WWW.EXFILE.COM, INC. -- 14090 -- MATRITECH, INC. -- EXHIBIT 4.6 TO FORM 8-K


    EXHIBIT
      4.6

    


    SECURITY
      AGREEMENT

    


    THIS
      SECURITY AGREEMENT (this “Agreement”)
      is
      made as of January 13, 2006, by and among SDS CAPITAL PARTNERS SPC, LTD., as
      collateral agent for the holders (the “Holders”)
      of the
      Notes (as defined below) (in such capacity, the “Collateral
      Agent”),
      and
      MATRITECH, INC., a Delaware corporation (together with its successors and
      permitted assigns, the “Borrower”).
      The
      Collateral Agent and the Holders are hereinafter collectively referred to as
      the
“Secured
      Party”.

    


    Background

    


    A. Borrower
      and Secured Party entered into that certain Securities Purchase Agreement dated
      as of the date hereof (as the same may be amended, restated, modified,
      supplemented and/or replaced from time to time, the “Purchase
      Agreement”)
      pursuant to which Borrower issued its 15% Secured Convertible Promissory Notes
      to the Holders in the original aggregate principal amount of $7,000,000 (as
      the
      same may be amended, restated, modified, supplemented and/or replaced from
      time
      to time, the “Notes”).

    


    B. In
      order
      to induce the Holders to purchase the Notes, Borrower has agreed to execute
      and
      deliver to Secured Party this Agreement and to grant Secured Party a perfected
      first priority security interest in certain property of Borrower to secure
      the
      prompt payment, performance and discharge in full of all of Borrower’s
      obligations under the Notes.

    


    C. In
      connection with this Agreement, concurrently herewith, Borrower and Collateral
      Agent are entering into a Contingent License Agreement dated as of the date
      hereof (as the same may be amended, restated, modified, supplemented and/or
      replaced from time to time, the “Contingent
      License Agreement”)
      pursuant to which Borrower has agreed to grant to Collateral Agent a contingent
      license under the Matritech Patent Rights, the Matritech Trademark Rights and
      the MIT Patent Rights (each as defined therein) on the terms and conditions
      set
      forth therein.

    


    Accordingly,
      Borrower, intending to be legally bound, hereby agrees with Secured Party as
      follows:

    


    1.  DEFINITIONS.
      Capitalized terms used but not otherwise defined herein shall have the meanings
      assigned to such terms in the Purchase Agreement. The following terms, as used
      herein, shall have the following meanings:

     

    “Account”
      shall
      be used herein as defined in the Uniform Commercial Code.

    


    “Collateral”
      shall
      have the meaning ascribed to such term in Section 3.

    


    “Document”
      shall
      be used herein as defined in the Uniform Commercial Code.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    “Effective
      Date”
      means
      the earlier of (i) April 1, 2006 and (ii) the date the Borrower’s 7.5%
      Convertible Debentures due March 31, 2006 are paid in full.

    


    “Equipment”
      shall
      be used herein as defined in the Uniform Commercial Code, but in any event
      shall
      include, but not be limited to, tangible personal property held by Borrower
      for
      use primarily in business and shall include equipment, machinery, furniture,
      vehicles, fixtures, furnishings, dyes, tools, and all accessories and parts
      now
      or hereafter affixed thereto as well as all attachments, replacements,
      substitutes, accessories, additions and improvements to any of the foregoing,
      but Equipment shall not include Inventory.

    


    “Event
      of Default”
      means
      an Event of Default described in Sections A(i), (vi) and (vii) of Article VI
      of
      the Notes.

    


    “General
      Intangibles”
      shall
      be used herein as defined in the Uniform Commercial Code but in any event shall
      include, without limitation, payment intangibles, contract rights (other than
      Accounts), franchises, licenses, choses in action, books, records, customer
      lists, tax, insurance and other kinds of refunds, patents, trademarks, trade
      names, service marks, slogans, trade dress, copyrights, other intellectual
      property rights and applications for intellectual property rights, goodwill,
      plans, licenses, software (to the extent it does not constitute Goods) and
      other
      rights in personal property.

    


    “Goods”
      shall
      be used herein as defined in the Uniform Commercial Code.

    


    “Intellectual
      Property”
      means,
      collectively, all patents, trademarks, service marks, trade dress, trade names
      and corporate names, and copyrights, and any registrations, applications and
      renewals for any of the foregoing,
      relating
      directly or indirectly, in whole or in part, to the NMP22 Product
      Line.

    


    “Inventory”
      shall
      be used herein as defined in the Uniform Commercial Code but in any event shall
      include, but not be limited to, tangible personal property held by or on behalf
      of Borrower (or in which Borrower has an interest in mass or a joint or other
      interest) for sale or lease or to be furnished under contracts of service,
      tangible personal property which Borrower has so leased or furnished, and raw
      materials, work in process and materials used, produced or consumed in
      Borrower’s business, and shall include tangible personal property returned to
      Borrower by the purchaser following a sale thereof by Borrower and tangible
      personal property represented by Documents. All equipment, accessories and
      parts
      at any time attached or added to items of Inventory or used in connection
      therewith shall be deemed to be part of the Inventory.

    


    “Licensed
      Assets”
      means,
      collectively, the Matritech Patent Rights, the Matritech Trademark Rights and
      the MIT Patent Rights (each as defined in the Contingent License Agreement)
      and
      any other Intellectual Property from time to time subject to the grant of a
      license in favor of the Collateral Agent pursuant to the Contingent License
      Agreement.

    


    “Lien”
      means
      any lien, mortgage, security interest, chattel mortgage, pledge or other
      encumbrance (statutory or otherwise) of any kind securing satisfaction or
      performance of an 

     

    
      
         

      

      
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    obligation,
      including any agreement to give any of the foregoing, any conditional sales
      or
      other title retention agreement, any lease in the nature thereof, and the filing
      of or the agreement to give any financing statement under the Code of any
      jurisdiction or similar evidence of any encumbrance, whether within or outside
      the United States.

