WWW.EXFILE.COM, INC. -- 14090 -- MATRITECH, INC. -- EXHIBIT 4.1 TO FORM 8-K


    

      EXHIBIT
        4.1

      


      SECURITIES
        PURCHASE AGREEMENT

      


      


      This
        SECURITIES PURCHASE AGREEMENT (the “Agreement”),
        dated
        as of January 13, 2006, is made by and among Matritech, Inc., a corporation
        organized under the laws of the State of Delaware (the “Company”),
        and
        each of the purchasers (individually, a “Purchaser”
and
        collectively the “Purchasers”)
        set
        forth on the execution pages hereof (each, an “Execution
        Page”
and
        collectively the “Execution
        Pages”).

      


      BACKGROUND

      


      A.  The
        Company and each Purchaser are executing and delivering this Agreement in
        reliance upon the exemption from securities registration afforded by the
        provisions of Regulation D (“Regulation
        D”),
        as
        promulgated by the United States Securities and Exchange Commission (the
        “SEC”)
        under
        the Securities Act of 1933, as amended (the “Securities
        Act”).

       

      B.  Upon
        the
        terms and conditions stated in this Agreement, the Company desires to issue
        and
        sell to the Purchasers, and each Purchaser desires to purchase (i) a secured
        convertible promissory note, in the form attached hereto as Exhibit
        A
        (collectively, the “Notes”),
        in
        the principal face amount set forth on the Execution Pages hereof (for each
        Purchaser, the “Subscription
        Amount”),
        which
        Notes shall initially be convertible into shares of the Company’s common stock,
        par value $0.01 per share (the “Common
        Stock”)
        at the
        conversion price set forth in the Note, and (ii) a warrant, in the form attached
        hereto as Exhibit
        B
        (the
“Warrants”),
        to
        acquire a number of shares of Common Stock equal to 60% of the number of
        shares
        of Common Stock such Purchaser would own if it converted its Notes on the
        Closing Date (as defined below) in accordance with the terms of such Notes
        plus
        an additional number of shares that may become issuable thereunder pursuant
        to
        Section 11(i) of such Warrants. The shares of Common Stock issuable upon
        conversion of or otherwise pursuant to the Notes, including shares of Common
        Stock issued as payment of interest under the Notes and shares paid upon
        amortization of the Notes, are referred to herein as the “Conversion
        Shares”
and
        the
        shares of Common Stock issuable upon exercise of or otherwise pursuant to
        the
        Warrants are referred to herein as the “Warrant
        Shares.”
The
        Notes, the Warrants, the Conversion Shares and the Warrant Shares are
        collectively referenced herein as the “Securities”
and
        each of them may individually be referred to herein as a “Security.”

       

      C.  In
        connection with the Closing pursuant to this Agreement, the Company will
        execute
        and deliver a Security Agreement, in the form attached hereto as Exhibit
        C
        (together with any other document securing the Notes, the “Security
        Documents”),
        in
        favor of the Collateral Agent (as defined herein) for the benefit of all
        of the
        Purchasers, pursuant to which the Company has agreed to grant a security
        interest in certain collateral described in the Security Documents in order
        to
        secure its obligations under the Notes.

       

      D.  In
        connection with the Closing pursuant to this Agreement, the parties hereto
        will
        execute and deliver a Registration Rights Agreement, in the form attached
        hereto
        as Exhibit
        D

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (the
        “Registration
        Rights Agreement”),
        pursuant to which the Company has agreed to provide certain registration
        rights
        under the Securities Act and the rules and regulations promulgated thereunder,
        and applicable state securities laws, and the Company and the Collateral
        Agent
        will execute and deliver a Contingent License Agreement, in the form attached
        hereto as Exhibit
        E
        (the
“Contingent
        License Agreement”),
        pursuant to which the Company has agreed, under certain circumstances, to
        provide a license to certain intellectual property rights. This Agreement,
        the
        Warrants, the Security Documents and the Registration Rights Agreement are
        collectively referred to herein as the “Transaction
        Documents.”

       

      NOW,
        THEREFORE, in consideration of the premises and mutual covenants contained
        herein and other good and valuable consideration, the receipt and sufficiency
        of
        which are hereby acknowledged, the Company and the Purchasers, intending
        to be
        legally bound, hereby agree as follows:

      


      1.  PURCHASE
        AND SALE OF SECURITIES.

       

      (a)  Purchase
        and Sale of Securities.
        Subject
        to the terms and conditions hereof, at the Closing (as defined in Section
        1(b)
        below), the Company shall issue and sell to the Purchasers an aggregate
        principal face amount of up to $7,000,000, and each Purchaser, severally
        and not
        jointly, shall purchase from the Company, its respective Subscription
        Amount.

       

      (b)  The
        Closing.
        Subject
        to the satisfaction (or waiver) of the conditions set forth in Sections 6
        and 7
        below, the closing of the transactions contemplated hereby (the “Closing”)
        shall
        take place at the offices of Drinker Biddle & Reath LLP at One Logan Square,
        18th
        &
        Cherry Streets, Philadelphia, Pennsylvania 19103 at 10:00 a.m., Philadelphia,
        Pennsylvania time, or such other time or place as the Company and the Purchasers
        may mutually agree (the “Closing
        Date”).

       

      2.  PURCHASER’S
        REPRESENTATIONS AND WARRANTIES.

       

      Each
        Purchaser severally, but not jointly, represents and warrants to the Company
        as
        follows:

      


      (a)  Purchase
        for Own Account, Etc.
        Such
        Purchaser is purchasing the Securities for such Purchaser’s own account for
        investment purposes only and not with a present view towards the public sale
        or
        distribution thereof, except pursuant to sales that are exempt from the
        registration requirements of the Securities Act and/or sales registered under
        the Securities Act. Such Purchaser understands that such Purchaser must bear
        the
        economic risk of this investment indefinitely, unless the Securities are
        registered pursuant to the Securities Act and any applicable state securities
        or
        blue sky laws or an exemption from such registration is available, and that
        the
        Company has no present intention of registering the resale of any such
        Securities other than as contemplated by the Registration Rights Agreement.
        Notwithstanding anything in this Section 2(a) to the contrary, by making
        the
        representations herein, such Purchaser does not agree to hold the Securities
        for
        any minimum or other specific term and reserves the right to dispose of the
        Securities at any time in accordance with or pursuant to a registration
        statement or an exemption from the registration requirements under the
        Securities Act.

       

      
        
          
          

        

        
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      (b)  Accredited
        Investor Status.
        Such
        Purchaser is an “Accredited Investor” as that term is defined in Rule 501(a) of
        Regulation D.

       

      (c)  Reliance
        on Exemptions.
        Such
        Purchaser understands that the Securities are being offered and sold to such
        Purchaser in reliance upon specific exemptions from the registration
        requirements of United States federal and state securities laws and that
        the
        Company is relying upon the truth and accuracy of, and such Purchaser’s
        compliance with, the representations, warranties, agreements, acknowledgments
        and understandings of such Purchaser set forth herein in order to determine
        the
        availability of such exemptions and the eligibility of such Purchaser to
        acquire
        the Securities.

       

      (d)  Information.
        Such
        Purchaser and its counsel, if identified to the Company, have been furnished
        all
        materials relating to the business, finances and operations of the Company
        and
        materials relating to the offer and sale of the Securities which have been
        specifically requested by such Purchaser or its counsel. Neither such inquiries
        nor any other investigation conducted by such Purchaser or its counsel or
        any of
        its representatives shall modify, amend or affect such Purchaser’s right to rely
        on the Company’s representations and warranties contained in Section 3 below.
        Such Purchaser understands that such Purchaser’s investment in the Securities
        involves a high degree of risk.

       

      (e)  Governmental
        Review.
        Such
        Purchaser understands that no United States federal or state agency or any
        other
        government or governmental agency has passed upon or made any recommendation
        or
        endorsement of the Securities.

       

      (f)  Authorization;
        Enforcement.
        This
        Agreement and the Registration Rights Agreement have been duly and validly
        authorized, executed and delivered on behalf of such Purchaser and are valid
        and
        binding agreements of such Purchaser enforceable against such Purchaser in
        accordance with their respective terms, subject to applicable bankruptcy,
        insolvency, fraudulent conveyance, reorganization, moratorium and similar
        laws
        affecting creditors’ rights and remedies generally and general principles of
        equity.

       

      (g)  Residency.
        Such
        Purchaser is a resident of the jurisdiction set forth under such Purchaser’s
        name on the Execution Page hereto executed by such Purchaser.

       

      (h)  No
        Trading in Securities.
        Such
        Purchaser has not offered to sell, solicited offers to buy, disposed of,
        loaned,
        pledged or granted any right with respect to the Company’s Common Stock since
        the date it agreed to learn the confidential terms of the transactions
        contemplated by the Transaction Documents.

       

      (i)  Beneficial
        Ownership.
        Prior
        to the Closing, such Purchaser is not a “beneficial owner” of more than 5% of
        the Common Stock (as defined for purposes of Rule 13d-3 of the Exchange
        Act).

       

      Each
        Purchaser’s representations and warranties made in this Article 2 are made
        solely for the purpose of permitting the Company to make a determination
        that
        the offer and sale of the Securities pursuant to this Agreement comply with
        applicable U.S. federal and state securities 

       

      
        
          
          

        

        
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      laws
        and
        not for any other purpose. Accordingly, the Company may not rely on such
        representations and warranties for any other purpose. No Purchaser has made
        or
        hereby makes any other representations or warranties, express or implied,
        to the
        Company in connection with the transactions contemplated hereby.

      


      3.  REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY.

       

      Except
        as
        set forth on a Disclosure Schedule executed and delivered by the Company
        to each
        Purchaser (the “Disclosure
        Schedule”),
        the
        Company represents and warrants to each Purchaser as follows:

      


      (a)  Organization
        and Qualification.
        The
        Company and each of its direct and indirect subsidiaries (collectively, the
        “Subsidiaries”)
        is a
        corporation duly organized and existing in good standing under the laws of
        the
        jurisdiction in which it is incorporated or organized, and has the requisite
        corporate power to own its properties and to carry on its business as now
        being
        conducted. The Company and each of its Subsidiaries is duly qualified as
        a
        foreign corporation to do business and is in good standing in every jurisdiction
        in which the nature of the business conducted by it makes such qualification
        necessary and where the failure so to qualify or be in good standing would
        have
        a Material Adverse Effect. For purposes of this Agreement, “Material
        Adverse Effect”
means
        any effect which, individually or in the aggregate with all other effects,
        reasonably would be expected to be materially adverse to (i) the Securities,
        (ii) the ability of the Company to perform its obligations under this Agreement
        or the other Transaction Documents or (iii) the business, operations,
        properties, prospects, condition (financial or otherwise) or results of
        operations of the Company and its Subsidiaries, taken as a whole.

       

      (b)  Authorization;
        Enforcement.
        (i) The
        Company has the requisite corporate power and authority to enter into and
        perform its obligations under this Agreement and the other Transaction
        Documents, to issue and sell the Notes and Warrants in accordance with the
        terms
        hereof, to issue the Conversion Shares upon conversion of the Notes in
        accordance with the terms thereof and to issue the Warrant Shares upon exercise
        of the Warrants in accordance with the terms thereof; (ii) the execution,
        delivery and performance of this Agreement and the other Transaction Documents
        by the Company and the consummation by it of the transactions contemplated
        hereby and thereby (including, without limitation, the issuance of the Notes
        and
        Warrants and the issuance and reservation for issuance of the Conversion
        Shares
        and Warrant Shares) have been duly authorized by the Company’s Board of
        Directors and, except for the approval of the Company’s stockholders referenced
        in Sections 4(g) and 7(h) hereof, no further consent or authorization of
        the
        Company, its Board of Directors, or any committee of the Board of Directors
        is
        required, and (iii) this Agreement constitutes, and, upon execution and delivery
        by the Company of the other Transaction Documents, such Transaction Documents
        will constitute, valid and binding obligations of the Company enforceable
        against the Company in accordance with their terms. 

