Document:

WWW.EXFILE.COM -- 13328 -- MATRITECH, INC. -- EXHIBIT 4.2

EXHIBIT 4.2

PURCHASE
AGREEMENT

THIS
PURCHASE AGREEMENT (“Agreement”) is made as of the 4th day of
March, 2005 by and among Matritech, Inc., a Delaware corporation (the
“Company”), and the Investors set forth on the signature pages affixed hereto
(each an “Investor” and collectively the “Investors”).

Recitals

A. The
Company and the Investors 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 U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and

B. The
Investors wish to purchase from the Company, and the Company wishes to sell and
issue to the Investors, upon the terms and conditions stated in this Agreement,
(i) an aggregate of 1,426,124 shares of Series A Convertible Preferred Stock,
par value $1.00 per share (the “Preferred Stock”), such Preferred Stock to have
the relative rights, preferences and designations set forth in the Certificate
of Designations set forth in Exhibit
A hereto
(the “Certificate of Designation”), at a purchase price of $8.80 per share, and
(ii) warrants to purchase an aggregate of 4,991,434 shares of Common Stock, par
value $0.01 per share (together with any securities into which the common stock
may be reclassified, the “Common Stock”) at an exercise price of $1.47 per share
(subject to adjustment) in the form attached hereto as Exhibit
B (the
“Warrants”), at a purchase price of $1.47 per Warrant Share (as defined below);
and

C. The
shares of Preferred Stock are convertible into shares of Common
Stock.

D. Subject
to the terms and conditions set forth herein, 670,272 shares of Preferred Stock
(the “Initial Shares”) and the Warrants will be issued and sold to the Investors
on the First Closing Date (as defined below) for an aggregate purchase price of
$5,898,393.60 (the “Initial Purchase Price”).

E. Subject
to the terms and conditions set forth herein, 755,852 shares of Preferred Stock
(the “Remaining Shares” and, collectively with the Initial Shares, the “Shares”)
will be issued and sold to the Investors on the Second Closing Date (as defined
below) for an aggregate purchase price of $6,651,497.60 (the “Remaining Purchase
Price”).

F. Contemporaneous
with the sale of the Initial Shares and Warrants, the parties hereto will
execute and deliver a Registration Rights Agreement, in the form attached hereto
as Exhibit
C (the
“Registration Rights Agreement”), pursuant to which the Company will agree to
provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and applicable
state securities laws.

 

In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1. Definitions. In
addition to those terms defined above and elsewhere in this Agreement, for the
purposes of this Agreement, the following terms shall have the meanings set
forth below:

“Affiliate” means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.

“Amex” means
the American Stock Exchange, Inc.

“Business
Day” means a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.

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

“Company’s
Knowledge” means
the actual knowledge of the executive officers (as defined in Rule 405 under the
1933 Act) of the Company, after due inquiry.

“Confidential
Information” means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).

“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

“Conversion
Shares” means
the shares of Common Stock issuable upon conversion of the Preferred
Stock.

“Effective
Date” means
the date on which the initial Registration Statement is declared effective by
the SEC.

“Effectiveness
Deadline” means
the date on which the initial Registration Statement is required to be declared
effective by the SEC under the terms of the Registration Rights
Agreement.

 

 

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“Intellectual
Property” means
all of the following: (i) patents; (ii) trademarks, service marks, trade dress,
trade names and corporate names, , together with all goodwill associated with
each of the foregoing; (iii) copyrights; and (iv) any registrations,
applications and renewals for any of the foregoing.

“Material
Adverse Effect” means a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of the Company and
its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.

“Person” means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.

“Proposal” has the
meaning set forth in Section 7.9.

“SEC
Filings” has the
meaning set forth in Section 4.6.

“Registration
Statement” has the
meaning set forth in the Registration Rights Agreement.

“Securities” means
the Shares, the Warrants, the Conversion Shares and the Warrant
Shares.

“Subsidiary” of any
Person means another Person, (i) an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first Person or (ii) which other
Person is directly or indirectly Controlled by such Person.

“Transaction
Documents” means
this Agreement, the Certificate of Designations, the Warrants and the
Registration Rights Agreement.

“Warrant
Shares” means
the shares of Common Stock issuable upon the exercise of the
Warrants.

“1933
Act” means
the Securities Act of 1933, as amended, or any successor statute, and the rules
and regulations promulgated thereunder.

“1934
Act” means
the Securities Exchange Act of 1934, as amended, or any successor statute, and
the rules and regulations promulgated thereunder.

2. Purchase
and Sale of the Series A Shares and Warrants.

 

 

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(a) Subject
to the terms and conditions of this Agreement, on the First Closing Date, each
of the Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Investors, the Initial Shares and the Warrants in
the respective amounts set forth opposite the Investors’ names on the signature
pages attached hereto in exchange for the Initial Purchase Price as specified in
Section 3(a) below (the “First Closing”).

(b) Subject
to the terms and conditions of this Agreement, on the Second Closing Date, each
of the Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Investors, the Remaining Shares in the respective
amounts set forth opposite the Investors’ names on the signature pages attached
hereto in exchange for the Remaining Purchase Price as specified in Section 3(b)
below (the “Second Closing”).

3. Closing.

(a) First
Closing. Upon
confirmation that the other conditions to closing specified herein have been
satisfied or duly waived by the Investors, the Company shall file the
Certificate of Designations with the Secretary of State of Delaware. Upon
confirmation that the Certificate of Designations have been filed and have
become effective, the Company shall deliver to Goodwin Procter LLP, in trust, a
certificate or certificates, registered in such name or names as the Investors
may designate, representing the Initial Shares and Warrants, with instructions
that such certificates are to be held for release to the Investors only upon
payment in full of the Initial Purchase Price to the Company by all the
Investors. Upon such receipt by Goodwin Procter LLP of the certificates, each
Investor shall promptly, but no more than one Business Day thereafter, cause a
wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Investor’s
pro rata portion of the Initial Purchase Price as set forth on the signature
pages to this Agreement. On the date (the “First Closing Date”) the Company
receives the Initial Purchase Price, the certificates evidencing the Initial
Shares and Warrants shall be released to the Investors. The First Closing shall
take place at the offices of Goodwin Procter LLP, Exchange Place, Boston,
Massachusetts 02109, or at such other location and on such other date as the
Company and a majority in interest of the Investors shall mutually
agree.

(b) Second
Closing. Upon
confirmation that the conditions to closing specified herein (other than Section
6.3(e)) have been satisfied or duly waived by the Investors, the Company shall
deliver to Goodwin Procter LLP, acting in its capacity as escrow agent in
connection with the Second Closing (the “Escrow Agent”), to be held in escrow, a
certificate or certificates, registered in such name or names as the Investors
may designate, representing the Remaining Shares, with instructions that such
certificates are to be held for release to the Investors only upon payment in
full and release of the Remaining Purchase Price to the Company by all the
Investors. Upon receipt of such certificates by the Escrow Agent, each Investor
shall promptly, but no more than one Business Day thereafter, cause a wire
transfer in same day funds to be sent to the account of the Escrow Agent as
instructed in writing by the Escrow Agent, in an amount representing such
Investor’s pro rata portion of the Remaining Purchase Price as set forth on the
signature pages to this Agreement (the “Escrow Funds”) (such date that the
Escrow Funds are received by the Escrow Agent shall hereafter be referred to as
the “Escrow Date”). The Escrow Funds and certificates representing the Remaining
Shares shall be

 

 

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 held
by the Escrow Agent until satisfaction of the condition set forth in Section
6.3(e) hereof. Upon confirmation that the condition set forth in Section 6.3(e)
hereof has been satisfied by the Company, the Escrow Agent shall release the
Escrow Funds to the Company. On the date (the “Second Closing Date”) the Company
receives the Remaining Purchase Price, the certificates evidencing the Remaining
Shares shall be released by the Escrow Agent to the Investors. The Second
Closing shall take place at the offices of Goodwin Procter LLP, Exchange Place,
Boston, Massachusetts 02109, or at such other location and on such other date as
the Company and a majority in interest of the Investors shall mutually agree.
Notwithstanding the foregoing, in the event that the condition set forth in
Section 6.3(e) is not satisfied within the time period set forth therein, the
Escrow Funds and certificates representing the Remaining Shares shall be
returned to each Investor, pursuant to instructions from each such Investor, and
the Company, respectively. 

4. Representations
and Warranties of the Company. The
Company hereby represents and warrants to the Investors that, except as set
forth in the schedules delivered herewith (collectively, the “Disclosure
Schedules”):

4.1 Organization,
Good Standing and Qualification. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not and could not reasonably be
expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule
4.1
hereto.

4.2 Authorization. The
Company has full power and authority and, except
for approval of the Proposal by its stockholders as contemplated in Section
7.9, has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company hereunder or thereunder and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the
Securities. The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally.