    


    “NMP22
      Business”
      means
      the business of Borrower relating to the NMP22 Product Line, including, without
      limitation, the development, manufacture, marketing, sale, distribution and
      licensing of the NMP22 Products.

    


    “NMP22
      Product Line”
      means
      the Borrower’s product line of diagnostic devices designed to detect bladder
      cancer, including, without limitation, the Point of Care NMP22® BladderChek®
      Test and NMP22® Test Kit.

    


    “NMP22
      Products”
      means
      the Point of Care NMP22® BladderChek® Test, the NMP22® Test Kit and any other
      products included from time to time in the NMP22 Product Line.

    


    “Organizational
      Documents”
      mean,
      with respect to any Person other than a natural person, the documents by which
      such Person was organized (such as a certificate of incorporation, certificate
      of limited partnership or articles of organization, and including, without
      limitation, any certificates of designation for preferred stock or other forms
      of preferred equity) and which relate to the internal governance of such Person
      (such as bylaws, a partnership agreement or an operating, limited liability
      or
      members agreement).

    


    “Permitted
      Liens”
      means,
      collectively, all of the following Liens: (a) Liens securing indebtedness
      described in Article VIII(C)(v)(a) of the Notes (i.e., indebtedness incurred
      to
      finance receivables in an amount at any time not to exceed 80% of the
      outstanding receivables owed to the Borrower at such time), (b) Liens securing
      indebtedness described in Article VIII(C)(v)(b) of the Notes (i.e., equipment
      purchase and lease financing in an amount at any time not to exceed $200,000),
      provided
      that no
      such Liens shall extend to or cover any property other than the leased property
      or equipment purchased by proceeds of such permitted financing; (c) Liens for
      taxes, fees, assessments or other governmental charges or levies, either not
      delinquent or being contested in good faith by appropriate proceedings and
      for
      which Borrower maintains adequate reserves, (d) Liens for mechanics and other
      similar Liens not delinquent, and (e) Liens to secure payment of workers’
      compensation, employment insurance, old age pensions, social security or other
      like obligations incurred in the ordinary course of business.

    


    “Person”
      means
      any individual,
      corporation, partnership, limited liability company, trust, unincorporated
      association, business, or other legal entity, and any government or any
      governmental agency or political subdivision thereof.

    


    “Proceeds”
      shall
      be used herein as defined in the Uniform Commercial Code but, in any event,
      shall include, but not be limited to, (a) any and all proceeds of any insurance
      (whether or not Collateral Agent is named as the loss payee thereof), indemnity,
      warranty or guaranty payable to Borrower or Collateral Agent from time to time
      with respect to any of the Collateral, (b) any and all payments (in any form
      whatsoever) made or due and payable to Borrower from time to time in


     

    
      
         

      

      
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    connection
      with any requisition, confiscation, condemnation, seizure or forfeiture of
      all
      or any part of the Collateral by any Governmental Authority (or any Person
      acting under color of Governmental Authority), (c) any and all amounts received
      when Collateral is sold, leased, licensed, exchanged, collected or disposed
      of,
      (d) any rights arising out of Collateral, and (e) any and all other amounts
      from
      time to time paid or payable under or in connection with any of the
      Collateral.

    


    “Secured
      Obligations”
      means
      all of Borrower’s obligations under the Notes, in each case, whether now or
      hereafter existing, voluntary or involuntary, direct or indirect, absolute
      or
      contingent, liquidated or unliquidated, whether or not jointly owed with others,
      and whether or not from time to time decreased or extinguished and later
      increased, created or incurred, and all or any portion of such obligations
      or
      liabilities that are paid, to the extent all or any part of such payment is
      avoided or recovered directly or indirectly from Secured Party as a preference,
      fraudulent transfer or otherwise as such obligations may be amended,
      supplemented, converted, extended or modified from time to time. Without
      limiting the generality of the foregoing, the term “Secured Obligations” shall
      include, without limitation: (i) principal of, and interest on the Notes; and
      (ii) all amounts (including but not limited to post-petition interest) in
      respect of the foregoing that would be payable but for the fact that the
      obligations to pay such amounts are unenforceable or not allowable due to the
      existence of a bankruptcy, reorganization or similar proceeding involving
      Borrower.

    


    “Uniform
      Commercial Code”
      shall
      mean the Uniform Commercial Code in effect on the date hereof and as amended
      from time to time, and as enacted in the State of Delaware or in any state
      or
      states which, pursuant to the Uniform Commercial Code as enacted in the State
      of
      Delaware, has jurisdiction with respect to all, or any portion of, the
      Collateral or this Agreement, from time to time. It is the intent of the parties
      that the definitions set forth above should be construed in their broadest
      sense
      so that Collateral will be construed in its broadest sense. Accordingly if
      there
      are, from time to time, changes to defined terms in the Uniform Commercial
      Code
      that broaden the definitions, they are incorporated herein and if existing
      definitions in the Uniform Commercial Code are broader than the amended
      definitions, the existing ones shall be controlling. Similarly, where the phrase
      “as defined in the Uniform Commercial Code, but in any event shall include,
      but
      not be limited to . . .” is used above, it means as defined in the Uniform
      Commercial Code except that if any of the enumerated types of items specified
      thereafter would not fall within the Uniform Commercial Code definition, they
      shall nonetheless be included in the applicable definition for purposes of
      this
      Agreement.

    


    2.  EFFECTIVE
      DATE.
      Notwithstanding anything herein to the contrary, if and to the extent there
      is a
      prohibition on the grant of a security interest in the Collateral under the
      Borrower’s 7.5% Convertible Debentures due March 31, 2006, the provisions of
      Sections 3 (Grant of Security Interest) and 5 (Remedies Upon Default) of this
      Agreement, including, without limitation, the grant of the security interest
      in
      the Collateral pursuant to Section 3 hereof, shall not be effective until the
      Effective Date, at which time such provisions shall become effective
      automatically and without further action on the part of any party.

