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WWW.EXFILE.COM -- MATRITECH FORM 8-K -- EXHIBIT 4.7 -- 14850

    EXHIBIT
      4.7

    
NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      AND,
      ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
      IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

     

    COMMON
      STOCK PURCHASE WARRANT

     

    To
      Purchase 55,556 Shares
      of
      Common Stock of

     

    Matritech,
      Inc.

     

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      CERTIFIES that, for value received, Roth Capital Partners, LLC (the
“Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the Closing
      Date (the
      “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the fifth (5th)
      anniversary of the Closing Date (the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from Matritech, Inc., a
      corporation incorporated in the State of Delaware (the “Company”),
      up to
      55,556 shares (the “Warrant
      Shares”)
      of
      Common Stock, par value $0.01 per share, of the Company (the “Common
      Stock”),
      such
      number of Warrant Shares being subject to adjustments as provided herein.
      Additionally, the Holder of this Warrant may become entitled, upon the
      conditions and subject to the limitations on exercise and the conditions
      hereinafter set forth, to exercise the Warrant for the Additional
      Warrant Shares
      (as
      defined below) at the Additional
      Warrant Exercise Price
      (as
      defined below) and, in such event, this Warrant will be exercisable for the
      Additional Warrant Shares at any time prior to the close of business on the
      Termination Date. With respect to the Warrant Shares, the purchase price of
      one
      share of Common Stock under this Warrant shall be $0.76 (the “Warrant
      Share Exercise Price”,
      and
      together with the Additional Warrant Exercise Price, the “Exercise
      Price”),
      subject to adjustment hereunder. The Warrant Share Exercise Price and the number
      of Warrant Shares for which the Warrant is exercisable shall be subject to
      adjustment as provided herein. Capitalized terms used and not otherwise defined
      herein shall have the meanings set forth in that certain Securities Purchase
      Agreement (the “Purchase
      Agreement”),
      dated
      January 22,
      2007,
      among the Company and the purchasers signatory thereto.

     

    1.  Title
      to Warrant.
      Prior
      to the Termination Date and subject to compliance with applicable laws and
      Section 7 of this Warrant, this Warrant and all rights hereunder are
      transferable, in whole or in part, at the office or agency of the Company by
      the
      Holder in person

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    or
      by
      duly authorized attorney, upon surrender of this Warrant together with the
      Assignment Form annexed hereto properly endorsed; provided,
      however,
      during
      any twelve (12) month period and except for transfers to an Affiliate of the
      Holder, the Holder, collectively with successor Holders, may not transfer this
      Warrant in more than two transactions to more than four assignees per
      transaction. The transferee shall sign an investment letter in form and
      substance reasonably satisfactory to the Company.

     

    2.  Authorization
      of Shares.
      The
      Company covenants that all Warrant Shares and all Additional Warrant Shares
      that
      may be issued upon the exercise of the purchase rights represented by this
      Warrant will, upon exercise of the purchase rights represented by this Warrant
      and in accordance with the terms hereof, be duly authorized, validly issued,
      fully paid and nonassessable and free from all taxes, liens and charges in
      respect of the issue thereof imposed by the Company other than restrictions
      on
      transfer provided for in the Transaction Documents.

     

    3.  Exercise
      of Warrant.

     

    (a)  Except
      as
      provided in Section 4 herein, exercise of the purchase rights represented
      by this Warrant may be made at any time or times on or after the Initial
      Exercise Date and on or before the Termination Date by the surrender of this
      Warrant and the Notice of Exercise Form annexed hereto duly executed, at the
      office of the Company (or such other office or agency of the Company as it
      may
      designate by notice in writing to the registered Holder at the address of such
      Holder appearing on the books of the Company) and upon payment of the applicable
      Exercise Price of the shares thereby purchased by wire transfer or cashier’s
      check drawn on a United States bank or by means of a cashless exercise pursuant
      to Section 3(d), the Holder shall be entitled to receive a certificate for
      the
      number of Warrant Shares so purchased. Certificates for shares purchased
      hereunder shall be delivered to the Holder within five (5) trading days after
      the date on which this Warrant shall have been exercised as aforesaid. This
      Warrant shall be deemed to have been exercised and such certificate or
      certificates shall be deemed to have been issued, and Holder or any other person
      so designated to be named therein shall be deemed to have become a holder of
      record of such shares for all purposes, as of the date the Warrant has been
      exercised by payment to the Company of the applicable Exercise Price and all
      taxes required to be paid by the Holder, if any, pursuant to Section 5
      prior to the issuance of such shares, have been paid. If the Company fails
      to
      deliver to the Holder a certificate or certificates representing the Warrant
      Shares pursuant to this Section 3(a) by the fifth (5th)
      trading
      day after the date of exercise, then the Holder will have the right to rescind
      such exercise. In addition to any other rights available to the Holder, if
      the
      Company fails to deliver to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise by the fifth
      (5th)
      trading
      day after the date of exercise and the Holder has not rescinded such exercise
      pursuant to this Section 3(a), and if after such fifth (5th)
      trading
      day the Holder is required by its broker to purchase (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Holder of the Warrant Shares which the Holder anticipated receiving
      upon such exercise (a “Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which
      (x) the Holder’s total purchase price (including brokerage commissions, if
      any) for the shares of Common Stock so purchased exceeds (y) the amount
      obtained by multiplying (A) the number of Warrant Shares and Additional

     

    
      
         

      

      
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    Warrant
      Shares that the Company was required to deliver to the Holder in connection
      with
      the exercise at issue times (B) the price at which the sell order giving
      rise to such purchase obligation was executed, and (2) at the option of the
      Holder, either reinstate the portion of the Warrant and equivalent number of
      Warrant Shares and Additional Warrant Shares for which such exercise was not
      honored or deliver to the Holder the number of shares of Common Stock that
      would
      have been issued had the Company timely complied with its exercise and delivery
      obligations hereunder. For example, if the Holder purchases Common Stock having
      a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
      exercise of shares of Common Stock with an aggregate sale price giving rise
      to
      such purchase obligation of $10,000, under clause (1) of the immediately
      preceding sentence the Company shall be required to pay the Holder $1,000.
      The
      Holder shall provide the Company written notice indicating the amounts payable
      to the Holder in respect of the Buy-In, together with applicable confirmations
      and other evidence reasonably requested by the Company. Nothing herein shall
      limit a Holder’s right to pursue any other remedies available to it hereunder,
      at law or in equity including, without limitation, a decree of specific
      performance and/or injunctive relief with respect to the Company’s failure to
      timely deliver certificates representing shares of Common Stock upon exercise
      of
      this Warrant as required pursuant to the terms hereof.

