Document:

www.EXFILE.com  888.775.4789   MATRITECH, INC.  FORM 8K == EXHIBIT 4.2

    EXHIBIT
      4.2

     

    THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR
      THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER
      JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
      TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
      SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
      PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
      LAWS.

    

    

    15%
      SECURED PROMISSORY NOTE

     

    
 

    
      	Issuance
              Date:  August 30, 2007	
              Principal:  $1,750,000

            

    

     

     

    FOR
      VALUE RECEIVED,
      MATRITECH, INC., a corporation organized under the laws of Delaware (the
“Borrower”), hereby promises to pay to the order of
      ____________________________, or their registered assigns (the
“Holder”), (i) the amount set out above as the Principal
      (as reduced pursuant to the terms hereof pursuant to redemption or otherwise,
      the “Principal”) when due, whether upon the Maturity Date,
      acceleration, redemption or otherwise (in each case in accordance with the
      terms
      hereof); (ii) interest (“Interest”) on any outstanding
      Principal at the rate of fifteen percent (15.0%) per annum for any portion
      of
      the first ninety (90) days from the date set out above as the Issuance Date
      (the
“Issuance Date”) and at the rate of eighteen percent (18.0%)
      per annum for any period after the first ninety (90) days from the Issuance
      Date
      (except as otherwise provided herein) (the “Interest Rate”),
      when such outstanding Principal becomes due and payable, whether upon the
      Maturity Date, acceleration, redemption or otherwise (in each case, in
      accordance with the terms hereof); and (iii) the Prepayment Premium (as
      defined below), which shall be payable upon the prepayment of this Note in
      accordance with Article I, Section C below or the Premium, which shall
      be payable when the outstanding Principal becomes due and payable, whether
      upon
      the Maturity Date, acceleration, redemption or otherwise (in each case, in
      accordance with the terms hereof).

     

               The
      term “Note” and all references thereto, as used throughout this
      instrument, shall mean this instrument as originally executed, or if later
      amended or supplemented, then as so amended or supplemented.  This
      Note is being issued by the Borrower along with similar secured promissory
      notes
      designated as Series C 15% Secured Promissory Notes (the “Other Series C
      Notes” and, together with this Note, the “Series C
Notes”) pursuant to that certain Securities
      Purchase
      Agreement dated as of August 30, 2007, between the Borrower and the other
      signatories thereto (the “Securities Purchase
      Agreement”).  The obligations under this Note and the Other
      Series C Notes are secured as provided in a Second Amended and Restated Security
      Agreement (the “Security Agreement”), dated as of the date
      hereof, by the Borrower in favor of the Collateral Agent (as defined in the
      Securities Purchase Agreement) for the benefit of the Holder of the Series
      C
      Notes, the Holders of the Series B 15% Secured Convertible Promissory Notes
      dated January 22, 2007 (the “Series B Notes”) and the
      holders of the 15% Secured Convertible Promissory Notes dated January 13,
      2006 (the “Series A Notes” and collectively with the Series B
      Notes and the Series C Notes, the “Secured Convertible
      Notes”).  

     

     

     

    
      
        
        

      

      
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    As
      provided in the Securities Purchase Agreement and in connection with the Asset
      Purchase Closing (as such term is defined in the Securities Purchase Agreement),
      the Security Agreement and the Contingent License Agreement (as defined below)
      shall each be terminated and replaced with the Pledge Agreement (as such term
      is
      defined in the Securities Purchase Agreement) (such agreement, the
“Pledge Agreement”).  The Series C Notes, the
      Security Agreement, the Pledge Agreement, and the Second Amended and Restated
      Contingent License Agreement, dated as of the date hereof, between the Borrower
      and the Collateral Agent for the benefit of the Holders of this Note and of
      the
      other Secured Convertible Notes (the “Contingent License
      Agreement”) are collectively referred to herein as the
“Transaction Documents.”

     

     

    ARTICLE
      I

     

    PAYMENT
      OF PRINCIPAL AND INTEREST

     

    A.  Payment
      of Principal.  On the Maturity Date, the Holder shall surrender
      this Note to the Borrower and the Borrower shall pay to the Holder, an amount
      in
      cash, equal to all outstanding Principal and the accrued and unpaid Interest
      thereon, and a premium equal to twenty-nine percent (29.0%) of the then
      outstanding Principal (the “Premium”); provided that
      if the Maturity Date occurs as a result of the Borrower’s consummation of a
      Change of Control in which the Borrower receives consideration in shares of
      capital stock of the acquiring party, the Borrower shall make such payment
      on
      the Payment Date instead of the Maturity Date.

     

    B.  Payment
      of Interest.  Interest shall accrue at the Interest Rate on the
      unpaid principal balance hereof from the Issuance Date until the same is paid,
      whether at maturity, or upon prepayment, repayment, or otherwise; provided
that if the Maturity Date occurs as a result of the Borrower’s consummation
      of a Change of Control in which the Borrower receives consideration in shares
      of
      capital stock of the acquiring party, Interest shall continue to accrue on
      this
      Note until the Payment Date instead of the Maturity Date.  Interest
      shall be calculated based on a 365 day year and shall be payable in arrears
      on
      the Maturity Date or the Payment Date, as applicable.  On the Maturity
      Date, the Holder shall surrender this Note to the Borrower and the Borrower
      shall pay to the Holder, an amount in cash, representing all outstanding
      Principal, the accrued and unpaid Interest thereon and the Premium; provided
that if the Maturity Date occurs as a result of the Borrower’s consummation
      of a Change of Control in which the Borrower receives consideration in shares
      of
      capital stock of the acquiring party, the Borrower shall make such payment
      on
      the Payment Date instead of the Maturity Date.  Upon the occurrence
      and during the continuance of an Event of Default, the Interest Rate shall
      be
      increased to twenty-four percent per annum (24.0%) (the “Default
      Rate”).  In the event that such Event of Default is
      subsequently cured, the adjustment referred to in the preceding sentence shall
      cease to be effective as of the date of such cure; provided that the
      Interest as calculated at such increased rate during the continuance of such
      Event of Default shall continue to apply to the extent relating to the days
      after the occurrence of such Event of Default through and including the date
      of
      cure of such Event of Default.  Interest on overdue interest shall
      accrue at the same rate compounded quarterly.

     

    C.  Prepayment.  The
      Borrower may at any time and from time to time upon thirty (30) calendar days’
prior written notice to the Holder prepay the outstanding Principal in cash,
      

     

     

     

     

    
      
        
        

      

      
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    in
      whole
      or in part, without premium or penalty, except as provided in the next
      sentence.  Any such prepayment shall be accompanied by payment in cash
      of a premium equal to twenty-nine percent (29.0%) of the amount of such
      prepayment constituting repayment of Principal (the “Prepayment
      Premium”), plus all accrued and unpaid interest on the Principal being
      prepaid.  A Change of Control, as defined herein, shall automatically
      trigger prepayment in full of the Series C Notes and the payment of the required
      Prepayment Premium, without the need for any prior notice by Borrower pursuant
      to this Article I.C and without any additional payment of the Premium,
provided that if the Borrower consummates a Change of Control in which
      the Borrower receives consideration in shares of capital stock of the acquiring
      party, the Borrower shall make such payment on the Payment Date instead of
      the
      Maturity Date.  The Borrower shall not prepay the Series C Notes
      except contemporaneously with prepayment of the other outstanding Secured
      Convertible Notes and if any such prepayment is made, the Borrower shall prepay
      the Series C Notes and the other outstanding Secured Convertible Notes pro
      rata, based on the total amounts due on the Series C Notes and the other
      Secured Convertible Notes at the time of prepayment, and any such prepayment
      among the Series C Notes and all other outstanding Secured Convertible Notes
      shall be in a minimum amount equal to $500,000 and in incremental amounts equal
      to $100,000 in excess of such minimum amount.  For the avoidance of
      doubt, in no event shall the Borrower be obligated to pay both the
      Premium and the Prepayment Premium.