4.3 Capitalization.
Schedule
4.3 sets
forth (a) the authorized capital stock of the Company on the date hereof; (b)
the number of shares of capital stock issued and outstanding; (c) the number of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Securities) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the Company.
All of the issued and outstanding shares of the Company’s capital stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in compliance with applicable state
and federal securities law and any rights of third parties. Except as described
on Schedule
4.3, 

 

 

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all of
the issued and outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights, were issued in compliance with applicable state and federal
securities law and any rights of third parties and are owned by the Company,
beneficially and of record, subject to no lien, encumbrance or other adverse
claim. Except as described on Schedule
4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on
Schedule
4.3,
there are no outstanding warrants, options, convertible securities or
other rights, agreements or arrangements of any character under which the
Company or any of its Subsidiaries is or may be obligated to issue any equity
securities of any kind and except as contemplated by this Agreement, neither the
Company nor any of its Subsidiaries is currently in negotiations for the
issuance of any equity securities of any kind. Except as described on
Schedule
4.3 and
except for the Registration Rights Agreement, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the securityholders of the
Company relating to the securities of the Company held by them. Except as
described on Schedule
4.3 and
except as provided in the Registration Rights Agreement, no Person has the right
to require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.

Except as
described on Schedule
4.3, the
issuance and sale of the Securities hereunder will not obligate the Company to
issue shares of Common Stock or other securities to any other Person (other than
the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.

Except as
described on Schedule
4.3, the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase any
equity interest in the Company upon the occurrence of certain
events.

4.4 Valid
Issuance. The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those created by an Investor solely with respect to that Investor’s
Shares), except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and will be entitled to the
rights, powers and preferences set forth in the Certificate of Designations. The
Warrants have been duly and validly authorized. Upon the exercise of the
Warrants in accordance with their terms, the Warrant Shares will be validly
issued, fully paid and non-assessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. Upon the due conversion of the Shares in
accordance with the Certificate of Designations, the Conversion Shares will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. The Company has reserved a sufficient
number of shares of Common Stock for the issuance of the Warrant Shares and
the

 

 

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Conversion
Shares, in each case free and clear of all encumbrances and restrictions, except
for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws and except for those created by the
Investors.

4.5 Consents.
Except
for approval of the Proposal by its stockholders as contemplated in Section 7.9,
the execution,
delivery and performance by the Company of the Transaction Documents and the
offer, issuance and sale of the Securities require no consent of, action by or
in respect of, or filing with, any Person, governmental body, agency, or
official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable time
periods. Subject to the accuracy of the representations and warranties of each
Investor set forth in Section 5 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Securities, (ii) the
issuance of the Warrant Shares upon due exercise of the Warrants, (iii) the
issuance of the Conversion Shares upon the due exercise of the Shares, and (iv)
the other transactions contemplated by the Transaction Documents from the
provisions of any stockholder rights plan or other “poison pill” arrangement,
any anti-takeover, business combination or control share law or statute binding
on the Company or to which the Company or any of its assets and properties may
be subject and any provision of the Company’s Certificate of Incorporation or
By-laws that is or could reasonably be expected to become applicable to the
Investors as a result of the transactions contemplated hereby, including without
limitation, the issuance of the Securities and the ownership, disposition or
voting of the Securities by the Investors or the exercise of any right granted
to the Investors pursuant to this Agreement or the other Transaction
Documents.

4.6 Delivery
of SEC Filings; Business. The
Company has made available to the Investors through the EDGAR system, true and
complete copies of the Company’s most recent Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 (the “10-K”), and all other reports filed by
the Company pursuant to the 1934 Act since the filing of the 10-K and prior to
the date hereof (collectively, the “SEC Filings”). The SEC Filings are the only
filings required of the Company pursuant to the 1934 Act for such period. The
Company and its Subsidiaries are engaged in all material respects only in the
business described in the SEC Filings and the SEC Filings contain a complete and
accurate description in all material respects of the business of the Company and
its Subsidiaries, taken as a whole.

4.7 Use of
Proceeds. The net
proceeds of the sale of the Shares and the Warrants hereunder shall be used by
the Company for working capital, research and development and general corporate
purposes.

4.8 No
Material Adverse Change. Except
as disclosed in the SEC Filings or as described on Schedule
4.8, since
December 31, 2003, there has not been:

(i) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the Company’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2004, except for changes in the ordinary course of business which have not
had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;

 

 

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(ii) any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company;

(iii) any
material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company or its Subsidiaries;

(iv) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;

(v) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);

(vi) any
change or amendment to the Company's Certificate of Incorporation or by-laws, or
material change to any material contract or arrangement by which the Company or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;

(vii) any
material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;

(viii) any
material transaction entered into by the Company or a Subsidiary other than in
the ordinary course of business; 

(ix) the loss
of the services of any key employee, or material change in the composition or
duties of the senior management of the Company or any Subsidiary;

(x) the loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or

(xi) any other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.

4.9 SEC
Filings; S-3 Eligibility.

(a) At the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

 

 

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(b) Each
registration statement and any amendment thereto filed by the Company since
January 1, 2001 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

(c) The
Company is eligible to use Form S-3 to register the resale by the Investors of
the Registrable Securities (as such term is defined in the Registration Rights
Agreement) contemplated by the Registration Rights Agreement.

4.10 No
Conflict, Breach, Violation or Default.
Subject
to the approval of the Proposal by its stockholders as contemplated in Section
7.9, the
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Company’s Certificate of Incorporation or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of which
are in the SEC Filings and have been made available and delivered to the
Investors through the EDGAR system), or (ii)(a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (b) any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject.

4.11 Tax
Matters. The
Company and each Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon or
otherwise owed by it. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company or
any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits by
any federal, state or local taxing authority except for any assessment which is
not material to the Company and its Subsidiaries, taken as a whole. All taxes
and other assessments and levies that the Company or any Subsidiary is required
to withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due. There are no tax
liens or claims pending or, to the Company’s Knowledge, threatened against the
Company or any Subsidiary or any of their respective assets or property. Except
as described on Schedule
4.11, there
are no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.

4.12 Title
to Assets. Except
as disclosed in the SEC Filings, the Company and each Subsidiary has good and
marketable title to all assets owned by it, in each case free from 

 

 

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liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

4.13 Certificates,
Authorities and Permits. The
Company and each Subsidiary possess adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.

4.14 Labor
Matters.

 

(a) [reserved]

 

(b) Except as
set forth on Schedule
4.14, the
Company is not a party to or bound by any collective bargaining agreements or
other agreements with labor organizations. The Company is not in violation in
any material respect of any laws, regulations, orders or contract terms,
affecting the collective bargaining rights of employees, labor organizations or
any laws, regulations or orders affecting employment discrimination, equal
opportunity employment, or employees’ health, safety, welfare, wages and
hours.

 

(c) (i) There
are no labor disputes existing, or to the Company's Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
or any other disruptions of or by the Company's employees, (ii) there are no
unfair labor practices or petitions for election pending or, to the Company's
Knowledge, threatened before the National Labor Relations Board or any other
federal, state or local labor commission relating to the Company's employees,
(iii) no demand for recognition or certification heretofore made by any labor
organization or group of employees is pending with respect to the Company and
(iv) to the Company's Knowledge, the Company enjoys good labor and employee
relations with its employees and labor organizations.

 

(d) The
Company is in compliance in all material respects with all applicable laws
respecting employment (including laws relating to classification of employees
and independent contractors) and employment practices, terms and conditions of
employment, wages and hours, and immigration and naturalization. There no claims
are pending against the Company before the Equal Employment Opportunity
Commission or any other administrative body or in any court asserting any
violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination
Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or local Law,
statute or ordinance barring discrimination in employment.

 

(e) Except as
described in the SEC Filings, the Company is not a party to, or bound by, any
employment or other contract or agreement that contains any severance,

 

 

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termination
pay or change of control liability or obligation, including, without limitation,
any “excess parachute payment,” as defined in Section 2806(b) of the Internal
Revenue Code.

(f) Except as
specified in Schedule
4.14, each of
the Company's employees is a Person who is either a United States citizen or a
permanent resident entitled to work in the United States. To the Company's
Knowledge, the Company has no liability for the improper classification by the
Company of such employees as independent contractors or leased employees prior
to the Closing.

4.15 Intellectual
Property.

To the
Company’s Knowledge, except for those matters described in the SEC Filings and
Schedule
4.15 and
except for other matters which are not material to the Company’s business taken
as a whole: 

(a) All
Intellectual Property of the Company and its Subsidiaries is currently in
material compliance with all legal requirements and is valid and enforceable. No
Intellectual Property of the Company or its Subsidiaries 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 is now involved in
any cancellation, dispute or litigation, and no such action is threatened. No
patent of the Company or its Subsidiaries is now involved in any interference,
reissue, re-examination or opposition proceeding.

(b) All of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are 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 to which the Company or any Subsidiary is a
party or by which any of their assets are bound (other than  generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License Agreements”) are valid and binding obligations of the
Company or its Subsidiaries that are parties thereto and the other parties
thereto, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and there exists no event or
condition which will result in a material violation or breach of or constitute
(with or without due notice or lapse of time or both) a default by the Company
or any of its Subsidiaries under any such License Agreement.