     

    (b)  If
      this
      Warrant shall have been exercised in part, the Company shall, at the time of
      delivery of the certificate or certificates representing Warrant Shares and
      Additional Warrant Shares, deliver to Holder a new Warrant evidencing the rights
      of Holder to purchase the unpurchased Warrant Shares and Additional Warrant
      Shares called for by this Warrant, which new Warrant shall in all other respects
      be identical with this Warrant.

     

    (c)  The
      Company shall not effect any exercise of this Warrant, and the Holder shall
      not
      have the right to exercise any portion of this Warrant, pursuant to Section
      3(a)
      or otherwise, to the extent that after giving effect to such issuance after
      exercise, the Holder (together with the Holder’s affiliates), as set forth on
      the applicable Notice of Exercise, would beneficially own in excess of 9.99%
      of
      the number of shares of the Common Stock outstanding immediately after giving
      effect to such issuance. For purposes of the foregoing sentence, the number
      of
      shares of Common Stock beneficially owned by the Holder and its affiliates
      shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude the number of shares of Common Stock which would be issuable
      upon (A) exercise of the remaining, nonexercised portion of this Warrant
      beneficially owned by the Holder or any of its affiliates and (B) exercise
      or conversion of the unexercised or nonconverted portion of any other securities
      of the Company (including, without limitation, any other Warrants) subject
      to a
      limitation on conversion or exercise analogous to the limitation contained
      herein beneficially owned by the Holder or any of its affiliates. Except as
      set
      forth in the preceding sentence, for purposes of this Section 3(c), beneficial
      ownership shall be calculated in accordance with Section 13(d) of the 1934
      Act.
      To the extent that the limitation contained in this Section 3(c) applies,
      the determination of whether this Warrant is exercisable (in relation to other
      securities owned by the Holder) and of which a portion of this Warrant is
      exercisable shall be in the sole discretion of such Holder, and the submission
      of a Notice of Exercise shall be deemed to be such Holder’s determination of
      whether this Warrant is 

     

    
      
         

      

      
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    exercisable
      (in relation to other securities owned by such Holder) and of which portion
      of
      this Warrant is exercisable, in each case subject to such aggregate percentage
      limitation, and the Company shall have no obligation to verify or confirm the
      accuracy of such determination. For purposes of this Section 3(c), in
      determining the number of outstanding shares of Common Stock, the Holder may
      rely on the number of outstanding shares of Common Stock as reflected in
      (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be,
      (y) a more recent public announcement by the Company or (z) any other
      notice by the Company or the Company’s Transfer Agent setting forth the number
      of shares of Common Stock outstanding.  Upon the written or oral request of
      the Holder, the Company shall within two (2) trading days confirm orally and
      in
      writing to the Holder the number of shares of Common Stock then outstanding.
      In
      any case, the number of outstanding shares of Common Stock shall be determined
      after giving effect to the conversion or exercise of securities of the Company,
      including this Warrant, by the Holder or its affiliates since the date as of
      which such number of outstanding shares of Common Stock was reported. The
      provisions of this Section 3(c) may be waived by the Holder upon, at the
      election of the Holder (other than SDS Capital Group SPC, LTD. or its
      affiliates), not less than sixty-one (61) days’ prior notice to the Company, and
      the provisions of this Section 3(c) shall continue to apply until such
      sixty-first (61st)
      day (or
      such later date, as determined by the Holder, as may be specified in such notice
      of waiver).

     

    (d)  At
      any
      time, this Warrant may also be exercised by means of a “cashless exercise” in
      which the Holder shall be entitled to receive a certificate for the number
      of
      Warrant Shares equal to the quotient obtained by dividing [(A-B)*(X)] by (A),
      where:

     

    (A)
      = the
      daily volume weighted average price of the Common Stock on the trading day
      immediately preceding the date of such election;

    

    (B)
      = the
      Warrant Share Exercise Price of this Warrant, as adjusted; and

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

     

    4.  No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall pay
      a
      cash adjustment in respect of such final fraction in an amount equal to such
      fraction multiplied by the Closing Sales Price as defined in the Series B Notes.
      

     

    5.  Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares and Additional Warrant Shares shall
      be made without charge to the Holder for any issue or transfer tax or other
      incidental expense in respect of the issuance of such certificate, all of which
      taxes and expenses shall be paid by the Company, and such certificates shall
      be
      issued in the name of the Holder or in such name or names as may be directed
      by
      the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the 

     

    
      
         

      

      
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    Assignment
      Form attached hereto duly executed by the Holder; and the Company may require,
      as a condition thereto, the payment of a sum sufficient to reimburse it for
      any
      transfer tax incidental thereto.

     

    6.  Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    7.  Transfer,
      Division and Combination.

     

    (a)  Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Sections 1 and 7(e) hereof and to the provisions of Section 5(b) of the
      Purchase Agreement, this Warrant and all rights hereunder are transferable,
      in
      whole or in part, upon surrender of this Warrant at the principal office of
      the
      Company, together with a written assignment of this Warrant substantially in
      the
      form attached hereto duly executed by the Holder or its agent or attorney and
      funds sufficient to pay any transfer taxes payable upon the making of such
      transfer. Upon such surrender and, if required, such payment, the Company shall
      execute and deliver a new Warrant or Warrants in the name of the assignee or
      assignees and in the denomination or denominations specified in such instrument
      of assignment, and shall issue to the assignor a new Warrant evidencing the
      portion of this Warrant not so assigned, and this Warrant shall promptly be
      cancelled. A Warrant, if properly assigned, may be exercised by a new holder
      for
      the purchase of Warrant Shares without having a new Warrant issued.