     

    D.  Manner
      of Payments.  All cash payments of principal and interest shall be
      made in, and all references herein to monetary denominations shall refer to,
      lawful money of the United States of America.  All cash payments shall
      be made at such address as the Holder shall have given or shall hereafter give
      to the Borrower by written notice made in accordance with the provisions of
      this
      Note.  If any payment to be made hereunder shall be due on a day other
      than a business day, such payment shall be made on the next succeeding business
      day and such extension of time shall be included in computing interest in
      connection with such payment.

     

    ARTICLE
      II

    

    INTENTIONALLY
      OMITTED.

    

    

    ARTICLE
      III

    

    INTENTIONALLY
      OMITTED.

    

    

    ARTICLE
      IV

    

    INTENTIONALLY
      OMITTED.

    

    

    ARTICLE
      V

    

    INTENTIONALLY
      OMITTED.

    

    

    
      
        
        

      

      
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    ARTICLE
      VI

     

    EVENTS
      OF DEFAULT

     

    A.  Events
      of Default.  In the event (each of the events described in clauses
      (i)-(v) below after expiration of the applicable cure period (if any) being
      an
“Event of Default”):

     

    (i)  the
      Borrower fails (a) to pay any amount of Principal, Interest or other
      amounts owing under the Series C Notes or any other Transaction Document, within
      three (3) business days after the applicable due date, at maturity, on the
      Payment Date, upon acceleration or otherwise or (b) after giving notice of
      any prepayment, to effect the prepayment in accordance with the terms of such
      notice or within three (3) trading days after the date for prepayment specified
      in such notice;

     

    (ii)   the
      Borrower or any subsidiary of the Borrower shall make an assignment for the
      benefit of creditors, or apply for or consent to the appointment of a receiver
      or trustee for it or for a substantial part of its property or business, or
      such
      a receiver or trustee shall otherwise be appointed;

     

    (iii)  bankruptcy,
      insolvency, reorganization or liquidation proceedings or other proceedings
      for
      the relief of debtors shall be instituted by or against the Borrower or any
      subsidiary of the Borrower and if instituted against the Borrower or any
      subsidiary of the Borrower by a third party, shall not be dismissed within
      sixty
      (60) days of their initiation;

     

    (iv)  the
      Borrower shall:

     

    (a)  either
      (i) fail to pay, when due, or within any applicable grace period, any
      payment with respect to any indebtedness of the Borrower in excess of $250,000
      due to any third party, other than payments contested by the Borrower in good
      faith, or otherwise be in breach or violation of any agreement for monies owed
      or owing in an amount in excess of $250,000, which breach or violation permits
      the other party thereto to declare a default or otherwise accelerate amounts
      due
      thereunder, or (ii) suffer to exist (A) any Event of Default under and
      as defined herein in the Secured Convertible Notes or (B) any other default
      or event of default under any agreement (including, without limitation, the
      Secured Convertible Notes) binding the Borrower, which default or event of
      default would or is likely to have a material adverse effect on the business,
      operations, properties, prospects or financial condition of the
      Borrower;

     

    (b)  have
      thirty-five percent (35%) or more of the voting power of its capital stock
      owned
      beneficially by one person, entity or “group” (as such term is used under
      Section 13(d) of the Securities Exchange Act of 1934, as amended);
      or

     

    (v)  except
      with respect to matters covered by subparagraphs (i) – (iv) above, as to which
      such applicable subparagraphs shall apply, the Borrower otherwise shall breach
      any material term hereunder or under the other Transaction Documents, including,
      without limitation, 

     

     

     

     

    
      
        
        

      

      
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    the
      representations and warranties contained herein or therein (i.e., in the event
      of a material breach as of the date such representation and warranty was made)
      and/or the covenants contained herein or therein, and if such breach is curable,
      shall fail to cure such breach within ten (10) business days after the Borrower
      has been notified thereof in writing by the Holder;

     

    then,
      upon the occurrence of any such Event of Default, at the option of the Holder,
      exercisable in whole or in part at any time and from time to time by delivery
      of
      a written notice to such effect (a “Default Notice”) to the
      Borrower while such Event of Default continues, the Borrower shall prepay,
      in
      satisfaction of its obligation to pay the outstanding Principal and accrued
      and
      unpaid interest thereon and the Prepayment Premium, an amount equal to the
      Default Amount (as defined in Article VI.B below); provided,
however, that in the case of an Event of Default described in
      clauses
      (ii) and (iii) of this Article VI.A, the Borrower’s obligation hereunder to pay
      the Default Amount shall be automatic and shall not require the delivery of
      a
      Default Notice by the Holder.  Such Default Amount, together with all
      other ancillary amounts payable hereunder, shall immediately become due and
      payable, all without demand, presentment or notice, all of which are hereby
      expressly waived, together with all costs, including, without limitation, legal
      fees and expenses of collection, and the Holder shall be entitled to exercise
      all other rights and remedies available at law or in equity.  For the
      avoidance of doubt, the occurrence of any event described in clauses (i), (ii),
      (iii) and (iv) above shall immediately constitute an Event of Default and there
      shall be no cure period.

    

    Notwithstanding
      the foregoing, in the
      event of the Borrower’s consummation of a Change of Control in which the
      Borrower receives consideration in shares of capital stock of the acquiring
      party, the Holder may not issue a Default Notice for (a) any Event of Default
      occurring under Article VI.A(i) with respect to non-payment of any Principal,
      Interest or other payment due or (b) any Event of Default occurring under
      Article VI.A(iv)(a) with respect to any failure to pay the holders of, or
      allowing an Event of Default to exist under, the Secured Convertible Notes
      or
      the Borrower’s Series A Convertible Preferred Stock until ten (10) business days
      after the later to occur of the Payment Trigger Events; provided,
      however, that the Holder need not forbear on issuance of a Default Notice
      for more than ninety (90) days after the closing of the Change of Control
      transaction..  If the Holder delivers a Default Notice to the Borrower
      before the tenth (10th) business
      day
      after the later to occur of the Payment Trigger Events, the Default Notice
      shall
      not be considered received by the Borrower until the tenth (10th) business
      day
      after the later to occur of such Payment Trigger Events.

    

    B.  Definition
      of Default Amount.  The “Default Amount” with
      respect to this Note means an amount equal to:

     

    V   x   R

    

    where:

    

    “V”
means
      the
      aggregate principal amount outstanding of the Series C Notes required to be
      prepaid plus all accrued and unpaid interest thereon through the date of payment
      of the Default Amount hereunder; and

     

     

    
 

    
      
        
        

      

      
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    “R”
means
      one hundred
      and twenty-nine percent (129%).

    

    C.  Failure
      to Pay Default Amounts.  If the Borrower fails to pay the Holder
      the Default Amount with respect to this Note within five (5) business days
      after
      its receipt of a Default Notice (the “Prepayment Date”), then
      the Holder shall be entitled to interest on the Default Amount at a rate equal
      to the lower of two percent (2.0%) per month and the highest interest rate
      permitted by applicable law (the “Default Rate”) from the date
      on which the Borrower receives the Default Notice until the date of payment
      of
      the Default Amount hereunder.  In the event the Borrower is not able
      to prepay this Note and all of the outstanding Secured Convertible Notes
      required to be prepaid on the Prepayment Date (including for such purpose all
      Secured Convertible Notes subject to Default Notices delivered prior to the
      Prepayment Date), the Borrower shall prepay the outstanding amount of this
      Note
      and of the Secured Convertible Notes to each holder of this Note and the Secured
      Convertible Notes pro rata, based on the total amounts due on this Note
      and the Secured Convertible Notes at the time of prepayment and required to
      be
      prepaid on the Prepayment Date relative to the total amounts due under this
      Note
      and the Secured Convertible Notes on the Prepayment Date.

