SERIES B 15% SECURED CONVERTIBLE PROMISSORY NOTE

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

FOR VALUE RECEIVED , MATRITECH, INC., a corporation organized under the laws of Delaware (the “ Borrower ”), hereby promises to pay to the order of ____________________, or its registered assigns (individually, the “ Holder ,” and, collectively with the holders of the Other Series B Notes (as defined below), the “ Holders ”), the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “ Principal ”) when due, whether upon the Scheduled Maturity Date, on any Monthly Installment Date with respect to the Principal Installment Amount due on such Monthly Installment Date (each, as defined herein), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“ Interest ”) on any outstanding Principal at the rate of fifteen percent (15.0%) per annum (except as otherwise provided herein) (the “ Interest Rate ”), from the date set out above as the Issuance Date (the “ Issuance Date ”) until the same becomes due and payable, whether upon the Scheduled Maturity Date, on any Quarterly Installment Date with respect to the Interest Installment Amount due on such Quarterly Installment Date (each, as defined herein), acceleration, conversion, redemption or otherwise (in each case, in accordance with the terms hereof).

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

January 13, 2006 (the “ Series A Notes ”). The Series B Notes, the Securities Purchase Agreement, the Security Agreement, the Warrants issued pursuant to the Securities Purchase Agreement (the “ Series B   Warrants ”), the Amended and Restated Contingent License Agreement (the “ Contingent License Agreement ”), dated as of the date hereof, between the Borrower and the Collateral Agent (as defined in the Securities Purchase Agreement) for the benefit of the Holders of the Series B Notes and the holders of the Series A Notes, and the Registration Rights Agreement, dated as of the date hereof, between the Borrower and the signatories thereto (the “ Registration Rights Agreement ”), are collectively referred to herein as the “ Transaction Documents .” All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Securities Purchase Agreement.

A.    Payment of Principal . On each Monthly Installment Date, commencing on July 13, 2007, the Borrower shall pay to the Holder an amount equal to the Principal Installment Amount due on such Monthly Installment Date in cash or, provided there has been no Stock Payment Conditions Failure, in shares of Common Stock (or any combination of the foregoing), in accordance with the provisions of Article III. On the Scheduled Maturity Date, the Holder shall surrender the Note to the Borrower and the Borrower shall pay to the Holder, an amount in cash, representing all outstanding Principal and the accrued and unpaid Interest thereon.

B.    Payment of Interest . Interest shall accrue at the Interest Rate on the unpaid principal balance hereof from the Issuance Date until the same is paid, whether at maturity, or upon prepayment, repayment, conversion or otherwise. Interest shall be calculated based on a 365 day year and shall be payable quarterly in arrears on each Quarterly Installment Date, commencing on June 13, 2007, except that the first payment shall be in respect of interest accrued from the Issuance Date to June 13, 2007, and on the Scheduled Maturity Date (each an “ Interest Payment Date ”). On each Quarterly Installment Date, the Borrower shall pay to the Holder an amount equal to the Interest Installment Amount due on such Quarterly Installment Date in cash or, provided there has been no Stock Payment Conditions Failure, in shares of Common Stock (or any combination of the foregoing), in accordance with the provisions of Article III. On the Scheduled Maturity Date, the Holder shall surrender the Note to the Borrower and the Borrower shall pay to the Holder, an amount in cash, representing all outstanding Principal and the accrued and unpaid Interest thereon. Upon the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to twenty-four percent (24.0%) (the “ Default Rate ”). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. Interest on overdue interest shall accrue at the same rate compounded quarterly.