     

    3.  GRANT
      OF SECURITY INTEREST.
      As
      security for the payment and performance of the Secured Obligations, effective
      as of the Effective Date, Borrower hereby pledges and hypothecates to Secured
      Party, and creates in favor of Secured Party, a security interest in and to,
      all
      of Borrower’s right, title and interest in and to all the following property, in


     

    
      
         

      

      
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    all
      its
      forms, in each case whether now or hereafter existing, whether now owned or
      hereafter acquired, created or arising, and wherever located (collectively,
      but
      without duplication, the “Collateral”):

     

    (a) All
      Inventory, Equipment and General Intangibles used by Borrower in connection
      with, or otherwise relating to, the NMP22 Product Line, including, without
      limitation:

    


    (i)
      any
      and all NMP22 Products and components thereof (including, without limitation,
      reagents and cell lines) held by or on behalf of Borrower (or in which Borrower
      has an interest in mass or a joint or other interest) for sale or lease or
      to be
      furnished under contracts of service, any and all NMP22 Products which Borrower
      has so leased or furnished, and any and all raw materials, work in process
      and
      materials used, produced or consumed to manufacture or produce the NMP22
      Products, and any and all written materials related to the NMP22 Products
      (including, without limitation, the written materials listed on Schedule
      5);

    


    (ii)
      any
      and all Equipment (including, without limitation, plastic molds and the
      Equipment listed on Schedule
      5)
      used by
      Borrower in the manufacture, production or processing of NMP22 Products, and
      all
      accessories and parts now or hereafter affixed thereto as well as all
      attachments, replacements, substitutes, accessories, additions and improvements
      to any of the foregoing;

    


    (iii)
      any
      and all contract rights of Borrower in or arising under any contract or
      agreement of Borrower relating directly or indirectly, in whole or in part,
      to
      the NMP22 Product Line, including without limitation Borrower’s agreements with
      Unotech Diagnostics, Inc. and Abbott Laboratories; and

    


    (iv)
      any
      and all cell lines used by Borrower in connection with the NMP22 Product Line,
      and any and all written know-how, protocols and other printed materials
      referring or relating to the culturing and propagation of such cell lines;
      and

    


    (b) All
      Proceeds of any and all of the foregoing.

    


    Notwithstanding
      the foregoing, it is the intention of the parties to the Agreement that the
      security interest granted herein shall not extend to, and the term "Collateral"
      shall exclude, (1) any and all (A) Intellectual Property utilized or to be
      utilized outside the Field (as defined in the Contingent License Agreement),
      but
      only if such Intellectual Property is subject to the grant of a license in
      favor
      of the Collateral Agent for use inside the Field pursuant to the Contingent
      License Agreement, and/or (B) other Licensed Assets; (2) the Borrower’s
      trademarks in the name “Matritech” and any registrations, applications and
      renewals for the foregoing,
      (3) any
      and all general laboratory Equipment and materials, and
      (4)
      any item of General Intangibles that is now or hereafter held by Borrower,
      solely in the event and to the extent that: (i) as the result of the security
      interest granted herein, Borrower's rights in or with respect to such item
      of
      General Intangibles would be forfeited or would become void, voidable,
      terminable, or revocable, or, with respect to any item of General Intangibles
      that is now or hereafter held by Borrower as licensee or lessee, if Borrower
      would be 

     

    
      
         

      

      
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    deemed
      to
      have breached, violated, or defaulted such underlying license, lease or other
      agreement that governs such item of General Intangibles; (ii) any such
      restriction shall be effective and enforceable under applicable law; and (iii)
      any such forfeiture, voidness, voidability, terminability, revocability, breach,
      violation, or default cannot be remedied by Borrower using its commercially
      reasonable efforts; provided,
      however,
      that
      the security interest granted herein shall extend to, and the term "Collateral"
      shall include, (y) any and all proceeds of such item of General Intangibles
      to
      the extent that the granting of a security interest in such proceeds is not
      so
      restricted, and (z) upon any such licensor, lessor or other applicable party's
      consent with respect to any such otherwise excluded item of General Intangibles
      being obtained, thereafter such item of General Intangibles as well as any
      proceeds thereof that might theretofore have been excluded from the grant of
      security interest contained herein and the term "Collateral".

    


    4.  REPRESENTATIONS
      AND WARRANTIES OF BORROWER.
      Borrower represents and warrants to Secured Party as follows. The following
      representations and warranties shall survive execution of this Agreement and
      shall not be affected or waived by any examination or
      inspection made by Secured Party:

     

    (a)  Status.
      Borrower is duly organized and validly existing as the type of entity and in
      the
      state of formation set forth on Schedule
      1
      hereto.
Schedule
      1
      hereto
      sets forth Borrower’s organizational identification number or, if Borrower does
      not have one, states that one does not exist. Borrower has perpetual existence
      and the power and authority to own its property and assets and to transact
      the
      business in which it is engaged or presently proposes to engage. Borrower has
      qualified to do business in each state or jurisdiction where its business or
      operations so require and where the failure to so qualify would have a Material
      Adverse Effect.

     

    (b)  Authority
      to Execute Agreement; Binding Agreement.
      Borrower has the corporate or other power to execute, deliver and perform its
      obligations under this Agreement (including, without limitation, the right
      and
      power to give Secured Party a security interest in the Collateral) and has
      taken
      all necessary corporate and other action to authorize the execution, delivery
      and performance of this Agreement. This Agreement has been duly executed by
      Borrower. This Agreement constitutes the legal, valid and binding obligation
      of
      Borrower, enforceable against Borrower in accordance with its terms except
      as
      such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors or general principles of
      equity.

     

    (c)  Borrower’s
      Title.
      Except
      for the security interests granted hereunder, Borrower is, as to all Collateral
      presently owned by it, and shall be as to all Collateral hereafter acquired
      by
      it, the owner or in the case of leased or licensed assets, the lessee or
      licensee, of said Collateral free from any Lien other than Permitted
      Liens.

     

    (d)  Location
      of Inventory and Equipment.
      All of
      Borrower’s Inventory and Equipment that are included in the Collateral are
      located at the locations specified on Schedule
      2-A.
      Except
      as disclosed on Schedule
      2-A,
      none of
      such Inventory or Equipment are in the possession of any consignee, bailee,
      warehouseman, agent or processor.