     

    D.  Accord
      with Prepayment Premium Provisions.  For the avoidance of doubt,
      if an Event of Default (as defined herein) were to occur and the Borrower were
      then to be required to pay the Holder the Default Amount, then the Borrower
      shall be relieved of any obligation to pay the Holder the Prepayment Premium
      or
      Premium described in Article I.C of this Note.

     

    

    ARTICLE
      VII

     

    INTENTIONALLY
      OMITTED.

     

    ARTICLE
      VIII

     

    RANK;
      SECURITY; CONSENT RIGHTS; NOTICE OF CERTAIN ACTIONS

     

    A.  Rank.  The
      Series C Notes shall rank pari passu as to repayment with the other
      Secured Convertible Notes and all such sets of notes shall rank senior as to
      repayment to any other indebtedness outstanding as of the Issuance Date other
      than equipment purchase and lease financing provided by General Electric Capital
      Corporation to the Borrower, with an outstanding principal amount of not more
      than $14,000 and (ii) equipment purchase and lease financing provided by
      VAResources, Inc. to the Borrower, with an outstanding principal amount of
      not
      more than $23,000.

     

    B.  Security.  This
      Note is one of the “Notes” referred to in the Security
      Agreement.  Reference is hereby made to such agreement for a
      description of the properties and assets in which a security interest has been
      granted, the nature and extent of the security and the rights of the Holder
      in
      respect thereof.

     

    C.  Consent
      Rights.  So long as any Series C Notes are outstanding, the
      Borrower shall not take any of the following corporate actions (whether by
      merger, consolidation or 

     

     

     

    
      
        
        

      

      
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    otherwise)
      without first obtaining the approval (by vote or written consent) of the Holder
      (or, if the Holder transfers portions of this Note to other holders, the
      approval of the Majority Holders (as defined herein)):

     

    (i)  alter
      or
      change the rights, preferences or privileges of the Series C Notes;

     

    (ii)  [Reserved];

     

    (iii)  redeem,
      repurchase or otherwise acquire, or declare or pay any cash dividend or
      distribution on, any securities of the Borrower, except (a) the Borrower may
      redeem all outstanding warrants of the Borrower originally issued by the
      Borrower on March 31, 2003 on such terms as its Board of Directors may
      establish, (b) pursuant to any equity compensation plan approved by the
      Borrower’s Board of Directors or (c) as expressly required by the terms of any
      Secured Convertible Note;

     

    (iv)  [Reserved];

     

    (v)  issue
      any
      debt securities or incur any indebtedness (except (a) any such indebtedness
      incurred to finance receivables in an amount at any time not to exceed eighty
      percent (80%) of the outstanding receivables owed to the Borrower at such time
      and (b) equipment purchase and lease financing in an amount at any time not
      to exceed $200,000), or redeem, repurchase, prepay or otherwise acquire any
      outstanding debt securities or indebtedness of the Borrower, except as expressly
      required by the terms of such securities or indebtedness;

     

    (vi)  enter
      into any agreement, commitment, understanding or other arrangement to take
      any
      of the foregoing actions; or

     

    (vii)  cause
      or
      authorize any subsidiary of the Borrower to engage in any of the foregoing
      actions.

     

    Notwithstanding
      the foregoing, no change pursuant to this
      Article VIII shall be effective to the extent that, by its terms, it
      applies to less than all of the Holders of the Series C Notes then
      outstanding.

    

    D.  Notice
      Rights.  In addition to the foregoing consent rights, the Borrower
      shall provide the Holder with prior notification of any meeting of the
      stockholders (at the same time and with copies of proxy materials and other
      information sent to stockholders).  If the Borrower takes a record of
      its stockholders for the purpose of determining stockholders entitled to
      (i) receive payment of any dividend or other distribution, any right to
      subscribe for, purchase or otherwise acquire (including by way of merger,
      consolidation or recapitalization) any share of any class or any other
      securities or property, or to receive any other right, or (ii) to vote in
      connection with any proposed sale, lease or conveyance of all or substantially
      all of the assets of the Borrower, or any proposed merger, consolidation,
      liquidation, dissolution or winding up of the Borrower, the Borrower shall
      mail
      a notice to the Holder, at least fifteen (15) days prior to the record date
      specified therein (or forty-five (45) days prior to the consummation of the
      transaction or event, whichever is earlier, but in no event earlier than public
      announcement of such proposed transaction), of the date on which any such record
      is to be taken for the purpose of such vote, dividend, distribution, right
      or
      other event, and a brief statement regarding the amount and character of such
      vote, dividend, distribution, right or other event to the extent known at such
      time.

     

    
      
        
        

      

      
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    ARTICLE
      IX

     

    INTENTIONALLY
      OMITTED.

     

    

    ARTICLE
      X

     

    INTENTIONALLY
      OMITTED.

     

    

    ARTICLE
      XI

     

    CERTAIN
      DEFINITIONS

     

     

    For
      purposes of this Note, in addition to the other terms defined herein, the
      following terms shall have the following meanings:

    

    A.  “business
      day” means any day, other than a Saturday or
      Sunday or a day on which banking institutions in the State of New York are
      authorized or obligated by law, regulation or executive order to
      close.

     

    B.  “Change
      of Control” means the consummation of a transaction in which the
      Borrower:

     

    (a)  sells,
      conveys, transfers or disposes of all or substantially all of its assets (the
      presentation of any such transaction for stockholder approval being conclusive
      evidence that such transaction involves the sale of all or substantially all
      of
      the assets of the Borrower);

     

    (b)  merges
      or
      consolidates with or into any person or entity, which results in either
      (i) the holders of the voting securities of the Borrower immediately prior
      to such transaction holding or having the right to direct the voting of fifty
      percent (50%) or less of the total outstanding voting securities of the Borrower
      or such other surviving or acquiring person or entity immediately following
      such
      transaction or (ii) the members of the board of directors or other
      governing body of the Borrower comprising fifty percent (50%) or less of the
      members of the board of directors or other governing body of the Borrower or
      such other surviving or acquiring person or entity immediately following such
      transaction.

     

    C.  “Majority
      Holders” means the Holders of a majority of the aggregate principal
      amount and accrued interest represented by the Series C Notes then
      outstanding.

     

    D.  “Maturity
      Date” means the earlier of December 13, 2007 or the date of
      consummation of a Change of Control.

     

     

     

    
      
        
        

      

      
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    E.  “Payment
      Date” applies only if the Borrower consummates a Change of Control in
      which the Borrower receives consideration in shares of the acquiring party’s
      capital stock, and shall mean the date that is on or before the tenth (10th) business
      day
      after the later to occur of the Payment Trigger Events; provided,
      however, that the Payment Date shall not be later than ninety (90) days
      after the closing of the Change of Control transaction.

     

    F.  “Payment
      Trigger Event” means (i) the declaration by the Securities and Exchange
      Commission that the Registration Statement on Form S-3 that registers the shares
      of the acquiring party for resale by the Borrower is effective or (ii) the
      closing of the Change of Control transaction.

     

    ARTICLE
      XII

     

    MISCELLANEOUS

     

    A.  Failure
      or Indulgency Not Waiver.  No failure or delay on the part of any
      Holder in the exercise of any power, right or privilege hereunder shall operate
      as a waiver thereof, nor shall any single or partial exercise of any such power,
      right or privilege preclude other or further exercise thereof or of any other
      right, power or privilege.