       

      (c)  Capitalization.
        The
        capitalization of the Company as of the date hereof, including the authorized
        capital stock, the number of shares issued and outstanding, the number of
        shares
        issuable and reserved for issuance pursuant to the Company’s stock option plans,
        the number of shares issuable and reserved for issuance pursuant to securities
        (other than the Notes and the 

       

      
        
          
          

        

        
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      Warrants)
        exercisable or exchangeable for, or convertible into, any shares of capital
        stock and the number of shares to be reserved for issuance upon conversion
        of
        the Notes and exercise of the Warrants is set forth in Section
        3(c)
        of the
        Disclosure Schedule. All of such outstanding shares of capital stock have
        been,
        or upon issuance in accordance with the terms of any such exercisable,
        exchangeable or convertible securities will be, validly issued, fully paid
        and
        non-assessable. Except as set forth in Section
        3(c)
        of the
        Disclosure Schedule, no shares of capital stock of the Company (including
        the
        Conversion Shares and the Warrant Shares) are subject to preemptive rights
        or
        any other similar rights of the stockholders of the Company or any liens
        or
        encumbrances. Except for the Securities and as set forth in Section
        3(c)
        of the
        Disclosure Schedule, (i) there are no outstanding options, warrants, scrip,
        rights to subscribe to, calls or commitments of any character whatsoever
        relating to, or securities or rights convertible into or exercisable or
        exchangeable for, any shares of capital stock of the Company or any of its
        Subsidiaries, or contracts, commitments, understandings or arrangements by
        which
        the Company or any of its Subsidiaries is or may become bound to issue
        additional shares of capital stock of the Company or any of its Subsidiaries,
        nor are any such issuances, contracts, commitments, understandings or
        arrangements contemplated, (ii) there are no contracts, commitments,
        understandings or arrangements under which the Company or any of its
        Subsidiaries is obligated to register the sale of any of its or their securities
        under the Securities Act (except the Registration Rights Agreement); (iii)
        there
        are no outstanding securities or instruments of the Company or any of its
        Subsidiaries which contain any redemption or similar provisions, and there
        are
        no contracts, commitments, understandings or arrangements by which the Company
        or any of its Subsidiaries is or may become bound to redeem or otherwise
        acquire
        any security of the Company or any of its Subsidiaries; and (iv) the Company
        does not have any shareholder rights plan, “poison pill” or other anti-takeover
        plans or similar arrangements. Section
        3(c)
        of the
        Disclosure Schedule sets forth all of the securities or instruments issued
        by
        the Company or any of its Subsidiaries that contain anti-dilution or similar
        provisions, and, except as and to the extent set forth thereon, the sale
        and
        issuance of the Securities will not trigger any anti-dilution adjustments
        to any
        such securities or instruments. The Company has furnished to each Purchaser
        true
        and correct copies of the Company’s Amended and Restated Certificate of
        Incorporation as amended and as in effect on the date hereof (“Certificate
        of Incorporation”),
        the
        Company’s Amended and Restated Bylaws as in effect on the date hereof (the
“Bylaws”),
        and
        all other instruments and agreements governing securities convertible into
        or
        exercisable or exchangeable for capital stock of the Company, all of which
        instruments and agreements are set forth in Section
        3(c)
        of the
        Disclosure Schedule. For purposes of all provisions of this Agreement, any
        document publicly available on the SEC’s EDGAR system shall be considered to
        have been validly “furnished,”“delivered” or “provided” to a Purchaser or its
        counsel, as applicable. The Company or one of its Subsidiaries has the
        unrestricted right to vote, and (subject to limitations imposed by applicable
        law) to receive dividends and distributions on, all capital securities of
        its
        Subsidiaries as owned by the Company or any such Subsidiary. 

       

      (d)  Issuance
        of Securities.
        The
        Notes and Warrants are duly authorized and, upon issuance in accordance with
        the
        terms of this Agreement, (i) will be validly issued, fully paid and
        non-assessable and free from all taxes, liens, security interests, claims
        and
        encumbrances (other than those imposed by the Transaction Documents), (ii)
        will
        not be subject to preemptive rights, rights of first refusal or other similar
        rights of stockholders of the Company or any other person and (iii) will
        not
        impose personal liability on the holder thereof. The Conversion Shares and
        

       

      
        
          
          

        

        
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      Warrant
        Shares are duly authorized and reserved for issuance, and, upon conversion
        of
        the Notes and exercise of the Warrants in accordance with the terms thereof,
        (x)
        will be validly issued, fully paid and non-assessable, and free from all
        taxes,
        liens, claims and encumbrances (other than those imposed by the Transaction
        Documents), (y) will not be subject to preemptive rights, rights of first
        refusal or other similar rights of stockholders of the Company or any other
        person and (z) will not impose personal liability upon the holder
        thereof.

       

      (e)  No
        Conflicts; Consents.
        The
        execution, delivery and performance of this Agreement and the other Transaction
        Documents by the Company and the consummation by the Company of the transactions
        contemplated hereby and thereby (including, without limitation, the issuance
        of
        the Notes and Warrants and the issuance and reservation for issuance of the
        Conversion Shares and Warrant Shares) will not (i) result in a violation
        of the
        Certificate of Incorporation or Bylaws, (ii) conflict with, or constitute
        a
        default (or an event that with notice or lapse of time or both would become
        a
        default) under, or give to others any rights of termination, amendment
        (including, without limitation, the triggering of any anti-dilution provisions),
        acceleration or cancellation of, any agreement, indenture or instrument to
        which
        the Company or any of its Subsidiaries is a party, or (iii) result in a
        violation of any law, rule, regulation, order, judgment or decree (including
        United States federal and state securities laws, rules and regulations and
        rules
        and regulations of any self-regulatory organizations to which either the
        Company
        or its securities are subject) applicable to the Company or any of its
        Subsidiaries or by which any property or asset of the Company or any of its
        Subsidiaries is bound or affected (except, with respect to clauses (ii) and
        (iii), for such conflicts, defaults, terminations, amendments, accelerations,
        cancellations and violations that would not, individually or in the aggregate,
        have a Material Adverse Effect). Except (w) as may be required under the
        Securities Act in connection with the performance of the Company’s obligations
        under the Registration Rights Agreement, (x) for the filing of a Form D with
        the
        SEC, (y) as may be required for compliance with applicable state securities
        or
“blue sky” laws, or (z) as otherwise set forth in Section
        3(e)
        of the
        Disclosure Schedule, the Company is not required to obtain any consent,
        approval, authorization or order of, or make any filing or registration with,
        any court or governmental agency or any regulatory or self-regulatory agency
        or
        other third party (including, without limitation, pursuant to any Material
        Contract (as defined in Section 3(g) below)) in order for it to execute,
        deliver
        or perform any of its obligations under this Agreement or any of the other
        Transaction Documents.

       

      (f)  Compliance.
        The
        Company is not in violation of its Certificate of Incorporation, Bylaws or
        other
        organizational documents and no Subsidiary is in violation of any of its
        organizational documents. Neither the Company nor any of its Subsidiaries
        is in
        default (and no event has occurred that with notice or lapse of time or both
        would put the Company or any of its Subsidiaries in default) under, nor,
        to the
        knowledge of the Company or any of its Subsidiaries, has there occurred any
        event giving others (with notice or lapse of time or both) any rights of
        termination, amendment, acceleration or cancellation of, any agreement,
        indenture or instrument to which the Company or any of its Subsidiaries is
        a
        party (including, without limitation, the Material Contracts), except for
        actual
        or possible violations, defaults or rights that would not, individually or
        in
        the aggregate, have a Material Adverse Effect. The businesses of the Company
        and
        its Subsidiaries are not being conducted, and shall not be conducted so long
        as
        any Purchaser owns any of the Securities, in violation of any law, ordinance
        or
        regulation of any 

       

      
        
          
          

        

        
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      governmental
        entity, except for possible violations the sanctions for which either
        individually or in the aggregate have not had and would not have a Material
        Adverse Effect. Neither the Company, nor any of its Subsidiaries has, nor,
        to
        the knowledge of the Company or any of its Subsidiaries, has any director,
        officer, agent, employee or other person acting on behalf of the Company
        or any
        Subsidiary, in the course of his actions for, or on behalf of, the Company
        or
        any Subsidiary, used any corporate funds for any unlawful contribution, gift,
        entertainment or other unlawful expenses relating to political activity,
        made
        any direct or indirect unlawful payment to any foreign or domestic government
        official or employee from corporate funds, violated or is in violation of
        any
        provision of the U.S. Foreign Corrupt Practices Act of 1977, or made any
        bribe,
        rebate, payoff, influence payment, kickback or other unlawful payment to
        any
        foreign or domestic government official or employee. The Company and its
        Subsidiaries possess all certificates, authorizations and permits issued
        by the
        appropriate federal, state, provincial or foreign regulatory authorities
        that
        are material to the conduct of its business, and neither the Company nor
        any of
        its Subsidiaries has received any notice of proceeding relating to the
        revocation or modification of any such certificate, authorization or permit.
        

       

      (g)  SEC
        Documents, Financial Statements.
        Since
        December 31, 2000, the Company has timely filed (within applicable extension
        periods) all reports, schedules, forms, statements and other documents required
        to be filed by it with the SEC pursuant to the reporting requirements of
        the
        Securities Exchange Act of 1934, as amended (the “Exchange
        Act”)
        (all
        of the foregoing filed prior to the date hereof and all exhibits included
        therein and financial statements and schedules thereto and documents
        incorporated by reference therein, the “SEC
        Documents”).
        The
        Company has delivered to each Purchaser true and complete copies of the SEC
        Documents. As of their respective dates, the SEC Documents complied in all
        material respects with the requirements of the Exchange Act or the Securities
        Act, as the case may be, and the rules and regulations of the SEC promulgated
        thereunder applicable to the SEC Documents, and none of the SEC Documents,
        at
        the time they were filed with the SEC, contained any untrue statement of
        a
        material fact or omitted to state a material fact required to be stated therein
        or necessary in order to make the statements therein, in light of the
        circumstances under which they were made, not misleading. None of the statements
        made in any such SEC Documents is, or has been, required to be amended or
        updated under applicable law (except for such statements as have been amended
        or
        updated in subsequent filings made prior to the date hereof). As of their
        respective dates, the financial statements of the Company included in the
        SEC
        Documents complied as to form in all material respects with applicable
        accounting requirements and the published rules and regulations of the SEC
        applicable with respect thereto. Such financial statements have been prepared
        in
        accordance with U.S. generally accepted accounting principles (“GAAP”),
        consistently applied, during the periods involved (except as may be otherwise
        indicated in such financial statements or the notes thereto or, in the case
        of
        unaudited interim statements, to the extent they may not include footnotes
        or
        may be condensed or summary statements) and fairly present in all material
        respects the consolidated financial position of the Company and its consolidated
        Subsidiaries as of the dates thereof and the consolidated results of their
        operations and cash flows for the periods then ended (subject, in the case
        of
        unaudited statements, to normal, immaterial year-end audit adjustments).
        Except
        as set forth in the financial statements of the Company included in the Select
        SEC Documents (as defined below), the Company has no liabilities, contingent
        or
        otherwise, other than (i) liabilities incurred in the ordinary course of
        business with non-affiliated third parties subsequent to the date of such
        

       

      
        
          
          

        

        
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      financial
        statements and (ii) obligations under contracts and commitments incurred
        in the
        ordinary course of business with non-affiliated third parties and not required
        under GAAP to be reflected in such financial statements, which liabilities
        and
        obligations referred to in clauses (i) and (ii), individually or in the
        aggregate, are not material to the financial condition or operating results
        of
        the Company. To the extent required by the rules and regulations of the SEC
        applicable thereto, the Select SEC Documents contain a complete and accurate
        list of all material undischarged written or oral contracts, agreements,
        leases
        or other instruments to which the Company or any Subsidiary is a party or
        by
        which the Company or any Subsidiary is bound or to which any of the properties
        or assets of the Company or any Subsidiary is subject (each, a “Material
        Contract”).
        Except as set forth in the Select SEC Documents, none of the Company, its
        Subsidiaries or, to the best knowledge of the Company, any of the other parties
        thereto is in breach or violation of any Material Contract, which breach
        or
        violation would have a Material Adverse Effect. For purposes of this Agreement,
        “Select
        SEC Documents”
means
        the Company’s (A) Proxy Statement for its 2004 Annual Meeting, (B) Annual Report
        on Form 10-K for the fiscal year ended December 31, 2004 (the “2004
        Annual Report”),
        (C)
        Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 2005,
        and
        September 30, 2005, and (D) Current Reports on Form 8-K filed since December
        31,
        2004.

       

      (h)  Internal
        Accounting Controls.
        The
        Company and each of its Subsidiaries maintains a system of internal accounting
        controls sufficient to provide reasonable assurance that (i) transactions
        are
        executed in accordance with management’s general or specific authorizations,
        (ii) transactions are recorded as necessary to permit preparation of financial
        statements in conformity with GAAP and to maintain asset accountability,
        (iii)
        access to assets is permitted only in accordance with management’s general or
        specific authorization, and (iv) the recorded accountability for assets is
        compared with the existing assets at reasonable intervals and appropriate
        action
        is taken with respect to any differences. The Company has established disclosure
        controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15)
        for
        the Company and designed such disclosure controls and procedures to ensure
        that
        material information relating to the Company, including its Subsidiaries,
        is
        made known to the certifying officers by others within those entities,
        particularly during the period in which the Company’s Annual Report on Form 10-K
        or Quarterly Report on Form 10-Q, as the case may be, is being prepared.
        The
        Company’s certifying officers have evaluated the effectiveness of the Company’s
        controls and procedures as of a date within 90 days prior to the filing date
        of
        the 2004 Annual Report and the Company’s most recently filed Quarterly Report on
        Form 10-Q (each such date, an “Evaluation
        Date”).
        The
        Company presented in the 2004 Annual Report and its most recently filed
        Quarterly Report on Form 10-Q the conclusions of the certifying officers
        about
        the effectiveness of the disclosure controls and procedures based on their
        evaluations as of the respective Evaluation Date. Since the Evaluation Date
        for
        the 2004 Annual Report, there have been no significant changes in the Company’s
        internal controls (as such term is defined in Item 307(b) of Regulation S-K
        under the Exchange Act) or, to the Company’s knowledge, in other factors that
        could significantly affect the Company’s internal controls.

       

      (i)  Absence
        of Certain Changes.
        Except
        as set forth in the Select SEC Documents, since December 31, 2004, there
        has
        been no material adverse change and no material adverse development in the
        business, properties, operations, prospects, financial condition or results
        of
        operations of the Company and its Subsidiaries, taken as a whole. The Company
        has not taken 

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      any
        steps, and does not currently expect to take any steps, to seek protection
        pursuant to any bankruptcy or receivership law, nor does the Company or any
        of
        its Subsidiaries have any knowledge or reason to believe that its creditors
        intend to initiate involuntary bankruptcy proceedings with respect to the
        Company or any of its Subsidiaries. 