     

    
      
         

      

      
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    (e)  Location
      of Borrower.
      The
      principal place of business of Borrower, the chief executive office of Borrower
      and the office where Borrower keeps its books and records relating to the
      Collateral are specified on Schedule
      2-B.
      Borrower has no other place of business except as separately specified on
Schedule
      2-B.

     

    (f)  Names
      Used by Borrower.
      (i) The
      actual name of Borrower is the name set forth in the preamble above; (ii)
      Borrower has no trade names except as set forth on Schedule
      3
      attached
      hereto; (iii) Borrower has not used any name other than that stated in the
      preamble hereto or as set forth on Schedule
      3
      for the
      preceding five years; and (iv) no entity has merged into Borrower or been
      acquired by Borrower within the past five years except as set forth on
Schedule
      3.

     

    (g)  Perfected
      Security Interest.
      Effective as of the Effective Date, this Agreement creates a valid, first
      priority security interest in the Collateral, subject only to Permitted Liens,
      securing payment of the Secured Obligations. Upon the later of (i) the Effective
      Date and (ii) the filing of the Uniform Commercial Code financing statement
      in
      the office set forth on Schedule
      4
      hereto,
      all security interests granted pursuant to this Agreement which may be perfected
      by filing a UCC financing statement shall have been duly perfected. Except
      for
      the filings referred to in the preceding sentence, no action of Borrower is
      necessary to create, perfect or protect such security interest. Without limiting
      the generality of the foregoing, except for such filings, no consent of any
      third parties and no authorization, approval or other action by, and no notice
      to or filing with any Governmental Authority or regulatory body by Borrower
      is
      required as of the date of this Agreement for (i) the execution, delivery and
      performance of this Agreement by Borrower, (ii) the creation or perfection
      of
      the security interest in the Collateral or (iii) the enforcement of Secured
      Party’s rights hereunder.

     

    (h)  Absence
      of Conflicts with Other Agreements, Etc.
      Neither
      the pledge by Borrower of the Collateral hereunder nor any of the provisions
      hereof (including, without limitation, the grant by Borrower of the remedies
      provided hereunder) violates any of the provisions of (i) any Organizational
      Documents of Borrower, (ii) any other agreement to which Borrower or any of
      its
      property is a party or is subject, or (iii) any judgment, decree, order or
      award
      of any court, governmental body or arbitrator or any applicable law, rule or
      regulation applicable to Borrower or any of its property (except, with respect
      to clauses (ii) and (iii), for such violations that would not, individually
      or
      in the aggregate, have a Material Adverse Effect).

     

    (i)  Subsidiaries.
      The
      Borrower has no subsidiaries other than Matritech GmbH. Matritech GmbH does
      not
      own any Equipment or Intellectual Property used in connection with or otherwise
      relating to the NMP22 Product Line.

     

    5.  COVENANTS
      OF BORROWER.
      Borrower covenants that:

     

    (a)  Filing
      of Financing Statements and Preservation of Interests.
      Borrower hereby authorizes Collateral Agent to file in such office or offices
      in
      the United States as is necessary, or as Collateral Agent reasonably deems
      desirable, such financing and continuation statements and amendments and
      supplements thereto, and such other documents as Collateral 

     

    
      
         

      

      
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    Agent
      reasonably may require to perfect, preserve and protect the security interests
      granted herein.

     

    (b)  Collateral
      In Possession of Third Parties.
      To the
      extent that any Collateral is in the possession of any third party, and such
      Collateral has a fair market value in excess of $25,000 in the aggregate,
      Borrower shall promptly notify Collateral Agent of the existence thereof and,
      at
      Collateral Agent’s request, Borrower shall join with Collateral Agent in
      notifying such third party of Secured Party’s security interest and shall make
      commercially reasonable efforts to obtain an acknowledgement from such third
      party that it is holding the Collateral for the benefit of Secured
      Party.

     

    (c)  Notice
      of Changes.
      Borrower shall notify Collateral Agent as follows:

     

    (i)  without
      providing at least thirty (30) days prior written notice to Collateral Agent,
      Borrower will not change its name in any respect, its place of business or,
      if
      more than one, chief executive office, or its mailing address or organizational
      identification number (if it has one);

     

    (ii)  if
      Borrower does not have an organizational identification number and obtains
      one
      after the date of this Agreement, Borrower will forthwith notify Collateral
      Agent in writing of such organizational identification number; and

     

    (iii)  Borrower
      will not change its type of organization, jurisdiction of organization or other
      legal structure without providing at least thirty (30) days prior written notice
      to Collateral Agent.

     

    (d)  Use
      and Condition of Equipment.
      Each
      item of Equipment included in the Collateral will be maintained in good repair,
      working order and condition, ordinary wear and tear and depreciation excepted,
      and Borrower will provide all maintenance service and repairs necessary for
      such
      purpose.

     

    (e)  Insurance.
      Borrower shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral against loss or damage of the kinds and in the
      amounts customarily insured against by entities of established reputation having
      similar properties similarly situated and in such amounts as are customarily
      carried under similar circumstances by other such Persons and otherwise as
      is
      prudent for Persons engaged in similar businesses but in any event sufficient
      to
      cover the full replacement cost thereof. Borrower shall cause each liability
      insurance policy issued in connection herewith to provide, and the insurer
      issuing such policy to certify to Collateral Agent that (a) Collateral Agent
      will be named as additional insured under each such liability insurance policy;
      (b) if such insurance be proposed to be cancelled or materially changed for
      any
      reason whatsoever, such insurer will promptly notify Collateral Agent and such
      cancellation or change shall not be effective as to Collateral Agent for at
      least thirty (30) days after receipt by Collateral Agent of such notice (ten
      (10) days in the case of cancellation for non-payment of premiums), unless
      the
      effect of such change is to extend or increase coverage under the policy; and
      (c) Collateral Agent will have the right (but no obligation) at its election
      to
      remedy any default in the payment of premiums within thirty (30) 

     

    
      
         

      

      
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    days
      of
      notice from the insurer of such default (ten (10) days in the case of
      cancellation for non-payment of premiums). Unless otherwise agreed by Borrower
      and Collateral Agent, the proceeds arising out of any claim in respect of any
      Collateral will be applied by Borrower to the repair and/or replacement of
      such
      Collateral with respect to which the loss was incurred to the extent reasonably
      feasible. Copies of such policies or the related certificates shall be delivered
      to Collateral Agent upon Collateral Agent’s reasonable request.