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

of the Series B Notes in cash in whole or in part, without premium or penalty, except as provided in the next sentence. Any such prepayment shall be accompanied by payment in cash of a premium equal to twenty-five percent (25.0%) of the principal amount of such prepayment plus all accrued and unpaid interest thereon. A Change of Control, as defined herein, shall automatically trigger prepayment in full of the Series B Notes and the payment of the required prepayment premium, without the need for any prior notice by Borrower pursuant to this Article I.C. The Borrower shall not prepay the outstanding Series B Notes except contemporaneously with prepayment of the outstanding Series A Notes and if any such prepayment is made, the Borrower shall prepay the outstanding Series A Notes and Series B Notes of each Holder and each holder of a Series A Note pro rata , based on the total amounts due on the Series A Notes and Series B Notes at the time of prepayment, and any such prepayment among all outstanding Series A Notes and Series B Notes shall be in a minimum amount equal to $500,000 and in incremental amounts equal to $100,000 in excess of such minimum amount. If Borrower, after giving notice of prepayment, fails to effect the prepayment in accordance with the terms of the notice (or within three (3) trading days after the date for prepayment), then Holder shall be entitled to exercise all remedies of Holder and the Borrower shall thereafter be prohibited from making any prepayment of the Note under this Article I.C.

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

A.    Conversion at the Option of the Holder . Subject to the limitations on conversions contained in Article IX, the Holder may, at any time and from time to time (including without limitation after receipt of notice of prepayment from Borrower under Article I.C hereof), convert (an “ Optional Conversion ”) all or any portion of the unpaid principal amount hereof and, to the extent requested in writing by the Holder, any accrued interest thereon into such number of fully paid and non-assessable shares of Common Stock as is equal to the quotient obtained by dividing (x) the amount of principal and interest, if any, being so converted by (y) the Conversion Price then in effect (the “ Optional Conversion Shares ”); provided that the Conversion Price may not be below $0.63 until after the Borrower’s stockholders have approved the stockholder proposal referred to in clause (i) of the last sentence of Section 4(g) of the Securities Purchase Agreement.

B.    Mechanics of Conversion . In order to effect an Optional Conversion, the Holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice of Optional Conversion to the Borrower (Attention: Secretary) and (y) surrender or cause to be surrendered this Note, duly endorsed, along with a copy of the Notice of Optional Conversion as soon as practicable

thereafter to the Borrower. Upon receipt by the Borrower of a facsimile copy of a Notice of Optional Conversion and the original Note, duly endorsed (or if this Note has been lost, stolen or destroyed the documentation required by Article XII.B hereof) from the Holder, the Borrower shall promptly send, via facsimile, a confirmation to the Holder stating that the Notice of Optional Conversion has been received, the date upon which the Borrower expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Borrower regarding the conversion.

(i)    Delivery of Common Stock Upon Conversion. Upon the surrender of this Note (or if this Note has been lost, stolen or destroyed the documentation required by Article XII.B hereof) accompanied by a Notice of Optional Conversion, the Borrower (itself, or through its transfer agent) shall, no later than the third (3 ^rd )business day following such surrender (the “ Delivery Period ”), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the Holder or its nominee stock certificates evidencing (x) that number of shares of Common Stock issuable upon conversion of that portion of this Note being converted and (y) a new Note representing the principal balance of this Note not being converted, if any. Notwithstanding the foregoing, if the Borrower’s transfer agent is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend (pursuant to the terms of the Securities Purchase Agreement) and the holder thereof is not then required to return such certificate for the placement of a legend thereon (pursuant to the terms of the Securities Purchase Agreement), the Borrower shall cause its transfer agent to promptly electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of the Holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“ DTC Transfer ”). If the aforementioned conditions to a DTC Transfer are not satisfied, the Borrower shall deliver as provided above to the Holder physical certificates representing the Common Stock issuable upon conversion. Further, the Holder may instruct the Borrower to deliver to the Holder physical certificates representing the Common Stock issuable upon conversion in lieu of delivering such shares by way of DTC Transfer.

(ii)    Taxes . The Borrower shall pay any and all taxes that may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the conversion of this Note.

(iii)    No Fractional Shares. If any conversion of this Note would result in the issuance of a fractional share of Common Stock (aggregating the entire amount of principal and interest being converted pursuant to a given Notice of Optional Conversion), such fractional share shall be payable in cash based upon the Closing Sales Price of the Common Stock at such time, and the number of shares of Common Stock issuable upon conversion of this Note shall be the next lower whole number of shares. If the Borrower elects not to, or is unable to, make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

(iv)    Conversion Disputes . In the case of any dispute with respect to a conversion, the Borrower shall promptly issue such number of shares of Common Stock as are not disputed in accordance with subparagraph (i) above. If such dispute involves the calculation of the Conversion Price, and such dispute is not promptly resolved by discussion between the