       

      (j)  Transactions
        With Affiliates.
        Except
        as set forth in the Select SEC Documents, none of the officers, directors,
        or
        employees of the Company or any of its Subsidiaries is presently a party
        to any
        transaction with the Company or any of its Subsidiaries (other than for ordinary
        course services solely in their capacity as officers, directors or employees),
        including any contract, agreement or other arrangement providing for the
        furnishing of services to or by, providing for rental of real or personal
        property to or from, or otherwise requiring payments to or from any such
        officer, director or employee or any corporation, partnership, trust or other
        entity in which any such officer, director, or employee has an ownership
        interest of five percent or more or is an officer, director, trustee or
        partner.

       

      (k)  Absence
        of Litigation.
        Except
        as disclosed in the Select SEC Documents, there is no action, suit, proceeding,
        inquiry or investigation before or by any court, public board, government
        agency, self-regulatory organization or body (including, without limitation,
        the
        SEC) pending or, to the knowledge of the Company or any of its Subsidiaries,
        threatened against or affecting the Company, any of its Subsidiaries, or
        any of
        their respective directors or officers in their capacities as such. There
        are no
        facts which, if known by a potential claimant or governmental authority,
        could
        give rise to a claim or proceeding which, if asserted or conducted with results
        unfavorable to the Company or any of its Subsidiaries, could reasonably be
        expected to have a Material Adverse Effect.

       

      (l)  Intellectual
        Property.
        Except
        for those matters described in the Company’s SEC Documents and except for other
        matters which are not material to the Company’s business taken as a whole:


       

      
        	(i)  	
                No
                  “Intellectual
                  Property” (consisting
                  of patents, trademarks, service marks, trade dress, trade names
                  and
                  corporate names, copyrights; and any registrations, applications
                  and
                  renewals for any of the foregoing) owned by the Company or its
                  Subsidiaries which is necessary for the conduct of the Company’s and each
                  of its Subsidiaries’ respective businesses as currently conducted or as
                  currently proposed to be conducted is now involved in any cancellation,
                  dispute or litigation, and, to the Company’s knowledge, no such action is
                  threatened. 

              


      

       

      
        	(ii)  	
                No
                  patent owned by the Company or its Subsidiaries is now involved
                  in any
                  interference, reissue, re-examination or opposition proceeding.
                  

              


      

       

      
        	(iii)  	
                To
                  the knowledge of the Company and its Subsidiaries, neither the
                  Company nor
                  any Subsidiary of the Company infringes or is in conflict with
                  any right
                  of any other person with respect to any third party Intellectual
                  Property.

              


      

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      
        	(iv)  	
                Neither
                  the Company nor any of its Subsidiaries has received written notice
                  of any
                  pending conflict with or infringement upon such third party Intellectual
                  Property. 

              


      

       

      
        	(v)  	
                Neither
                  the Company nor any of its Subsidiaries has entered into any consent
                  agreement, forbearance to sue or settlement agreement with respect
                  to the
                  validity of the Company’s or its Subsidiaries’ ownership of or right to
                  use its Intellectual Property. 

              


      

       

      
        	(vi)  	
                The
                  Company and its Subsidiaries have complied, in all material respects,
                  with
                  their respective contractual obligations relating to the protection
                  of the
                  Intellectual Property used pursuant to licenses.
                  

              


      

       

      
        	(vii)  	
                To
                  the Company’s knowledge, no person is infringing on or violating the
                  Intellectual Property owned by the Company which is necessary for
                  the
                  conduct of Company’s and each of its Subsidiaries’ respective businesses
                  as currently conducted or as currently proposed to be
                  conducted.

              


      

       

      (m)  Title.
        The
        Company and its Subsidiaries have good and marketable title in fee simple
        to all
        real property and good and merchantable title to all personal property owned
        by
        them that is material to the business of the Company and its Subsidiaries,
        in
        each case free and clear of all liens, encumbrances and defects except such
        as
        do not materially affect the value of such property and do not materially
        interfere with the use made and proposed to be made of such property by the
        Company and its Subsidiaries. Any real property and facilities held under
        lease
        by the Company and its Subsidiaries are held by them under valid, subsisting
        and
        enforceable leases with such exceptions as are not material and do not
        materially interfere with the use made and proposed to be made of such property
        and buildings by the Company and its Subsidiaries.

       

      (n)  Tax
        Status.
        Except
        as set forth in the Select SEC Documents, the Company and each of its
        Subsidiaries has made or filed all foreign, U.S. federal, state, provincial
        and
        local income and all other tax returns, reports and declarations required
        by any
        jurisdiction to which it is subject (unless and only to the extent that the
        Company and each of its Subsidiaries has set aside on its books provisions
        reasonably adequate for the payment of all unpaid and unreported taxes) and
        has
        paid all taxes and other governmental assessments and charges that are material
        in amount, shown or determined to be due on such returns, reports and
        declarations, except those being contested in good faith and has set aside
        on
        its books provisions reasonably adequate for the payment of all taxes for
        periods subsequent to the periods to which such returns, reports or declarations
        apply. There are no unpaid taxes in any material amount claimed to be due
        by the
        taxing authority of any jurisdiction, and the officers of the Company know
        of no
        basis for any such claim. The Company has not executed a waiver with respect
        to
        any statute of limitations relating to the assessment or collection of any
        foreign, federal, state, provincial or local tax. None of the Company’s tax
        returns is presently being audited by any taxing authority.

       

      (o)  Key
        Employees.
        Each of
        the Company’s directors and officers and any Key Employee (as defined below) is
        currently serving the Company in the capacity disclosed in the Select SEC
        Documents. No Key Employee is, or is now expected to be, in violation of
        any


       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

      material
        term of any employment contract, confidentiality, disclosure or proprietary
        information agreement, non-competition agreement, or any other contract or
        agreement or any restrictive covenant, and the continued employment of each
        Key
        Employee does not subject the Company or any of its Subsidiaries to any material
        liability with respect to any of the foregoing matters. No Key Employee has,
        to
        the knowledge of the Company and its Subsidiaries, any intention to terminate
        or
        limit his employment with, or services to, the Company or any of its
        Subsidiaries, nor is any such Key Employee subject to any constraints which
        would cause such employee to be unable to devote his full time and attention
        to
        such employment or services. For purposes of this Agreement, “Key
        Employee”
means
        the persons listed in Section
        3(o)
        of the
        Disclosure Schedule and any individual who assumes or performs any of the
        duties
        of a Key Employee.

       

      (p)  Employee
        Relations.
        Neither
        the Company nor any of its Subsidiaries is involved in any material union
        labor
        dispute nor, to the knowledge of the Company or any of its Subsidiaries,
        is any
        such dispute threatened. The Company and its Subsidiaries believe that their
        relations with their employees are good. No executive officer (as defined
        in
        Rule 501(f) of the Securities Act) has notified the Company that such officer
        intends to leave the Company or otherwise terminate such officer’s employment
        with the Company. The Company and its Subsidiaries are in compliance with
        all
        federal, state, local and foreign laws and regulations respecting employment
        and
        employment practices, terms and conditions of employment and wages and hours,
        except where failure to be in compliance would not, either individually or
        in
        the aggregate, result in a Material Adverse Effect.

       

      (q)   Insurance.
        The
        Company and each Subsidiary maintains in full force and effect insurance
        coverage that is customary for comparably situated companies for the business
        being conducted and properties owned or leased by the Company and each
        Subsidiary, and the Company reasonably believes such insurance coverage to
        be
        adequate against all liabilities, claims and risks against which it is customary
        for comparably situated companies to insure. To the Company’s knowledge, no
        default or event has occurred that could give rise to a default under any
        such
        policy.

       

      (r)  Environmental
        Matters.
        Neither
        the Company nor any Subsidiary is in violation of any statute, rule, regulation,
        decision or order of any governmental agency or body or any court, domestic
        or
        foreign, relating to the use, disposal or release of hazardous or toxic
        substances or relating to the protection or restoration of the environment
        or
        human exposure to hazardous or toxic substances (collectively, “Environmental
        Laws”);
        owns
        or, to the Company’s knowledge, operates any real property contaminated with any
        substance that is subject to any Environmental Laws; is liable for any off-site
        disposal or contamination pursuant to any Environmental Laws, and is subject
        to
        any claim relating to any Environmental Laws, which violation, contamination,
        liability or claim has had or could reasonably be expected to have a Material
        Adverse Effect, individually or in the aggregate; and there is no pending
        or, to
        the Company’s knowledge, threatened investigation that might lead to such a
        claim.

       

      (s)  Solvency.
        Based
        on the financial condition of the Company as of the Closing Date, and after
        giving effect to the net proceeds of the transactions contemplated by this
        Agreement, (i) the Company’s fair saleable value of its assets exceeds the
        amount that is currently required to be paid on or in respect of the Company’s
        existing debts and other liabilities 

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

       

      (including
        known contingent liabilities); and, (ii) the Company’s assets do not constitute
        unreasonably small capital to carry on its business for the current fiscal
        year
        as now conducted and as proposed to be conducted including its capital needs
        taking into account the particular capital requirements of the business
        conducted by the Company, and projected capital requirements and capital
        availability thereof. The Company does not intend to incur debts beyond its
        ability to pay such debts as they mature (taking into account the timing
        and
        amounts of cash to be payable on or in respect of its debt).

       

      (t)  Listing.
        The
        Common Stock is currently listed for trading on the American Stock Exchange
        (“AMEX”).
        Except as set forth in Schedule
        3(t)
        of the
        Disclosure Schedule, the Company is not in violation of the listing requirements
        of AMEX, does not reasonably anticipate that the Common Stock will be delisted
        by AMEX for the foreseeable future, and has not received any notice regarding
        the possible delisting of the Common Stock from AMEX. 

       

      (u)  Form
        S-3 Eligibility.
        The
        Company is eligible to register the resale of its Common Stock on a registration
        statement on Form S-3 under the Securities Act. There exist no facts or
        circumstances that would prohibit or delay the preparation and filing of
        a
        registration statement on Form S-3 with respect to the Registrable Securities
        (as defined in the Registration Rights Agreement). The Company has no basis
        to
        believe that its past or present independent public auditors will withhold
        their
        consent to the inclusion, or incorporation by reference, of their audit opinion
        concerning the Company’s financial statements which are included in the
        Registration Statement required to be filed pursuant to the Registration
        Rights
        Agreement.

       

      (v)  Anti-Takeover
        Provisions.
        The
        Company and its board of directors have taken all necessary action, if any,
        in
        order to render inapplicable any control share acquisition, business
        combination, poison pill (including any distribution under a rights agreement)
        or other similar anti-takeover provision under its Certificate of Incorporation
        or the laws of the state of its incorporation (including, without limitation,
        Section 203 of the Delaware General Corporation Law, as amended) which is
        or
        could become applicable to any Purchaser as a result of the transactions
        contemplated by this Agreement, including, without limitation, the Company’s
        issuance of the Securities and any and all Purchaser’s ownership of the
        Securities.

       

      (w)  Acknowledgment
        Regarding Each Purchaser’s Purchase of the Securities.
        The
        Company acknowledges and agrees that each Purchaser is acting solely in the
        capacity of arm’s length purchaser with respect to this Agreement and the other
        Transaction Documents and the transactions contemplated hereby and thereby,
        and
        that prior to the Closing no Purchaser is (i) an officer or director of the
        Company, (ii) an “affiliate” of the Company (as defined in Rule 144 under the
        Securities Act (including any successor rule, “Rule
        144”))
        or
        (iii) a “beneficial owner” of more than 5% of the Common Stock (as defined for
        purposes of Rule 13d-3 of the Exchange Act). The Company further acknowledges
        that no Purchaser is acting as a financial advisor or fiduciary of the Company
        (or in any similar capacity) with respect to this Agreement or the other
        Transaction Documents and the transactions contemplated hereby and thereby,
        and
        any advice given by a Purchaser or any of its representatives or agents in
        connection with this Agreement or the other Transaction Documents and the
        transactions contemplated hereby and thereby is merely incidental to such
        Purchaser’s purchase of the Securities. The Company further represents to each
        Purchaser that the Company’s decision to enter into this Agreement and the other


       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

       

      Transaction
        Documents has been based solely on the independent evaluation by the Company
        and
        its representatives. 

       

      (x)  No
        General Solicitation or Integrated Offering.
        Neither
        the Company nor any distributor participating on the Company’s behalf in the
        transactions contemplated hereby (if any) nor any person acting for the Company,
        or any such distributor, has conducted any “general solicitation” (as such term
        is defined in Regulation D) with respect to any of the Securities being offered
        hereby. Neither the Company nor any of its affiliates, nor any person acting
        on
        its or their behalf, has directly or indirectly made any offers or sales
        of any
        security or solicited any offers to buy any security under circumstances
        that
        would require registration of the Securities being offered hereby under the
        Securities Act or cause this offering of Securities to be integrated with
        any
        prior offering of securities of the Company for purposes of the Securities
        Act,
        which result of such integration would require registration under the Securities
        Act, or any applicable stockholder approval provisions.

       

      (y)  No
        Brokers.
        The
        Company has taken no action that would give rise to any claim by any person
        for
        brokerage commissions, finder’s fees or similar payments by any Purchaser
        relating to this Agreement or the transactions contemplated hereby.

       

      (z)  Acknowledgment
        Regarding Securities.
        The
        number of Conversion Shares issuable upon conversion of the Notes and the
        number
        of Warrant Shares issuable upon exercise of the Warrants may increase in
        certain
        circumstances. The Company’s directors and executive officers have studied and
        fully understand the nature of the Securities being sold hereunder. The Company
        acknowledges that its obligation to issue Conversion Shares upon conversion
        of
        the Notes in accordance with the terms thereof and the Warrant Shares upon
        the
        exercise of the Warrants in accordance with the terms thereof is absolute
        and
        unconditional, regardless of the dilution that such issuance may have on
        the
        ownership interests of other stockholders and the availability of remedies
        provided for in any of the Transaction Documents relating to a failure or
        refusal to issue Conversion Shares or Warrant Shares. Taking the foregoing
        into
        account, the Company’s Board of Directors has determined in its good faith
        business judgment that the issuance of the Notes and Warrants hereunder and
        the
        consummation of the other transactions contemplated hereby are in the best
        interests of the Company and its stockholders.