     

    (b)  This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 7(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    (c)  The
      Company shall prepare, issue and deliver at its own expense (other than transfer
      taxes) the new Warrant or Warrants under this Section 7.

     

    (d)  The
      Company agrees to maintain, at its aforesaid office, books for the registration
      and the registration of transfer of the Warrants.

     

    (e)  If,
      at
      the time of the surrender of this Warrant in connection with any transfer of
      this Warrant, the transfer of this Warrant shall not be registered pursuant
      to
      an effective registration statement under the 1933 Act and under applicable
      state securities or blue sky laws, the Company may require, unless waived in
      its
      reasonable discretion, as a condition of allowing such transfer (i) that
      the Holder or transferee of this Warrant, as the case may be, furnish to the
      Company a written opinion of counsel (which opinion shall be in form, substance
      and scope customary for opinions of counsel in comparable transactions) to
      the
      effect that such transfer may be made without registration under the 1933 Act
      and under applicable state securities or blue sky laws; (ii) that the
      holder or transferee execute and deliver to the Company an investment letter
      in
      form and substance 

     

    
      
         

      

      
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    acceptable
      to the Company; and (iii) that the transferee be an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated
      under the 1933 Act or a qualified institutional buyer as defined in Rule 144A(a)
      under the 1933 Act.

     

    8.  No
      Rights as Shareholder until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof. Upon the surrender
      of
      this Warrant and the payment of the aggregate Exercise Price (or by means of
      a
      cashless exercise pursuant to Section 3(d) hereof), the Warrant Shares and
      Additional Warrant Shares so purchased shall be and be deemed to be issued
      to
      such Holder as the record owner of such shares as of the close of business
      on
      the later of the date of such surrender or payment.

     

    9.  Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
      or any stock certificate relating to the Warrant Shares or Additional Warrant
      Shares, and in case of loss, theft or destruction, of indemnity or security
      reasonably satisfactory to it (which, in the case of the Warrant, shall not
      include the posting of any bond), and upon surrender and cancellation of such
      Warrant or stock certificate, if mutilated, the Company will make and deliver
      a
      new Warrant or stock certificate of like tenor and dated as of such
      cancellation, in lieu of such Warrant or stock certificate.

     

    10.  Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall be a Saturday, Sunday or a legal holiday,
      then such action may be taken or such right may be exercised on the next
      succeeding day not a Saturday, Sunday or legal holiday.

     

    11.  Adjustments
      of Exercise Price and Number of Warrant Shares.

     

    (a)  Dilutive
      Issuances.
      If the
      Company shall issue or sell, or is, in accordance with subsections (b)(i)
      through (viii) below, deemed to have issued or sold (each, a “Dilutive
      Issuance”),
      any
      additional shares of Common Stock, other than Excluded Stock (the “New
      Issuance Shares”),
      without consideration or for a consideration per share less than the Exercise
      Price in effect immediately prior to the time of such issue or sale (the lowest
      price at which such shares of Common Stock are issued or deemed to be issued
      hereunder is hereinafter referred to as the “New
      Issuance Price”),
      then
      and in each such case (a “Trigger
      Issuance”)
      the
      then-existing Warrant Share Exercise Price, shall be reduced, as of the close
      of
      business on the effective date of the Trigger Issuance, to a price determined
      in
      accordance with the immediately succeeding paragraphs.

     

    Prior
      to
      stockholder approval of the Stockholder Proposals, the Warrant Share Exercise
      Price shall be reduced to the higher of (i) the New Issuance Price or
      (ii) $0.76 (appropriately adjusted for any stock split, reverse stock
      split, stock dividend or other reclassification or combination of the Common
      Stock occurring after the date hereof) (the “Full-Ratchet
      Floor Price”).
      From
      and after the date of stockholder approval of the Stockholder Proposals, if
      any,
      the Warrant Share Exercise Price shall be reduced to the New Issuance Price.
      In
      the event that in the time period prior to such stockholder approval a Dilutive
      Issuance is made and the Warrant Share Exercise Price is adjusted to the
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    immediately
      following such stockholder approval, the Warrant Share Exercise Price shall
      be
      adjusted to such New Issuance Price if such New Issuance Price is lower than
      the
      then current Warrant Share Exercise Price.

    

    For
      purposes of this subsection (a), “Excluded
      Stock”
means
      (1) shares of Common Stock issued pursuant to the terms thereof upon the
      exercise or conversion of the Company’s options, warrants or convertible
      securities outstanding as of the Closing Date in accordance with the terms
      of
      such options, warrants or other securities as in effect on the Closing Date
      and
      provided that such securities have not been amended since the Closing Date
      to
      increase the number of shares of Common Stock issuable thereunder or to lower
      the exercise or conversion price thereof; (2) stock, stock options or other
      stock rights issued pursuant to any stock or option plan duly adopted by a
      majority of the non-employee members of the Board of Directors of the Company
      or
      a majority of the members of a committee of non-employee directors established
      for such purpose; (3) securities issued pursuant to a bona fide
      underwritten public offering with gross proceeds of at least $25,000,000;
      (4) the shares of Common Stock issuable pursuant to (i) the Series B Notes
      and the Series A Notes or (ii) the Series B Warrants and the warrants
      issued by the Company on January 13, 2006 in connection with the issuance of
      the
      Series A Notes; (5) securities issued in a bona fide business acquisition
      the primary purpose of which, as determined in good faith by a majority of
      the
      members of the Board of Directors of the Company, is not the raising of capital;
      (6) capital stock or convertible securities issued in a joint venture,
      strategic partnership or licensing arrangement, the primary purpose of which,
      as
      determined in good faith by a majority of the members of the Board of Directors
      of the Company, is not the raising of capital; and (7) shares of common
      stock issued or issuable by reason of a dividend, stock split or other
      distribution on shares of common stock (but only to the extent that such a
      dividend, split or distribution results in an adjustment in the Exercise Price
      pursuant to the other provisions herein).