Majority Holders and the Borrower, the Borrower shall submit the disputed calculations to an independent outside accountant (which accountant shall be subject to the reasonable approval of the Majority Holders via facsimile within three (3) business days of receipt of the Notice of Optional Conversion. The accountant, at the Borrower’s sole expense, shall promptly audit the calculations and notify the Borrower and the Holders of the results no later than three (3) business days from the date it receives the disputed calculations. The accountant’s calculation shall be deemed conclusive, absent manifest error. The Borrower shall then issue the appropriate number of shares of Common Stock in accordance with subparagraph (i) above.

(v)    Payment of Accrued Amounts . Upon conversion of any unpaid principal amount of this Note, if the Holder has not elected to convert all of the accrued interest thereon, then all accrued but unconverted interest on such amount through and including the Conversion Date shall be paid on the Conversion Date in cash by the Borrower.

C.    Optional Conversion Make-Whole . If, in connection with any Optional Conversion, the Borrower is unable to issue at the applicable Conversion Price all the applicable Optional Conversion Shares that the Borrower is required to issue, then (A) the Borrower shall deliver to the Holder the maximum number of Optional Conversion Shares available on the applicable Conversion Date in accordance with Article II and (B) the Borrower shall pay to the Holder in cash, on the applicable Conversion Date, an amount equal to the product of (1) the number of Optional Conversion Shares that the Borrower is prohibited from issuing on the applicable Conversion Date and (2) the greater of (x) the applicable Conversion Price and (y) the Closing Sales Price on the trading day immediately preceding the applicable Conversion Date (the “ Optional Conversion Make-Whole ”).

A.    General . Subject to and in accordance with the terms of this Article III, on each applicable Installment Date, the Borrower shall pay to the Holder the Installment Amount as of such Installment Date by the combination of any of the following: (i) (A) provided that there has been no Stock Payment Conditions Failure and (B) provided that prior to the receipt of stockholder approval referred to in clause (i) of the last sentence of Section 4(g) of the Securities Purchase Agreement, the 10-day VWAP is not less than the then effective Conversion Price (unless waived by the Holder on its behalf), by requiring the conversion of all or any portion of the applicable Installment Amount into shares of Common Stock in accordance with the provisions of this Article III (a “ Borrower Conversion ”), and/or (ii) redeeming for cash all or any portion of the applicable Installment Amount in accordance with the provisions of this Article III (a “ Borrower Redemption ”); provided that all of the outstanding applicable Installment Amount as of each such Installment Date must be converted or redeemed by the Borrower on the applicable Installment Date, subject to the provisions of this Article III. Unless the Borrower Installment Notice (as defined below) indicates otherwise or if there is a Stock Payment Conditions Failure, the entire Installment Amount to be paid on such Installment Date shall be paid through a Borrower Conversion; provided that in no event may a Borrower Conversion be made at a Conversion Price below $0.63 until after the Borrower’s stockholders have approved the stockholder proposal referred to in clause (i) of the last sentence of