       

      (aa)  Disclosure.
        All
        information relating to or concerning the Company and/or any of its Subsidiaries
        set forth in this Agreement or provided to the Purchasers pursuant to Section
        2(d) hereof or otherwise in connection with the transactions contemplated
        hereby
        is true and correct in all material respects and the Company has not omitted
        to
        state any material fact necessary in order to make the statements made herein
        or
        therein, in light of the circumstances under which they were made, not
        misleading. No event or circumstance has occurred or exists with respect
        to the
        Company or its Subsidiaries or their respective businesses, properties,
        prospects, operations or financial conditions, which has not been publicly
        disclosed but, under applicable law, rule or regulation, would be required
        to be
        disclosed by the Company in a registration statement filed on the date hereof
        by
        the Company under the Securities Act with respect to a primary issuance of
        the
        Company’s securities.

       

      4.  COVENANTS.

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

       

      (a)  Best
        Efforts.
        The
        parties shall use their respective best efforts timely to satisfy each of
        the
        conditions described in Sections 6 and 7 of this Agreement.

       

      (b)  Form
        D; Blue Sky Laws.
        The
        Company shall file with the SEC a Form D with respect to the Securities as
        required under Regulation D. The Company shall, on or before the Closing
        Date,
        take such action as the Company shall reasonably determine is necessary to
        qualify the Securities for sale to each Purchaser pursuant to this Agreement
        under applicable securities or “blue sky” laws of the states of the United
        States or obtain exemption therefrom. The Company shall issue a press release
        (the “Press
        Release”)
        describing in reasonable detail the transactions contemplated hereby and
        such
        other matters as had previously been discussed by the Purchasers and the
        Company, as soon as practicable on or after the date hereof, but in no event
        later than 8:30 a.m., New York, New York time, on the first trading day
        following the date hereof. The Press Release shall be subject to prior review
        and comment from the Purchasers. In addition, no later than the second business
        day after the Closing Date, the Company shall file a Form 8-K with the SEC
        concerning this Agreement and the transactions contemplated hereby, which
        Form
        8-K shall attach this Agreement and its Exhibits as exhibits to such Form
        8-K
        (the “8-K
        Filing”).
        Except as set forth in Schedule
        4(b)
        to the
        Disclosure Schedules, from and after the date of the Press Release, the Company
        hereby acknowledges that no Purchaser shall be in possession of any material
        nonpublic information received from the Company, any of its Subsidiaries
        or, to
        the best of the Company’s knowledge, any of its or their respective directors,
        officers, employees, affiliates, stockholders, agents or representatives,
        that
        is not disclosed in the Press Release. The Company shall not, and shall cause
        each of its Subsidiaries and its and each of their respective directors,
        officers, employees, affiliates, stockholders, agents or representatives
        not to,
        provide any Purchaser with any material nonpublic information regarding the
        Company or any of its Subsidiaries from and after the Press Release without
        the
        prior express written consent of such Purchaser; provided,
        however,
        that a
        Purchaser that exercises its rights under Section 4(m) hereof shall be
        deemed to have given such express written consent. In the event the covenant
        in
        the preceding sentence is breached for any reason, whether or not as a result
        of
        the fault or nonfeasance of the Company, the Company shall, as promptly as
        practicable and in no event later than the first trading day after becoming
        aware of such breach, disclose all such material nonpublic information to
        the
        public in accordance with Regulation FD promulgated under the Exchange Act.
        Subject to the foregoing, neither the Company nor any Purchaser shall issue
        any
        press releases or any other public statements with respect to the transactions
        contemplated hereby; provided,
        however,
        that
        the Company shall be entitled, without the prior approval of any Purchaser,
        to
        make any press release or other public disclosure with respect to such
        transactions as is required by applicable law and regulations (provided that
        (a)
        the Required Holders (as defined herein) shall be consulted by the Company
        in
        connection with any such press release or other public disclosure prior to
        its
        release and (b) in no event will any Purchaser be identified by name in any
        press release, including without limitation, the Press Release, or other
        public
        disclosure (other than the registration statement on Form S-3 with respect
        to
        the Registrable Securities) without the express prior approval of the Purchaser
        to be named). 

       

      (c)  Reporting
        Status.
        So long
        as any Purchasers (or any of their respective affiliates) beneficially own
        any
        of the Securities, the Company shall timely file all reports required to
        be
        filed with the SEC pursuant to the Exchange Act, and the Company shall not
        terminate its status 

       

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

       

      as
        an
        issuer required to file reports under the Exchange Act even if the Exchange
        Act
        or the rules and regulations thereunder would permit such termination. In
        addition, the Company shall take all actions necessary to meet the “registrant
        eligibility” requirements set forth in the general instructions to Form S-3 or
        any successor form thereto, to continue to be eligible to register the resale
        of
        its Common Stock on a registration statement on Form S-3 under the Securities
        Act.

       

      (d)  Use
        of
        Proceeds.
        The
        Company shall use the proceeds from the sale and issuance of the Notes and
        Warrants as set forth on Schedule
        4(d)
        of the
        Disclosure Schedule. Except as set forth on Schedule
        4(d)
        of the
        Disclosure Schedule such proceeds shall not be used to (i) pay dividends;
        (ii)
        pay for any increase in executive compensation or make any loan or other
        material advance to any officer, employee, shareholder, director or other
        affiliate of the Company, without the express approval of the Board of Directors
        acting in accordance with past practice; (iii) purchase debt or equity
        securities of any entity (including redeeming the Company’s own securities, but
        expressly excluding any scheduled monthly redemptions of the Company’s
        outstanding 7.5% Convertible Notes and the scheduled monthly redemptions
        of the
        Notes), except for (A) evidences of indebtedness issued or fully guaranteed
        by
        the United States of America and having a maturity of not more than one year
        from the date of acquisition, (B) certificates of deposit, notes, acceptances
        and repurchase agreements having a maturity of not more than one year from
        the
        date of acquisition issued by a bank organized in the United States having
        capital, surplus and undivided profits of at least $500,000,000, (C) the
        highest-rated commercial paper having a maturity of not more than one year
        from
        the date of acquisition, and (D) “Money Market” fund shares, or money market
        accounts fully insured by the Federal Deposit Insurance Corporation and
        sponsored by banks and other financial institutions, provided that the
        investments consist principally of the types of investments described in
        clauses
        (A), (B), or (C) above; or (iv) make any investment not directly related
        to the
        current business of the Company.

       

      (e)  Financial
        Information.
        So long
        as any Purchasers (or any of their respective affiliates) beneficially own
        any
        of the Securities, the Company shall deliver the following reports to each
        such
        Purchaser: (i) within ten days after the filing with the SEC, a copy of its
        Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
        statements and any Current Reports on Form 8-K; and (ii) within one day after
        release, copies of all press releases issued by the Company or any of its
        Subsidiaries.

       

      (f)  Reservation
        of Shares.
        The
        Company currently has authorized and reserved for the purpose of issuance
        a
        sufficient number of shares of Common Stock required to provide for the full
        conversion of the Notes (at the current conversion price) and issuance of
        the
        Conversion Shares in connection therewith, the full exercise of the Warrants
        (at
        the current exercise price) and the issuance of the Warrant Shares in connection
        therewith. The Company shall be obligated to authorize and reserve for issuance
        a sufficient number of shares of Common Stock to provide for the full conversion
        of the Notes, the issuance of the Conversion Shares in connection therewith,
        the
        full exercise of the Warrants and the issuance of the Warrant Shares in
        connection therewith (including those shares issued pursuant to Section 11(i)
        of
        the Warrant) (collectively, the “Issuance
        Obligations”).
        In
        the event such number of shares becomes insufficient to satisfy the Issuance
        Obligations, the Company shall take all necessary action to authorize and
        reserve such additional shares of Common Stock necessary to satisfy the Issuance
        Obligations.

       

      
        
          
          

        

        
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      (g)  Listing;
        Stockholder Meeting.
        The
        Company shall: (i) prepare and file an additional listing application with
        AMEX
        covering the Optional Conversion Shares initially issuable upon conversion
        of
        the Notes (without giving effect to any limitations on conversion contained
        in
        Article IX.B of the Notes) and the Warrant Shares initially issuable upon
        exercise of the Warrants (without giving effect to any limitations on exercise
        contained in Section 3(c) of the Warrants); (ii) use its best efforts to
        cause
        such Conversion Shares and Warrant Shares to be approved for listing on AMEX
        as
        soon as possible thereafter; (iii) use its best efforts to maintain the listing
        of such Conversion Shares and Warrant Shares on AMEX, or the NASDAQ Small-Cap
        Market (the “Small
        Cap Market”),
        the
        New York Stock Exchange (the “NYSE’)
        or the
        NASDAQ National Market (the “National
        Market”),
        whichever is at the time the principal trading exchange or market for the
        Common
        Stock, based upon share volume and (iv) take any other action required by,
        and
        comply with any other request of, AMEX required to cause such Conversion
        Shares
        and Warrant Shares to be approved for listing on AMEX or to maintain the
        listing
        of such Conversion Shares and Warrant Shares on AMEX. In addition, the Company
        shall, at its next regularly scheduled annual or special meeting of
        stockholders, but in no event later than June 15, 2006, include proposals
        (the
“Stockholder
        Proposals”)
        for
        stockholder approval (as required by the applicable rules and regulations
        of
        AMEX) with respect to the transactions contemplated by the Transaction
        Documents, including a proposal approving an amendment to the Company’s
        Certificate of Incorporation, if required, to increase the number of authorized
        shares of Common Stock to at least the amount required to allow for the issuance
        of the maximum number of Conversion Shares and Warrants Shares by the Company
        issuable under the Notes and the Warrants, and a proposal approving (i) the
        issuance of shares upon conversion of the Notes, as payment of interest on
        the
        Notes, or upon the amortization of the Notes, at a price below the last sale
        price of the Common Stock on AMEX on the last trading day before the Closing
        Date (such last sale price, the “Floor
        Price”),
        and
        (ii) the issuance of shares upon exercise of the Warrants pursuant to the
        full
        ratchet antidilution provisions in the Warrants at a price below the Floor
        Price, with the recommendation of the Company’s Board of Directors that such
        proposals be approved, and the Company shall use its best efforts to solicit
        proxies from its stockholders in connection therewith in favor of such proposals
        and all management-appointed proxyholders shall vote their proxies in favor
        of
        such proposals.

       

      (h)  Corporate
        Existence.
        So long
        as any Purchasers (or any of their respective affiliates) beneficially own
        any
        of the Securities, the Company shall maintain its corporate existence, and
        in
        the event of a merger, consolidation or sale of all or substantially all
        of the
        Company’s assets, the Company shall ensure that the surviving or successor
        entity in such transaction (i) assumes the Company’s obligations under this
        Agreement and the other Transaction Documents and the agreements and instruments
        entered into in connection herewith and therewith regardless of whether or
        not
        the Company would have had a sufficient number of shares of Common Stock
        authorized and available for issuance in order to effect the conversion of
        all
        the Notes and exercise in full of all Warrants outstanding as of the date
        of
        such transaction or in order to effect an Amortization Issuance and (ii)
        except
        in the event of a merger, consolidation of the Company into any other
        corporation, or the sale or conveyance of all or substantially all of the
        assets
        of the Company where the consideration consists solely of cash, the surviving
        or
        successor entity is a publicly traded corporation whose common stock is listed
        for trading on the SmallCap Market, the National Market, the NYSE or the
        AMEX.

       

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

       

      (i)  No
        Integrated Offerings.
        The
        Company shall not make any offers or sales of any security (other than the
        Securities) under circumstances that would require registration of the
        Securities being offered or sold hereunder under the Securities Act or cause
        this offering of the Securities to be integrated with any other offering
        of
        securities by the Company for purposes of any stockholder approval provision
        applicable to the Company or its securities.

       

      (j)  Legal
        Compliance.
        The
        Company shall conduct its business and the business of its Subsidiaries in
        compliance with all laws, ordinances or regulations of governmental entities
        applicable to such businesses, except where the failure to do so would not
        have
        a Material Adverse Effect.

       

      (k)  Redemptions,
        Dividends and Repayments of Indebtedness.
        So long
        as any Purchasers (or any of their respective affiliates) beneficially own
        any
        of the Notes, the Company shall not, without first obtaining the written
        approval of the holders of a majority of the aggregate principal face amount
        of
        the Notes then outstanding (which approval may be given or withheld by such
        holders in their sole and absolute discretion), repurchase, redeem or declare
        or
        pay any cash dividend or distribution on any shares of capital stock of the
        Company or repay or prepay any indebtedness of the Company other than as
        expressly required pursuant to the terms of such indebtedness as in effect
        on
        the date hereof.

       

      (l)  Information.
        So long
        as any Purchasers (or any of their respective affiliates) beneficially own
        any
        of the Securities, the Company shall furnish to each such Purchaser the
        information the Company must deliver to any holder or to any prospective
        transferee of Securities in order to permit the sale or other transfer of
        such
        Securities pursuant to Rule 144A of the SEC or any similar rule then in
        effect.