     

    B.  Lost
      or Stolen Notes.  Upon receipt by the Borrower of
      (i) evidence of the loss, theft, destruction or mutilation of this Note and
      (ii) (y) in the case of loss, theft or destruction, of indemnity
      (without any bond or other security) reasonably satisfactory to the Borrower,
      or
      (z) in the case of mutilation, this Note (surrendered for cancellation),
      the Borrower shall execute and deliver a new Series C Note of like tenor and
      date.

     

    C.  Remedies
      Cumulative.  The remedies provided in this Note shall be
      cumulative and in addition to all other remedies available under this Note,
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the Holder’s right to pursue
      actual damages for any failure by the Borrower to comply with the terms of
      this
      Note.  The Borrower acknowledges that a breach by it of its
      obligations hereunder will cause irreparable harm to the Holder and that the
      remedy at law for any such breach may be inadequate.  The Borrower
      therefore agrees, in the event of any such breach or threatened breach, that
      the
      Holder shall be entitled, in addition to all other available remedies, to seek
      an injunction restraining any breach, without the necessity of showing economic
      loss and without any bond or other security being required.

     

    D.  Waiver.  Notwithstanding
      any provision in this Note to the contrary, any provision contained herein
      and
      any right of the Holder granted hereunder may be waived as to all of the Series
      C Notes then outstanding (and the Holders thereof) upon the written consent
      of
      the Majority Holders, unless a higher percentage is required by applicable
      law,
      in which case the written consent of the Holders of not less than such higher
      percentage of the Series C Notes shall be required.

     

    E.  Notices.  Any
      notices required or permitted to be given under the terms hereof shall be sent
      by certified or registered mail (return receipt requested) or delivered
      personally, by responsible overnight carrier or by confirmed facsimile, and
      shall be effective five (5) days after 

     

     

    
      
        
        

      

      
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    being
      placed in the mail, if mailed, or upon receipt or refusal of receipt, if
      delivered personally or by responsible overnight carrier or confirmed facsimile,
      in each case addressed to a party.  The addresses for such
      communications are:

     

    (i)     
        if
      to the
      Borrower, to:

     

    Matritech,
      Inc.

    330
      Nevada Street

    Newton,
      MA 02460

    Telephone:  (617)
      928-0820

    Facsimile:  (617)
      928-0821

    Attention:  Chief
      Executive
      Officer

    

    (ii)    
        if
      to the
      Holder, to:

     

    U.S.
      Boston Corporation Profit Sharing Plan

    Lincoln
      North

    Lincoln,
      MA 01773

    Telephone:
      (781) 259-0249

    Facsimile:
      (781) 259-1166

    Attention:
      Willard Umphrey and Leon Okurowski

    

    or
      such
      other address as may be designated by the Holder in writing hereafter, in the
      same manner, by such person.

    

    F.  Amendment
      Provision.  This Note and any provision hereof may be amended only
      by an instrument in writing signed by the Borrower and the Majority Holders;
      provided, however, that no such amendment, as applied to any
      of the Series C Notes held by any particular Holder of Series C Notes, shall,
      without the written consent of that particular Holder, (i) reduce the
      Interest Rate, extend the time for payment of Interest or change the manner
      or
      rate of accrual of Interest on the Series C Notes, (ii) reduce the amount
      of Principal, or extend the Maturity Date or the Payment Date, of the Series
      C
      Notes, (iii)  impair the right of any Holder to receive payment of
      Principal, Interest, the Premium or the Prepayment Premium, or other payments
      due under the Series C Notes, if any, on or after the due dates therefor; or
      (iv) modify any of the provisions of, or impair the right of any Holder
      under, this Article XII.F.

     

    G.  Assignability.  This
      Note shall be binding upon the Borrower and its successors and assigns and
      shall
      inure to the benefit of the Holder and its successors and
      assigns.  Notwithstanding anything to the contrary contained in this
      Note or the Transaction Documents, this Note may be pledged and all rights
      of
      the Holder under this Note may be assigned to any affiliate or to any other
      person or entity without the consent of the Borrower.

     

    H.  Cost
      of Collection.  If an Event of Default occurs hereunder, the
      Borrower shall pay the Holder hereof costs of collection, including reasonable
      attorneys’ fees.

     

    I.  Governing
      Law; Jurisdiction.  This Note shall be governed by and construed
      in accordance with the laws of the State of Delaware applicable to contracts
      made and to be 

     

     

     

    
      
        
        

      

      
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    performed
      in the State of Delaware.  The Borrower and the Holder irrevocably
      consent to the exclusive jurisdiction of the United States federal courts and
      the state courts located in the County of New Castle, State of Delaware, in
      any
      suit or proceeding based on or arising under this Note and irrevocably agree
      that all claims between the parties in respect of such suit or proceeding may
      be
      determined in such courts.  The Borrower and the Holder irrevocably
      waive the defense of an inconvenient forum to the maintenance of such suit
      or
      proceeding in such forum.  The Borrower and the Holder further agree
      that service of process upon the Borrower or the Holder, as applicable, mailed
      by first class mail shall be deemed in every respect effective service of
      process upon such party in any such suit or proceeding.  Nothing
      herein shall affect the right of the Borrower or the Holder to serve process
      in
      any other manner permitted by law.  The Borrower and the Holder agree
      that a final non-appealable judgment in any such suit or proceeding shall be
      conclusive and may be enforced in other jurisdictions by suit on such judgment
      or in any other lawful manner.

     

    J.  Denominations.  At
      the request of the Holder, upon surrender of this Note, the Borrower shall
      promptly issue new Series C Notes in the aggregate outstanding principal amount
      hereof, in the form hereof, in such denominations of at least $25,000 as the
      Holder shall request.

     

    K.  Certain
      Waivers.  The Borrower and each endorser hereby waive presentment,
      notice of nonpayment or dishonor, protest, notice of protest and all other
      notices in connection with the delivery, acceptance, performance, default or
      enforcement of payment of this Note, and hereby waive all notice or right of
      approval of any extensions, renewals, modifications or forbearances which may
      be
      allowed.

     

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

     

    M.  Maximum
      Interest Rate.  If the effective interest rate on this Note would
      otherwise violate any applicable usury law, then the interest rate shall be
      reduced to the maximum permissible rate and any payment received by the Holder
      in excess of the maximum permissible rate shall be treated as a prepayment
      of
      the principal of this Note.

     

     

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      OF PAGE LEFT BLANK INTENTIONALLY]

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Borrower has caused this Series C Note to be
      executed by its duly authorized officer as of the date first written
      above.

    

     

    
 

    MATRITECH,
      INC.

     

    
 

    

    By:                                                              

    Name:    Stephen
      D. Chubb

    Title:      Chief
      Executive Officerwww.EXFILE.com  888.775.4789   MATRITECH, INC.  FORM 8K == EXHIBIT 4.3

    EXHIBIT
      4.3

     

    SECOND
      AMENDED AND RESTATED

    SECURITY
      AGREEMENT

    

    THIS
      SECOND AMENDED AND RESTATED
      SECURITY AGREEMENT (this “Agreement”) is made as of
      August  30, 2007, by and among SDS CAPITAL GROUP SPC, LTD., as
      collateral agent for the holders (the “Holders”) of
      the Notes (as defined below) (in such capacity, the “Collateral
      Agent”), and MATRITECH, INC., a Delaware corporation (together
      with its successors and permitted assigns, the
“Borrower”).  The Collateral Agent and the
      Holders are hereinafter collectively referred to as the “Secured
      Party.”

    

    Background

    

    A.           Borrower
      and certain Holders entered into that certain Securities Purchase Agreement
      dated as of January 13, 2006 (as the same may be amended, restated, modified,
      supplemented and/or replaced from time to time, the “Series
      A Purchase Agreement”),
      pursuant to which Borrower issued its 15% Secured Convertible Promissory Notes
      to such Holders (the “Series A Note Holders”) in the
      original aggregate principal amount of $6,997,960 (as the same may be amended,
      restated, modified, supplemented and/or replaced from time to time, the
“Series
      A Notes”).