Section 4(g) of the Securities Purchase Agreement. Notwithstanding anything to the contrary herein, a Holder may elect to defer the receipt of any shares of Common Stock pursuant to a Borrower Conversion with written notice delivered to the Borrower until the earlier of (i) the Scheduled Maturity Date or (ii) the date a Registration Statement (as defined in the Registration Rights Agreement) is declared effective by the SEC. On or prior to the date which is the twentieth (20th) trading day prior to each Installment Date (each, an “ Installment Notice Due Date” ), the Borrower shall deliver written notice (each, a “ Borrower Installment Notice ”), to the Holder which Borrower Installment Notice shall state (i) the portion, if any, of the applicable Installment Amount to be converted pursuant to a Borrower Conversion (the “ Borrower Conversion Amount ”), (ii) the portion, if any, of the applicable Installment Amount which the Borrower elects to redeem pursuant to a Borrower Redemption (the “ Borrower Redemption Amount ”), (iii) whether the Holder elects a deferral of receipt of the shares of Common Stock pursuant to the Borrower Conversion and (iv) unless the Borrower has elected to pay the applicable Installment Amount entirely through a Borrower Redemption, the Borrower Installment Notice shall certify that the Stock Payment Conditions have been satisfied as of the date of the Borrower Installment Notice. Each Borrower Installment Notice whether actually given or deemed given shall be irrevocable, except as otherwise provided herein. The Borrower may give a Borrower Installment Notice that is effective with respect to all subsequent Installment Dates, unless and until modified by a subsequent Borrower Installment Notice given in accordance with this Article III.A, provided however, that such standing notice shall not become an irrevocable Borrower Installment Notice with respect to any Installment Amount until twenty (20) trading days prior to the applicable Installment Date. Except as expressly provided in this Article III.A, the Borrower shall redeem and convert the applicable Installment Amount of this Note pursuant to this Article III and the corresponding Installment Amounts of the Other Series B Notes pursuant to the corresponding provisions of the Other Series B Notes in the same ratio of the Installment Amount being redeemed and converted hereunder. The Borrower Redemption Amount (whether set forth in the Borrower Installment Notice or by operation of this Article III) shall be redeemed in accordance with Article III.B and the Borrower Conversion Amount shall be converted in accordance with Article III.C.

B.    Mechanics of Borrower Redemption . If the Borrower elects, or is deemed to have elected, a Borrower Redemption in accordance with Article III.A, then the Borrower Redemption Amount, if any, which is to be paid to the Holder on the applicable Installment Date shall be redeemed by the Borrower on such Installment Date upon payment by the Borrower to the Holder on such Installment Date, by wire transfer of immediately available funds, an amount in cash (the “ Borrower Installment Redemption Price ”) equal to 100% of the Borrower Redemption Amount. If the Borrower fails to redeem the Borrower Redemption Amount on the applicable Installment Date by payment of the Borrower Installment Redemption Price on such date, then at the option of the Holder designated in writing to the Borrower (any such designation, a “ Conversion Notice ” for purposes of this Note), the Holder may require the Borrower to convert all or any part of the Borrower Redemption Amount at the Effective Conversion Price. Conversions required by this Article III.B shall be made in accordance with the provisions of Article II.B. Notwithstanding anything to the contrary in this Article III.B, but subject to Article IX, until the Borrower Installment Redemption Price (together with any interest thereon) is paid in full, the Borrower Redemption Amount (together with any interest thereon) may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to Article II. In the event the Holder elects to convert all or any

portion of the Borrower Redemption Amount prior to the applicable Installment Date as set forth in the immediately preceding sentence, the Borrower Redemption Amount so converted shall be deducted from the Installment Amounts relating to the Installment Dates as set forth in the applicable Conversion Notice.

C.    Mechanics of Borrower Conversion .

(i)    If the Borrower pays any part of an Installment Amount pursuant to a Borrower Conversion in accordance with Article III.A, then on the Installment Date the Borrower shall issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the Holder or its nominee stock certificates evidencing a number of shares of Common Stock equal to the quotient of (x) the Borrower Conversion Amount divided by (y) the Effective Conversion Price (the “ Installment Conversion Shares ”), with cash in lieu of fractional shares (if any) payable to the Holder in accordance with Article II.B(iii). Notwithstanding the foregoing, if the Borrower’s transfer agent is participating in the DTC Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend (pursuant to the terms of the Securities Purchase Agreement) and the holder thereof is not then required to return such certificate for the placement of a legend thereon (pursuant to the terms of the Securities Purchase Agreement), the Borrower shall deliver such shares by way of DTC Transfer. If the aforementioned conditions to a DTC Transfer are not satisfied, the Borrower shall deliver as provided above to the Holder physical certificates representing the Common Stock issuable upon conversion. Further, the Holder may instruct the Borrower to deliver to the Holder physical certificates representing the Common Stock issuable upon conversion in lieu of delivering such shares by way of DTC Transfer.