(c) The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that 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 and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third 

 

 

-11-

 

party
Intellectual Property and Confidential Information used or held for use in the
respective businesses of the Company and its Subsidiaries.

(d) The
conduct of the Company’s and its Subsidiaries’ businesses as currently conducted
does not infringe or otherwise impair or conflict with (collectively,
“Infringe”) any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party. The Intellectual Property and
Confidential Information of the Company and its Subsidiaries which are necessary
for the conduct of Company’s and each of its Subsidiaries’ respective businesses
as currently conducted or as currently proposed to be conducted are not being
Infringed by any third party. There is no litigation or order pending or
outstanding, threatened or imminent, that seeks to limit or challenge or that
concerns the ownership, use, validity or enforceability of any Intellectual
Property or Confidential Information of the Company and its Subsidiaries and the
Company’s and its Subsidiaries’ use of any Intellectual Property or Confidential
Information owned by a third party, and there is no valid basis for the
same.

(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information 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.

(f) The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information. Each employee, consultant and contractor who has had
access to Confidential Information 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 has executed an agreement to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof. Except under confidentiality obligations, there has been
no material disclosure of any of the Company’s or its Subsidiaries’ Confidential
Information to any third party.

4.16 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,
to the Company’s Knowledge, 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.

 

 

-12-

 

 

4.17 Litigation. Except
as described in the SEC Filings or on Schedule
4.17, there
are no pending actions, suits or proceedings against or affecting the Company,
its Subsidiaries or any of its or their properties; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or
contemplated.

4.18 Financial
Statements. The
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and,
in the case of quarterly financial statements, as permitted by Form 10-Q under
the 1934 Act). Except as set forth in the financial statements of the Company
included in the SEC Filings or as described on Schedule
4.18, neither
the Company nor any of its Subsidiaries has incurred any liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of such
financial statements, none of which, individually or in the aggregate, have had
or could reasonably be expected to have a Material Adverse Effect.

4.19 Insurance
Coverage. 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.

4.20 Compliance
with Amex Continued Listing Requirements. The
Company is in compliance with applicable Amex continued listing requirements.
There are no proceedings pending or, to the Company’s Knowledge, threatened
against the Company relating to the continued listing of the Common Stock on
Amex and the Company has not received any notice of, nor to the Company’s
Knowledge is there any basis for, the delisting of the Common Stock from
Amex.

4.21 Brokers
and Finders. No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in Schedule
4.21.

4.22 No
Directed Selling Efforts or General Solicitation. Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.

4.23 No
Integrated Offering. 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 Company
security or solicited any offers to buy any security, under circumstances that
would 

 

 

-13-

 

adversely
affect reliance by the Company on Section 4(2) for the exemption from
registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.

4.24 Private
Placement.
Assuming the accuracy of the representations and warranties of the Investors set
forth in Article 5, the offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933
Act.

4.25 Questionable
Payments.
Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary, has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary; or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.

4.26 Transactions
with Affiliates. Except
as disclosed in the SEC Filings or as disclosed on Schedule
4.26, none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and for services as employees, officers and directors), 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 officer, director or such
employee or, to the Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.

4.27 Internal
Controls. The
Company is in
material compliance with the provisions of the Sarbanes-Oxley Act of 2002
currently applicable to the Company. The Company and the
Subsidiaries maintain 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 1934 Act Rules 13a-14 and 15d-14) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including the Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company’s most recently filed period report under the
1934 Act, as the case may be, is being prepared. The Company's certifying
officers have evaluated the 

 

 

-14-

 

effectiveness
of the Company's controls and procedures as of the end of the period covered by
the most recently filed periodic report under the 1934 Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed periodic
report under the 1934 Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, 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) or, to the Company's Knowledge, in
other factors that could significantly affect the Company's internal controls.
The Company maintains and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP and the
applicable requirements of the 1934 Act.

4.28 Disclosures. The
written materials delivered to the Investors in connection with the transactions
contemplated by the Transaction Documents (including the SEC Filings) do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

5. Representations
and Warranties of the Investors. Each of
the Investors hereby severally, and not jointly, represents and warrants to the
Company that:

5.1 Organization
and Existence. Such
Investor is a validly existing corporation, limited partnership or limited
liability company and has all requisite corporate, partnership or limited
liability company power and authority to invest in the Securities pursuant to
this Agreement.

5.2 Authorization. The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.

5.3 Purchase
Entirely for Own Account. The
Securities to be received by such Investor hereunder will be acquired for such
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws.
Nothing
contained herein shall be deemed a representation or warranty by such Investor
to hold the Securities for any period of time. 

5.4 Investment
Experience. Such
Investor acknowledges that it can bear the economic risk and complete loss of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.

 

 

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5.5 Disclosure
of Information. Such
Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the
Company regarding the Company, its business and the terms and conditions of the
offering of the Securities. Such Investor acknowledges receipt of copies of the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, amend or affect such Investor’s right
to rely on the Company’s representations and warranties contained in this
Agreement.

5.6 Restricted
Securities. Such
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited
circumstances.

5.7 Legends.

(a) It is
understood that, except as provided below, certificates evidencing the Preferred
Stock may bear the following or any similar legend: “THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.”

(b) It is
understood that, except as provided below, certificates evidencing the Warrant
may bear the following or any similar legend: “NEITHER THIS SECURITY NOR THE
SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES
ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.”

 

 

-16-

 

(c) If
required by the authorities of any state in connection with the issuance of sale
of the Securities, the legend required by such state authority.

5.8 Accredited
Investor. Such
Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as
amended, under the 1933 Act.

5.9 No
General Solicitation. Such
Investor did not learn of the investment in the Securities as a result of any
public advertising or general solicitation.

5.10 Brokers
and Finders. No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.

5.11 Prohibited
Transactions. Since
agreeing to go “over-the-wall” to learn the confidential name of the Company
and the
proposed details of the terms of the transactions contemplated by the
Transaction Documents, neither such Investor nor any Affiliate of such Investor
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to such Investor’s investments or trading or
information concerning such Investor’s investments, including in respect of the
Securities, or (z) is subject to such Investor’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a “Prohibited
Transaction”). Prior to the earliest to occur of (i) the termination of this
Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such
Investors as set forth on Schedule
5.11 shall
not, and shall cause its Trading Affiliates not to, engage, directly or
indirectly, in a Prohibited Transaction. Such Investor acknowledges that the
representations, warranties and covenants contained in this Section 5.11 are
being made for the benefit of the other Investors as well as the Company and
that each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.11.

6.
Conditions
to the Closings.

6.1 Conditions
to the Investors’ Obligations - First Closing. The
obligation of the Investors to purchase the Initial Shares and the Warrants at
the First Closing is subject to the fulfillment to the Investors’ satisfaction,
on or prior to the First Closing Date, of the following conditions, any of which
may be waived by such Investor (as to itself only):

(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct as of the date hereof
through

 

 

-17-

 

and on
the First Closing Date, except to the extent any such representation or warranty
expressly speaks as of an earlier date, in which case such representation or
warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not
qualified as to materiality shall be true and correct in all material respects
as of the date hereof through and on the First Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
all material respects as of such earlier date. The Company shall have performed
in all material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the First Closing Date.

(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Initial Shares and the Warrants and the consummation of
the other transactions contemplated by the Transaction Documents to be
consummated on or prior to the First Closing Date, all of which shall be in full
force and effect.

(c) The
Company shall have executed and delivered the Registration Rights
Agreement.

(d) [reserved]

(e) The
Certificate of Designations shall have been filed with the Secretary of State of
Delaware and shall be effective.

(f) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

(g) The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
First Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (e), (f) and (j) of this Section 6.1.

(h) The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Secretary, dated as of the First Closing Date, certifying the resolutions
adopted by the Board of Directors of the Company approving the transactions
contemplated by this Agreement and the other Transaction Documents, the calling
of the Special Meeting (as defined below), and the issuance of the Securities,
certifying the current versions of the Certificate of Incorporation and Bylaws
of the Company and certifying as to the signatures and authority of persons
signing the Transaction Documents and related documents on behalf of the
Company.

(i) The
Investors shall have received an opinion from Goodwin Procter
LLP, the
Company's counsel, dated as of the First Closing Date, in form and
substance

 

 

-18-

 

reasonably
acceptable to the Investors and addressing such legal matters as the Investors
may reasonably request.

(j) No stop
order or suspension of trading shall have been imposed by Amex, the SEC or any
other governmental or regulatory body with respect to public trading in the
Common Stock.

6.2 Conditions
to Obligations of the Company - First Closing. The
Company's obligation to sell and issue the Initial Shares and the Warrants at
the First Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the First Closing Date of the following conditions, any
of which may be waived by the Company:

(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the First Closing Date with the same force and effect as if
they had been made on and as of said date. The Investment Representations shall
be true and correct in all respects when made, and shall be true and correct in
all respects on the First Closing Date with the same force and effect as if they
had been made on and as of said date. The Investors shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by them on or prior to the First Closing Date.