       

      The
        Company shall keep at its principal executive office a true copy of this
        Agreement (as at the time in effect), and cause the same to be available
        for
        inspection at such office during normal business hours by any holder of
        Securities or any prospective transferee of Securities designated by a holder
        thereof.

      


      (m)  Inspection
        of Properties and Books.
        So long
        as any Purchasers (or any of their respective affiliates) beneficially own
        any
        of the Securities, each such Purchaser and its representatives and agents
        (collectively, the “Inspectors”)
        shall
        have the right, at such Purchaser’s expense, to visit and inspect any of the
        properties of the Company and of its Subsidiaries, to examine the books of
        account and records of the Company and of its Subsidiaries, to make or be
        provided with copies and extracts therefrom, to discuss the affairs, finances
        and accounts of the Company and of its Subsidiaries with, and to be advised
        as
        to the same by, its and their officers, employees and independent public
        accountants (and by this provision the Company authorizes such accountants
        to
        discuss such affairs, finances and accounts, whether or not a representative
        of
        the Company is present) all at such reasonable times and intervals and to
        such
        reasonable extent as the Purchasers may desire; provided,
        however,
        that
        each Inspector shall hold in confidence and shall not make any disclosure
        (except to such Purchaser) of any such information which the Company determines
        in good faith to be confidential, and of which determination the Inspectors
        are
        so notified, unless (i) the parties mutually determine on a reasonable basis
        that the disclosure of such information is necessary to 

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

       

      avoid
        or
        correct a misstatement or omission in any Registration Statement filed pursuant
        to the Registration Rights Agreement, (ii) the release of such information
        is
        ordered pursuant to a subpoena or other order from a court or government
        body of
        competent jurisdiction, or (iii) such information has been made generally
        available to the public other than by disclosure in violation of this or
        any
        other agreement. Each Purchaser agrees that it shall, upon learning that
        disclosure of such information is sought in or by a court or governmental
        body
        of competent jurisdiction or through other means, give prompt notice to the
        Company and allow the Company, at its expense, to undertake appropriate action
        to prevent disclosure of, or to obtain a protective order for, the information
        deemed confidential. 

       

      (n)  Stockholders
        Rights Plan.
        No
        claim shall be made or enforced by the Company or any other person that any
        Purchaser is an “Acquiring Person” under any stockholders rights plan or similar
        plan or arrangement in effect or hereafter adopted by the Company, or that
        any
        Purchaser could be deemed to trigger the provisions of any such plan or
        arrangement, by virtue of receiving Securities under this Agreement or any
        other
        Transaction Documents or under any other agreement between the Company and
        the
        Purchasers.

       

      (o)  Pledge
        of Securities.
        The
        Company acknowledges and agrees that the Securities may be pledged by any
        Purchaser in connection with a bona fide margin agreement or other loan or
        financing arrangement that is secured by the Securities. The pledge of
        Securities shall not be deemed to be a transfer, sale or assignment of the
        Securities hereunder, and no Purchaser effecting a pledge of Securities shall
        be
        required to provide the Company with any notice thereof or otherwise make
        any
        delivery to the Company pursuant to this Agreement or any other Transaction
        Document. The Company shall execute and deliver such documentation as a pledgee
        of the Securities may reasonably request in connection with a pledge of the
        Securities to such pledgee by a Purchaser. 

       

      (p)  Expenses.
        At the
        Closing, the Company shall pay to SDS Capital Partners SPC, Ltd. (“SDS”)
        reimbursement for the out-of-pocket expenses reasonably incurred by SDS,
        its
        affiliates and its advisors in connection with the negotiation, preparation,
        execution and delivery of this Agreement and the other Transaction Documents
        and
        the consummation of the transactions contemplated hereby and thereby, including,
        without limitation, SDS’ and its respective affiliates’ and advisors’ reasonable
        due diligence and attorneys’ fees and expenses (the “Expenses”);
        provided,
        however,
        that
        SDS shall be permitted, in its discretion, to deduct all of its Expenses
        from
        the Purchase Price payable by SDS hereunder; and provided,
        further,
        that
        the aggregate amount of the Expenses payable to SDS shall not exceed $70,000
        (including reasonable legal fees and expenses related to the preparation
        of the
        Transaction Documents and the transactions contemplated thereby without the
        prior consent of the Company, which consent shall not be unreasonably withheld
        (the “Expense
        Cap”).
        

       

      (q)  Participation
        Right.
        Subject
        to the terms and conditions specified in this Section 4(q), until the third
        anniversary of the date hereof (or such later date to which the maturity
        date of
        the Notes is extended), Purchasers holding $250,000 or more of aggregate
        principal face amount of the Notes (each, a “Qualifying
        Purchaser”)
        shall
        have a right to participate in any issuance by the Company of (i) equity
        or
        equity-linked securities, or (ii) debt which is convertible into equity or
        in
        which there is an equity component (“Additional
        Securities”)
        on


       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

       

      the
        same
        terms and conditions as offered by the Company to the other purchasers of
        such
        Additional Securities. Each time the Company proposes to offer any Additional
        Securities, the Company shall make an offering of such Additional Securities
        to
        each such Purchaser in accordance with the following provisions:

       

      (i)  At
        least
        ten (10) trading days prior to the closing of the sale of Additional
        Securities,
        the
        Company shall deliver to each Qualifying Purchaser a written notice of its
        intention to effect a Subsequent Financing (“Pre-Notice”),
        which
        Pre-Notice shall ask such Qualifying Purchaser if it wants to review the
        details
        of such financing (such additional notice, a “Subsequent
        Financing Notice”).
        Upon
        the request of a Qualifying Purchaser, and only upon a request by such
        Qualifying Purchaser, for a Subsequent Financing Notice, the Company shall
        promptly, but no later than five (5) trading days after such request, deliver
        a
        Subsequent Financing Notice to such Qualifying Purchaser.
        The
        Subsequent Financing Notice shall describe in reasonable detail the proposed
        terms of such Subsequent Financing, the amount of proceeds intended to be
        raised
        thereunder, the Person with whom such Subsequent Financing is proposed to
        be
        effected (provided that the name of such Person(s) is available), and attached
        to which shall be a term sheet or similar document relating thereto. Each
        Qualifying Purchaser shall notify the Company by 6:30 p.m. (New York City
        time)
        on the fifth (5th)
        trading
        day after their receipt of the Subsequent Financing Notice of its willingness
        to
        provide the Subsequent Financing on the terms described in the Subsequent
        Financing Notice, subject to completion of mutually acceptable documentation.
        No
        Purchaser shall offer to sell, solicit offers to buy, dispose of, loan, pledge
        or grant any right with respect to the Company’s Common Stock (other than
        pursuant to this Section 4(q)) from the time the Company delivers the Subsequent
        Financing Notice until such time as the Purchaser is no longer in possession
        of
        material non-public information regarding the Company. 

       

      (ii)  Each
        Qualifying Purchaser agreeing to participate in the Subsequent Financing
        (the
“Participating
        Purchasers”)
        shall
        have the right to purchase, at the price and on the terms specified in the
        Notice, up to an amount of such Additional Securities equal to the aggregate
        principal amount of Notes then held by such Purchaser provided,
        that
        such
        rights are subject, until December 20, 2006, to the prior rights of the holders
        of the Company’s Series A Preferred Stock, and that the Purchasers eligible to
        participate in the offering of the Additional Securities may only purchase
        in
        the aggregate up to 50% of the aggregate maximum dollar amount and/or other
        consideration being offered in such offering (with any cutback required being
        allocated on a pro rata basis among the participating Purchasers based upon
        percentage of aggregate principal amount of all such participating Purchasers);
        and further
        provided, that
        any
        Purchaser who has a participation right with respect to the purchase of the
        Company’s Series A Preferred Stock may not exercise its participation rights
        hereunder if it has exercised its rights under the transaction documents
        related
        to its purchase of the Company’s Series A Preferred Stock, and further
        provided that
        the
        limitations on the number of Additional Securities that a Participating
        Purchaser may acquire pursuant to this Section 4(q) shall include all Additional
        Securities that such Participating Purchaser may acquire pursuant to the
        exchange right set forth in Article X of the Notes.

       

      (iii)  If
        all
        Additional Securities which the eligible Purchasers are entitled to purchase
        pursuant to this Section 4(q) are not purchased as provided herein, the Company
        may, 

       

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

       

      during
        the 60 trading-day period following the expiration of the 5 trading- day
        period
        provided in clause (i), offer the remaining unsubscribed portion of such
        Additional Securities to any person at a price not less than, and upon terms
        no
        more favorable to the offeree than, as specified in the Notice. If the Company
        does not consummate the sale of such Additional Securities within such period,
        the right provided hereunder shall be deemed to be revived and such Additional
        Securities shall not be offered or sold unless first reoffered to the Purchasers
        in accordance herewith. 

       

      (iv)  Notwithstanding
        the foregoing, the participation rights granted in this Section 4(q) shall
        not
        be applicable to: (A) the issuance of shares of Common Stock upon the exercise
        or conversion of the Company’s options, warrants or convertible securities
        outstanding as of the date hereof and disclosed in Section
        3(c)
        of the
        Disclosure Schedule in accordance with the terms of such options, warrants
        or
        other securities as in effect on the date hereof; (B) the issuance of stock,
        stock options or other stock rights pursuant to any stock or option plan
        duly
        adopted by a majority of the non-employee members of the Board of Directors
        of
        the Company or a majority of the members of a committee of non-employee
        directors established for such purpose; (C) the issuance of securities pursuant
        to a bona fide underwritten public offering with gross proceeds of at least
        $25,000,000; (D) the issuance of the Notes, the Warrants, the Conversion
        Shares,
        the Warrant Shares and the Additional Warrant Shares (as defined in the
        Warrants); (E) the issuance of securities in a bona fide business acquisition
        the primary purpose of which, as determined in good faith by a majority of
        the
        members of the Board of Directors of the Company, is not the raising of capital;
        (F) the issuance of capital stock or convertible securities in a joint venture,
        strategic partnership or licensing arrangement, the primary purpose of which,
        as
        determined in good faith by a majority of the members of the Board of Directors
        of the Company, is not the raising of capital; and (G) the issuance of shares
        of
        common stock 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 of the Notes
        and
        the exercise price and number of shares issuable under the
        Warrants).

       

      (r)  Restriction
        on Sales.
        Until
        such time that the Company issues the Press Release, or otherwise publicly
        announces the transactions contemplated hereby, the Purchasers will not offer
        to
        sell, solicit offers to buy, dispose of, loan, pledge or grant any right
        with
        respect to the Company’s Common Stock.

       

      (s)  Investor
        Board Seat/Observer Right.
        Matritech will use its best efforts to recruit to serve as a Board member
        (to be
        nominated for election at the 2006 Annual Meeting of the Company’s stockholder
        to be held on or before June 15, 2006) a qualified person who has
        experience as a qualified CEO, COO or CFO of a publicly traded company in
        the
        human diagnostics industry.

       

      (t)  Listing
        of Additional Securities on AMEX.
        Immediately following stockholder approval of the Stockholder Proposals,
        the
        Company shall prepare and file with AMEX a listing application covering all
        additional Conversion Shares issuable and not included in the listing
        application referenced in Section 7(c) hereof, and, if necessary, all
        additional Warrant Shares and shares of Common Stock issuable in connection
        with
        the Warrants not included in the Company's AMEX listing application referred
        to
        in Section 7(c) hereof.

       

      
        
          
          

        

        
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      (u)  Dilutive
        Issuances.
        Until
        such time as the Company has held a meeting of its stockholder at which the
        Stockholders Proposals have been voted upon, the Company shall not issue
        any
        shares of Common Stock, or any securities convertible into or exercisable
        or
        exchangeable for shares of Common Stock, at an effective price below the
        Floor
        Price, except for shares of Common Stock that would be excluded from the
        participation right in clauses (A), (B) or (D) of Section 4(q)(iv)
        above.

       

      


      5.  SECURITIES
        TRANSFER MATTERS.

       

      (a)  Conversion
        and Exercise.
        Upon
        conversion of the Notes or exercise of the Warrants by any person, (i) if
        the
        DTC Transfer Conditions (as defined below) are satisfied, the Company shall
        cause its transfer agent to electronically transmit all Conversion Shares
        and
        Warrant Shares by crediting the account of such person or its nominee with
        the
        Depository Trust Company (“DTC”)
        through its Deposit Withdrawal Agent Commission system; or (ii) if the DTC
        Transfer Conditions are not satisfied, the Company shall issue and deliver,
        or
        instruct its transfer agent to issue and deliver, certificates (subject to
        the
        legend and other applicable provisions hereof and the Notes and Warrants),
        registered in the name of such person or its nominee, physical certificates
        representing the Conversion Shares and Warrant Shares, as applicable. Even
        if
        the DTC Transfer Conditions are satisfied, any person effecting a conversion
        of
        Notes or exercising Warrants may instruct the Company to deliver to such
        person
        or its nominee physical certificates representing the Conversion Shares and
        Warrant Shares, as applicable, in lieu of delivering such shares by way of
        DTC
        Transfer. For purposes of this Agreement, “DTC
        Transfer Conditions”
means
        that (A) the Company’s transfer agent is participating in the DTC Fast Automated
        Securities Transfer program and (B) the certificates for the Conversion Shares
        or Warrant Shares required to be delivered do not bear a legend and the person
        effecting such conversion or exercise is not then required to return such
        certificate for the placement of a legend thereon.