    

    B.           In
      order to induce the Series A Note Holders to purchase the Series A Notes,
      Borrower executed and delivered to the Collateral Agent a Security Agreement,
      dated as of January 13, 2006 (the “Initial Security
      Agreement”), pursuant to which Borrower granted to the Collateral
      Agent, for the benefit of the Series A Note Holders, a perfected security
      interest in certain property of Borrower to secure the prompt payment,
      performance and discharge in full of all of Borrower’s obligations under the
      Series A Notes.

    

    C.           In
      connection with the Series A Purchase Agreement, concurrently therewith,
      Borrower and the Collateral Agent entered into a Contingent License Agreement,
      dated as of January 13, 2006 (the “Initial
Contingent License Agreement”), pursuant
      to which Borrower granted to the Collateral Agent, for the benefit of the Series
      A Note Holders, a contingent license under the Matritech Patent Rights, the
      Matritech Trademark Rights and the MIT Patent Rights (each as defined therein)
      on the terms and conditions set forth therein.

    

    D.           Borrower
      and certain Holders entered into a Securities Purchase Agreement, dated as
      of
      January 22, 2007 (as the same may be amended, restated, modified, supplemented
      and/or replaced from time to time, the “Series
      B Purchase Agreement”),
      pursuant to which Borrower issued its Series B 15% Secured Convertible
      Promissory Notes to such Holders (the “Series B Note
      Holders”) in the original aggregate principal amount of up to
      $4,500,000 (as the same may be amended, restated, modified, supplemented and/or
      replaced from time to time, the “Series
      B Notes”).

     

    E.           In
      connection with the Series B Purchase Agreement, concurrently therewith, the
      holders of a majority of outstanding principal balance of the Series A Notes
      consented to the 

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    issuance
      of the Series B Notes and directed the Collateral Agent to amend and restate
      the
      Initial Security Agreement and Initial Contingent License Agreement to enable
      the Series B Note Holders to have a pari passu position with the Series
      A Note Holders as to the security interest and license granted under such
      agreements, and the Initial Security Agreement and Initial Contingent License
      Agreement were so amended and restated (as heretofore amended, the
“Existing Security Agreement” and
“Existing Contingent License,”
respectively).

    

    F.           Concurrently
      herewith, Borrower and certain Holders are entering into a Securities Purchase
      Agreement, dated as of the date hereof (as the same may be amended, restated,
      modified, supplemented and/or replaced from time to time, the
“Series C Purchase
      Agreement”, and, together with the Series A Purchase Agreement and
      the Series B Purchase Agreement, the “Purchase
      Agreements”) pursuant to which Borrower is issuing Series C 15%
      Secured Promissory Notes to such Holders (the “Series C Note
      Holders” and together with the Series A Note Holders and the
      Series B Note Holders, the “Holders”) in the original
      aggregate principal amount of $3,500,000 (as the same may be amended, restated,
      modified, supplemented and/or replaced from time to time, the
“Series
      C Notes” and together with
      the Series A Notes and Series B Notes, the
“Notes”).

    

    G.           Concurrently
      herewith, the holders of a majority of outstanding principal balance of the
      Series A Notes, and the holders of a majority of outstanding principal balance
      of the Series B Notes, have consented to the issuance of the Series C Notes
      and
      directed the Collateral Agent to amend and restate the Existing Security
      Agreement and Existing Contingent License Agreement to enable the Series C
      Note
      Holders to have a pari passu position with the Series A Note Holders
      and the Series B Note Holders as to the security interest and license granted
      under such agreements.

    

    H.           In
      connection with the Series C Purchase Agreement, concurrently therewith,
      Borrower and Collateral Agent are amending and restating the Existing Contingent
      License Agreement (as the same may be amended, restated, modified, supplemented
      and/or replaced from time to time, the “Contingent License
      Agreement”) to, among other things, grant to the Collateral Agent,
      for the benefit of all the Holders, a contingent license under the Matritech
      Patent Rights, the Matritech Trademark Rights and the MIT Patent Rights (each
      as
      defined therein), on the terms and conditions set forth therein.

    

    I.           In
      order to induce the Series C Note Holders to extend credit to the Borrower
      under
      and pursuant to the Series C Notes, Borrower agrees to amend and restate the
      Existing Security Agreement in order to grant to the Collateral Agent, for
      the
      benefit of itself and the Holders, a perfected security interest in certain
      property of Borrower to secure the prompt payment, performance and discharge
      in
      full of all of Borrower’s obligations under the Notes, all on the terms and
      conditions set forth herein.

    

    Accordingly,
      in consideration of the
      foregoing and the mutual covenants contained herein, and for other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree to amend and restate the Existing
      Security Agreement so that, as amended and restated, it reads in its entirety
      as
      provided herein:

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
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2
–

        
          

        

      

      
        
        

      

    

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

     

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

    

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

    

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

    

    “Effective
      Date” means the date of this Agreement.

    

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

    

    “Event
      of
      Default” means any Event of Default described in (1) Sections A(i),
      (ii) or (iii) of Article VI of the Series C Notes; (2) Sections A(i), (vi)
      or
      (vii) of Article VI of the Series B Notes; or (3) Sections A(i), (vi) or (vii)
      of Article VI of the Series A Notes.

    

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

    

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

    

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

    

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

     

     

    
 

    
      
        
        

      

      
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3
–

        
          

        

      

      
        
        

      

    

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

    

    “Lien”
means
      any lien, mortgage, security interest, chattel mortgage, pledge or other
      encumbrance (statutory or otherwise) of any kind securing satisfaction or
      performance of an obligation, including any agreement to give any of the
      foregoing, any conditional sales or other title retention agreement, any lease
      in the nature thereof, and the filing of or the agreement to give any financing
      statement under the Code of any jurisdiction or similar evidence of any
      encumbrance, whether within or outside the United States.

    

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

    

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

    

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

    

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

    

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

     

     

    
 

    
      
        
        

      

      
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4
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    “Person”
means
      any individual, corporation, partnership, limited liability company, trust,
      unincorporated association, business, or other legal entity, and any government
      or any governmental agency or political subdivision thereof.

    

    “Proceeds”
      shall be used herein as defined in the Uniform Commercial Code but, in any
      event, shall include, but not be limited to, (a) any and all proceeds of any
      insurance (whether or not Collateral Agent is named as the loss payee thereof),
      indemnity, warranty or guaranty payable to Borrower or Collateral Agent from
      time to time with respect to any of the Collateral, (b) any and all payments
      (in
      any form whatsoever) made or due and payable to Borrower from time to time
      in
      connection with any requisition, confiscation, condemnation, seizure or
      forfeiture of all or any part of the Collateral by any Governmental Authority
      (or any Person acting under color of Governmental Authority), (c) any and all
      amounts received when Collateral is sold, leased, licensed, exchanged, collected
      or disposed of, (d) any rights arising out of Collateral, and (e) any and all
      other amounts from time to time paid or payable under or in connection with
      any
      of the Collateral.