(b) The
Investors shall have executed and delivered the Registration Rights
Agreement.

(c) The
Investors shall have delivered the Initial Purchase Price to the
Company.

6.3 Conditions
to the Investors’ Obligations - Second Closing. The
obligation of the Investors to purchase the Remaining Shares at the Second
Closing is subject to the fulfillment to the Investors’ satisfaction, on or
prior to the Second Closing Date, of the following conditions, any of which may
be waived by such Investor (as to itself only):

(a) There has
been no breach of any representation or warranty made by the Company in Section
4 hereof since the First Closing Date that has had or would reasonably be
expected to have a Material Adverse Effect. The Company shall have performed in
all material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the Second Closing Date.

(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers (including,
without limitation, approval of the Proposal by its stockholders in accordance
with applicable law) necessary
or appropriate for consummation of the purchase and sale of the Remaining Shares
and the consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.

 

 

-19-

 

(c) The First
Closing shall have been consummated in accordance with the terms of this
Agreement.

(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

(e) The
Remaining Shares shall have been approved for listing on Amex no later than 25
days after the Escrow Date.

(f) The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Second Closing Date, certifying to the fulfillment of the conditions specified
in subsections (a), (b), (d) and (i) of this Section 6.3.

(g) The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Secretary, dated as of the Second Closing Date, certifying the resolutions
adopted by the Board of Directors of the Company approving the transactions
contemplated by this Agreement and the other Transaction Documents, the calling
of the Stockholders Meeting (as defined below), and the issuance of the
Securities, certifying the current versions of the Certificate of Incorporation
and Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.

(h) The
Investors shall have received an opinion from Goodwin Procter
LLP, the
Company's counsel, dated as of the Second Closing Date, in form and substance
reasonably acceptable to the Investors and addressing such legal matters as the
Investors may reasonably request.

(i) No stop
order or suspension of trading shall have been imposed by Amex, the SEC or any
other governmental or regulatory body with respect to public trading in the
Common Stock.

6.4 Conditions
to Obligations of the Company - Second Closing. The
Company's obligation to sell and issue the Remaining Shares at the Second
Closing is subject to the fulfillment to the satisfaction of the Company on or
prior to the Second Closing Date of the following conditions, any of which may
be waived by the Company:

(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the Investment Representations, shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Second Closing Date with the same force and effect as if they had been made
on and as of said date. The Investment Representations shall be true and correct
in all respects when made, and shall be true and correct in all respects on the
Second Closing Date with the same force and effect as if they

 

 

-20-

 

had been
made on and as of said date. The Investors shall have performed in all material
respects all obligations and conditions herein required to be performed or
observed by them on or prior to the Second Closing Date.

(b) The
Investors shall have delivered the Remaining Purchase Price to the
Company.

6.5 Termination
of Obligations to Effect Closing; Effects.

(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect any Closing shall terminate as follows:

(i) Upon the
mutual written consent of the Company and the Investors;

(ii) By the
Company if any of the conditions set forth in Section 6.2 or 6.4, respectively,
shall have become incapable of fulfillment, and shall not have been waived by
the Company;

(iii) By an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 or 6.3, respectively, shall have become incapable of fulfillment,
and shall not have been waived by the Investor; or

(iv) By either
the Company or any Investor (with respect to itself only) if the First Closing
has not occurred on or prior to March 7, 2005 or the Second Closing has not
occurred on or prior to the earlier of (i) the tenth day after the Company’s
stockholders approve the Proposal or (ii) June 15, 2005;

provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.

(b) In the
event of termination by the Company or any Investor of its obligations to effect
a Closing pursuant to this Section 6.5, written notice thereof shall forthwith
be given to the other Investors and the other Investors shall have the right to
terminate their obligations to effect such Closing upon written notice to the
Company and the other Investors. Nothing in this Section 6.5 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents.

(c) A
termination of the obligation to effect the Second Closing pursuant to the terms
of this Section 6.5 shall not affect this Agreement or the other Transaction
Documents which shall otherwise continue in full force and effect.

 

 

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7. Covenants
and Agreements of the Company.

7.1 Reservation
of Common Stock. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of providing for the
conversion of the outstanding Shares and the exercise of the Warrants, such
number of shares of Common Stock as shall from time to time equal the number of
shares sufficient to permit the conversion of the Shares and exercise of the
Warrants in accordance with their respective terms.

7.2 Reports. The
Company will furnish to the Investors and/or their assignees such information
relating to the Company and its Subsidiaries as from time to time may reasonably
be requested by the Investors and/or their assignees; provided, however, that
the Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.

7.3 No
Conflicting Agreements. The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.

7.4 Insurance. The
Company shall not materially reduce the insurance coverages described in Section
4.19.

7.5 Compliance
with Laws. The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.

7.6 Listing
of Underlying Shares and Related Matters.
Promptly following the First Closing Date, the Company shall take all necessary
action to cause the Conversion Shares, issuable upon the conversion of the
Initial Shares, and the Warrant Shares to be listed on Amex. Promptly following
the Second Closing Date, the Company shall take all necessary action to cause
the Remaining Shares to be listed on Amex. Further, if the Company applies to
have its Common Stock or other securities traded on any other principal stock
exchange or market, it shall include in such application the Conversion Shares
and will take such other action as is necessary to cause such Common Stock to be
so listed. The Company will use commercially reasonable efforts to continue the
listing and trading of its Common Stock on Amex or another national stock
exchange or stock market and, in accordance, therewith, will use commercially
reasonable efforts to comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of such exchange or
market, as applicable.

7.7 Termination
of Covenants. The
provisions of Sections 7.2 through 7.5 shall terminate and be of no further
force and effect on the date on which the Company’s 

 

 

-22-

 

obligations
under the Registration Rights Agreement to register or maintain the
effectiveness of any registration covering the Registrable Securities (as such
term is defined in the Registration Rights Agreement) shall
terminate.

7.8 Removal
of Legends. Upon
the earlier of (i) registration for resale of certain Securities pursuant to the
Registration Rights Agreement and receipt by the Company of the Investor’s
written confirmation that such Securities will not be disposed of except in
compliance with the prospectus delivery requirements of the 1933 Act or (ii)
Rule 144(k) becoming available (subject to compliance with the requirements of
Rule 144(k) and delivery to the Company of a representation letter in customary
form) the Company shall, upon an Investor’s written request, promptly cause
certificates evidencing the Investor’s Securities to be replaced with
certificates which do not bear such restrictive legends. Warrant Shares
subsequently issued upon due exercise of the Warrants shall not bear such
restrictive legends provided the provisions of clause (ii) above are satisfied
with respect thereto, and Conversion Shares subsequently issued upon due
conversion of the Shares and the Warrant Shares shall not bear such restrictive
legends provided the provisions of either clause (i) or clause (ii) above, as
applicable, are satisfied with respect thereto. When the Company is required to
cause unlegended certificates to replace previously issued legended
certificates, if unlegended certificates are not delivered to an Investor within
three (3) Business Days of submission by that Investor of legended
certificate(s) to the Company’s transfer agent together with delivery to the
Company of a representation letter in customary form, the Company shall be
liable to the Investor for liquidated damages in an amount equal to 1.5% of the
aggregate purchase price of the Securities evidenced by such certificate(s) for
each thirty (30) day period (or portion thereof) beyond such three (3) Business
Day that the unlegended certificates have not been so delivered.

7.9 Proxy
Statement; Stockholders Meeting. (a)
Promptly following the execution and delivery of this Agreement the Company
shall take all action necessary to call a meeting of its stockholders (the
“Stockholders Meeting”), which shall occur not later than June 13, 2005 (the
“Stockholders Meeting Deadline”), for the purpose of seeking approval of the
Company’s stockholders for the issuance and sale to the Investors of the
Securities in connection with Amex rules (the “Proposal”). In connection
therewith, the Company will promptly prepare and file with the SEC proxy
materials (including a proxy statement and form of proxy) for use at the
Stockholders Meeting and, after receiving and promptly responding to any
comments of the SEC thereon, shall promptly mail such proxy materials to the
stockholders of the Company. Each Investor shall promptly furnish in writing to
the Company such information relating to such Investor and its investment in the
Company as the Company may reasonably request for inclusion in the Proxy
Statement. The Company will comply with Section 14(a) of the 1934 Act and the
rules promulgated thereunder in relation to any proxy statement (as amended or
supplemented, the “Proxy Statement”) and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders Meeting, and the
Proxy Statement shall not, on the date that the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies or the Stockholders Meeting which has
become false or misleading; provided, however, that the 

 

 

-23-

 

Company
shall not be liable for any breach of this Section 7.9 to the extent that an
untrue statement of a material fact or an omission to state a material fact in
the Proxy Statement was made by the Company in reliance upon and in conformity
with information concerning the Investors furnished in writing to the Company by
the Investors specifically for use in the Proxy Statement. If the Company should
discover at any time prior to the Stockholders Meeting, any event relating to
the Company or any of its Subsidiaries or any of their respective affiliates,
officers or directors that is required to be set forth in a supplement or
amendment to the Proxy Statement, in addition to the Company's obligations under
the 1934 Act, the Company will promptly inform the Investors
thereof.