(ii)    If there is a Stock Payment Conditions Failure with respect to any Borrower Conversion, which failure occurs after the Borrower Installment Notice with respect to such Borrower Conversion has become irrevocable, then the Borrower upon written notice to the Holder not less than five (5) trading days prior to the applicable Conversion Date shall be entitled to satisfy the payment of the relevant Installment Amount by wire transfer of immediately available funds, in an amount in cash equal to one hundred percent (100%) of the unconverted Borrower Conversion Amount on such Installment Date (plus accrued and unpaid interest thereon). If there is a Stock Payment Conditions Failure with respect to any Borrower Conversion and the Borrower does not timely notify the Holder of its election to make cash payment in accordance with the preceding sentence, then at the option of the Holder designated in writing to the Borrower, the Holder may require the Borrower to satisfy the payment of the relevant Installment Amount in one of the following ways or any combination thereof: (x) the Borrower shall redeem all or any part designated by the Holder of the unconverted Borrower Conversion Amount (such designated amount is referred to as the “First Redemption Amount” ) on such Installment Date, by paying to the Holder on such Installment Date (or such later date not more than two (2) trading days after the Holder delivers its election under this clause (ii)), by wire transfer of immediately available funds, an amount in cash equal to one hundred percent (100%) of such First Redemption Amount (plus accrued and unpaid interest thereon), (y) the Borrower Conversion shall be null and void with respect to all or any part designated by the Holder of the unconverted Borrower Conversion Amount (other than any amount redeemed under clause (x) of this Article III.C(ii)) and the Holder shall be entitled to all the rights of a Holder with respect to such amount of the Borrower Conversion Amount, or

(z) the Borrower shall deliver the Installment Conversion Shares on the next scheduled Installment Date or any other mutually agreed upon date if the Holder so elects pursuant to clauses (ii) or (iii) of Article XI.T; for the avoidance of doubt, the Borrower’s failure to issue shares of Common Stock on an Installment Date with respect to any Borrower Conversion Amount due to a Stock Payment Conditions Failure shall not be deemed an Event of Default hereunder so long as the Borrower otherwise promptly complies with the Holder’s written designation with respect to such Borrower Conversion Amount. If the Borrower fails to redeem any First Redemption Amount on or before the applicable Installment Date, by payment of such amount on the applicable Installment Date, then the Holder shall have the rights set forth in Article VI as if the Borrower failed to pay the applicable Borrower Redemption Amount and all other rights under this Note. Notwithstanding anything to the contrary in this Article III.C, but subject to Article IX, until the Borrower delivers shares of Common Stock representing the Borrower Conversion Amount to the Holder, the Borrower Conversion Amount may be converted by the Holder into shares of Common Stock pursuant to Article II. In the event the Holder elects to convert the Borrower Conversion Amount prior to the applicable Installment Date as set forth in the immediately preceding sentence, the Borrower Conversion Amount so converted shall be deducted from the Installment Amounts relating to the Installment Dates as set forth in the applicable Conversion Notice.

D.    Borrower Conversion Make-Whole . If, in connection with any Borrower Conversion, the Borrower is unable to issue at the applicable Effective Conversion Price all the shares of Common Stock that the Borrower would have been required to issue, then the Borrower shall pay to the Holder in cash, on the applicable Installment Date, an amount equal to the product of (1) the number of Installment Conversion Shares that the Borrower is prohibited from issuing on the applicable Installment Date and (2) the greater of (x) the applicable Effective Conversion Price and (y) the Closing Sales Price on the trading day immediately preceding the applicable Installment Date (the “ Borrower Conversion Make-Whole ”).

E.    Increase in Interest Applicable to Installment Amounts . In the event that (i) the Borrower shall have held a stockholder meeting and the stockholders shall have failed to approve the Stockholder Proposal providing for the issuance of any shares in payment of the Notes at a price below the Conversion Floor Price, as defined in the Securities Purchase Agreement, and (ii) the Borrower makes a Borrower Redemption in payment of any Installment Amounts at a time when the Effective Conversion Price shall be below the Conversion Price then in effect; then the Borrower shall, at the time it makes its next quarterly interest payment in accordance with Article I.B, pay interest on each installment paid by the Borrower as a Borrower Redemption under circumstances (i) and (ii) at the rate of seventeen percent (17%) rather than fifteen percent (15%).

