Exhibit 10.8

 

OMNIBUS AMENDMENT TO 2015 TRANSACTION DOCUMENTS

 

This Omnibus Amendment to 2015 Transaction Documents (this “Amendment”) dated as
of August 3, 2015 (the “Effective Date”), is entered into by and among (i) MELA
Sciences, Inc., a Delaware corporation (the “Company”), and (ii) the holders
(the “Purchasers” and each, a “Purchaser”) identified on the signature pages
hereto of (A) the Company’s 2.25% Series A Senior Secured Convertible Debentures
due June 22, 2020 (the “Series A Debentures”), (B) the Company’s 2.25% Series B
Senior Unsecured Convertible Debentures due June 22, 2020 (the “Series B
Debentures” and, together with the Series A Debentures, the “Debentures”) and
(C) the Company’s 9% Senior Secured Notes (the “Notes” and, together with the
Debentures, the “Debt Securities”), in each case issued pursuant to that certain
Securities Purchase Agreement dated as of June 22, 2015 (the “Purchase
Agreement”) entered into by and among the Company and the Purchasers.

 

1          Purpose. The Company has requested that the Purchasers agree to amend
the Purchase Agreement and the other Transaction documents as set forth herein,
and the Purchasers agree to such amendments on and subject to the terms and
conditions set forth herein and in reliance upon the representations and
warranties of the Company set forth herein. All capitalized terms used but not
defined in this Amendment have the meaning given to them in the Purchase
Agreement.

 

2          Amendments to Purchase Agreement. The Purchase Agreement is hereby
amended as follows:

 

(a)          The preamble to the Purchase Agreement is hereby amended by
deleting therefrom “(each, including its successors and assigns, a “Purchaser”
and collectively, the “Purchasers”)”.

 

(b)          Section 1.1 of the Purchase Agreement is hereby amended by deleting
therefrom in their entirety the definitions of the following terms: Debentures,
Intellectual Property Security Agreement, Security Agreement and Security
Documents.

 

(c)          Section 1.1 of the Purchase Agreement is hereby amended by
inserting therein the following definitions, each in its alphabetical order:

 

“Agent” has the meaning ascribed to such term in the Security Agreement.

 

“Debentures” means the Series A Debentures and the Series B Debentures, or any
of them, as the context may require.

 

“Intellectual Property Security Agreement” means the Amended and Restated
Intellectual Property Security Agreement dated on or about the date of the
Omnibus Amendment to 2015 Transaction Documents among the Company and the
Secured Parties, in the form of Exhibit D to the Omnibus Amendment to 2015
Transaction Documents.

 

“Note Purchasers” means the purchasers of the Notes.

 

 

 

 

 

“Omnibus Amendment to 2015 Transaction Documents” means that certain Omnibus
Amendment to 2015 Transaction Documents dated on or about August 3, 2015 entered
into by and among the Company and the Purchasers, amending this Agreement and
the other Transaction Documents as set forth therein.

 

“Purchasers” means the Series A Debentures Purchasers, the Series B Debentures
Purchasers and the Note Purchasers, or any of them, as the context may require.

 

“Secured Parties” means the Series A Purchasers and the Notes Purchasers, or any
of them, as the context may require.

 

“Security Agreement” means the Amended and Restated Security Agreement dated on
or about the date of the Omnibus Amendment to 2015 Transaction Documents among
the Company and the Secured Parties, in the form of Exhibit C to the Omnibus
Amendment to 2015 Transaction Documents.

 

“Security Documents” means the Security Agreement, the Intellectual Property
Security Agreement and any other documents and filings required under either of
them in order to grant the Secured Parties a first priority security interest in
the assets of the Company and the Subsidiaries as provided therein, including
all UCC-1 filing receipts.

 

“Series A Debentures” means the Company’s 2.25% Series A Senior Secured
Convertible Debentures due June 22, 2020, issued by the Company hereunder to
each of the Series A Purchasers, in the form of Exhibit A-1 hereto.

 

“Series A Purchasers” means the purchasers of the Series A Debentures identified
on the signature pages to the Omnibus Amendment to Transaction Documents.

 

“Series B Debentures” means the Company’s 2.25% Series B Senior Unsecured
Convertible Debentures due June 22, 2020, issued by the Company hereunder to
each of the Series B Purchasers, in the form of Exhibit A-2 hereto.

 

“Series B Purchasers” means the purchasers of the Series B Debentures identified
on the signature pages to the Omnibus Amendment to Transaction Documents.

 

“Transaction Documents” means this Agreement, the Debentures, the Notes, the
Warrants, the Registration Rights Agreement, the Warrant Amendments, the
Existing Debt Amendments, the Escrow Agreement, the Security Agreement, the
Intellectual Property Security Agreement, the Subsidiary Guarantee, the Omnibus
Amendment to 2015 Transaction Documents, all exhibits and schedules thereto and
hereto and any other documents, certificates, instruments or agreements executed
in connection with the transactions contemplated hereunder.

 

(d)          Section 4.14(a) of the Purchase Agreement is hereby amended and
restated in its entirety as follows:

 

(a)          No consideration (including any modification of any Transaction
Document) shall be offered or paid to any Person to amend or consent to a waiver
or modification of any provision of this Agreement unless the same consideration
is also offered to all of the parties to this Agreement. Further, the Company
shall not make any payment of principal or interest on the Debt Securities in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debt Securities at any applicable time. For clarification
purposes, (i) this provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and is
intended for the Company to treat the Purchasers as a class and shall not in any
way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise and (ii) none
of foreclosure upon, any results of foreclosure upon or any proceeds of
foreclosure upon any of the Collateral constitute payments made by the Company
on the Debt Securities within the meaning of the preceding sentence of this
Section 4.14(a).