(b)
 Notwithstanding
the foregoing, the Investors shall not be entitled to vote any Securities
acquired in the First Closing,
including, without limitation, any Conversion
Shares, on the Proposal at the Stockholders Meeting.

(c) Subject
to their fiduciary obligations under applicable law (as determined in good faith
by the Company’s Board of Directors after consultation with the Company’s
outside counsel), the Company's Board of Directors shall recommend to the
Company's stockholders (and, subject to their fiduciary obligations, not revoke
or amend such recommendation) that the stockholders vote in favor of the
Proposal and shall cause the Company to take all commercially reasonable action
(including, without limitation, the hiring of a proxy solicitation firm of
nationally recognized standing) to solicit the approval of the stockholders for
the Proposal. Whether or not the Company's Board of Directors determines at any
time after the date hereof that, due to its fiduciary duties, it must revoke or
amend its recommendation to the Company’s stockholders, the Company shall be
required to, and will take, in accordance with applicable law and its
Certificate of Incorporation and Bylaws, all action necessary to convene the
Stockholders Meeting as promptly as practicable, but no later than the
Stockholders Meeting Deadline, to consider and vote upon the approval of the
Proposal.

7.10 Right
to Participate in Future Financings.
From the
date hereof until the eighteen month anniversary of the Second Closing Date (or,
in the event that the Second Closing does not occur, the date on which the
obligation to effect the Second Closing is terminated or expires), upon any
financing by the Company of its Common Stock or Common Stock Equivalents (a
“Subsequent Financing”), each Investor who together with its Affiliates owns at
least $495,000 in aggregate face amount of the Preferred Stock (a “Qualifying
Investor”) shall have the right to participate in such Subsequent Financing as
provided herein. At least five (5) Business Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Qualifying Investor a
written notice of its intention to effect a Subsequent Financing (“Pre-Notice”),
which Pre-Notice shall ask such Qualifying Investor if it wants to review the
details of such financing (such additional notice, a “Subsequent Financing
Notice”). Upon the request of a Qualifying Investor, and only upon a request by
such Qualifying Investor, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one Business Day after such request, deliver a
Subsequent Financing Notice to such Qualifying Investor. 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 Investor shall notify the Company by 6:30 p.m. (New York City
time) on the fifth (5th)
Business 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. Each 

 

 

-24-

 

Qualifying
Investor agreeing to participate in the Subsequent Financing (the “Participating
Investors”) shall have the right to invest in the Subsequent Financing an amount
equal to the aggregate face amount of Preferred Stock then held by it or its
Affiliates (the “Subscription Amount”); provided, however, that such amount may
be allocated between the Participating Investor and its Affiliates as the
Participating Investor may determine in its sole discretion. If the
Participating Investors do not agree to provide all of the Subsequent Financing,
the Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice; provided
that the Company must provide the Qualifying Investors with a second Subsequent
Financing Notice, and the Qualifying Investors will again have the right of
first refusal set forth above in this Section 7.10, if the Subsequent Financing
subject to the initial Subsequent Financing Notice is not consummated for any
reason on the price and substantially equivalent terms to those set forth in
such Subsequent Financing Notice within 60 Business Days after the date of the
initial Subsequent Financing Notice. In the event the Company receives responses
to Subsequent Financing Notices from Qualifying Investors seeking to purchase
more than the financing sought by the Company in the Subsequent Financing such
Qualifying Investors shall have the right to purchase their Pro Rata Portion (as
defined below) of the Common Stock or Common Stock Equivalents to be issued in
such Subsequent Financing. “Pro Rata Portion” is the ratio of (x) such
Qualifying Investors Subscription Amount and (y) the aggregate sum of all of the
Subscription Amounts of the Qualifying Investors agreeing to participate in the
Subsequent Financing. Notwithstanding the foregoing, this Section 7.10 shall not
apply in respect of the issuance of (a) shares of Common Stock or options to
employees, consultants, officers or directors of the Company 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 and (b)
securities upon the exercise of or conversion of any convertible securities,
options or warrants issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of shares of Common Stock issuable thereunder
or to lower the exercise or conversion price thereof.

8. Survival
and Indemnification.

8.1 Survival. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement.

 

8.2 Indemnification. The
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”) to which such Person 

 

 

-25-

 

may
become subject as a result of any breach of representation, warranty, covenant
or agreement made by or to be performed on the part of the Company under the
Transaction Documents, and will reimburse any such Person for all such amounts
as they are incurred by such Person.

8.3 Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to Section
8.2, such Indemnified Person shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person, and shall assume the
payment of all fees and expenses; provided,
however, that the
failure of any Indemnified Person so to notify the Company shall not relieve the
Company of its obligations hereunder except to the extent that the Company is
materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed to
the retention of such counsel; or (ii) in the reasonable judgment of counsel to
such Indemnified Person representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.

9. Miscellaneous.

9.1 Successors
and Assigns. This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable, provided, however, that
an Investor may assign its rights and delegate its duties hereunder in whole or
in part to an Affiliate or to a third party acquiring some or all of its
Securities in a private transaction without the prior written consent of the
Company or the other Investors, after notice duly given by such Investor to the
Company provided, that no such assignment or obligation shall affect the
obligations of such Investor hereunder. The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

 

-26-

 

9.2 Counterparts;
Faxes. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed via facsimile, which shall be
deemed an original.

9.3 Titles
and Subtitles. The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.

9.4 Notices. Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal, and
(iii) if given by an internationally recognized overnight air courier, then such
notice shall be deemed given one business day after delivery to such carrier.
All notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:

If to the
Company:

Matritech,
Inc.

330
Nevada Street

Newton,
MA 02460

Attention:    
Stephen
D. Chubb 

       Patricia Randall,
Esq.

Fax:     (617)
928-0821

With a
copy to:

Goodwin
Procter LLP

Exchange
Place

Boston,
MA 02109

Attention:
Rufus C. King, Esq.

Fax:
(617) 523-1231

If to the
Investors:

to the
addresses set forth on the signature pages hereto.

9.5 Expenses. The
parties hereto shall pay their own costs and expenses in connection herewith.
The Company shall reimburse the Investors upon demand for all reasonable
out-of-pocket expenses incurred by the Investors, including without limitation
reimbursement of attorneys’ fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Transaction
Documents. In the event that legal proceedings are commenced by any party to
this 

 

 

-27-

 

Agreement
against another party to this Agreement in connection with this Agreement or the
other Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.

9.6 Amendments
and Waivers. Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Securities purchased under
this Agreement at the time outstanding, each future holder of all such
Securities, and the Company.

9.7 Publicity. Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Investors (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow the
Investors or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance. By 8:30 a.m. (New York City time) on the trading day
immediately following the Closing Date, the Company shall issue a press release
disclosing the consummation of the transactions contemplated by this Agreement.
No later than the third trading day following the Closing Date, the Company will
file a Current Report on Form 8-K attaching the press release described in the
foregoing sentence as well as copies of the Transaction Documents. In addition,
the Company will make such other filings and notices in the manner and time
required by the SEC or Amex. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Investor, or include the name of any
Investor in any filing with the SEC (other than the Registration Statement and
any exhibits thereto, and any other filings made in respect of this transaction
in accordance with the 1934 Act) or any regulatory agency or Amex, without the
prior written consent of such Investor, except to the extent such disclosure is
required by law, trading market regulations or
customary practice, in which case the Company shall provide the Investors with
prior notice of such disclosure.

9.8 Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which
renders any provision hereof prohibited or unenforceable in any
respect.

9.9 Entire
Agreement. This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement 

 

 

-28-

 

among the
parties hereof with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof, other
than any written confidentiality agreement between the Company and an Investor,
which shall remain in full force and effect.

9.10 Further
Assurances. The
parties shall execute and deliver all such further instruments and documents and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.

9.11 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York or, if such court does not have subject matter jurisdiction, the courts
of the State of New York located in New York County for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby. Service of process in connection with any
such suit, action or proceeding may be served on each party hereto anywhere in
the world by the same methods as are specified for the giving of notices under
this Agreement. Each of the parties hereto irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.

9.12 Independent
Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of 

 

 

-29-

 

the
Investors has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Investors and not because it was required
or requested to do so by any Investor.