    

    Additionally,
      for purposes of this subsection (a), the following subsections (b)(i) to (viii)
      shall also be applicable:

    

    (b)  (i)      
      Issuance
      of Rights or Options.
      In case
      at any time the Company shall in any manner grant (directly and not by
      assumption in a merger or otherwise) any warrants or other rights to subscribe
      for or to purchase, or any options for the purchase of, Common Stock or any
      stock or security convertible into or exchangeable for Common Stock (such
      warrants, rights or options being called “Options”
and
      such convertible or exchangeable stock or securities being called “Convertible
      Securities”)
      whether or not such Options or the right to convert or exchange any such
      Convertible Securities are immediately exercisable, and the price per share
      for
      which Common Stock is issuable upon the exercise of such Options or upon the
      conversion or exchange of such Convertible Securities (determined by dividing
      (i) the sum (which sum shall constitute the applicable consideration) of
      (x) the total amount, if any, received or receivable by the Company as
      consideration for the granting of such Options, plus (y) the aggregate
      amount of additional consideration payable to the Company upon the exercise
      of
      all such Options, plus (z), in the case of such Options that relate to
      Convertible Securities, the aggregate amount of additional consideration, if
      any, payable upon the issue or sale of such Convertible Securities and upon
      the
      conversion or exchange thereof, by (ii) the total maximum number of shares
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    Options
      or upon the conversion or exchange of all such Convertible Securities issuable
      upon the exercise of such Options) shall be less than the Warrant Share Exercise
      Price in effect immediately prior to the time of the granting of such Options,
      then the total number of shares of Common Stock issuable upon the exercise
      of
      such Options or upon conversion or exchange of the total amount of such
      Convertible Securities issuable upon the exercise of such Options shall be
      deemed to have been issued for such price per share as of the date of granting
      of such Options or the issuance of such Convertible Securities and thereafter
      shall be deemed to be outstanding for purposes of adjusting the Warrant Share
      Exercise Price. Except as otherwise provided in subsection (b)(iii) of this
      Section 11, no adjustment of the Warrant Share Exercise Price shall be made
      upon the actual issue of such Common Stock or of such Convertible Securities
      upon exercise of such Options or upon the actual issue of such Common Stock
      upon
      conversion or exchange of such Convertible Securities.

     

    (ii)
        Issuance
      of Convertible Securities.
      In case
      the Company shall in any manner issue (directly and not by assumption in a
      merger or otherwise) or sell any Convertible Securities, whether or not the
      rights to exchange or convert any such Convertible Securities are immediately
      exercisable, and the price per share for which Common Stock is issuable upon
      such conversion or exchange (determined by dividing (i) the sum (which sum
      shall constitute the applicable consideration) of (x) the total amount
      received or receivable by the Company as consideration for the issue or sale
      of
      such Convertible Securities, plus (y) the aggregate amount of additional
      consideration, if any, payable to the Company upon the conversion or exchange
      thereof, by (ii) the total number of shares of Common Stock issuable upon
      the conversion or exchange of all such Convertible Securities) shall be less
      than the Warrant Share Exercise Price in effect immediately prior to the time
      of
      such issue or sale, then the total maximum number of shares of Common Stock
      issuable upon conversion or exchange of all such Convertible Securities shall
      be
      deemed to have been issued for such price per share as of the date of the issue
      or sale of such Convertible Securities and thereafter shall be deemed to be
      outstanding for purposes of adjusting the Warrant Share Exercise Price, provided
      that (a) except as otherwise provided in subsection (b)(iii) of this
      Section 11, no adjustment of the Warrant Share Exercise Price shall be made
      upon the actual issuance of such Common Stock upon conversion or exchange of
      such Convertible Securities; and (b) no further adjustment of the Warrant
      Share Exercise Price shall be made by reason of the issue or sale of Convertible
      Securities upon exercise of any Options to purchase any such Convertible
      Securities for which adjustments of the Warrant Share Exercise Price have been
      made pursuant to the other provisions of Section 11.

     

    (iii)
        Change
      in Option Price or Conversion Rate.
      Upon
      the happening of any of the following events, namely, if the purchase price
      provided for in any Option referred to in subsection (b)(i) hereof, the
      additional consideration, if any, payable upon the conversion or exchange of
      any
      Convertible Securities referred to in subsections (b)(i) or (b)(ii), or the
      rate
      at which Convertible Securities referred to in subsections (b)(i) or (b)(ii)
      are
      convertible into or exchangeable for Common Stock shall change at any time
      (including, but not limited to, changes under or by reason of provisions
      designed to protect against dilution), the Warrant Share Exercise Price in
      effect at the time of such event shall forthwith be readjusted to the Warrant
      Share Exercise Price which would have been in effect at such time had such
      Options or Convertible Securities still outstanding

     

    
      
         

      

      
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    provided
      for such changed purchase price, additional consideration or conversion rate,
      as
      the case may be, at the time initially granted, issued or sold. On the
      termination of any Option for which any adjustment was made pursuant to
      subsections (a) and (b) hereof or any right to convert or exchange Convertible
      Securities for which any adjustment was made pursuant to this subsection (b)
      (including without limitation upon the redemption or purchase for consideration
      of such Convertible Securities by the Company), the Warrant Share Exercise
      Price
      then in effect hereunder shall forthwith be changed to the Warrant Share
      Exercise Price which would have been in effect at the time of such termination
      had such Option or Convertible Securities, to the extent outstanding immediately
      prior to such termination, never been issued.

     

    (iv)
        Stock
      Dividends.
      In case
      the Company shall declare a dividend or make any other distribution upon any
      stock of the Company (other than the Common Stock) payable in Common Stock,
      Options or Convertible Securities, then any Common Stock, Options or Convertible
      Securities, as the case may be, issuable in payment of such dividend or
      distribution shall be deemed to have been issued or sold without
      consideration.