    

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

    

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

    

    2. 
 LIEN
      PRIORITIES; PARI PASSU RANKING.  The Collateral Agent and each
      Holder agree as amongst themselves that, notwithstanding any provision of the
      Uniform

     

     

    
      
        
        

      

      
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5
–

        
          

        

      

      
        
        

      

    

    Commercial
      Code, any applicable law or decision, any Note, the Existing Security Agreement,
      any Purchase Agreement or any other Transaction Document to the
      contrary:

     

    (a)           the
      Collateral Agent and the Holders shall have a valid and perfected security
      interest in and Lien on the Collateral and all proceeds thereof, subject only
      to
      Permitted Liens, to secure payment and performance of the Secured Obligations,
      and such security interest and Lien shall be pari passu in all respects as
      amongst the Collateral Agent and the Holders, notwithstanding the date, time,
      method, manner or order of creation or perfection of the Liens granted to the
      Collateral Agent, any Series A Note Holder, any Series B Note Holder or any
      Series C Note Holder, notwithstanding any defect or deficiency in, or failure
      to
      perfect such Liens, or whether the Collateral Agent or any other Secured Party
      holds possession of all or any part of the Collateral, or whether any such
      Lien
      was granted prior to or after commencement of any insolvency, bankruptcy or
      similar proceeding of Borrower;

    

    (b)           the
      Series A Notes, Series B Notes and Series C Notes shall rank pari passu
      in right of payment with each other; and

    

    (c)           all
      Proceeds of Collateral shall be paid to the Collateral Agent, to be paid or
      distributed as follows: (i) first, to the Collateral Agent to payment of that
      portion of the Secured Obligations constituting fees, expenses (including,
      without limitation, expenses related to attorneys’ fees and other professionals’
fees), indemnities and other amounts due to the Collateral Agent in its capacity
      as such; (ii) second, to the Series A Note Holders, Series B Note Holders and
      Series C Note Holders, ratably according to the aggregate amounts remaining
      unpaid on account of the Secured Obligations owing to each such Holder, to
      the
      extent necessary to pay in full all Secured Obligations remaining unpaid; and
      (iii) third, any remainder shall be paid to Borrower or as a court of competent
      jurisdiction may direct.

    

    3.  
GRANT
      OF SECURITY INTEREST.  As security for the payment and performance
      of the Secured Obligations, effective as of the Effective Date, Borrower hereby
      affirms, pledges and hypothecates to the Collateral Agent, for the benefit
      of
      the Holders, and creates in favor of the Collateral Agent, for the benefit
      of
      the Holders, a security interest in and to, all of Borrower’s right, title and
      interest in and to all the following property, in all its forms, in each case
      whether now or hereafter existing, whether now owned or hereafter acquired,
      created or arising, and wherever located (collectively, but without duplication,
      the “Collateral”):

     

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

    

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

     

     

    
      
        
        

      

      
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6
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    and
      any
      and all written materials related to the NMP22 Products (including, without
      limitation, the written materials listed on Schedule 5);

    

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

    

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

    

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

    

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

    

    Notwithstanding
      the foregoing, it is the intention of the parties to the Agreement that the
      security interest granted herein shall not extend to, and the term “Collateral”
shall exclude, (1) any and all (A) Intellectual Property utilized or to be
      utilized outside the Field (as defined in the Contingent License Agreement),
      but
      only if such Intellectual Property is subject to the grant of a license in
      favor
      of the Collateral Agent for use inside the Field pursuant to the Contingent
      License Agreement, and/or (B) other Licensed Assets; (2) the Borrower’s
      trademarks in the name “Matritech” and any registrations, applications and
      renewals for the foregoing, (3) any and all general laboratory Equipment and
      materials, and (4) any item of General Intangibles that is now or hereafter
      held
      by Borrower, solely in the event and to the extent that:  (i) as the
      result of the security interest granted herein, Borrower’s rights in or with
      respect to such item of General Intangibles would be forfeited or would become
      void, voidable, terminable, or revocable, or, with respect to any item of
      General Intangibles that is now or hereafter held by Borrower as licensee or
      lessee, if Borrower would be deemed to have breached, violated, or defaulted
      such underlying license, lease or other agreement that governs such item of
      General Intangibles; (ii) any such restriction shall be effective and
      enforceable under applicable law; and (iii) any such forfeiture, voidness,
      voidability, terminability, revocability, breach, violation, or default cannot
      be remedied by Borrower using its commercially reasonable efforts;
provided, however, that the security interest granted herein shall
      extend to, and the term “Collateral” shall include, (y) any and all proceeds of
      such item of General Intangibles to the extent that the granting of a security
      interest in such proceeds is not so restricted, and (z) upon any such licensor,
      lessor or other applicable party’s consent with respect to any such otherwise
      excluded item of General Intangibles being obtained, thereafter such item of
      General Intangibles as well as any proceeds thereof that might theretofore
      have
      been excluded from the grant of security interest contained herein and the
      term
“Collateral”.

     

     

    
 

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

     

     

    
      
        
        

      

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

     

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

     

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

     

    5.  
COVENANTS
      OF BORROWER.  Borrower covenants that:

     

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

     

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

     

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

     

    (i)  without
      providing at least thirty (30) days prior written notice to Collateral Agent,
      Borrower will not change its name in any respect, its place of business or,
      if

     

     

    
      
        
        

      

      
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    more
      than
      one, chief executive office, or its mailing address or organizational
      identification number (if it has one);

     

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

     

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

     

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

     

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

     

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

     

     

     

     

    
      
        
        

      

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

     

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

     

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

     

    (j)  Inspections.  Borrower
      will permit Collateral Agent, or its designee, upon its reasonable request
      and
      reasonable prior notice, and at any reasonable times during Borrower’s usual
      business hours, to inspect the Collateral, all records related thereto (and
      to
      make extracts or copies from such records), and the premises upon which any
      of
      the Collateral is located, and, if an Event of Default has occurred and is
      continuing, to discuss Borrower’s affairs and finances with any Person and to
      verify with such Person the amount, quality, value and condition of, or any
      other matter relating to, the Collateral.

     

    (k)  Power
      of Attorney.  Borrower has duly executed and delivered to
      Collateral Agent a power of attorney (a “Power of Attorney”) in
      substantially the form attached hereto as Annex A.  The power
      of attorney granted pursuant to the Power of Attorney is a power coupled with
      an
      interest and shall be irrevocable until full and indefeasible payment of the
      Secured Obligations.  The powers conferred on Collateral Agent under
      the Power of Attorney are solely to protect Secured Party’s interests in the
      Collateral and shall not impose any duty upon Collateral Agent to exercise
      any
      such powers.  Collateral Agent agrees that, notwithstanding anything
      to the contrary in the Power of Attorney, (i) except for the powers granted
      in
      clause (e) of the Power of Attorney, it shall not exercise any power or
      authority granted under the Power of Attorney unless an Event of Default has
      occurred and is continuing (and, in any event, it shall not exercise any such
      power or authority until the Effective Date), and (ii) Collateral Agent shall
      account for any moneys received by Collateral Agent in respect of any
      foreclosure on or disposition of Collateral pursuant to the Power of Attorney
      provided that Collateral Agent shall 

     

     

     

    
      
        
        

      

      
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    not
      have
      any duty as to any Collateral, and Collateral Agent shall be accountable only
      for amounts that it actually receives as a result of the exercise of such
      powers.  NEITHER SECURED PARTY NOR ITS AFFILIATES, PARTNERS, OFFICERS,
      DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO BORROWER
      FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT
      IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR
      WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION,
      NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

     

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

     

    6.  
REMEDIES
      UPON DEFAULT.

     

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

     

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

     

     

     

     

    
      
        
        

      

      
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    including,
      without limitation, its right following an Event of Default to take immediate
      possession of the Collateral and to exercise its rights and remedies with
      respect thereto.