9.13 Limited
Liability of Escrow Agent. Except
in cases of the Escrow Agent's bad faith, willful misconduct or gross
negligence, the Escrow Agent shall be fully protected (i) in acting in reliance
upon any certificate, statement, request, notice, advice, instruction,
direction, other agreement or instrument or signature reasonably and in good
faith believed by the Escrow Agent to be genuine, (ii) in assuming that any
person purporting to give the Escrow Agent any of the foregoing in accordance
with the provisions hereof, or in connection with either this Agreement or the
Escrow Agent's duties hereunder, has been duly authorized to do so, and (iii) in
acting or failing to act in good faith on the advice of any counsel retained by
the Escrow Agent. The Escrow Agent shall not be liable for any mistake of fact
or any error of judgment, or for any act or omission, except as a result of its
bad faith, willful misconduct or gross negligence. The Escrow Agent shall not be
responsible for any loss incurred upon any investment made under circumstances
not constituting bad faith, willful misconduct or gross negligence.

 

Without
limiting the generality of the foregoing, it is hereby agreed that in no event
will the Escrow Agent be liable for any lost profits or other indirect, special,
incidental or consequential damages which the parties may incur or experience
arising out of or in connection with the Escrow Agent's services, even if the
Escrow Agent was advised or otherwise made aware of the possibility of such
damages; nor shall the Escrow Agent be liable for acts of God, acts of war,
breakdowns or malfunctions of machines or computers, interruptions or
malfunctions of communications or power supplies, labor difficulties, actions of
public authorities, or any other similar cause or catastrophe beyond the Escrow
Agent's reasonable control.

 

In the
event that the Escrow Agent shall be uncertain as to its duties or rights
hereunder, or shall receive any certificate, statement, request, notice, advice,
instruction, direction or other agreement or instrument from any other party
with respect to the Escrow Funds which, in the Escrow Agent's reasonable and
good faith opinion, is in conflict with any of the provisions of this Agreement,
or shall be advised that a dispute has arisen with respect to the Escrow Fund or
any part thereof or the certificates representing the Remaining Shares, the
Escrow Agent shall be entitled, without liability to any person, to refrain from
taking any action other than to keep safely the Escrow Funds and such
certificates until the Escrow Agent shall be directed by and in accordance with
the terms of joint written instructions signed by the Company and each Investor.

 

[signature
page follows]

-30-

IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.

    

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

      Name:
      Stephen D. Chubb
	 	Title: Chief Executive
Officer  

--

-31-

The
Investors:    

Name of
Investor: __________________________

Signature
of Authorized Signatory of Investor:
__________________________

Name of
Authorized Signatory: _________________________

Title of
Authorized Signatory: __________________________

Email
Address of Investor:________________________________

Address
for Notice of Investor:

Address
for Delivery of Securities for Investor (if not same as above):

Subscription
Amount:

Initial
Shares (First Closing):

Initial
Purchase Price:

Remaining
Shares (Second Closing):

Remaining
Purchase Price:

Warrant
Shares:

EIN
Number: 

-32-

[Investor
Signature Page to Purchase Agreement]

LIBC/2280662.3WWW.EXFILE.COM -- 13328 -- MATRITECH, INC. -- EXHIBIT 4.3

EXHIBIT
4.3

REGISTRATION
RIGHTS AGREEMENT 

        This Registration Rights
Agreement (the “Agreement”) is made and entered into as of this 4th
day of March, 2005 by and among Matritech, Inc., a Delaware corporation (the
“Company”), and the “Investors” named in that certain Purchase Agreement by and
among the Company and the Investors (the “Purchase Agreement”). Capitalized
terms used herein have the respective meanings ascribed thereto in the Purchase
Agreement unless otherwise defined herein. 

        The parties hereby agree
as follows: 

        1.   
Certain Definitions. 

        As used in this
Agreement, the following terms shall have the following meanings: 

        “Affiliate” means,
with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such person.

        “Business Day”
means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business. 

        “Common Stock”
shall mean the Company’s common stock, par value $0.01 per share, and any
securities into which such shares may hereinafter be reclassified. 

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

        “Investors” shall
mean the Investors identified in the Purchase Agreement and any Affiliate or
permitted transferee of any Investor who is a subsequent holder of any Warrants
or Registrable Securities. 

        “Prospectus” shall
mean the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus. 

        “Register,”
“registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document. 

        “Registrable
Securities” shall mean (i) the Conversion Shares and the Warrant Shares and
(ii) any other securities issued or issuable with respect to or in exchange for
Registrable Securities; provided, that, a security shall cease to be a
Registrable Security upon (A) sale pursuant to a Registration Statement or Rule
144 under the 1933 Act, or (B) such security becoming eligible for sale by the
Investors pursuant to Rule 144(k). 

        “Registration
Statement” shall mean any registration statement of the Company filed under
the 1933 Act that covers the resale of any of the Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to such
Registration Statement, 

including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement. 

        “Required
Investors” means the Investors holding a majority of the Registrable
Securities. 

        “SEC” means the
U.S. Securities and Exchange Commission. 

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

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

        2.   
Registration. 

            (a)
Registration Statements. 

            (i)
Promptly following the First Closing Date but no later than thirty (30) days
after the First Closing Date (the “First Filing Deadline”), the Company shall
prepare and file with the SEC one Registration Statement on Form S-3 (or, if
Form S-3 is not then available to the Company, on such form of registration
statement as is then available to effect a registration for resale of the
Registrable Securities, subject to the Required Investors’ consent), covering
the resale of the Registrable Securities in an amount at least equal to the
Conversion Shares issuable upon conversion of the Initial Shares and exercise of
the Warrants (the “Initial Registrable Securities”). Such Registration Statement
shall include the plan of distribution attached hereto as Exhibit A. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act (including Rule 416), such indeterminate number of additional shares of
Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities. The Company shall use
its reasonable best efforts to obtain from each person who now has piggyback
registration rights a waiver of those rights with respect to the Registration
Statement; provided, however, that the Company shall be entitled to include
shares of Common Stock issuable upon conversion of its outstanding Convertible
Debentures and any payment-in-kind interest thereon. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Initial Registrable Securities is not filed
with the SEC on or prior to the First Filing Deadline, the Company will make pro
rata payments to each Investor, as liquidated damages and not as a penalty, in
an amount equal to 1.5% of the aggregate amount invested by such Investor for
each 30-day period or pro rata for any portion thereof following the First
Filing Deadline for which no Registration Statement is filed with respect to the
Registrable Securities. Such payments shall constitute the Investors’ sole
monetary remedy for such events but shall not limit the Investors’ right to seek
specific performance of the provisions hereof. Such payments shall be made to
each Investor in cash. 

            (ii)
Promptly following the Second Closing Date but no later than thirty (30) days
after the Second Closing Date (the “Second Filing Deadline”), the Company shall
prepare and file with the SEC one Registration Statement on Form S-3 (or, if
Form S-3 is not then available to the Company, on such form of registration
statement as is then available to effect a registration for resale of the
Registrable Securities, subject to the Required Investors’ 

-2-

consent),
covering the resale of the Registrable Securities in an amount at least equal to
the Conversion Shares issuable upon conversion of the Remaining Shares (the
“Remaining Registrable Securities”). Such Registration Statement shall include
the plan of distribution attached hereto as Exhibit A. Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. The Company shall use its reasonable best
efforts to obtain from each person who now has piggyback registration rights a
waiver of those rights with respect to the Registration Statement; provided,
however, that the Company shall be entitled to include shares of Common Stock
issuable upon conversion of its outstanding Convertible Debentures and any
payment-in-kind interest thereon. The Registration Statement (and each amendment
or supplement thereto, and each request for acceleration of effectiveness
thereof) shall be provided in accordance with Section 3(c) to the Investors and
one counsel designated by the Investors prior to its filing or other submission.
If a Registration Statement covering the Remaining Registrable Securities is not
filed with the SEC on or prior to the Second Filing Deadline, the Company will
make pro rata payments to each Investor, as liquidated damages and not as a
penalty, in an amount equal to 1.5% of the aggregate amount invested by such
Investor for each 30-day period or pro rata for any portion thereof following
the Second Filing Deadline for which no Registration Statement is filed with
respect to the Registrable Securities. Such payments shall constitute the
Investors’ sole monetary remedy for such events but shall not limit the
Investors’ right to seek specific performance of the provisions hereof. Such
payments shall be made to each Investor in cash. 