     

    (v)
        Consideration
      for Stock.
      In case
      any shares of Common Stock, Options or Convertible Securities shall be issued
      or
      sold for cash, the consideration received therefor shall be deemed to be the
      amount received by the Company therefor. In case any shares of Common Stock,
      Options or Convertible Securities shall be issued or sold for a consideration
      other than cash, the amount of the consideration other than cash received by
      the
      Company shall be deemed to be the fair value of such consideration as determined
      in good faith by the Board of Directors of the Company using standard commercial
      valuation methods appropriate for valuing such assets; provided,
      however,
      that if
      the Required Holders do not agree to such fair value calculation within three
      (3) business days after receipt thereof from the Company, then such fair value
      shall be determined in good faith by an investment banker or other appropriate
      expert of national reputation selected by the Company and reasonably acceptable
      to the Required Holders, with the costs of such appraisal to be borne 50%
      equally by the Company and 50% by the Holders (ratably on the basis of the
      respective number of Warrant Shares outstanding). In case any Options shall
      be
      issued in connection with the issue and sale of other securities of the Company,
      together comprising one integral transaction in which no specific consideration
      is allocated to such Options by the parties thereto, such Options shall be
      deemed to have been issued for nominal consideration. If Common Stock, Options
      or Convertible Securities shall be issued or sold by the Company and, in
      connection therewith, other Options or Convertible Securities (the “Additional
      Rights”)
      are
      issued without any specific consideration allocated to such Additional Rights,
      then the consideration received or deemed to be received by the Company for
      such
      Additional Rights shall be deemed to be nominal.

     

    (vi)
        Record
      Date.
      In case
      the Company shall take a record of the holders of its Common Stock for the
      purpose of entitling them (i) to receive a dividend or other distribution
      payable in Common Stock, Options or Convertible Securities or (ii) to
      subscribe for or purchase Common Stock, Options or Convertible Securities,
      then
      such record date shall be deemed to be the date of the issue or sale of the
      shares of Common Stock deemed to have been issued or sold upon the declaration
      of such dividend or the

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    making
      of
      such other distribution or the date of the granting of such right of
      subscription or purchase, as the case may be.

     

    (vii)
        Treasury
      Shares.
      The
      number of shares of Common Stock outstanding at any given time shall not include
      shares owned or held by or for the account of the Company or any of its
      wholly-owned subsidiaries, and the disposition of any such shares (other than
      the cancellation or retirement thereof) shall be considered an issue or sale
      of
      Common Stock for the purpose of this Section 11.

     

    (c)  Stock
      Splits and Dividends.
      If the
      Company shall, at any time or from time to time while Warrants are outstanding,
      pay a dividend or make a distribution on its Common Stock in shares of Common
      Stock, subdivide its outstanding shares of Common Stock into a greater number
      of
      shares or combine its outstanding shares of Common Stock into a smaller number
      of shares or issue by reclassification of its outstanding shares of Common
      Stock
      any shares of its capital stock (including any such reclassification in
      connection with a consolidation or merger in which the Company is the continuing
      corporation), then the Warrant Share Exercise Price and the number of Warrant
      Shares in effect immediately prior to the date upon which such change shall
      become effective shall be adjusted by the Company so that the Holder shall
      be
      entitled to receive the number of shares of Common Stock or other capital stock
      which such Holder would have received immediately following such event had
      this
      Warrant been exercised immediately prior to such event. Such adjustments shall
      be made successively whenever any event listed above shall occur.

     

    (d)  Reorganization
      or Reclassification.
      If any
      capital reorganization or reclassification of the capital stock of the Company
      shall be effected in such a way (including, without limitation, by way of
      consolidation or merger) that holders of Common Stock but not holders of Company
      Warrants shall be entitled to receive stock, securities or assets with respect
      to or in exchange for Common Stock then, as a condition of such reorganization
      or reclassification, lawful and adequate provision shall be made whereby the
      Holder shall thereafter have the right to receive, upon the basis and upon
      the
      terms and conditions specified herein and in lieu of the shares of Common Stock
      of the Company immediately theretofore receivable upon the exercise of this
      Warrant, such shares of stock, securities or assets as may be issued or payable
      with respect to or in exchange for a number of outstanding shares of Common
      Stock equal to the number of shares of such stock immediately theretofore so
      receivable had such reorganization or reclassification not taken place and
      in
      any such case appropriate provision shall be made with respect to the rights
      and
      interests of such Holder to the end that the provisions hereof (including
      without limitation provisions for adjustments of the Warrant Share Exercise
      Price) shall thereafter be applicable, as nearly as may be, in relation to
      any
      shares of stock, securities or assets thereafter deliverable upon the exercise
      of such rights (including an immediate adjustment, by reason of such
      reorganization or reclassification, of the Exercise Price to the value for
      the
      Common Stock reflected by the terms of such reorganization or reclassification
      if the value so reflected is less than the Warrant Share Exercise Price in
      effect immediately prior to such reorganization or reclassification). In the
      event of a merger or consolidation of the Company as a result of which a greater
      or lesser number of shares of common stock of the surviving corporation are
      issuable to holders of the Common Stock of the Company outstanding immediately
      prior to such

     

    
      
         

      

      
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    merger
      or
      consolidation, the Warrant Share Exercise Price in effect immediately prior
      to
      such merger or consolidation shall be adjusted in the same manner as though
      there were a subdivision or combination of the outstanding shares of Common
      Stock of the Company.