       

      (b)  Transfer
        or Resale.
        Each
        Purchaser understands that (i) except as provided in the Registration Rights
        Agreement, the sale or resale of the Securities have not been and are not
        being
        registered under the Securities Act or any state securities laws, and the
        Securities may not be transferred unless (A) the transfer is made pursuant
        to
        and as set forth in an effective registration statement under the Securities
        Act
        covering the Securities; or (B) such Purchaser shall have delivered to the
        Company an opinion of counsel (which opinion shall be in form, substance
        and
        scope customary for opinions of counsel in comparable transactions) to the
        effect that the Securities to be sold or transferred may be sold or transferred
        pursuant to an exemption from such registration; or (C) sold under and in
        compliance with Rule 144; or (D) sold or transferred to an affiliate of such
        Purchaser that agrees to sell or otherwise transfer the Securities only in
        accordance with the provisions of this Section 5(b); and (ii) neither the
        Company nor any other person is under any obligation to register such Securities
        under the Securities Act or any state securities laws (other than pursuant
        to
        the terms of the Registration Rights Agreement). Notwithstanding the foregoing
        or anything else contained herein to the contrary, the Securities may be
        pledged
        as collateral in connection with a bona fide margin account or other lending
        arrangement, provided such pledge is consistent with applicable laws, rules
        and
        regulations.

       

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

       

      (c)  Legends.
        Each
        Purchaser understands that the Notes and Warrants and, until such time as
        the
        Conversion Shares and Warrant Shares have been registered under the Securities
        Act (including registration pursuant to Rule 416 thereunder) as contemplated
        by
        the Registration Rights Agreement or otherwise may be sold by such Purchaser
        under Rule 144, the certificates for the Conversion Shares and Warrant Shares
        may bear a restrictive legend in substantially the following form:

       

      The
        securities represented by this certificate have not been registered under
        the
        Securities Act of 1933, as amended, or the securities laws of any state of
        the
        United States or in any other jurisdiction. The securities represented hereby
        may not be offered, sold or transferred in the absence of an effective
        registration statement for the securities under applicable securities laws
        unless offered, sold or transferred pursuant to an available exemption from
        the
        registration requirements of those laws.

      


      For
        so
        long as the Conversion Shares and Warrant Shares (i) have been registered
        for
        resale under the Securities Act (including registration pursuant to Rule
        416
        thereunder) as contemplated by the Registration Rights Agreement or (ii)
        otherwise may be sold by such Purchaser under Rule 144(k), the Company shall
        instruct the transfer agent that, in connection with the issuance of the
        Conversion Shares and Warrant Shares, certificates representing such Conversion
        Shares and Warrant Shares shall be issued without the restrictive legend
        above,
        provided that, in the case of in clause (i), the Company shall have received
        an
        undertaking from the holder that such Conversion Shares and Warrant Shares
        will
        be sold or transferred pursuant to the prospectus contained in such registration
        statement referred to in clause (i), including the prospectus delivery
        requirements if any, in accordance with the plan of distribution included
        in the
        registration statement. 

      


      The
        legend set forth above shall be removed and the Company shall issue a
        certificate without such legend to the holder of any Security upon which
        it is
        stamped, if, unless otherwise required by state securities laws, (i) the
        sale of
        such Security is registered under the Securities Act (including registration
        pursuant to Rule 416 thereunder); (ii) such holder provides the Company with
        an
        opinion of counsel, in form, substance and scope customary for opinions of
        counsel in comparable transactions, to the effect that a public sale or transfer
        of such Security may be made without registration under the Securities Act;
        or
        (iii) such holder provides the Company with reasonable assurances that such
        Security can be sold under Rule 144(k). In the event the above legend is
        removed
        from any Security and thereafter the effectiveness of a registration statement
        covering such Security is suspended or the Company determines that a supplement
        or amendment thereto is required by applicable securities laws, then upon
        reasonable advance written notice to such Purchaser the Company may require
        that
        the above legend be placed on any such Security that cannot then be sold
        pursuant to an effective registration statement or under Rule 144 and such
        Purchaser shall cooperate in the replacement of such legend. Such legend
        shall
        thereafter be removed when such Security may again be sold pursuant to an
        effective registration statement or under Rule 144(k). 

       

      
        
          
          

        

        
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      (d)  Transfer
        Agent Instruction.
        Upon
        compliance by any Purchaser with the provisions of this Section 5 with respect
        to the transfer of any Securities, the Company shall permit the transfer
        of such
        Securities and, in the case of the transfer of Conversion Shares or Warrant
        Shares, promptly instruct its transfer agent to issue one or more certificates
        (or effect a DTC Transfer) in such name and in such denominations as specified
        by such Purchaser. The Company shall not give any instructions to its transfer
        agent with respect to the Securities, other than any permissible or required
        instructions provided in this Section 5, and the Securities shall otherwise
        be
        freely transferable on the books and records of the Company as and to the
        extent
        provided in this Agreement.

       

      6.  CONDITIONS
        TO THE COMPANY’S OBLIGATION TO SELL.

       

      The
        obligation of the Company hereunder to issue and sell the Notes and Warrants
        to
        each Purchaser hereunder is subject to the satisfaction, at or before the
        Closing Date, of each of the following conditions as to such Purchaser, provided
        that such conditions are for the Company’s sole benefit and may be waived by the
        Company at any time in its sole discretion:

      


      (a)  Execution
        of Transaction Documents.
        Each
        Purchaser shall have executed such Purchaser’s Execution Page to this Agreement
        and each other Transaction Document to which such Purchaser is a party and
        delivered the same to the Company.

       

      (b)  Payment
        of Purchase Price.
        Each
        Purchaser shall have delivered the full amount of such Purchaser’s Purchase
        Price to the Company by wire transfer in accordance with the Company’s written
        wiring instructions.

       

      (c)  Representations
        and Warranties True; Covenants Performed.
        The
        representations and warranties of each Purchaser shall be true and correct
        as of
        the date when made and as of the Closing Date as though made at that time
        (except for representations and warranties that speak as of a specific date,
        which representations and warranties shall be true and correct as of such
        date),
        and such Purchaser shall have performed, satisfied and complied with the
        covenants, agreements and conditions required by this Agreement to be performed,
        satisfied or complied with by such Purchaser at or prior to the Closing
        Date.

       

      (d)  No
        Legal Prohibition.
        No
        statute, rule, regulation, executive order, decree, ruling, injunction, action
        or proceeding shall have been enacted, entered, promulgated or endorsed by
        any
        court or governmental authority of competent jurisdiction or any self-regulatory
        organization having authority over the matters contemplated hereby which
        restricts or prohibits the consummation of any of the transactions contemplated
        by this Agreement.

       

      7.  CONDITIONS
        TO EACH PURCHASER’S OBLIGATION TO PURCHASE.

       

      The
        obligation of each Purchaser hereunder to purchase the Notes and Warrants
        for
        which it is subscribing from the Company hereunder is subject to the
        satisfaction, at or before the Closing Date, of each of the following
        conditions, provided that such conditions are for each Purchaser’s individual
        and sole benefit and may be waived by any Purchaser as to such Purchaser
        at any
        time in such Purchaser’s sole discretion:

       

      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

      


      (a)  Execution
        of Transaction Documents.
        The
        Company shall have executed such Purchaser’s Execution Page to this Agreement
        and each Transaction Document to which the Company is a party and delivered
        executed originals of the same to such Purchaser. All other parties to the
        Transaction Documents shall have executed such Transaction Documents to which
        they are a party.

       

      (b)  Delivery
        of Securities.
        The
        Company shall have delivered to such Purchaser a duly executed Note and Warrant
        for the Subscription Amount being purchased by such Purchaser, registered
        in
        such Purchaser’s name.

       

      (c)  AMEX
        Listing.
        The
        Company shall: (i) prepare and file with AMEX a listing application covering
        the
        Optional Conversion Shares initially issuable upon conversion of the Notes
        (without giving effect to any limitations on conversion contained in Article
        IX.A of the Notes) and the Warrant Shares initially issuable upon exercise
        of
        the Warrants (without giving effect to any limitations on exercise contained
        in
        Section 3(c) of the Warrants), (ii) use its best efforts to take all steps
        necessary to cause such shares to be approved for listing on AMEX as soon
        as
        possible thereafter, (iii) notify the Holders upon such listing, and (iv)
        use
        its best efforts to maintain the listing of the Common Stock on AMEX, the
        SmallCap Market, the National Market or the NYSE.

       

      (d)  Representations
        and Warranties True; Covenants Performed.
        The
        representations and warranties of the Company shall be true and correct as
        of
        the date when made and as of the Closing Date as though made at that time
        (except for representations and warranties that speak as of a specific date,
        which representations and warranties shall be true and correct as of such
        date)
        and the Company shall have performed, satisfied and complied with the covenants,
        agreements and conditions required by this Agreement to be performed, satisfied
        or complied with by the Company at or prior to the Closing Date. Such Purchaser
        shall have received a certificate, executed by the Chief Executive Officer
        of
        the Company after reasonable investigation, dated as of the Closing Date
        to the
        foregoing effect and as to such other matters as may reasonably be requested
        by
        such Purchaser.

       

      (e)  No
        Legal Prohibition.
        No
        statute, rule, regulation, executive order, decree, ruling, injunction, action
        or proceeding shall have been enacted, entered, promulgated or endorsed by
        any
        court or governmental authority of competent jurisdiction or any self-regulatory
        organization having authority over the matters contemplated hereby which
        restricts or prohibits the consummation of, any of the transactions contemplated
        by this Agreement.

       

      (f)  Legal
        Opinion.
        Such
        Purchaser shall have received an opinion of the Company’s counsel dated as of
        the Closing Date in substantially the form approved by the Required Holders
        prior to the Closing.

       

      


      (g)  No
        Material Adverse Change.
        There
        shall have been no material adverse changes and no material adverse developments
        in the business, properties, operations, prospects, condition (financial
        or
        otherwise) or results of operations of the Company and its Subsidiaries,
        

       

      
        
          
          

        

        
          -24-

          
            

          

        

        
          
          

        

      

       

      taken
        as
        a whole, since the date hereof, and no information that is materially adverse
        to
        the Company and of which such Purchaser is not currently aware shall come
        to the
        attention of such Purchaser.

       

      (h)  Corporate
        Approvals.
        Such
        Purchaser shall have received (i) a copy of resolutions, duly adopted by
        the
        Board of Directors of the Company, which shall be in full force and effect
        at
        the time of the Closing, authorizing the execution, delivery and performance
        by
        the Company of this Agreement and the other Transaction Documents and the
        consummation by the Company of the transactions contemplated hereby and thereby
        and providing a determination that none of the Purchasers is or will be an
        “interested stockholder” as defined in Section 203 of the Delaware General
        Corporation Law, as amended, certified as such by the Secretary or Assistant
        Secretary of the Company, (ii) consents of the holders of at least 75% of
        the
        outstanding face amount of the Company's Series A Preferred Stock and a copy
        of
        any amendment filed by the Company to its Certificate of Incorporation in
        connection therewith, certified as such by the Secretary or Assistant Secretary
        of the Company; and (iii) such other documents they reasonably request in
        connection with the Closing.

       

      8.  COLLATERAL
        AGENCY PROVISIONS.

       

      (a)  Appointment
        of Collateral Agent.
        The
        Purchasers hereby appoint SDS Capital Partners SPC, LTD. to act as collateral
        agent (the “Collateral
        Agent”)
        and
        SDS Capital Partners SPC, LTD. agrees to act as Collateral Agent for the
        Purchasers, as contemplated herein and in the Security Documents.

       

      (b)  Collateral
        Agent Authorized to Enter into Collateral Documents.
        Each of
        the Purchasers authorizes the Collateral Agent to enter into the Security
        Documents on its behalf.

       

      (c)  Amendment
        to Security Documents.
        The
        Purchasers holding a majority of the total outstanding principal balance
        of the
        Notes (the “Required
        Holders”)
        shall
        have the right to direct the Collateral Agent, from time to time, to consent
        to
        any amendment, modification or supplement to or waiver of any provision of
        any
        Security Document and to release any Collateral (as defined in the Security
        Documents) from any lien or security interest held by the Collateral Agent;
        provided,
        however,
        that
        (i) no such direction shall require the Collateral Agent to consent to the
        modification of any provision or portion thereof which (in the sole judgment
        of
        the Collateral Agent) is intended to benefit the Collateral Agent, (ii) the
        Collateral Agent shall have the right to decline to follow any such direction
        if
        the Collateral Agent shall determine in good faith that the directed action
        is
        not permitted by the terms of any Security Document or may not lawfully be
        taken
        and (iii) no such direction shall waive or modify any provision of any Security
        Document the waiver or modification of which requires the consent of all
        Purchasers unless all Purchasers consent thereto. The Collateral Agent may
        rely
        on any such direction given to it by the Required Holders and shall be fully
        protected in relying thereon, and shall under no circumstances be liable,
        except
        in circumstances involving the Collateral Agent's gross negligence or willful
        misconduct as shall have been determined in a final nonappealable judgment
        of a
        court of competent jurisdiction, to any holder of the Notes or any other
        person
        or entity for taking or refraining from taking action in accordance with
        any
        direction or otherwise in accordance with any of the Security
        Documents.

       

      
        
          
          

        

        
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      (d)  Duties
        of Collateral Agent.
        

       

      (i)  Powers.
        The
        Collateral Agent shall have and may exercise such powers under the Security
        Documents as are specifically delegated to the Collateral Agent by the terms
        hereof and thereof, together with such powers as are reasonably incidental
        thereto. The Collateral Agent shall not have any implied duties or any
        obligations to take any action under the Security Documents except any action
        specifically provided by the Security Documents to be taken by the Collateral
        Agent.