            (iii)
Additional Registrable Securities. Upon the written demand of any
Investor and upon any change in a Conversion Price (as defined in the
Certificate of Designations) or the Exercise Price (as defined in the Warrant)
such that additional shares of Common Stock become issuable upon the conversion
of the Preferred Stock or the exercise of the Warrants, the Company shall
prepare and file with the SEC one or more Registration Statements on Form S-3 or
amend the related Registration Statement filed pursuant to clauses (i) or (ii)
above, if such Registration Statement has not previously been declared effective
(or, if Form S-3 is not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of such additional shares of Common Stock (the “Additional Shares”), subject to
the Required Investors’ consent) covering the resale of the Additional Shares,
but only to the extent the Additional Shares are not at the time covered by an
effective Registration Statement. Such Registration Statement also shall cover,
to the extent allowable under the 1933 Act (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Shares. The Company shall use its reasonable best efforts to obtain from each
person who now has piggyback registration rights a waiver of those rights with
respect to such Registration Statement; provided, however, that the Company
shall be entitled to include shares of Common Stock issuable upon conversion of
its outstanding Convertible Debentures and any payment-in-kind interest thereon.
The Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investors and their counsel prior to its
filing or other submission. If a Registration Statement covering the Additional
Shares is required to be filed under this Section 2(a)(iii) and is not filed
with the SEC within five Business Days of the request of any Investor or upon
the occurrence of any of the events specified in this Section 2(a)(iii), the

-3-

Company will
make pro rata payments to each Investor, as liquidated damages and not as a
penalty, in an amount equal to 1.5% of the aggregate amount invested by such
Investor for each 30-day period or pro rata for any portion thereof following
the date by which such Registration Statement should have been filed for which
no Registration Statement is filed with respect to the Additional Shares. Such
payments shall constitute the Investors’ sole monetary remedy for such events
but shall not limit the Investors’ right to seek specific performance of the
provisions hereof. Such payments shall be made to each Investor in cash.

            (b)
Expenses. The Company will pay all expenses associated with each
registration, including filing and printing fees, the Company’s counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws, listing fees, fees
and expenses of one counsel to the Investors and the Investors’ reasonable
expenses in connection with the registration, but excluding discounts,
commissions, fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals with respect to the Registrable Securities
being sold. 

            (c)
Effectiveness.

            (i)
The Company shall use commercially reasonable efforts to have each Registration
Statement declared effective as soon as practicable. The Company shall notify
the Investors by facsimile or e-mail as promptly as practicable, and in any
event, within twenty-four (24) hours, after any Registration Statement is
declared effective and shall within one Business Day of such effective date
provide the Investors with copies of any related Prospectus to be used in
connection with the sale or other disposition of the securities covered thereby.
If (A)(x) a Registration Statement covering the Initial Registrable Securities
is not declared effective by the SEC prior to the earlier of (i) five (5)
Business Days after the SEC shall have informed the Company that no review of
the Registration Statement will be made or (ii) the 90th day after
the First Closing Date (or the 120th day after the First Closing Date
in the event that such Registration Statement is reviewed by the SEC), (y) a
Registration Statement covering the Remaining Registrable Securities is not
declared effective by the SEC prior to the earlier of (i) five (5) Business Days
after the SEC shall have informed the Company that no review of the Registration
Statement will be made or (ii) the 90th day after the Second Closing
Date (or the 120th day after the Second Closing Date in the event
that such Registration Statement is reviewed by the SEC), or (z) a Registration
Statement covering Additional Shares is not declared effective by the SEC within
90 days following the time such Registration Statement was required to be filed
pursuant to Section 2(a)(iii) (or the 120th day following the time
such Registration Statement was required to be filed pursuant to Section
2(a)(iii) in the event that such Registration Statement is reviewed by the SEC),
or (B) after a Registration Statement has been declared effective by the SEC,
sales cannot be made pursuant to such Registration Statement for any reason
(including without limitation by reason of a stop order, or the Company’s
failure to update the Registration Statement), but excluding the inability of
any Investor to sell the Registrable Securities covered thereby due to market
conditions and except as excused pursuant to subparagraph (ii) below, then the
Company will make pro rata payments to each Investor, as liquidated damages and
not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by
such Investor for each 30-day period or pro rata for any portion thereof
following the date by which such Registration Statement should have been
effective (the “Blackout Period”). Such payments shall be in partial
compensation to the Investors, and shall not constitute the 

-4-

Investors'
exclusive remedy for such events. The amounts payable as liquidated damages
pursuant to this paragraph shall be paid monthly within three (3) Business Days
of the last day of each month following the commencement of the Blackout Period
until the termination of the Blackout Period. Such payments shall be made to
each Investor in cash. 

            (ii)
For not more than twenty (20) consecutive days or for a total of not more than
forty-five (45) days in any twelve (12) month period, the Company may delay the
disclosure of material non-public information concerning the Company, by
suspending the use of any Prospectus included in any registration contemplated
by this Section containing such information, the disclosure of which at the time
is not, in the good faith opinion of the Company, in the best interests of the
Company (an “Allowed Delay”); provided, that the Company shall promptly (a)
notify the Investors in writing of the existence of (but in no event, without
the prior written consent of an Investor, shall the Company disclose to such
Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, (b) advise the Investors in writing
to cease all sales under the Registration Statement until the end of the Allowed
Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay
as promptly as practicable. 

        3.   
Company Obligations. The Company will use commercially reasonable efforts
to effect the registration of the Registrable Securities in accordance with the
terms hereof, and pursuant thereto the Company will, as expeditiously as
possible: 

            (a)
use commercially reasonable efforts to cause such Registration Statement to
become effective and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable Securities
covered by such Registration Statement as amended from time to time, have been
sold, and (ii) the date on which all Registrable Securities covered by such
Registration Statement may be sold pursuant to Rule 144(k) (the “Effectiveness
Period”) and advise the Investors in writing when the Effectiveness Period has
expired;

            (b)
prepare and file with the SEC such amendments and post-effective amendments to
the Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the period specified in Section 3(a) and to
comply with the provisions of the 1933 Act and the 1934 Act with respect to the
distribution of all of the Registrable Securities covered thereby;

            (c)
provide copies to and permit one counsel designated by the Investors to review
each Registration Statement and all amendments and supplements thereto no fewer
than three (3) Business Days prior to their filing with the SEC and not file any
document to which such counsel reasonably objects;

            (d)
furnish to the Investors and their legal counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company (but not later than two (2) Business Days after the filing date, receipt
date or sending date, as the case may be) one (1) copy of any Registration
Statement and any amendment thereto, each preliminary prospectus and Prospectus
and each amendment or supplement thereto, and each letter written by or on
behalf of the Company to the SEC or the staff of the SEC, and each
item

-5-

of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
and (ii) such number of copies of a Prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as each Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor that are covered by the
related Registration Statement; 

            (e)
use commercially reasonable efforts to (i) prevent the issuance of any stop
order or other suspension of effectiveness and, (ii) if such order is issued,
obtain the withdrawal of any such order at the earliest possible
moment;

            (f)
prior to any public offering of Registrable Securities, use commercially
reasonable efforts to register or qualify or cooperate with the Investors and
their counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions requested by the Investors and do any and all other
commercially reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(f), (ii) subject itself to general taxation in any
jurisdiction where it would not otherwise be so subject but for this Section
3(f), or (iii) file a general consent to service of process in any such
jurisdiction;

            (g)
use commercially reasonable efforts to cause all Registrable Securities covered
by a Registration Statement to be listed on each securities exchange,
interdealer quotation system or other market on which similar securities issued
by the Company are then listed;

            (h)
immediately notify the Investors, at any time when a Prospectus relating to
Registrable Securities is required to be delivered under the 1933 Act, upon
discovery that, or upon the happening of any event as a result of which, the
Prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and at the request of any such
holder, promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such Prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing; and

            (i)
otherwise use commercially reasonable efforts to comply with all applicable
provisions of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder; and make available to its security holders, as
soon as reasonably practicable, but not later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12)
months, beginning after the effective date of each Registration
Statement,

-6-

which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act,
including Rule 158 promulgated thereunder (for the purpose of this subsection
3(i), “Availability Date” means the 45th day following the end of the fourth
fiscal quarter that includes the effective date of such Registration Statement,
except that, if such fourth fiscal quarter is the last quarter of the Company’s
fiscal year, “Availability Date” means the 90th day after the end of such fourth
fiscal quarter). 

            (j)
With a view to making available to the Investors the benefits of Rule 144 (or
its successor rule) and any other rule or regulation of the SEC that may at any
time permit the Investors to sell shares of Common Stock to the public without
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) six months after such date as all of the Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of similar
effect or (B) such date as all of the Registrable Securities shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act; and (iii) furnish to each
Investor upon request, as long as such Investor owns any Registrable Securities,
(A) a written statement by the Company that it has complied with the reporting
requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other
information as may be reasonably requested in order to avail such Investor of
any rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration. 

        4.   
Due Diligence Review; Information. To the extent that an Investor
determines it is necessary to avail itself of any “due diligence” defense under
the 1933 with respect to a Registration Statement, the Company shall make
available, during normal business hours, for inspection and review by the
Investor and its advisors and representatives (who may or may not be affiliated
with the Investor and who are reasonably acceptable to the Company), all
financial and other records, all SEC Filings (as defined in the Purchase
Agreement) and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of
establishing such defense, and cause the Company’s officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of such Registration
Statement. 

            The
Company shall not disclose material nonpublic information to the Investor, or to
advisors to or representatives of the Investor, unless prior to disclosure of
such information the Company identifies such information as being material
nonpublic information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto. 

-7-

        5.   
Obligations of the Investors. 

            (a)
Each Investor shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least five (5) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
each Investor and its respective representative as identified in the Purchase
Agreement of the information the Company requires from such Investor. An
Investor shall provide such information to the Company at least two (2) Business
Days prior to the first anticipated filing date of such Registration
Statement.