     

    (e)  Distributions.
      In case
      the Company shall fix a payment date for the making of a distribution to all
      holders of Common Stock (including any such distribution made in connection
      with
      a consolidation or merger in which the Company is the continuing corporation)
      of
      evidences of indebtedness or assets (other than cash dividends or cash
      distributions payable out of consolidated earnings or earned surplus or
      dividends or distributions referred to in subsection (c) of this
      Section 11), or subscription rights or warrants, the Warrant Share Exercise
      Price to be in effect after such payment date shall be determined by multiplying
      the Warrant Share Exercise Price in effect immediately prior to such payment
      date by a fraction, the numerator of which shall be the total number of shares
      of Common Stock outstanding multiplied by the Market Price (as defined below)
      per share of Common Stock immediately prior to such payment date, less the
      fair
      market value (as determined by the Company’s Board of Directors in good faith)
      of said assets or evidences of indebtedness so distributed, or of such
      subscription rights or warrants, and the denominator of which shall be the
      total
      number of shares of Common Stock outstanding multiplied by such Market Price
      per
      share of Common Stock immediately prior to such payment date. “Market
      Price”
means,
      for any security as of any date, the last sales price of such security on the
      principal trading market where such security is listed or traded as reported
      by
      Bloomberg Financial Markets (or a comparable reporting service of national
      reputation selected by the Company and reasonably acceptable to the holder
      hereof if Bloomberg Financial Markets is not then reporting closing sales prices
      of such security) (in any case, “Bloomberg”),
      or if
      the foregoing does not apply, the last reported sales price of such security
      on
      a national exchange or in the over-the-counter market on the electronic bulletin
      board for such security as reported by Bloomberg, or, if no such price is
      reported for such security by Bloomberg, the average of the bid prices of all
      market makers for such security as reported in the “pink sheets” by Pink Sheets
      LLC, in each case for such date or, if such date was not a trading day for
      such
      security, on the next preceding date which was a trading day. If the Market
      Price cannot be calculated for such security as of such date on any of the
      foregoing bases, the Market Price of such security on such date shall be the
      fair market value as reasonably determined by an investment banking firm
      selected by the Company and reasonably acceptable to the holder hereof, with
      the
      costs of such appraisal to be borne by the Company. Such adjustment shall be
      made successively whenever such a payment date is fixed.

     

    (f)  Effective
      Date of Adjustment.
      An
      adjustment to the Warrant Share Exercise Price shall become effective
      immediately after the payment date in the case of each dividend or distribution
      and immediately after the effective date of each other event which requires
      an
      adjustment.

     

    (g)  Subsequent
      Adjustments.
      In the
      event that, as a result of an adjustment made pursuant to subsections (a)
      through (e), the Holder shall become entitled to receive any shares of capital
      stock of the Company other than shares of Common Stock, the number of such
      other
      shares so receivable upon the exercise of this Warrant 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    shall
      be
      subject thereafter to adjustment from time to time in a manner and on terms
      as
      nearly equivalent as practicable to the provisions contained
      herein.

     

    (h)  Other
      Action Affecting Exercise Price.
      If, at
      any time during the Exercise Period, the Company takes any action affecting
      the
      Common Stock that would be covered by Section 11, but for the manner in
      which such action is taken or structured, which would in any way diminish the
      value of this Warrant, then the Warrant Share Exercise Price shall be adjusted
      in such manner as the Board of Directors of the Company shall in good faith
      determine to be equitable under the circumstances.

     

    (i)  Additional
      Warrant Shares.
      If
      after the Registration Statement registering the Warrant Shares required by
      Section 2(a) of the Registration Rights Agreement has been declared
      effective by the Securities and Exchange Commission, (i)(A) sales of
      Warrant Shares can no longer be made pursuant to such Registration Statement,
      (B) such Registration Statement is no longer effective, or (C) the
      Common Stock is not listed or included for quotation on the Nasdaq Capital
      Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
      York
      Stock Exchange or the American Stock Exchange and (ii) the Holder no longer
      holds any portion of the Notes (or Conversion Shares into which they have been
      converted) (each of such events, a “Default
      Event”)
      and
      such Default Event exists without interruption for more than five (5) business
      days, then this Warrant will become exercisable for an additional number of
      shares of Common Stock (the “Additional
      Warrant Shares”)
      equal
      to (s) the number of Warrant Shares then issuable upon exercise of the
      Warrant assuming a cashless exercise pursuant to Section 3(d) of this Warrant,
      multiplied by (t) ten hundredths (.10). If the Default Event continues
      without interruption for more than sixty (60) days, then this Warrant will
      become exercisable for a further amount of Additional Warrant Shares equal
      to
      (u) the number of Warrant Shares then issuable upon exercise of the Warrant
      assuming a cashless exercise pursuant to Section 3(d) of this Warrant,
      multiplied by (v) five hundredths (.05). If the Default Event continues
      without interruption for more than one hundred twenty (120) days, then this
      Warrant will become exercisable (in part or in whole) for a further amount
      of
      Additional Warrant Shares equal to (w) the number of Warrant Shares then
      issuable upon exercise of the Warrant assuming a cashless exercise pursuant
      to
      Section 3(d) of this Warrant, multiplied by (x) five hundredths (.05).
      Thereafter, for each additional sixty (60) day period after the one hundred
      and
      twentieth (120th)
      day
      following the commencement of a Default Event during which such Default Event
      continues without interruption, but limited to a period of three hundred sixty
      (360) days of existence of a continuous Default Event, this Warrant will become
      exercisable for a further amount of Additional Warrant Shares equal to
      (y) the number of Warrant Shares then issuable upon exercise of the Warrant
      assuming a cashless exercise pursuant to Section 3(d) of this Warrant,
      multiplied by (z) five hundredths (.05). After the three hundred and
      sixtieth (360th)
      day of
      existence of a continuous Default Event, the Holder will accrue no further
      rights to Additional Warrant Shares. The exercise price for such Additional
      Warrant Shares (the “Additional
      Share Exercise Price”)
      shall
      be $.01 per share.

     

    12.  Voluntary
      Adjustment by the Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Warrant Share Exercise Price to any 

     

    
      
         

      

      
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    amount
      and for any period of time deemed appropriate by the Board of Directors of
      the
      Company provided that such reduction shall apply on a pro
      rata
      basis to
      all of the Warrants.

     

    13.  Notice
      of Adjustment.
      Whenever the number of Warrant Shares or number or kind of securities or other
      property purchasable upon the exercise of this Warrant or the Warrant Share
      Exercise Price is adjusted, as herein provided, the Company shall give notice
      thereof to the Holder, which notice shall state the number of Warrant Shares
      (and other securities or property) purchasable upon the exercise of this Warrant
      and the Warrant Share Exercise Price for such Warrant Shares (and other
      securities or property) after such adjustment, setting forth a brief statement
      of the facts requiring such adjustment and setting forth the computation by
      which such adjustment was made.