     

    (f)  Transfer
      of Collateral.
      Other
      than the disposition of Inventory in the ordinary course of Borrower’s business
      as presently conducted, and the disposition of obsolete, worn-out or surplus
      Equipment in the ordinary course of Borrower’s business with a fair market value
      not to exceed $25,000 in any calendar year, Borrower shall not sell, assign,
      transfer, encumber or otherwise dispose of any Collateral without the prior
      written consent of Collateral Agent and Collateral Agent does not authorize
      any
      such disposition. For purposes of this provision, “dispose of any Collateral”
      shall include, without limitation, the creation of a security interest or other
      encumbrance (whether voluntary or involuntary) on such Collateral other than
      Permitted Liens.

     

    (g)  Taxes
      and Assessments.
      Borrower shall promptly pay when due and payable, all taxes and assessments
      imposed upon the Collateral, provided
      that no
      such tax or assessment need be paid if being contested in good faith by
      appropriate proceedings promptly initiated and diligently conducted and if
      such
      reserve or other appropriate provision, if any, as shall be required by
      generally accepted accounting principles, shall have been made therefor and,
      if
      the filing of a bond or other indemnity is necessary to avoid the creation
      of a
      Lien against any of the Collateral, such bond shall have been filed or indemnity
      provided.

     

    (h)  Inventory.
      Borrower shall not return any Inventory included in the Collateral to the
      supplier thereof, except for damaged or unsalable Inventory or otherwise in
      the
      ordinary course of Borrower’s business. Without limiting the generality of the
      foregoing, in the event Borrower becomes a “debtor in possession” as defined in
      11 U.S.C. §1101 (or any successor thereto), Borrower agrees, to the extent
      permitted by applicable law, not to move pursuant to 11 U.S.C. §546 (or any
      successor thereto) for permission to return Inventory included in the Collateral
      to any creditor which shipped such goods to Borrower without Collateral Agent’s
      written consent and Borrower hereby waives any rights to return such Inventory
      arising under 11 U.S.C. §546(h), or any successor section thereto. Without the
      consent of Collateral Agent, Borrower shall not permit any subsidiary of
      Borrower to maintain Collateral in excess of $500,000 at any time. Borrower
      shall deliver to Collateral Agent, no later than 45 days after the end of each
      of Borrower’s fiscal quarters, a certificate setting forth the amount of
      Collateral maintained by its subsidiaries as of the end of such fiscal
      quarter.

     

    (i)  Defense
      of Secured Party’s Rights.
      Borrower warrants and will defend Secured Party’s right, title and security
      interest in and to the Collateral against the claims of any Person (other than
      the holders of Permitted Liens with respect to such Permitted
      Liens).

     

    (j)  Inspections.
      Borrower will permit Collateral Agent, or its designee, upon its reasonable
      request and reasonable prior notice, and at any reasonable times during
      Borrower’s usual business hours, to inspect the Collateral, all records related
      thereto (and to make extracts or 

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    copies
      from such records), and the premises upon which any of the Collateral is
      located, and, if an Event of Default has occurred and is continuing, to discuss
      Borrower’s affairs and finances with any Person and to verify with such Person
      the amount, quality, value and condition of, or any other matter relating to,
      the Collateral.

     

    (k)  Power
      of Attorney.
      Borrower has duly executed and delivered to Collateral Agent a power of attorney
      (a “Power
      of Attorney”)
      in
      substantially the form attached hereto as Annex
      A.
      The
      power of attorney granted pursuant to the Power of Attorney is a power coupled
      with an interest and shall be irrevocable until full and indefeasible payment
      of
      the Secured Obligations. The powers conferred on Collateral Agent under the
      Power of Attorney are solely to protect Secured Party’s interests in the
      Collateral and shall not impose any duty upon Collateral Agent to exercise
      any
      such powers. Collateral Agent agrees that, notwithstanding anything to the
      contrary in the Power of Attorney, (i) except for the powers granted in clause
      (e) of the Power of Attorney, it shall not exercise any power or authority
      granted under the Power of Attorney unless an Event of Default has occurred
      and
      is continuing (and, in any event, it shall not exercise any such power or
      authority until the Effective Date), and (ii) Collateral Agent shall account
      for
      any moneys received by Collateral Agent in respect of any foreclosure on or
      disposition of Collateral pursuant to the Power of Attorney provided that
      Collateral Agent shall not have any duty as to any Collateral, and Collateral
      Agent shall be accountable only for amounts that it actually receives as a
      result of the exercise of such powers. NEITHER SECURED PARTY NOR ITS AFFILIATES,
      PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE
      RESPONSIBLE TO BORROWER FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF
      ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO
      THEIR
      OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT
      OF
      COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
      CONSEQUENTIAL DAMAGES.

     

    (l)  Other
      Assurances.
      Borrower agrees that from time to time, at the sole expense of Borrower, it
      will
      promptly execute and deliver all such further instruments and documents, and
      take all such further action as may be necessary, or as Collateral Agent may
      reasonably request, in order to perfect and protect any security interest
      granted or purported to be granted hereby or to enable Collateral Agent to
      exercise and enforce its rights and remedies hereunder and with respect to
      any
      Collateral or to otherwise carry out the purposes of this Agreement, including,
      without limitation: (i) using commercially reasonable efforts to obtain
      governmental and other third party waivers, consents and approvals in form
      and
      substance reasonably satisfactory to the Collateral Agent, including, without
      limitation, any consent of any licensor, lessor or other person obligated on
      Collateral, and (ii) using commercially reasonable efforts to obtain waivers
      from landlords in form and substance reasonably satisfactory to the Collateral
      Agent.