            (b)
Each Investor, by its acceptance of the Registrable Securities agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of a Registration Statement
hereunder.

            (c)
Each Investor agrees that, upon receipt of any notice from the Company of either
(i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii)
the happening of an event pursuant to Section 3(h) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the
Investor’s receipt of the copies of the supplemented or amended prospectus filed
with the SEC and until any related post-effective amendment is declared
effective and, if so directed by the Company, the Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor’s possession of the
Prospectus covering the Registrable Securities current at the time of receipt of
such notice. 

        6.   
Indemnification. 

            (a)
Indemnification by the Company. The Company will indemnify and hold
harmless each Investor and its officers, directors, members, employees and
agents, successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof; (ii) any blue sky application
or other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information
herein called a “Blue Sky Application”); (iii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; (iv) any violation
by the Company or its agents of any provision under the 1933 Act applicable to
the Company or its agents and relating to action or inaction required of the
Company in connection with such registration; or (v) any failure to register or
qualify the Registrable Securities included in any

-8-

such
Registration in any state where the Company or its agents has affirmatively
undertaken or agreed in writing that the Company will undertake such
registration or qualification on an Investor’s behalf and will reimburse such
Investor, and each such officer, director or member and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Investor or any such controlling person in writing
specifically for use in such Registration Statement or
Prospectus.

            (b)
Indemnification by the Investors. Each Investor agrees, severally but not
jointly, to indemnify and hold harmless, to the fullest extent permitted by law,
the Company, its directors, officers, employees, stockholders and each person
who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from any untrue statement of a material fact or any omission of
a material fact required to be stated in the Registration Statement or
Prospectus or preliminary prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent that such untrue statement or omission is contained in any
information furnished in writing by such Investor to the Company specifically
for inclusion in such Registration Statement or Prospectus or amendment or
supplement thereto. In no event shall the liability of an Investor be greater in
amount than the dollar amount of the proceeds (net of all expense paid by such
Investor in connection with any claim relating to this Section 6 and the amount
of any damages such Investor has otherwise been required to pay by reason of
such untrue statement or omission) received by such Investor upon the sale of
the Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.

            (c)
Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled
to indemnification hereunder shall have the right to employ separate counsel and
to participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists
between such person and the indemnifying party with respect to such claims (in
which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more than
one separate firm

-9-

of attorneys at
any time for all such indemnified parties. No indemnifying party will, except
with the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation. 

            (d)
Contribution. If for any reason the indemnification provided for in the
preceding paragraphs (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder in connection with any claim relating to this Section 6 and
the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities giving rise
to such contribution obligation.

        7.   
Miscellaneous. 

            (a)
Amendments and Waivers. This Agreement may be amended only by a writing
signed by the Company and the Required Investors. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Required Investors.

            (b)
Notices. All notices and other communications provided for or permitted
hereunder shall be made as set forth in Section 9.4 of the Purchase
Agreement.

            (c)
Assignments and Transfers by Investors. The provisions of this Agreement
shall be binding upon and inure to the benefit of the Investors and their
respective successors and assigns. An Investor may transfer or assign, in whole
or from time to time in part, to one or more persons its rights hereunder in
connection with the transfer of Registrable Securities by such Investor to such
person, provided that such Investor complies with all laws applicable thereto
and provides written notice of assignment to the Company promptly after such
assignment is effected.

            (d)
Assignments and Transfers by the Company. This Agreement may not be
assigned by the Company (whether by operation of law or otherwise) without the
prior written consent of the Required Investors, provided, however, that the
Company may assign its rights and delegate its duties hereunder to any surviving
or successor corporation in connection with a merger or consolidation of the
Company with another corporation, or a sale, transfer or other disposition of
all or substantially all of the Company’s assets to another
corporation,

-10-

without the prior written
consent of the Required Investors, after notice duly given by the Company to
each Investor. 

            (e)
Benefits of the Agreement. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

            (f)
Counterparts; Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.

            (g)
Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

            (h)
Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which
renders any provisions hereof prohibited or unenforceable in any respect.

            (i)
Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

            (j)
Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

            (k)
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York or, if such court does not have subject matter jurisdiction, the courts
of the State of New York located in New York County for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby. Service of process in connection with any
such suit, action or proceeding

-11-

may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER. 

-12-

        IN WITNESS WHEREOF, the
parties have executed this Agreement or caused their duly authorized officers to
execute this Agreement as of the date first above written. 

 

	 	 	 
	 The Company:
      	
      MATRITECH,
      INC.

	 
 	 
 	 
 
		By:  	/s/ Stephen D.
      Chubb
	 	
      

      Name: Stephen D. Chubb 
	 	
      Title: Chief
      Executive Officer 

 

-13-

The Investors:

Name of
Investor: __________________________ 

Signature of
Authorized Signatory of Investor: __________________________ 

Name of
Authorized Signatory: _________________________ 

Title of
Authorized Signatory: __________________________ 

-14-

[Investor
Signature Page to Registration Rights Agreement] 

Exhibit A

Plan of
Distribution 

        The selling stockholders,
which as used herein includes donees, pledgees, transferees or other
successors-in-interest selling shares of common stock or interests in shares of
common stock received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of their
shares of common stock or interests in shares of common stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These dispositions may be at fixed prices, at prevailing
market prices at the time of sale, at prices related to the prevailing market
price, at varying prices determined at the time of sale, or at negotiated
prices. 

        The selling stockholders
may use any one or more of the following methods when disposing of shares or
interests therein: 

        — ordinary brokerage
transactions and transactions in which the broker-dealer solicits purchasers;

        — block trades in which
the broker-dealer will attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the transaction;

        — purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;

        — an exchange
distribution in accordance with the rules of the applicable exchange;

         — privately
negotiated transactions; 

        — short sales effected
after the date the registration statement of which this Prospectus is a part is
declared effective by the SEC; 

        — through the writing or
settlement of options or other hedging transactions, whether through an options
exchange or otherwise; 

        — broker-dealers may
agree with the selling stockholders to sell a specified number of such shares at
a stipulated price per share; 

        — a combination of any
such methods of sale; and 

        — any other method
permitted pursuant to applicable law. 

        The selling stockholders
may, from time to time, pledge or grant a security interest in some or all of
the shares of common stock owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and sell
the shares of common stock, from time to time, under this prospectus, or under
an amendment to this 

-15-

prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.

        In connection with the
sale of our common stock or interests therein, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the common stock in the
course of hedging the positions they assume. The selling stockholders may also
sell shares of our common stock short and deliver these securities to close out
their short positions, or loan or pledge the common stock to broker-dealers that
in turn may sell these securities. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery
to such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction). 

        The aggregate proceeds to
the selling stockholders from the sale of the common stock offered by them will
be the purchase price of the common stock less discounts or commissions, if any.
Each of the selling stockholders reserves the right to accept and, together with
their agents from time to time, to reject, in whole or in part, any proposed
purchase of common stock to be made directly or through agents. We will not
receive any of the proceeds from this offering. Upon any exercise of the
warrants by payment of cash, however, we will receive the exercise price of the
warrants. 

        The selling stockholders
also may resell all or a portion of the shares in open market transactions in
reliance upon Rule 144 under the Securities Act of 1933, provided that they meet
the criteria and conform to the requirements of that rule. 

        The selling stockholders
and any underwriters, broker-dealers or agents that participate in the sale of
the common stock or interests therein may be “underwriters” within the meaning
of Section 2(11) of the Securities Act. Any discounts, commissions, concessions
or profit they earn on any resale of the shares may be underwriting discounts
and commissions under the Securities Act. Selling stockholders who are
“underwriters” within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act.

        To the extent required,
the shares of our common stock to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices, the
names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

        In order to comply with
the securities laws of some states, if applicable, the common stock may be sold
in these jurisdictions only through registered or licensed brokers or dealers.
In addition, in some states the common stock may not be sold unless it has been
registered or 

-16-

qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with. 

        We have advised the
selling stockholders that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of shares in the market and to the activities of
the selling stockholders and their affiliates. In addition, we will make copies
of this prospectus (as it may be supplemented or amended from time to time)
available to the selling stockholders for the purpose of satisfying the
prospectus delivery requirements of the Securities Act. The selling stockholders
may indemnify any broker-dealer that participates in transactions involving the
sale of the shares against certain liabilities, including liabilities arising
under the Securities Act. 

        We have agreed to
indemnify the selling stockholders against liabilities, including liabilities
under the Securities Act and state securities laws, relating to the registration
of the shares offered by this prospectus. 

        We have agreed with the
selling stockholders to keep the registration statement of which this prospectus
constitutes a part effective until the earlier of (1) such time as all of the
shares covered by this prospectus have been disposed of pursuant to and in
accordance with the registration statement or (2) the date on which the shares
may be sold pursuant to Rule 144(k) of the Securities Act.

-17-

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