     

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

     

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

     

    7.  
OBLIGATIONS
      ABSOLUTE.

     

    (a)  Change
      of Circumstance.  THE RIGHTS OF THE COLLATERAL AGENT HEREUNDER AND
      THE OBLIGATIONS OF BORROWER HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL,
      SHALL
      NOT BE SUBJECT TO ANY COUNTERCLAIM, SETOFF, RECOUPMENT OR DEFENSE BASED UPON
      ANY
      CLAIM THAT BORROWER OR ANY OTHER PERSON MAY HAVE AGAINST ANY SECURED PARTY
      AND
      SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL FULL AND INDEFEASIBLE SATISFACTION
      OF THE SECURED OBLIGATIONS.  Without limiting the generality of the
      foregoing, the obligations of Borrower shall not be released, discharged or
      in
      any way affected by any circumstance or condition (whether or not Borrower
      shall
      have any notice or knowledge thereof) including, without limitation, any
      amendment or modification of or supplement to a Purchase Agreement, the Notes
      or
      any other Transaction Document (including, without limitation, increasing the
      amount or extending the maturity of the Secured Obligations); any waiver,
      consent, extension, indulgence or other action or inaction under or in respect
      of any such agreements or instruments, or any exercise or failure to exercise
      of
      any right, remedy, power or privilege under or in respect of any such agreements
      or instruments, or any exercise or failure to exercise of any right, remedy,
      power or privilege under or in respect of any such agreements or instruments;
      any invalidity or unenforceability, in whole or in part, of any term hereof
      or
      of the Purchase Agreements, the Notes or any other Transaction Document; any
      failure on the part of Borrower or any other Person for any reason to perform
      or
      comply with any term of the Purchase Agreements, the Notes or any other
      Transaction Document; any furnishing or acceptance of any additional security
      or
      guaranty; any release of Borrower or any other Person or any release of any
      or
      all security or any or all guarantees for the Secured Obligations, whether
      any
      such release is granted in connection with a bankruptcy or otherwise; any
      bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
      liquidation or similar proceeding with respect to Borrower or any other Person
      or their respective properties or creditors; the application of payments
      received by Secured Party from any source that were lawfully used for some
      other
      purpose, which lawfully could have been applied to the payment, in full or
      in
      part, of the Secured Obligations; or any other occurrence whatsoever, whether
      similar or dissimilar to the foregoing.  Without limiting the
      generality of the foregoing, at any time that 

     

     

    
      
        
        

      

      
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    the
      Notes
      are amended to increase the amount of the obligations thereunder, the amount
      of
      the Secured Obligations shall be accordingly increased.

     

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

     

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

     

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

     

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

     

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

     

    8.  
NO
      IMPLIED WAIVERS.  No failure or delay on the part of Secured Party
      in exercising any right, power or privilege under this Agreement or the other
      Transaction 

     

     

     

    
      
        
        

      

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

     

    9.  
STANDARD
      OF CARE.

     

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

     

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

     

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

     

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

     

     

     

    
      
        
        

      

      
        –
15
–

        
          

        

      

      
        
        

      

    

    collect
      the payment of any amounts which may have been assigned to Collateral Agent
      or
      to which Collateral Agent may be entitled at any time or times.

     

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

     

    10.  
       
MISCELLANEOUS.

     

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

     

    (b)  Notices.  Any
      notice contemplated herein or required or permitted to be given hereunder shall
      be made in the manner set forth in the applicable Purchase Agreement, and
      delivered, in the case of Borrower and Collateral Agent, at the addresses set
      forth on the signature pages to the applicable Purchase Agreement, or to such
      other address as any party hereto may have last specified by written notice
      to
      the other party or parties.

     

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

     

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

     

    (e)  Indemnification
      by Borrower.  Borrower shall indemnify, reimburse and hold
      harmless Collateral Agent and its affiliates, and all of their partners,
      members, shareholders, officers, directors, employees, agents and advisors
      and
      any successors, assigns and participants 

     

     

     

     

    
      
        
        

      

      
        –
16
–

        
          

        

      

      
        
        

      

    

    thereof
      (each, an “Indemnitee”), from and against any and all
      losses, claims, liabilities, damages, penalties, suits, costs and expenses,
      of
      any kind or nature (including fees relating to the cost of investigating and
      defending any of the foregoing) imposed on, incurred by or asserted against
      such
      Indemnitee in any way related to or arising from or alleged to arise from this
      Agreement or the Collateral, except any such losses, claims, liabilities,
      damages, penalties, suits, costs and expenses which result from the gross
      negligence or willful misconduct of the Indemnitee as determined by a final
      nonappealable decision of a court of competent jurisdiction.  This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in any other Transaction Document.

     

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

     

    (g)  Amendments
      and Waivers.  The terms of this Agreement may be waived, altered
      or amended only by an instrument in writing duly executed by Borrower and
      Collateral Agent and consented to by (i) the holders of at least a majority
      of
      the aggregate outstanding principal balance of the Series A Notes, (ii) the
      holders of at least a majority of the aggregate outstanding principal balance
      of
      the Series B Notes and (iii) the holder(s) of at least a majority of the
      aggregate outstanding principal balance of the Series C Notes.

     

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

     

    (i)  Amended
      and Restated Agreement.  This Agreement amends, restates and
      replaces the Existing Security Agreement.  The security interests
      granted by the Borrower under the Existing Security Agreement continue without
      interruption under this Agreement.

     

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

     

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

     

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

     

    (a)  Governing
      Law; Jurisdiction.  This Agreement shall be governed by and
      construed in accordance with the laws of the State of Delaware applicable to
      contracts made and 

     

     

    
      
        
        

      

      
        –
17
–

        
          

        

      

      
        
        

      

    

    to
      be
      performed in the State of Delaware.  Each of Borrower and Collateral
      Agent irrevocably consents to the exclusive jurisdiction of the United States
      federal courts and the state courts located in the County of New Castle,
      Delaware, in any suit or proceeding between the parties based on or arising
      under this Agreement and irrevocably agrees that all claims in respect of such
      suit or proceeding may be determined in such courts.  Each of Borrower
      and Collateral Agent irrevocably waives the defense of an inconvenient forum
      to
      the maintenance of such suit or proceeding in such forum.  Each of
      Borrower and Collateral Agent further agrees that service of process upon it
      mailed by first class mail shall be deemed in every respect effective service
      of
      process upon it in any such suit or proceeding.  Nothing herein shall
      affect the right of Collateral Agent or Borrower to serve process in any other
      manner permitted by law.  Borrower and Collateral Agent agree that a
      final non-appealable judgment in any such suit or proceeding shall be conclusive
      and may be enforced in other jurisdictions by suit on such judgment or in any
      other lawful manner.

     

    (b)  Waiver
      of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
      THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
      TRIAL
      BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
      RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
      THEORY).  EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE,
      AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
      THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
      THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
      HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION
      DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
      THIS
      SECTION.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        –
18
–

        
          

        

      

      
        
        

      

    

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

    

    

    BORROWER

    

    MATRITECH,
      INC.

    

    

    By:
      ____________________________

    Name: 
  Stephen
      D.
      Chubb

    Title:      Chief
      Executive Officer

    

     

     

    
 

    
      	
               

            	
              COLLATERAL
                AGENT

            

    

    

    SDS
      CAPITAL GROUP SPC,
      LTD.,

    as
      Collateral Agent

    

    

    By:
      ____________________________

    Name:

    Title:

    

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Annex
      A

    

    
      FORM
        OF POWER OF ATTORNEY

    

    This
      Power of Attorney is executed and delivered by Matritech, Inc., a Delaware
      corporation (“Borrower”), to SDS Capital Group SPC, Ltd. as Collateral
      Agent (“Attorney”).  This Power of Attorney is delivered in
      connection with and pursuant to those certain 15% Secured Convertible Promissory
      Notes dated January 13, 2006, the Series B 15% Secured Convertible Promissory
      Notes dated January 22, 2007 and the 15% Secured Promissory Note dated the
      date
      hereof (each as the same may be amended, modified, restated and/or supplemented
      from time to time) (collectively the “Notes”) and that certain Second
      Amended and Restated Security Agreement dated as of even date herewith delivered
      in connection therewith (the “Security
      Agreement”).  Capitalized terms used but not otherwise defined
      herein shall have the meanings assigned to such terms in the Security
      Agreement.  No person or entity to whom this Power of Attorney is
      presented, as authority for Attorney to take any action or actions contemplated
      hereby, shall be required to inquire into or seek confirmation from Borrower
      as
      to the authority of Attorney to take any action described below, or as to the
      existence of or fulfillment of any condition to this Power of Attorney, which
      is
      intended to grant to Attorney unconditionally the authority to take and perform
      the actions contemplated herein, and Borrower irrevocably waives any right
      to
      commence any suit or action, in law or equity, against any person or entity
      which acts in reliance upon or acknowledges the authority granted under this
      Power of Attorney.  The power of attorney granted hereby is coupled
      with an interest, and may not be revoked or canceled by Borrower without
      Attorney’ s written consent.