     

    14.  Call
      Provision.
      Unless
      and to the extent Holder is prohibited from exercising under Section 3(c),
      notwithstanding any other provision contained herein to the contrary, in the
      event that the closing bid price of a share of Common Stock as traded on the
      American Stock Exchange, Inc. (or such other exchange or stock market on which
      the Common Stock may then be listed or quoted) equals or exceeds $2.52
      (appropriately adjusted for any stock split, reverse stock split, stock dividend
      or other reclassification or combination of the Common Stock occurring after
      the
      date hereof) for twenty (20) consecutive trading days commencing after the
      Registration Statement (as defined in the Registration Rights Agreement) has
      been declared effective, the Company, upon thirty (30) days prior written notice
      (the “Notice
      Period”)
      given
      to the Holder within one business day immediately following the end of such
      twenty (20) trading day period, may call this Warrant, in whole or in part,
      at a
      redemption price equal to $0.76 per
      share
      of Common Stock then purchasable pursuant to this Warrant; provided that
      (i) all of Warrant Shares issuable upon the exercise of this Warrant either
      (A) are registered pursuant to an effective Registration Statement (as
      defined in the Registration Rights Agreement) that has not been suspended and
      for which no stop order is in effect, and pursuant to which the Holder is able
      to sell such shares of Common Stock at all times during the Notice Period or
      (B) no longer constitute Registrable Securities (as defined in the
      Registration Rights Agreement); (ii) the number of shares of Common Stock
      issuable upon the exercise of Warrants and any other series of warrants included
      in such notice of redemption does not exceed the cumulative trading volume
      of
      the Common Stock on any stock exchange or market on which the Common Stock
      may
      then be traded for the thirty (30) consecutive trading days prior to the first
      day of the Notice Period; (iii) the Company has not issued a warrant
      redemption notice on any other series of warrants within sixty (60) days of
      the
      first day of the Notice Period; and (iv) the first day of such Notice
      Period is not within three hundred and sixty-five (365) days of the Closing
      Date
      or within ninety (90) days of the Termination Date. In the event that less
      than
      all of the Company Warrants (as defined below) are called pursuant to this
      Section 14, any call of less than all the Company Warrants shall be on a
      pro rata basis for each holder of Company Warrants. Notwithstanding any such
      notice by the Company, the Holder shall have the right to exercise this Warrant
      prior to the end of the Notice Period. The term “Company
      Warrants”
means
      a
      series of Warrants of like tenor issued by the Company pursuant to the Purchase
      Agreement.

     

    15.  Notice
      of Corporate Action.
      If at
      any time:

     

    (a)  the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend or other distribution, or any
      right

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    to
      subscribe for or purchase any evidences of its indebtedness, any shares of
      stock
      of any class or any other securities or property, or to receive any other right,
      or

     

    (b)  there
      shall be any capital reorganization of the Company, any reclassification or
      recapitalization of the capital stock of the Company or any consolidation or
      merger of the Company with, or any sale, transfer or other disposition of all
      or
      substantially all the property, assets or business of the Company to, another
      corporation or,

     

    (c)  there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of
      the Company;

     

    then,
      in
      any one or more of such cases, the Company shall give to Holder (i) at
      least ten (10) days’ prior written notice of the date on which a record is to be
      taken for such dividend, distribution or right or for determining rights to
      vote
      in respect of any such reorganization, reclassification, merger, consolidation,
      sale, transfer, disposition, liquidation or winding up, and (ii) in the
      case of any such reorganization, reclassification, merger, consolidation, sale,
      transfer, disposition, dissolution, liquidation or winding up, at least ten
      (10)
      days’ prior written notice of the date when the same shall take place. Such
      notice in accordance with the foregoing clause also shall specify (i) the
      date on which the holders of Common Stock shall be entitled to any such
      dividend, distribution or right, and the amount and character thereof, and
      (ii) the date on which any such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up is to take place and the time, if any such time is to be fixed, as of which
      the holders of Common Stock shall be entitled to exchange their Warrant Shares
      for securities or other property deliverable upon such disposition, dissolution,
      liquidation or winding up. Each such written notice shall be sufficiently given
      if addressed to Holder at the last address of Holder appearing on the books
      of
      the Company and delivered in accordance with Section 17(d).

     

    16.  Authorized
      Shares.
      The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be
      listed.

     

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    the
      par
      value of any Warrant Shares or Additional Warrant Shares above the amount
      payable therefor upon such exercise immediately prior to such increase in par
      value, (b) take all such action as may be necessary or appropriate in order
      that the Company may validly and legally issue fully paid and nonassessable
      Warrant Shares or Additional Warrant Shares upon the exercise of this Warrant,
      and (c) use commercially reasonable efforts to obtain all such
      authorizations, exemptions or consents from any public regulatory body having
      jurisdiction thereof as may be necessary to enable the Company to perform its
      obligations under this Warrant.

     

    17.  Miscellaneous.

     

    (a)  Jurisdiction.
      This
      Warrant shall constitute a contract under the laws of Delaware, without regard
      to its conflict of law, principles or rules.

     

    (b)  Restrictions.
      The
      Holder acknowledges that the Warrant Shares and Additional Warrant Shares
      acquired upon the exercise of this Warrant, if not registered, will have
      restrictions upon resale imposed by state and federal securities
      laws.

     

    (c)  Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding all rights hereunder
      terminate on the Termination Date. If the Company willfully and knowingly fails
      to comply with any provision of this Warrant, which failure to comply results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    (d)  Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    (e)  Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant or purchase Warrant Shares or Additional Warrant Shares, and no
      enumeration herein of the rights or privileges of Holder, shall give rise to
      any
      liability of Holder for the purchase price of any Common Stock or as a
      stockholder of the Company, whether such liability is asserted by the Company
      or
      by creditors of the Company.

     

    (f)  Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive the defense in any action
      for specific performance that a remedy at law would be adequate.