       

      (ii)  Reliance
        on Instructions of Required Holders.
        The
        Collateral Agent shall be required to act or to refrain from acting (and
        shall
        be fully protected in so acting or refraining from acting) upon the written
        instructions of the Required Holders and such instructions shall be binding
        upon
        all the Purchasers; provided,
        however,
        that the
        Collateral Agent shall not be required to take any action which the Collateral
        Agent in good faith believes (A) could reasonably be expected to expose it
        to
        personal liability or (B) is contrary to this Agreement, the Security Documents
        and applicable law.

       

      (iii)  Action
        Without Instructions After Event of Default.
        Absent
        written instructions from the Required Holders at a time when an Event of
        Default shall have occurred and be continuing, the Collateral Agent may take,
        but shall have no obligation to take, any and all actions under the Security
        Documents or any of them or otherwise as it shall deem to be in the best
        interests of the Purchasers; provided,
        however,
        that in
        the absence of written instructions from the Required Holders, the Collateral
        Agent shall not exercise remedies available to it under any Security Document
        with respect to the Collateral or any part thereof (other than preserving,
        collecting and protecting the Collateral and the proceeds thereof).

       

      (iv)  Independent
        Right of Each Purchaser to Instruct Collateral Agent.
        The
        right of each Purchaser to instruct the Collateral Agent is the separate
        and
        individual property of such Purchaser and may be exercised as such Purchaser
        sees fit in its sole discretion and with no liability to any other such
        Purchaser for the exercise or non-exercise thereof. Without limiting the
        foregoing, the Required Holders shall not be liable under any circumstances
        to
        any other Purchaser for any action taken or omitted to be taken hereunder
        by the
        Collateral Agent upon written instructions from the Required
        Holders.

       

      (v)  Relationship
        Between Collateral Agent and Purchasers.
        The
        relationship between the Collateral Agent and the Purchasers is and shall
        be
        only to the extent explicitly provided for herein that of agent and principal
        and nothing herein contained shall be construed to constitute the Collateral
        Agent a trustee for any Purchaser or to impose on the Collateral Agent duties
        and obligations other than those expressly provided for herein. Without limiting
        the generality of the foregoing, neither the Collateral Agent nor any of
        its
        directors, officers, employees, partners or agents shall:

       

      (A)  be
        responsible to the other Purchasers for any recitals, representations or
        warranties contained in, or for the execution, validity, genuineness,
        perfection, effectiveness or enforceability of, the Security Documents (it
        being
        expressly understood that any determination of the foregoing is the
        responsibility of each Purchaser),

       

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      

       

      (B)  be
        responsible to the other Purchasers for the validity, genuineness, perfection,
        effectiveness, enforceability, existence, value or enforcement of any security
        interest in the Collateral (it being expressly understood that any determination
        of the foregoing is the responsibility of each Purchaser),

       

      (C)  be
        under
        any duty to inquire into or pass upon any of the foregoing matters, or to
        make
        any inquiry concerning the performance by any person or entity of its or
        their
        obligations under any Security Document (it being expressly understood that
        any
        determination of the foregoing is the responsibility of each
        Purchaser),

       

      (D)  be
        deemed
        to have knowledge of the occurrence of an Event of Default (as defined in
        the
        Notes), or any event, condition or circumstance the occurrence of which would,
        with the giving of notice or the passage of time or both, constitute an Event
        of
        Default,

       

      (E)  be
        responsible or liable to the Purchasers for any shortage, discrepancy, damage,
        loss or destruction of any part of the Collateral wherever the same may be
        located regardless of the cause thereof unless the same shall happen solely
        through the gross negligence or willful misconduct of the Collateral Agent
        as
        shall have been determined in a final nonappealable judgment of a court of
        competent jurisdiction,

       

      (F)  have
        any
        liability to the Purchasers for any error or omission or action or failure
        to
        act of any kind made in the settlement, collection or payment in connection
        with
        any of the Security Documents or any of the Collateral or any instrument
        received in payment therefor or for any damage resulting therefrom other
        than as
        a sole result of its own gross negligence or willful misconduct as shall
        have
        been determined in a final nonappealable judgment of a court of competent
        jurisdiction, or

       

      (G)  in
        any
        event, be liable to the Purchasers as such for any action taken or omitted
        by
        it, absent, in each case described in this subsection, its gross negligence
        or
        willful misconduct as shall have been determined in a final nonappealable
        judgment of a court of competent jurisdiction.

       

      (e)  Standard
        of Care.
        Each
        Purchaser agrees with all other Purchasers and the Collateral Agent that
        nothing
        contained in this Agreement shall be construed to give rise to, nor shall
        such
        Purchaser have, any claims whatsoever against the Collateral Agent on account
        of
        any act or omission to act in connection with the exercise of any right or
        remedy of the Collateral Agent with respect to the Security Documents or
        the
        Collateral in the absence of gross negligence or willful misconduct of the
        Collateral Agent as shall have been determined in a final nonappealable judgment
        of a court of competent jurisdiction.

       

      (f)  Collateral
        In Possession of Collateral Agent.
        The
        Collateral Agent shall be at liberty to place any of the Collateral, this
        Agreement, the Security Documents and any other instruments, documents or
        deeds
        delivered to it pursuant to or in connection with any of such documents in
        any
        safe deposit box, safe or receptacle selected by it or with any bank, any
        company whose business includes undertaking the safe custody of documents
        or any
        firm of 

       

      
        
          
          

        

        
          -27-

          
            

          

        

        
          
          

        

      

       

      lawyers
        of good repute and the Collateral Agent shall not be responsible for any
        loss
        thereby incurred unless such loss is solely the result of the Collateral
        Agent’s
        gross negligence or willful misconduct as shall have been determined in a
        final
        nonappealable judgment of a court of competent jurisdiction. The Collateral
        Agent’s books and records shall at all times show that the Collateral is held by
        the Collateral Agent subject to the pledge and lien of the Security
        Documents.

       

      (g)  Agents,
        Officers and Employees of Collateral Agent.
        The
        Collateral Agent may execute any of its duties under the Security Documents
        by
        or through its agents, officers or employees. Neither the Collateral Agent
        nor
        any of its agents, officers or employees shall be liable for any action taken
        or
        omitted to be taken by it or them in good faith, be responsible for the
        consequence of any oversight or error of judgment or answerable for any loss
        unless any of the foregoing shall happen through its or their gross negligence
        or willful misconduct as shall have been determined in a final nonappealable
        judgment of a court of competent jurisdiction.

       

      (h)  Appointment
        of Co-Agent.
        Whenever the Collateral Agent shall deem it necessary or prudent in order
        either
        to conform to any law of any jurisdiction in which all or any part of the
        Collateral shall be situated or to make any claim or bring any suit with
        respect
        to the Collateral or the Security Documents, or in the event that the Collateral
        Agent shall have been requested to do so by or on behalf of the Required
        Holders, the Collateral Agent shall execute and deliver a supplemental agreement
        and all other instruments and agreements necessary or proper to constitute
        a
        bank or trust company, or one or more other persons or entities approved
        by the
        Collateral Agent, either to act as co-agent or co-agents with respect to
        all or
        any part of the Collateral or with respect to the Security Documents, jointly
        with the Collateral Agent or any successor or successors, or to act as separate
        agent or agents of any such property, in any such case with such powers as
        may
        be provided in such supplemental agreement, and to vest in such bank, trust
        company or other persons or entities as such co-agent or separate agent,
        as the
        case may be, any property, title, right or power of the Collateral Agent
        deemed
        necessary or advisable by the Required Holders or the Collateral
        Agent.

       

      (i)  Reliance
        on Certain Documents.
        The
        Collateral Agent shall be entitled to rely on any communication, instrument
        or
        document believed by it to be genuine and correct and to have been signed
        or
        sent by the proper person or entity, and with respect to all legal matters
        shall
        be entitled to rely on the advice of legal advisors selected by it concerning
        all matters relating to the Security Documents and its duties hereunder and
        thereunder and otherwise shall rely on such experts as it deems necessary
        or
        desirable, and shall not be liable to any Purchaser or any other person or
        entity for the consequences of such reliance in the absence of gross negligence
        or willful misconduct as shall have been determined in a final nonappealable
        judgment of a court of competent jurisdiction.

       

      (j)  Collateral
        Agent May Have Separate Relationship with Parties.
        The
        Collateral Agent (or any affiliate of the Collateral Agent) may, notwithstanding
        the fact that it is the Collateral Agent, act as a lender to the Company
        and
        lend money to, and generally engage in any kind of business with such party
        in
        the same manner and to the same effect as though it were not the Collateral
        Agent; and such business shall not constitute a breach of any obligation
        of the
        Collateral Agent to the other Purchasers.

       

      
        
          
          

        

        
          -28-

          
            

          

        

        
          
          

        

      

       

      (k)  Indemnification
        of Collateral Agent.
        Each of
        the Purchasers, ratably on the basis of the respective principal amounts
        of the
        Notes outstanding at the time of the occurrence giving rise to the below
        liabilities, losses, etc., agrees to indemnify the Collateral Agent for any
        and
        all liabilities, losses, damages, penalties, actions, judgments, suits, costs,
        expenses or disbursements of any kind and nature whatsoever that may be imposed
        on, incurred by or asserted against the Collateral Agent in its capacity
        as the
        Collateral Agent, in any way relating to or arising out of the Security
        Documents or the transactions contemplated hereby or thereby or the enforcement
        of any of the terms hereof or thereof, provided that neither the Company
        nor any
        Purchaser shall be liable for any of the foregoing to the extent they arise
        from
        gross negligence or willful misconduct on the part of the Collateral Agent
        as
        shall have been determined in a final nonappealable judgment of a court of
        competent jurisdiction. This Section 8(k) shall survive the termination of
        this
        Agreement. Prior to taking any action hereunder as Collateral Agent, the
        Collateral Agent may require each Purchaser to deposit with it sufficient
        sums
        as it determines in good faith is necessary to protect the Collateral Agent
        for
        costs and expenses associated with taking such action, and the Collateral
        Agent
        shall have no liability hereunder for failure to take such action unless
        the
        Purchasers promptly deposit such sums.

       

      (l)  Resignation.
        The
        Collateral Agent at any time may resign, upon 30 days’ prior written notice, by
        an instrument addressed and delivered to the Purchasers and the Company and
        may
        be removed at any time with or without cause upon 30 days’ prior written notice,
        by an instrument in writing duly executed by duly authorized signatories
        of the
        Required Holders. The Required Holders shall also have the right to appoint
        a
        successor to the Collateral Agent upon any such resignation or removal, by
        instrument of substitution complying with the requirements of applicable
        law,
        or, in the absence of any such requirement, without any formality other than
        appointment and designation in writing, a copy of which instrument or writing
        shall be sent to each Purchaser. Upon the making of such appointment and
        delivery to such successor Collateral Agent of the Collateral then held by
        the
        retiring Collateral Agent, such successor Collateral Agent shall thereupon
        succeed to and become vested with all the rights, powers, privileges and
        duties
        conferred hereby and by the Security Documents upon the Collateral Agent
        named
        herein, and one or more such appointments and designations shall not exhaust
        the
        right to appoint and designate further successor Collateral Agents hereunder.
        The retiring Collateral Agent shall not be discharged from its duties and
        obligations hereunder until, and the retiring Collateral Agent shall be so
        discharged when, all the Collateral held by the retiring Collateral Agent
        has
        been delivered to the successor Collateral Agent and such successor Collateral
        Agent shall execute, acknowledge and deliver to each holder of the Notes
        and to
        the Company an instrument accepting such appointment. If no successor shall
        be
        appointed and approved on or prior to the date of any such resignation, the
        resigning Collateral Agent may apply to any court of competent jurisdiction
        to
        appoint a successor to act until a successor shall have been appointed by
        the
        Required Holders as above provided.

       

      (m)  Rights
        with Respect to Collateral.

       

      (i)  Each
        Purchaser agrees with all other Purchasers (A) that it shall not, and shall
        not
        attempt to, exercise any rights with respect to its security interest in
        the
        Collateral, whether pursuant to any other agreement or otherwise (other than
        pursuant to this Agreement), or take or institute any action against the
        Collateral Agent or any of the other Purchasers in respect 

       

      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

      

       

      of
        the
        Collateral or its rights hereunder (other than any such action arising from
        the
        breach of this Agreement) and (B) that such Purchaser has no other rights
        with
        respect to the Collateral other than as set forth in this Agreement and the
        Security Documents.

       

      (ii)  Each
        Purchaser agrees with all other Purchasers and the Collateral Agent that
        nothing
        contained in this Section 8 shall be construed to give rise to, nor shall
        such
        Purchaser have, any claims whatsoever against any other Purchaser or the
        Collateral Agent on account of any act or omission to act in connection with
        the
        exercise of any right or remedy of the Collateral Agent or any other Purchaser
        with respect to the Collateral in the absence of gross negligence or willful
        misconduct of such other Purchaser or Collateral Agent, as applicable, as
        shall
        have been determined in a final nonappealable judgment of a court of competent
        jurisdiction.

       

      9.  GOVERNING
        LAW; MISCELLANEOUS.

       

      (a)  Governing
        Law; Jurisdiction.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Delaware applicable to contracts made and to be performed in the
        State
        of Delaware. The Company and each Purchaser irrevocably consent to the exclusive
        jurisdiction of the United States federal courts and the state courts located
        in
        the County of New Castle, State of Delaware, in any suit or proceeding based
        on
        or arising under this Agreement or the transactions contemplated hereby and
        irrevocably agree that all claims between the parties in respect of such
        suit or
        proceeding may be determined in such courts. The Company and each Purchaser
        irrevocably waive the defense of an inconvenient forum to the maintenance
        of
        such suit or proceeding in such forum. The Company and each Purchaser further
        agree that service of process upon the Company or any Purchaser mailed by
        first
        class mail shall be deemed in every respect effective service of process
        upon
        the Company or such Purchaser, as the case may be, in any such suit or
        proceeding. Nothing herein shall affect the right of the Company or any
        Purchaser to serve process in any other manner permitted by law. The Company
        and
        each Purchaser agree that a final non-appealable judgment in any such suit
        or
        proceeding shall be conclusive and may be enforced in other jurisdictions
        by
        suit on such judgment or in any other lawful manner.

