portion of the consideration so
received which is reasonably determined in good faith by the Board to be
allocable to such Additional Shares of Common Stock, Convertible Securities or
rights or options.

(iii)          For the purpose of subsection (i)
above, if at any time, or from time to time, the Corporation issues any stock
or other securities convertible into Additional Shares of Common Stock (other
than the issuance of additional Series B Preferred Stock as provided in the
purchase agreement under which the Series B Preferred Stock were sold by the
Corporation to 

 6
 

the initial purchasers thereof) (“Convertible
Securities”) or issues any rights or options to purchase Additional Shares of
Common Stock or Convertible Securities (“Rights”), then, and in each such case,
if the Effective Conversion Price (as defined below) of such Rights or
Convertible Securities shall be less than the Conversion Price in effect
immediately prior to the issuance of such Rights or Convertible Securities, the
Corporation shall be deemed to have issued at the time of the issuance of such
Rights or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
in consideration therefore an amount equal to the aggregate Effective
Conversion Price of such Rights or Convertible Securities.  “Effective Conversion Price” means the
lowest amount of consideration, if any, received or receivable by the
Corporation with respect to any Additional Share(s) of Common Stock upon
issuance of the Rights or Convertible Securities and upon their exercise or
conversion, respectively.  No further
determination shall be made under subsection (ii) above upon the issuance of
such Rights or Convertible Securities as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such Rights or the
conversion of any such Convertible Securities.

(A)          “Additional Shares of Common Stock”
means all shares of Common Stock issued or deemed to be issued by the
Corporation, whether or not subsequently reacquired or retired by the
Corporation, other than (i) the issuance of shares of Common Stock upon
the conversion of Series B Preferred Stock, Series A Preferred Stock, and the
exercise of the C and D Warrants issued in the Offering; (ii) the issuance of
shares of Common Stock, Convertible Securities or Rights to the Corporation’s
management team as compensation, or the issuance of shares of Common Stock upon
exercise of Convertible Securities or Rights, or issuance of Convertible
Securities or Rights to the officers, employees, directors, consultants or
advisors to the Corporation pursuant to any stock option plan, stock purchase
plan, or other arrangement approved by the Board;  (iii) the issuance of shares of Common Stock,
Convertible Securities or Rights in a merger or acquisition by the Corporation
approved by the Board; (iv) the issuance of shares of Common Stock, Convertible
Securities or Rights to financial institutions or lessors, pursuant to a
commercial credit arrangement, equipment financing transaction, or a similar
transaction, or in connection with a strategic partnership approved by the
Board; (v) the issuance of securities in a registered public offering; (vi) the
issuance of securities pursuant to the exercise of currently outstanding
options, warrants, notes or other rights to acquire Common Stock of the
Corporation; or (vii) the issuance of shares of Common Stock, Convertible Securities
or Rights approved by the Corporation’s shareholders.

(B)           “Common Stock” as used in this
Section (g) means any shares of any class of the Corporation’s voting capital
stock other than the Series B Preferred Stock.

(h)           Reservation
of Shares.  The Corporation
shall at all times reserve out of its authorized but unissued shares of Common
Stock such number of shares of Common Stock as shall from time to time be
sufficient to permit the conversion of all of the Series B Preferred Stock then
outstanding, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding Series B Preferred Stock, the Corporation shall take such action as
may be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient 

 7
 

for such purpose.  All shares of Common Stock when issued upon
conversion of Series B Preferred Stock shall be validly issued, fully paid and
non-assessable.

(i)            Rights
Upon Conversion.  All Series B
Preferred Stock which shall have been converted into shares of Common Stock as
herein provided shall no longer be deemed to be outstanding and all rights with
respect to such Series B Preferred Stock, including the rights, if any, to
receive notices and to vote, shall forthwith cease and terminate except only
the right of the holder thereof to receive shares of Common Stock in exchange
therefore and payment of any accrued and unpaid dividends thereon.

IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights of Series B Preferred Stock
to be signed by the undersigned authorized officer this      
day of April, 2007.

	
   

  	
   

  	
   

  
	
  

  	
  Edwin Reilly,
  President and

  	
   

  
	
   

  	
  Chief Operating
  Officer

  

 

 8

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