     

    6.  REMEDIES
      UPON DEFAULT.

     

    (a)  At
      any
      time after the Effective Date, upon the occurrence and during the continuation
      of an Event of Default, Collateral Agent may exercise, in addition to any other
      rights and remedies provided herein, under other contracts and under law, all
      the rights and 

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    remedies
      of a secured party under the Uniform Commercial Code. Without limiting the
      generality of the foregoing, at any time after the Effective Date, upon the
      occurrence and during the continuation of an Event of Default, in accordance
      with applicable law, (i) at the request of Collateral Agent, Borrower shall,
      at
      its cost and expense, assemble the Collateral owned or used by it as directed
      by
      Collateral Agent at a place that is reasonably convenient to Collateral Agent
      and Borrower; and (ii) Collateral Agent may (but is not obligated to), without
      notice except as provided below, sell the Collateral at public or private sale,
      on such terms as are commercially reasonable. Borrower agrees that ten (10)
      days
      prior written notice of any sale referred to in clause (ii) above shall
      constitute sufficient notice. Any Secured Party may purchase Collateral at
      any
      such sale. Borrower shall be liable to Secured Party for any deficiency
      amount.

     

    (b)  Collateral
      Agent may comply with any applicable law in connection with a disposition of
      Collateral and compliance will not be considered adversely to affect the
      commercial reasonableness of any sale of the Collateral. Collateral Agent may
      sell the Collateral without giving any warranties and may specifically disclaim
      such warranties. If Collateral Agent sells any of the Collateral on credit,
      Borrower will only be credited with payments actually made by the purchaser.
      In
      addition, Borrower waives any and all rights that it may have to a judicial
      hearing in advance of the enforcement of any of Secured Party’s rights and
      remedies hereunder, including, without limitation, its right following an Event
      of Default to take immediate possession of the Collateral and to exercise its
      rights and remedies with respect thereto.

     

    (c)  For
      the
      purpose of enabling Collateral Agent to further exercise rights and remedies
      under this Section 6 or elsewhere provided by agreement or applicable law,
      Borrower has granted to Collateral Agent a license to use, license or sublicense
      any of the Licensed Assets now owned or hereafter acquired by Borrower pursuant
      to the Contingent License Agreement, on the terms and subject to the conditions
      set forth therein.

     

    (d)  The
      parties understand and agree that (i) the security interest granted to
      Collateral Agent with respect to the Collateral, and (ii) the license granted
      to
      the Collateral Agent with respect to the Licensed Assets pursuant to the
      Contingent License Agreement, will and is intended to permit Collateral Agent
      and its successors and assigns, during the continuance of an Event of Default
      as
      provided herein, to take title to and make use of all rights to the Collateral,
      and make use of all rights of Borrower to the Licensed Assets in conjunction
      with the Collateral.

     

    7.  OBLIGATIONS
      ABSOLUTE.

     

    (a)  Change
      of Circumstance.
      THE
      RIGHTS OF THE COLLATERAL AGENT HEREUNDER AND THE OBLIGATIONS OF BORROWER
      HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL, SHALL NOT BE SUBJECT TO ANY
      COUNTERCLAIM, SETOFF, RECOUPMENT OR DEFENSE BASED UPON ANY CLAIM THAT BORROWER
      OR ANY OTHER PERSON MAY HAVE AGAINST ANY SECURED PARTY AND SHALL REMAIN IN
      FULL
      FORCE AND EFFECT UNTIL FULL AND INDEFEASIBLE SATISFACTION OF THE SECURED
      OBLIGATIONS. Without limiting the generality of the foregoing, the obligations
      of Borrower shall not be released, discharged or in any way affected by any
      circumstance or condition (whether or not Borrower shall have any notice or
      knowledge thereof) including, without limitation, any amendment or modification
      of or 

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    supplement
      to the Purchase Agreement, the Notes or any other Transaction Document
      (including, without limitation, increasing the amount or extending the maturity
      of the Secured Obligations); any waiver, consent, extension, indulgence or
      other
      action or inaction under or in respect of any such agreements or instruments,
      or
      any exercise or failure to exercise of any right, remedy, power or privilege
      under or in respect of any such agreements or instruments, or any exercise
      or
      failure to exercise of any right, remedy, power or privilege under or in respect
      of any such agreements or instruments; any invalidity or unenforceability,
      in
      whole or in part, of any term hereof or of the Purchase Agreement, the Notes
      or
      any other Transaction Document; any failure on the part of Borrower or any
      other
      Person for any reason to perform or comply with any term of the Purchase
      Agreement, the Notes or any other Transaction Document; any furnishing or
      acceptance of any additional security or guaranty; any release of Borrower
      or
      any other Person or any release of any or all security or any or all guarantees
      for the Secured Obligations, whether any such release is granted in connection
      with a bankruptcy or otherwise; any bankruptcy, insolvency, reorganization,
      arrangement, readjustment, composition, liquidation or similar proceeding with
      respect to Borrower or any other Person or their respective properties or
      creditors; the application of payments received by Secured Party from any source
      that were lawfully used for some other purpose, which lawfully could have been
      applied to the payment, in full or in part, of the Secured Obligations; or
      any
      other occurrence whatsoever, whether similar or dissimilar to the foregoing.
      Without limiting the generality of the foregoing, at any time that the Notes
      are
      amended to increase the amount of the obligations thereunder, the amount of
      the
      Secured Obligations shall be accordingly increased.

     

    (b)  No
      Duty To Marshal Assets.
      Secured
      Party shall have no obligation to marshal any assets in favor of Borrower or
      any
      other Person or against or in payment of any or all of the Secured
      Obligations.

     

    (c)  Waiver
      of Right of Subrogation, Etc.
      Borrower
      hereby waives any and all rights of subrogation, reimbursement, or indemnity
      whatsoever in respect of Borrower arising out of remedies exercised by
      Collateral Agent hereunder until full and indefeasible payment of the Secured
      Obligations.