     

    
      
         

      

      
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    (g)  Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant and shall be enforceable by any such Holder
      or
      holder of Warrant Shares or Additional Warrant Shares.

     

    (h)  Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    (i)  Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

    (j)  Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized.

     

    

    Dated:       
      January 22, 2007

     

    
      	 	 	 
	 	MATRITECH,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
              Stephen D. Chubb
	 	Title:  
              Chief Executive Officer

    

     

     

    

     

    

    
 

     

     

     

     

     

     

     

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    NOTICE
      OF EXERCISE

    

    To: Matritech,
      Inc.

    

    (1)  The
      undersigned hereby elects to purchase ________ Warrant Shares/Additional Warrant
      Shares of Matritech, Inc. pursuant to the terms of the attached Warrant (only
      if
      exercised in full), and tenders herewith payment of the exercise price in full,
      together with all applicable transfer taxes, if any.

     

    (2)  Payment
      shall take the form of (check applicable box):

     

    o  
lawful
      money of the United States;
      or

     

    o  
the
      cancellation of such number of Warrant Shares as is necessary, in accordance
      with the formula set forth in subsection 3(d), to exercise this Warrant with
      respect to the maximum number of Warrant Shares purchasable pursuant to the
      cashless exercise provision set forth in subsection 3(d).

     

    (3)  Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

    

    

    The
      Warrant Shares shall be delivered to the following:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)     
      Accredited
      Investor/Qualified Institutional Buyer.
      The
      undersigned is either: (i) an “accredited investor” as defined in Rule
      501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act of 1933,
      as
      amended (the “Securities Act”) or (ii) a qualified institutional buyer as
      defined in Rule 144(A)(a) under the Securities Act. 

    

    [PURCHASER]

    

    

    By:
      ______________________________

    Name:

    Title:

    

    Dated:
      ___________________________

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information.

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
      assigned to

     

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:
      ______________, _______

    

    

    Holder’s
      Signature: _____________________________

    

    Holder’s
      Address:   _____________________________

     

                                _____________________________

    

    

    

    Signature
      Guaranteed: __________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.WWW.EXFILE.COM -- MATRITECH FORM 8-K -- EXHIBIT 4.8 -- 14850

    EXHIBIT
      4.8

     

    AMENDED
      AND RESTATED

    SECURITY
      AGREEMENT

    

    THIS
      AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”)
      is
      made as of January 22, 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 (as heretofore amended, the “Existing
      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 (as heretofore amended, the “Existing 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.    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
      B Purchase
      Agreement”
and,
      together with the Series A Purchase Agreement, the “Purchase
      Agreements”),
      pursuant to which Borrower is issuing its Series B 15% Secured Convertible
      Promissory Notes to such Holders (the “Series
      B Note Holders”
and,
      together with the Series A Note Holders, the “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”
and
      together with the Series A Notes, the “Notes”).

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    E.    Concurrently
      herewith, the holders of a majority of outstanding principal balance of the
      Series A Notes have consented to the issuance of the Series B Notes and directed
      the Collateral Agent to amend and restate the Existing Security Agreement and
      Existing 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.

    

    F.    In
      connection with the Series B 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 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.

    

    F.    In
      order
      to induce the Series B Note Holders to purchase the Series B Notes pursuant
      to
      the Series B Purchase Agreement, 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:

    

    1.    DEFINITIONS.
      Capitalized terms used but not otherwise defined herein shall have the meanings
      assigned to such terms in the respective Purchase Agreements, 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 (i) Sections A(i), (vi) or (vii) of Article
      VI
      of the Series A Notes or (ii) Sections A(i), (vi) or (vii) of Article VI of
      the

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Series
      B
      Notes.

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “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 both the Series A Notes and the Series
      B
      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 both the Series A Notes and the Series B Notes (i.e., equipment purchase
      and
      lease financing in an amount at any time not to exceed $200,000), provided
      that no
      such Liens shall extend to or cover any property other than the leased property
      or equipment purchased by proceeds of such permitted financing; (c) Liens for
      taxes, fees, assessments or other governmental charges or levies, either not
      delinquent or being contested in good faith by appropriate proceedings and
      for
      which Borrower maintains adequate reserves, (d) Liens for mechanics and other
      similar Liens not delinquent, and (e) Liens to secure payment of workers’
compensation, employment insurance, old age pensions, social security or other
      like obligations incurred in the ordinary course of business.

    

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

    

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    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 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 or any Series B 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 and Series B 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 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Series
      A
      Note Holders and the Series B 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, 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 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (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”.

    

    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, 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    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.

     

    (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.

     

    
      
        
        

      

      
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    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
      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

     

    
      
        
        

      

      
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    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.

     

    (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).

     

    
      
        
        

      

      
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    (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 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 

     

    
      
        
        

      

      
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    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, 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 

     

    
      
        
        

      

      
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    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 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 

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    9.    STANDARD
      OF CARE.

     

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

     

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

     

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

     

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

     

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

     

    10.    MISCELLANEOUS.

     

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

     

    (b)    Notices.
      Any
      notice contemplated herein or required or permitted to be given hereunder shall
      be made in the manner set forth in the 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.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (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 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.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

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

    

    
      	 	 	 
	 	BORROWER
	 	 
	 	MATRITECH, INC. 
	 
 	 
 	 
 
	 	By:  	/s/ Stephen
              D. Chubb
	 	
              
Name: Stephen
              D. Chubb
	 	Title: Chief
              Executive Officer 

    

     

    
      

      
        	 	 	 
	 	COLLATERAL
                AGENT
	 	 
	 	
                SDS
                  CAPITAL GROUP SPC, LTD.,

                as
                  Collateral Agent 

              
	 
 	 
 	 
 
	 	By:  	/s/ Steve
                Derby 
	 	
                
Name:
                Steve Derby 
	 	
                Title:
                  Director 

              

    

    

     

     

    

    

    
      Signature
        Page to Security Agreement

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

    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 and the Series
      B
      15% Secured Convertible Promissory Notes dated as of 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 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;

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (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:  	/s/ 
	 	
              

              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 

            

    

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    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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