A.    Reserved Amount . On or prior to the Issuance Date, and at all times thereafter until the date of stockholder approval of the Stockholder Proposals, the Borrower shall reserve such number of shares of its authorized but unissued shares of Common Stock for issuance of Optional Conversion Shares and Installment Conversion Shares pursuant to Articles II and III,

respectively, of the Series B Notes as is sufficient to provide for the full conversion of all of the Series B Notes outstanding at the then current Conversion Price thereof (without giving effect to the limitations contained in Article IX). On the date of stockholder approval of the Stockholder Proposals and at all times thereafter, the Borrower shall reserve such number of shares of its authorized but unissued shares of Common Stock for issuance of Optional Conversion Shares and Installment Conversion Shares pursuant to Articles II and III, respectively, of the Series B Notes as is sufficient to provide for the issuance of all such Optional Conversion Shares and Installment Conversion Shares (without giving effect to the limitations contained in Article IX). The amount of shares of the Borrower’s authorized but unissued shares of Common Stock reserved pursuant to this Article IV.A shall be referred to herein as the “ Reserved Amount. ” The Reserved Amount shall be allocated among the Holders as provided in Article XII.C.

B.    Increases to Reserved Amount . If the Reserved Amount for any three (3) consecutive trading days (the last of such three (3) trading days being the “ Authorization Trigger Date ”) shall be less than one hundred percent (100%) of the number of shares of Common Stock issuable upon full conversion of all then outstanding Series B Notes (without giving effect to the limitations contained in Article IX), the Borrower shall immediately notify the Holders of such occurrence and shall take immediate action (including, if necessary, seeking stockholder approval to authorize the issuance of additional shares of Common Stock) to increase the Reserved Amount to one hundred percent (100%) of the number of shares of Common Stock then issuable upon full conversion of all then outstanding Series B Notes at the then current Conversion Price (without giving effect to the limitations contained in Article IX). In the event the Borrower fails to so increase the Reserved Amount within ninety (90) days after an Authorization Trigger Date, the Holder shall thereafter have the option, exercisable in whole or in part at any time and from time to time, by delivery of a Default Notice to the Borrower, to require the Borrower to prepay in cash, for an amount equal to the Default Amount (as defined in Article VI.B), that portion of the unpaid principal amount hereof and accrued interest thereon such that, after giving effect to such prepayment, the then unissued portion of the Holder’s Reserved Amount is at least equal to one hundred percent (100%) of the total number of shares of Common Stock issuable upon conversion of this Note by the Holder. If the Borrower fails to prepay any portion of this Note as required hereby within five (5) business days after its receipt of such Default Notice, then the Holder shall be entitled to the remedies provided in Article VI.C.

A.    Conversion Defaults . If, (i) the Holder at any time submits a Notice of Optional Conversion and the Borrower fails for any reason (other than because such issuance would exceed the Holder’s allocated portion of the Reserved Amount, for which failures the Holders shall have the remedies set forth in Article IV) to deliver, on or prior to the fifth (5 ^th ) business day following the expiration of the Delivery Period for such conversion, such number of shares of Common Stock to which the Holder is entitled upon such conversion, or (ii) the Borrower provides written notice to the Holders (or makes a public announcement via press release) at any time of its intention not to issue shares of Common Stock upon exercise by the Holders of their conversion rights in accordance with the terms of the Series B Notes (other than because such

issuance would exceed a Holder’s allocated portion of the Reserved Amount), (each of (i) and (ii) being a “ Conversion Default ”), then the Holder may elect, at any time and from time to time prior to the Default Cure Date for such Conversion Default, by delivery of a Default Notice to the Borrower, to have all or any portion of the unpaid principal amount hereof and accrued interest thereto prepaid by the Borrower in cash, for an amount equal to the Default Amount (as defined in Article VI.B). If the Borrower fails to prepay any portion of this Note as required hereby within five (5) business days after its receipt of such Default Notice, then the Holder shall be entitled to the remedies provided in Article VI.C.