     

    (d)  Other
      Waivers.
      Borrower hereby waives promptness, diligence and notice of acceptance of this
      Agreement. In connection with any sale or other disposition of Collateral,
      to
      the extent permitted by applicable law, Borrower waives any right of redemption
      or equity of redemption in the Collateral. Borrower further waives presentment
      and demand for payment of any of the Secured Obligations, protest and notice
      of
      protest, dishonor and notice of dishonor or notice of default or any other
      similar notice with respect to any of the Secured Obligations, and all other
      similar notices to which Borrower might otherwise be entitled, except as
      otherwise expressly provided in the Transaction Documents. Secured Party is
      under no obligation to pursue any rights against third parties with respect
      to
      the Secured Obligations and Borrower hereby waives any right it may have to
      require otherwise. Borrower (to the extent that it may lawfully do so) covenants
      that it shall not at any time insist upon or plead, or in any manner claim
      or
      take the benefit of, any stay, valuation, appraisal or redemption now or at
      any
      time hereafter in force that, but for this waiver, might be applicable to any
      sale made under any judgment, order or decree based on this Agreement; and
      Borrower (to the extent that it may lawfully do so) hereby expressly waives
      and
      relinquishes all benefit of any and all such laws and 

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    hereby
      covenants that it will not hinder, delay or impede the execution of any power
      in
      this Agreement delegated to Collateral Agent, but that it will suffer and permit
      the execution of every such power as though no such law or laws had been made
      or
      enacted.

     

    (e)  Borrower
      further waives to the fullest extent permitted by law any right it may have
      under the constitution of the State of Delaware (or under the constitution
      of
      any other state in which any of the Collateral or Borrower may be located),
      or
      under the Constitution of the United States of America, to notice (except for
      notice specifically required hereby) or to a judicial hearing prior to the
      exercise of any right or remedy provided by this Agreement to Collateral Agent,
      and waives its rights, if any, to set aside or invalidate any sale duly
      consummated in accordance with the foregoing provisions hereof on the grounds
      (if such be the case) that the sale was consummated without a prior judicial
      hearing.

     

    (f)  BORROWER’S
      WAIVERS UNDER THIS SECTION 7 HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND
      KNOWINGLY AND AFTER BORROWER HAS BEEN APPRISED AND COUNSELED BY ITS ATTORNEY
      AS
      TO THE NATURE THEREOF AND ITS POSSIBLE ALTERNATIVE RIGHTS.

     

    8.  NO
      IMPLIED WAIVERS.
      No
      failure or delay on the part of Secured Party in exercising any right, power
      or
      privilege under this Agreement or the other Transaction Documents and no course
      of dealing between Borrower, on the one hand, and Secured Party, on the other
      hand, shall operate as a waiver of any such right, power or privilege. No single
      or partial exercise of any right, power or privilege under this Agreement or
      the
      other Transaction Documents precludes any other or further exercise of any
      such
      right, power or privilege or the exercise of any other right, power or
      privilege. The rights and remedies expressly provided in this Agreement and
      the
      other Transaction Documents are cumulative and not exclusive of any rights
      or
      remedies which Secured Party would otherwise have. No notice to or demand on
      Borrower in any case shall entitle Borrower to any other or further notice
      or
      demand in similar or other circumstances or shall constitute a waiver of the
      right of Secured Party to take any other or further action in any circumstances
      without notice or demand. Any waiver that is given shall be effective only
      if in
      writing and only for the limited purposes expressly stated in the applicable
      waiver.

     

    9.  STANDARD
      OF CARE.

     

    (a)  In
      General.
      No act
      or omission of Collateral Agent (or agent or employee of any thereof) shall
      give
      rise to any defense, counterclaim or offset in favor of Borrower or any claim
      or
      action against Collateral Agent (or agent or employee thereof), in the absence
      of gross negligence or willful misconduct of Collateral Agent (or agent or
      employee thereof) as determined in a final, nonappealable judgment of a court
      of
      competent jurisdiction. Collateral Agent shall be deemed to have exercised
      reasonable care in the custody and preservation of the Collateral in its
      possession if the Collateral is accorded treatment substantially equal to that
      which Collateral Agent accords to other collateral it holds (or, in the absence
      of any such collateral, to its own property of such type), it being understood
      that it has no duty to take any action with respect to calls, conversions,
      exchanges, maturities, tenders or other matters relative to any Collateral
      or to
      preserve any rights of any parties and shall only be liable for losses which
      

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    are
      a
      result of its gross negligence or willful misconduct as determined in a final,
      nonappealable judgment of a court of competent jurisdiction.

     

    (b)  No
      Duty to Preserve Rights.
      Without
      limiting the generality of the foregoing, Collateral Agent has no duty (either
      before or after an Event of Default) to collect any amounts in respect of the
      Collateral or to preserve any rights relating to the Collateral.

     

    (c)  No
      Duty to Prepare for Sale.
      Without
      limiting the generality of the foregoing, Collateral Agent has no obligation
      to
      clean-up or otherwise prepare the Collateral for sale.

     

    (d)  Duties
      Relative to Contracts.
      Without
      limiting the generality of the foregoing, Borrower shall remain obligated and
      liable under each contract or agreement included in the Collateral to be
      observed or performed by Borrower thereunder. Collateral Agent shall not have
      any obligation or liability under any such contract or agreement by reason
      of or
      arising out of this Agreement or the receipt by Collateral Agent of any payment
      relating to any of the Collateral, nor shall Collateral Agent be obligated
      in
      any manner to perform any of the obligations of Borrower under or pursuant
      to
      any such contract or agreement, to make inquiry as to the nature or sufficiency
      of any payment received by Collateral Agent in respect of the Collateral or
      as
      to the sufficiency of any performance by any party under any such contract
      or
      agreement, to present or file any claim, to take any action to enforce any
      performance or to collect the payment of any amounts which may have been
      assigned to Collateral Agent or to which Collateral Agent may be entitled at
      any
      time or times.

     

    (e)  Reliance
      on Advice of Counsel.
      In
      taking any action under this Agreement or any other Transaction Document,
      Collateral Agent shall be entitled to rely upon the advice of counsel of
      Collateral Agent’s choice and shall be fully protected in acting on such advice
      whether or not the advice rendered is ultimately determined to have been
      accurate.