       

      (b)  Counterparts.
        This
        Agreement may be executed in two or more counterparts, all of which shall
        be
        considered one and the same agreement and shall become effective when
        counterparts have been signed by each party and delivered to the other party.
        This Agreement, once executed by a party, may be delivered to the other parties
        hereto by facsimile transmission of a copy of this Agreement bearing the
        signature of the party so delivering this Agreement. In the event any signature
        is delivered by facsimile transmission, the party using such means of delivery
        shall cause the manually executed execution page(s) hereof to be physically
        delivered to the other party within five days of the execution hereof, provided
        that the failure to so deliver any manually executed execution page shall
        not
        affect the validity or enforceability of this Agreement.

       

      (c)  Construction.
        Whenever the context requires, the gender of any word used in this Agreement
        includes the masculine, feminine or neuter, and the number of any word includes
        the singular or plural. Unless the context otherwise requires, all references
        to
        articles and sections 

       

      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

      

       

      refer
        to
        articles and sections of this Agreement, and all references to schedules
        are to
        schedules attached hereto, each of which is made a part hereof for all purposes.
        The descriptive head-ings of the several articles and sections of this Agreement
        are inserted for purposes of reference only, and shall not affect the meaning
        or
        construction of any of the provisions hereof.

       

      (d)  Severability.
        If any
        provision of this Agreement shall be invalid or unenforceable in any
        jurisdiction, such invalidity or unenforceability shall not affect the validity
        or enforceability of the remainder of this Agreement or the validity or
        enforceability of this Agreement in any other jurisdiction.

       

      (e)  Entire
        Agreement; Amendments.
        This
        Agreement and the other Transaction Documents (including any schedules and
        exhibits hereto and thereto) contain the entire understanding of the Purchasers,
        the Company, their affiliates and persons acting on their behalf with respect
        to
        the matters covered herein and therein and, except as specifically set forth
        herein or therein, neither the Company nor the Purchasers make any
        representation, warranty, covenant or undertaking with respect to such matters.
        No provision of this Agreement may be waived other than by an instrument
        in
        writing signed by the party to be charged with enforcement, and no provision
        of
        this Agreement may be amended other than by an instrument in writing signed
        by
        the Company and each Purchaser.

       

      (f)  Notices.
        Any
        notices required or permitted to be given under the terms of this Agreement
        shall be in writing and sent by certified or registered mail (return receipt
        requested) or delivered personally, by nationally recognized overnight carrier
        or by confirmed facsimile transmission, and shall be effective five days
        after
        being placed in the mail, if mailed, or upon receipt or refusal of receipt,
        if
        delivered personally or by nationally recognized overnight carrier or confirmed
        facsimile transmission, in each case addressed to a party as provided herein.
        The initial addresses for such communications shall be as follows, and each
        party shall provide notice to the other parties of any change in such party’s
        address:

       

      (i)  If
        to the
        Company:

       

      Matritech,
        Inc.

      330
        Nevada Street

      Newton,
        Massachusetts 02460

      Telephone:
        (617) 928-0820

      Facsimile:
        (617) 928-0821

      Attention:
        Chief Executive Officer

      


      with
        a
        copy simultaneously transmitted by like means (which transmittal 

      shall
        not
        constitute notice hereunder) to:

      


      Goodwin
        Procter LLP

      Exchange
        Place

      53
        State
        Street

      Boston,
        Massachusetts 02109

      Telephone:
        (617) 570-1000

       

      
        
          
          

        

        
          -31-

          
            

          

        

        
          
          

        

      

       

      Facsimile:
        (617) 523-1231

      Attention:
        Rufus C. King

      


      (ii)  If
        to any
        Purchaser, to the address set forth under such Purchaser’s name on the Execution
        Page hereto executed by such Purchaser.

       

      (g)  Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and assigns. Except as provided herein, the Company shall
        not
        assign this Agreement or any rights or obligations hereunder. Any Purchaser
        may
        assign or transfer the Securities pursuant to the terms of this Agreement
        and of
        such Securities, or assign such Purchaser’s rights hereunder to any other person
        or entity.

       

      (h)  Third
        Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        permitted successors and assigns, and is not for the benefit of, nor may
        any
        provision hereof be enforced by, any other person; provided,
        however,
        that
        Section 4(q) may be enforced by any Purchaser’s affiliates and its or their
        advisors to the extent the same is entitled to reimbursement of Expenses
        pursuant thereto.

       

      (i)  Survival.
        The
        representations and warranties of the Company and the agreements and covenants
        set forth in Sections 3, 4, 5, 8 and 9 hereof shall survive the Closing
        notwithstanding any due diligence investigation conducted by or on behalf
        of any
        Purchaser. Moreover, none of the representations and warranties made by the
        Company herein shall act as a waiver of any rights or remedies any Purchaser
        may
        have under applicable U.S. federal or state securities laws.

       

      (j)  Publicity.
        The
        Company and each Purchaser shall have the right to approve before issuance
        any
        press releases or SEC filings, or any other public statements with respect
        to
        the transactions contemplated hereby; provided,
        however,
        that
        the Company shall be entitled, without the prior approval of the Purchasers,
        to
        make any press release, SEC filings or, to the extent applicable, AMEX filings
        with respect to such transactions as is required by applicable law and
        regulations (although the Purchasers shall be consulted by the Company in
        connection with any such press release prior to its release, and the Purchasers
        shall be provided with a copy thereof and must provide specific consent to
        the
        use of a Purchaser’s name in connection therewith).

       

      (k)  Further
        Assurances.
        Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      (l)  Indemnification.
        In
        consideration of each Purchaser’s execution and delivery of this Agreement and
        the other Transaction Documents and purchase of the Securities hereunder,
        and in
        addition to all of the Company’s other obligations under this Agreement and the
        other Transaction Documents, from and after the Closing, the Company shall
        defend, protect, indemnify and hold harmless each Purchaser and each other
        holder of the Securities and all of 

       

      
        
          
          

        

        
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      their
        stockholders, partners, members, officers, directors, employees and direct
        or
        indirect investors and any of the foregoing persons’ agents or other
        representatives (including, without limitation, those retained in connection
        with the transactions contemplated by this Agreement, collectively, the
“Indemnitees”)
        from
        and against any and all actions, causes of action, suits, claims, losses,
        costs,
        penalties, fees, liabilities and damages, and expenses in connection therewith
        (irrespective of whether any such Indemnitee is a party to the action for
        which
        indemnification hereunder is sought), and including reasonable attorneys’ fees
        and disbursements (the “Indemnified
        Liabilities”),
        incurred by any Indemnitee as a result of, or arising out of, or relating
        to (i)
        any misrepresentation or breach of any representation or warranty made by
        the
        Company in this Agreement, any other Transaction Document or any other
        certificate, instrument or document contemplated hereby or thereby, (ii)
        any
        breach of any covenant, agreement or obligation of the Company contained
        in this
        Agreement, any other Transaction Document or any other certificate, instrument
        or document contemplated hereby or thereby, or (iii) any cause of action,
        suit,
        claim, order, proceeding or process brought or made against such Indemnitee
        by a
        third party (including for these purposes a derivative action brought on
        behalf
        of the Company) and arising out of or resulting from (A) the execution,
        delivery, performance or enforcement of this Agreement, any other Transaction
        Document or any other certificate, instrument or document contemplated hereby
        or
        thereby, (B) any disclosure made by such Purchaser pursuant to Section 4(b)
        or
        4(m) hereof, or (C) the status of such Purchaser or holder of the Securities
        as
        an investor in the Company; provided,
        however,
        that
        with respect to clause (iii) above, excluding any Indemnified Liabilities
        (a)
        resulting from the Indemnitee’s or the Purchaser’s own acts of fraud or willful
        misconduct and (b) resulting from any cause of action, suit, claim, order,
        proceeding or process brought or asserted against any Indemnified Party by
        any
        investor in or partner, shareholder, member, employee or agent of said
        Indemnified Party. To the extent that the foregoing undertaking by the Company
        may be unenforceable for any reason, the Company shall make the maximum
        contribution to the payment and satisfaction of each of the Indemnified
        Liabilities which is permissible under applicable law. Except as otherwise
        set
        forth herein, the mechanics and procedures with respect to the rights and
        obligations under this Section 9(l) shall be the same as those set forth
        in
        Section 7(c) of the Registration Rights Agreement. 

       

      (m)  Payment
        Set Aside.
        To the
        extent that the Company makes a payment or payments to any Purchaser hereunder
        or pursuant to any of the other Transaction Documents or any Purchaser enforces
        or exercises its rights hereunder or thereunder, and such payment or payments
        or
        the proceeds of such enforcement or exercise or any part thereof are
        subsequently invalidated, declared to be fraudulent or preferential, set
        aside,
        recovered from, disgorged by or are required to be refunded, repaid or otherwise
        restored to the Company, a trustee, receiver or any other person under any
        law
        (including, without limitation, any bankruptcy law, state or federal law,
        common
        law or equitable cause of action), then to the extent of any such restoration
        the obligation or part thereof originally intended to be satisfied shall
        be
        revived and continued in full force and effect as if such payment had not
        been
        made or such enforcement or setoff had not occurred. 

       

      (n)  Joint
        Participation in Drafting.
        Each
        party to this Agreement has participated in the negotiation and drafting
        of this
        Agreement and the other Transaction Documents. As such, the language used
        herein
        and therein shall be deemed to be the language chosen by the parties


       

      
        
          
          

        

        
          -33-

          
            

          

        

        
          
          

        

      

       

      hereto
        to
        express their mutual intent, and no rule of strict construction will be applied
        against any party to this Agreement.

       

      (o)  Remedies.
        No
        provision of this Agreement or any other Transaction Document providing for
        any
        remedy to a Purchaser shall limit any other remedy which would otherwise
        be
        available to such Purchaser at law, in equity or otherwise. Nothing in this
        Agreement or any other Transaction Document shall limit any rights any Purchaser
        may have under any applicable federal or state securities laws with respect
        to
        the investment contemplated hereby. The Company acknowledges that a breach
        by it
        of its obligations hereunder will cause irreparable harm to the Purchasers
        by
        vitiating the intent and purpose of the transactions contemplated hereby.
        Accordingly, the Company acknowledges that the remedy at law for a breach
        of its
        obligations hereunder (including, but not limited to, its obligations pursuant
        to Section 5 hereof) will be inadequate and agrees, in the event of a breach
        or
        threatened breach by the Company of the provisions of this Agreement (including,
        but not limited to, its obligations pursuant to Section 5 hereof), that each
        Purchaser shall be entitled, in addition to all other available remedies,
        to an
        injunction restraining any breach and requiring immediate issuance and transfer
        of the Securities, without the necessity of showing economic loss and without
        any bond or other security being required.

       

      (p)  Knowledge.
        As used
        in this Agreement, the term “knowledge” of any person or entity shall mean and
        include such person’s or entity’s or, with respect to the Company, the Company’s
        executive officers’ actual knowledge and that knowledge which a reasonably
        prudent business person could have obtained in the management of his or her
        business affairs after making due inquiry and exercising due diligence which
        a
        prudent business person should have made or exercised, as applicable, with
        respect thereto.

       

      (q)  Exculpation
        Among Purchasers; No “Group”.
        Each
        Purchaser acknowledges that it has independently evaluated the merits of
        the
        transactions contemplated by this Agreement and the other Transaction Documents,
        that it has independently determined to enter into the transactions contemplated
        hereby and thereby, that it is not relying on any advice from or evaluation
        by
        any other Purchaser, and that it is not acting in concert with any other
        Purchaser in making its purchase of securities hereunder or in monitoring
        its
        investment in the Company. The Purchasers and, to its knowledge, the Company
        agree that the Purchasers have not taken any actions that would deem such
        Purchasers to be members of a “group” for purposes of Section 13(d) of the
        Exchange Act, and the Purchasers have not agreed to act together for the
        purpose
        of acquiring, holding, voting or disposing of equity securities of the Company.
        Each Purchaser further acknowledges that SDS has retained Drinker Biddle
&
Reath LLP (“DB&R”)
        to act
        as its counsel in connection with the transactions contemplated by this
        Agreement and the other Transaction Documents and that DB&R has not acted as
        counsel for any of the other Purchasers in connection therewith and none
        of the
        other Purchasers have the status of a client of DB&R for conflict of
        interest or other purposes as a result thereof.

       

      [REMAINDER
        OF PAGE LEFT BLANK INTENTIONALLY]

      



      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this
        Securities Purchase Agreement to be duly executed as of the date first above
        written.

      


      MATRITECH,
        INC.

      


      


      By:______________________________

      Name:

      Title:

      


      PURCHASER:

       

      
        
          

        



      (Print
        or
        Type Name of Purchaser)

      


      


      By:______________________________

      Name: 

      Title:

      


      RESIDENCE:______________________

      
 

      ADDRESS:_______________________

       

      Telephone:
        ______________

      Facsimile:
        _______________

      Attention:_______________

       

      SUBSCRIPTION
        AMOUNT:

      


      Aggregate
        Face Amount of Note:$________________