B.    Buy-In Cure . Unless the Borrower has notified the Holder in writing (or made a written announcement via press release) prior to the delivery by the Holder of a Notice of Optional Conversion that the Borrower is unable to honor conversions, if (i) (a) the Borrower fails to promptly deliver during the Delivery Period shares of Common Stock to the Holder upon a conversion of all or any portion of this Note or (b) there shall occur a Legend Removal Failure (as defined in Article VI.A(iv) below) and (ii) thereafter, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to make delivery in satisfaction of a sale by the Holder of the unlegended shares of Common Stock (the “ Sold Shares ”) which the Holder anticipated receiving upon such conversion (a “ Buy-In ”), the Borrower shall pay the Holder, in addition to any other remedies available to the Holder, the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the unlegended shares of Common Stock so purchased exceeds (y) the net proceeds received by the Holder from the sale of the Sold Shares. For example, if the Holder purchases unlegended shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for $10,000, the Borrower will be required to pay the Holder $1,000. The Holder shall provide the Borrower written notification and supporting documentation indicating any amounts payable to the Holder pursuant to this Article V.B.

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

(i)    the Borrower fails to pay any amount of Principal (including, without limitation, the Borrower’s failure to pay any redemption or make-whole payments), Interest or other amounts owing under this Note or any other Transaction Document, within three (3) business days after the applicable due date, whether on any applicable Installment Date, at maturity, upon acceleration or otherwise;

(ii)    the Common Stock (including any of the shares of Common Stock issuable upon conversion of this Note) is suspended from trading on any of, or is not listed (and authorized) for trading on at least one of, the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global Market, Nasdaq Global Select Market, or the Nasdaq Capital Market for an aggregate of ten (10) or more trading days in any twelve (12) month period;

(iii)    (a) the registration statement, if required to be filed by the Borrower pursuant to Section 2(a) of the Registration Rights Agreement, has not been declared effective by the one hundred eightieth (180 ^th ) day following the Demand Date (as defined in Section 2(a) of the Registration Rights Agreement), or in the case of any Additional Registration Statement (as defined in Section 3(b) of the Registration Rights Agreement), has not been declared effective by the sixtieth (60 ^th ) day after the event giving rise to the obligation to file the Additional Registration Statement, (b) any such registration statement (including any such Additional Registration Statement), after being declared effective, cannot be utilized by the Holders for the resale of all of their Registrable Securities (as defined in the Registration Rights Agreement) covered thereby for an aggregate of more than sixty (60) days, or (c) any Additional Registration Statement is not filed on or before the later of fifteen (15) trading days or three (3) trading days after receipt of all information from the holders of Registrable Securities required to be included in such Additional Registration Statement; provided, however that it shall not be deemed an Event of Default if the Borrower is unable to have a registration statement or an Additional Registration Statement declared effective solely because the SEC will not declare either the registration statement or Additional Registration Statement effective due to interpretations of Rule 415;

(iv)    the Borrower fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder upon conversion of this Note as and when required by the terms hereof and of the Securities Purchase Agreement or the Registration Rights Agreement (a “ Legend Removal Failure ”), and any such failure continues uncured for five (5) business days after the Borrower has been notified thereof in writing by the Holder;

(v)    the Borrower provides written notice (or otherwise indicates) to the Holder, or states by way of public announcement distributed via a press release, at any time, of its intention not to issue, or otherwise refuses to issue, shares of Common Stock to the Holder upon conversion in accordance with the terms of this Note (other than because such issuance would exceed the Holder’s allocated portion of the Reserved Amount, for which failures the Holder shall have the remedies set forth in Article IV);

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

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

(viii)    the Borrower shall:

(a)    sell, convey, transfer or dispose of all or substantially all of its assets (the presentation of any such transaction for stockholder approval being conclusive evidence that such transaction involves the sale of all or substantially all of the assets of the Borrower);

(b)    merge or consolidate with or into any person or entity, which results in either (i) the holders of the voting securities of the Borrower immediately prior to such transaction holding or having the right to direct the voting of fifty percent (50%) or less of the total outstanding voting securities of the Borrower or such other surviving or acquiring person or entity immediately following such transaction or (ii) the members of the board of directors or other governing body of the Borrower comprising fifty percent (50%) or less of the members of the board of directors or other governing body of the Borrower or such other surviving or acquiring person or entity immediately following such transaction (each of (i), (ii) and subclause (a) above being a “ Change of Control” );

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

(d)    have thirty-five percent (35%) or more of the voting power of its capital stock owned beneficially by one per