     

    10.  MISCELLANEOUS.

     

    (a)  Assignment.
      Collateral Agent may assign or transfer this Agreement and any or all rights
      or
      obligations hereunder without the consent of Borrower and without prior notice.
      Borrower shall not assign or transfer this Agreement or any rights or
      obligations hereunder without the prior written consent of Collateral Agent.
      Notwithstanding
      the foregoing, if there should be any assignment of any rights or obligations
      by
      operation of law or in contravention of the terms of this Agreement or otherwise
      then all covenants, agreements, representations and warranties made herein
      or
      pursuant hereto by or on behalf of Borrower shall bind the successors and
      assigns of Borrower, together with the preexisting Borrower, whether or not
      such
      new or additional Persons execute a joinder hereto or assumption
      hereof.
      The
      rights and privileges of Collateral Agent under this Agreement shall inure
      to
      the benefit of its successors and assigns.

     

    (b)  Notices.
      Any
      notice contemplated herein or required or permitted to be given hereunder shall
      be made in the manner set forth in the Purchase Agreement and delivered, in
      the
      case of Borrower and Collateral Agent, at the addresses set forth on the
      signature pages to 

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    the
      Purchase Agreement, or to such other address as any party hereto may have last
      specified by written notice to the other party or parties.

     

    (c)  Severability.
      Every
      provision of this Agreement is intended to be severable. If any term or
      provision of this Agreement shall be invalid, illegal or unenforceable for
      any
      reason, the validity, legality and enforceability of the remaining provisions
      shall not be affected or impaired thereby. Any invalidity, illegality or
      unenforceability in any jurisdiction shall not affect the validity, legality
      or
      enforceability of any such term or provision in any other
      jurisdiction.

     

    (d)  Costs
      and Expenses.
      Without
      limiting any other cost reimbursement provisions in the Transaction Documents,
      upon demand, Borrower
      shall
      pay to
      Collateral Agent the amount of any and all reasonable expenses incurred by
      Collateral Agent hereunder or in connection herewith, including, without
      limitation those that may be incurred in connection with (i) the administration
      of this Agreement, (ii) the custody or preservation of, or the sale of,
      collection from, or other realization upon, any of the Collateral, (iii) the
      exercise or enforcement of any of the rights of Collateral Agent hereunder
      or
      (iv) the failure of Borrower to perform or observe any of the provisions
      hereof.

     

    (e)  Indemnification
      by Borrower.
      Borrower shall indemnify, reimburse and hold harmless Collateral Agent and
      its
      affiliates, and all of their partners, members, shareholders, officers,
      directors, employees, agents and advisors and any successors, assigns and
      participants thereof (each, an “Indemnitee”),
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature (including fees relating to the cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in any other Transaction Document.

     

    (f)  Counterparts;
      Integration.
      This
      Agreement may be executed in counterparts (and by different parties hereto
      in
      different counterparts), each of which shall constitute an original, but all
      of
      which when taken together shall constitute a single contract. This Agreement,
      the Contingent License Agreement and the other Transaction Documents constitute
      the entire contract among the parties relating to the subject matter hereof
      and
      supersede any and all previous agreements and understandings, oral or written,
      relating to the subject matter hereof. Delivery of an executed counterpart
      of a
      signature page of this Agreement by telecopy shall be effective as delivery
      of a
      manually executed counterpart of this Agreement.

     

    (g)  Amendments
      and Waivers.
      The
      terms of this Agreement may be waived, altered or amended only by an instrument
      in writing duly executed by Borrower and Collateral Agent.

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    (h)  Headings.
      Headings to this Agreement are for purposes of reference only and shall not
      limit or otherwise affect the meaning hereof.

     

    11.  SPECIFIC
      PERFORMANCE.
      Borrower hereby authorizes Collateral Agent to demand specific performance
      of
      this Agreement at any time when Borrower shall have failed to comply with any
      provision hereof, and Borrower hereby irrevocably waives any defense based
      on
      the adequacy of a remedy at law which might be asserted as a bar to the remedy
      of specific performance hereof in any action brought therefor.

     

    12.  TERMINATION.
      At such
      time as the Secured Obligations have been indefeasibly paid and performed in
      full, then the security provided for herein shall terminate, provided,
      however, that all indemnities of Borrower contained in this Agreement shall
      survive and remain operative and in full force and effect regardless of the
      termination of this Agreement.

     

    13.  GOVERNING
      LAW; JURISDICTION; WAIVER OF JURY TRIAL.

     

    (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. Each of Borrower and Collateral Agent irrevocably consents to
      the
      exclusive jurisdiction of the United States federal courts and the state courts
      located in the County of New Castle, Delaware, in any suit or proceeding between
      the parties based on or arising under this Agreement and irrevocably agrees
      that
      all claims in respect of such suit or proceeding may be determined in such
      courts. Each of Borrower and Collateral Agent irrevocably waives the defense
      of
      an inconvenient forum to the maintenance of such suit or proceeding in such
      forum. Each of Borrower and Collateral Agent further agrees that service of
      process upon it mailed by first class mail shall be deemed in every respect
      effective service of process upon it in any such suit or proceeding. Nothing
      herein shall affect the right of Collateral Agent or Borrower to serve process
      in any other manner permitted by law. Borrower and Collateral Agent 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)  Waiver
      of Jury Trial.
      EACH
      PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
      APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
      DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
      OTHER
      TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER
      BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
      (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
      PERSON
      HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT,
      IN
      THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
      (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED
      TO
      ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS BY, AMONG OTHER
      THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    



    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      in
      the name and on behalf of the parties hereto as of the date first above
      written.

    


    


    BORROWER

    


    MATRITECH,
      INC.

    


    


    By:
      /s/
      Stephen D. Chubb

    Name:
      Stephen D. Chubb

    Title:
      Chief Executive Officer

    


    


    COLLATERAL
      AGENT

    


    SDS
      CAPITAL PARTNERS SPC, LTD.,

    as
      Collateral Agent

    


    


    By:
      /s/
      Steve Derby

    Name:
      Steve Derby

    Title:
      Director

    


    


    


    



    
      
         

      

      
        -17-