    

    Borrower
      hereby irrevocably constitutes and appoints Attorney (and all officers,
      employees or agents designated by Attorney), with full power of substitution,
      as
      Borrower’s true and lawful attorney-in-fact with full irrevocable power and
      authority in the place and stead of Borrower and in the name of Borrower or
      in
      its own name, from time to time in Attorney’s discretion upon the occurrence and
      during the continuation of an Event of Default, to take any and all appropriate
      action and to execute and deliver any and all documents and instruments which
      may be necessary or desirable to accomplish the purposes of the Notes, the
      Security Agreement and any and all agreements, documents and instruments
      executed, delivered or filed in connection therewith from time to time
      (collectively, the “Transaction Documents”) and, without limiting the
      generality of the foregoing, Borrower hereby grants to Attorney the power and
      right, on behalf of Borrower, without notice to or assent by Borrower, and
      at
      any time, to do the following (to the extent the same may be necessary or
      desirable to accomplish the purposes of the Transaction Documents):

    

    (a)  effect
      any repairs to any Collateral, or continue or obtain any insurance required
      under the Transaction Documents and pay all or any part of the premiums therefor
      and costs thereof, and make, settle and adjust all claims under such policies
      of
      insurance, and make all determinations and decisions with respect to such
      policies;

     

    (b)  pay
      or
      discharge any taxes, liens, security interests, or other encumbrances levied
      or
      placed on or threatened against the Collateral;

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)  defend
      any suit, action or proceeding brought against Borrower relating to the
      Collateral if Borrower does not defend such suit, action or proceeding, and
      settle, compromise or adjust any suit, action, or proceeding described above
      and, in connection therewith, give such discharges or releases as Attorney
      may
      deem appropriate;

     

    (d)  communicate
      in its own name with any party to any contract included in the Collateral with
      regard to the assignment of the right, title and interest of Borrower in and
      under such contracts and other matters relating thereto;

     

    (e)  to
      the
      extent that Borrower’s authorization given in the Security Agreement is not
      sufficient, to file such financing statements with respect to the Security
      Agreement as Attorney may deem appropriate and to execute in Borrower’s name
      such financing statements and amendments thereto and continuation statements
      which may require Borrower’s signature; and

     

    (f)  execute,
      deliver and/or record, as applicable, in connection with any sale or other
      remedy provided for in any Transaction Document, any endorsements, assignments
      or other applications for or instruments of conveyance or transfer with respect
      to the Collateral and to otherwise direct such sale or resale, all as though
      Attorney were the absolute owner of the property of Borrower for all purposes,
      and to do, at Attorney’s option and Borrower’s expense, at any time or from time
      to time, all acts and other things that Attorney reasonably deems necessary
      to
      perfect, preserve, or realize upon the Collateral and Attorney’s liens thereon,
      all as fully and effectively as Borrower might do.

     

    IN
      WITNESS WHEREOF, this Power of Attorney is duly executed on behalf of Borrower
      this ____ day of ____________, 20___.

    

    MATRITECH,
      INC.

    

    

    By:    ________________

    Name:

    Title:

    

     

    
 

    

    NOTARY
      PUBLIC CERTIFICATE

    

    On
      this
      _____ day of ____________, 20___, [officer’s name] who is personally known to me
      appeared before me in his/her capacity as the [title] of [name of Borrower]
      (“Borrower”) and executed on behalf of Borrower the Power of Attorney in
      favor of _______________, as Collateral Agent, to which this Certificate is
      attached.

    

    

     

    _______________________________________

    Notary
      Public

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Schedule
      1

     

     

     

    
      STATUS

     

    

    Matritech,
      Inc. is a Delaware corporation

    

    Matritech,
      Inc.’s federal taxpayer ID# is 04-2985132

    

    Matritech,
      Inc.’s organization ID# in Delaware is 2142166

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      2-A

     

    
      LOCATIONS
        OF GOODS

    

    

     

    
      Matritech,
        Inc.

    

    
      330
        Nevada Street

      
        Newton,
          MA 02460

      

    

     

    
      Matritech
        GmbH

    

    Jechtinger
      Strasse 9

    D79111 Freiburg

    Germany

    

    One
      mold
      (value in excess of $25,000) for the NMP22® BladderChek® Test cassette housing
      is located at:

    

    Sterling
      Manufacturing Company, Inc.

    P.O.
      Box
      1205

    640
      Sterling Street

    South
      Lancaster, MA 01561

    

    One
      mold
      (value less than $25,000) for the NMP22® BladderChek® Test cassette housing is
      located at:

    

    Fireball
      Technology Ltd.

    77
      Lingyun Xinchun, #302

    Shanghai,
      China

    

    Raw
      materials and WIP (value in excess of $25,000) for NMP22® BladderChek® Test are
      located at:

    

    Unotech
      Diagnostics,
      Inc.

    2235
      Polvorosa Ave. Suite 220

    San
      Leandro, CA 94577

    

    WIP
      (value less than $25,000) for NMP22® BladderChek® Test is located
      at:

    

    LSNE

    Lyophilization
      Services of New England

    1
      Sundial
      Avenue, Suite 112

    Manchester,
      NH 03103

    

    Cell
      lines used to produce antibodies used in the NMP® products are located
      at:

    

    Maine
      Biotechnology Services

    1037R
      Forest Avenue

    Portland,
      ME 04103

     

    
       

      
        with
          a
          back-up vial at:

         

        
          American
            Tissue Culture Center

        

        
          10801
            University Blvd.

        

        
          Manassas,
            VA 20110-2209

           

           

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

           

        

      

    

    Schedule
      2-B

    

     

      LOCATIONS
        OF BORROWER

    

     

     

     

    
      Matritech,
        Inc.

    

    
      330
        Nevada Street

    

    
      Newton,
        MA 02460

    
      Matritech
        GmbH

    

    Jechtinger
      Strasse 9

    D79111 Freiburg

    Germany

     

     

    
      Books
        and
        records are maintained primarily at the Newton location.

    

    
 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    Schedule
      3

     

     

    
      NAMES
        USED BY BORROWER

    

    

     

     

    Matritech,
      Inc.

    

    Matritech
      GmbH

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      4

    

     

    
      FILING
        OFFICES

    

    

    Delaware
      Secretary of State

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      5

     

     

    
      DEDICATED
        EQUIPMENT

     

    

    Equipment
      located in Newton and dedicated to production of the NMP22®
Test Kit:

    

    2
      plate
      fillers

    automatic
      labeler for vials

    incubation
      oven

    automatic
      fill machine

    plate
      reader

    2
      plate
      washers

    

    Written
      materials related to NMP22® products:

    

    Marketing
      materials

    Package
      inserts

    Device
      history record for NMP22® Test Kit and related SOPs

    Device
      history record for NMP22® BladderChek® Test (without SOPs)

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