 

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(e)          Section 4.20 of the Purchase Agreement is hereby amended and
restated in its entirety as follows:

 

4.20        [reserved]

 

(f)           Section 5.5 of the Purchase Agreement is hereby amended and
restated in its entirety as follows:

 

5.5          Amendments; Waivers. No provision of this Agreement, or any
agreement or instrument annexed as an exhibit hereto, may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchasers holding at least a majority in
interest of the Securities then outstanding or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is sought; provided,
however, that (i) unanimous consent shall be required for any amendment that
would adversely affect any Purchaser, (ii) any amendment that would adversely
affect any Purchaser entered into without unanimous consent will be void
ab initio and (iii) no amendment to any of the Security Documents shall be
deemed to adversely affect any Series B Purchaser. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right. The consent of the Major Investors
may be satisfied by a written instrument signed, in the case of an amendment, by
the Company and the Major Investors holding at least a majority in interest of
the Debt Securities then outstanding.

 

(g)          Section 5.18 of the Purchase Agreement is hereby amended and
restated in its entirety as follows:

 

5.18       Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as, and
the Company acknowledges that the Purchasers do not so constitute, a
partnership, an association, a joint venture or any other kind of group or
entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group or entity with respect to such obligations or the
transactions contemplated by the Transaction Documents or any matters, and the
Company acknowledges that the Purchasers are not acting in concert or as a
group, and the Company shall not assert any such claim with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
decision of each Purchaser to purchase Securities pursuant to the Transaction
Documents has been made by such Purchaser independently of any other Purchaser.
Each Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with such Purchaser making its investment hereunder and
that no other Purchaser will be acting as agent of such Purchaser in connection
with monitoring such Purchaser’s investment in the Securities. The Company and
each Purchaser confirms that each Purchaser has independently participated with
the Company and its Subsidiaries in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in its review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and its respective counsel have
chosen to communicate with the Company through GP. GP does not represent the
Purchasers other than Broadfin. EGS does not represent the Purchasers other than
Sabby. The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers. The use of a single
agreement to effectuate the purchase and sale of the Securities contemplated
hereby was solely in the control of the Company, not the action or decision of
any Purchaser, and was done solely for the convenience of the Company and its
Subsidiaries and not because it was required or requested to do so by any
Purchaser. It is expressly understood and agreed that each provision contained
in this Agreement and in each other Transaction Document is between the Company,
each Subsidiary and a Purchaser, solely, and not between the Company, its
Subsidiaries and the Purchasers collectively and not between and among the
Purchasers.

 

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(h)         Section 5.24 of the Purchase Agreement is hereby deleted.

 

(i)          The Purchase Agreement is hereby amended by adding Schedule 3.1(s)
attached hereto as Schedule 3.1(s) to the Purchase Agreement.

 

(j)          The Purchase Agreement is hereby amended by amending and restating
Schedule 3.1(aa) thereto in the form attached hereto as Schedule 3.1(aa).

 

(k)         Annex A to the Purchase Agreement is hereby deleted.

 

(l)          Exhibit A to the Purchase Agreement is hereby deleted. 

 

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(m)        The Purchase Agreement is hereby amended by adding Exhibit A-1
attached hereto as Exhibit A-1 to the Purchase Agreement.

 

(n)         The Purchase Agreement is hereby amended by adding Exhibit A-2
attached hereto as Exhibit A-2 to the Purchase Agreement.

 

(o)         Exhibit G to the Purchase Agreement is hereby amended and restated
in its entirety in the form attached hereto as Exhibit B.

 

3          Amendment to Security Agreement. The Security Agreement is hereby
amended by amending and restating the Security Agreement in its entirety in the
form attached hereto as Exhibit C.

 

4          Amendment to Notes. Each of the Notes is hereby amended by amending
and restating Section 9.j) in each Note as follows:

 

(j)          Secured Obligations. The obligations of the Company under this Note
are secured by all assets of the Company pursuant to the Security Agreement.

 

5          Amendment to Intellectual Property Security Agreement. The
Intellectual Property Security Agreement is hereby amended by amending and
restating the Intellectual Property Security Agreement in its entirety in the
form attached hereto as Exhibit D.

 

6          Representations and Warranties.

 

(a)          The Company represents and warrants to the Purchasers that (i) the
Purchasers are the only holders of Debentures registered on the Debenture
Register as of the date hereof, (ii) according to the Company’s share register,
as of the date hereof the Purchasers are the only holders of Securities, (iii)
after giving effect to this Amendment, no Event of Default exists; (iv) the
Company has performed and complied with all covenants, agreements, obligations
and conditions contained in the Purchase Agreement and the Transaction Documents
that are required to be performed or complied with by it; and (v) no injunction
or restraining order is in effect prohibiting the transactions contemplated
hereby. The Company acknowledges, confirms and agrees that, as of the date
hereof, the Company has no knowledge of any offsets, defenses, claims or
counterclaims against any Purchaser with respect to any of the Company’s
liabilities and obligations to the Purchasers under the Transaction Documents.

 

(b)          Each of the Purchasers represents and warrants to the Company that
such Purchaser, without having conducted any investigation, does not know of any
injunction or restraining order in effect prohibiting such Purchaser from
consummating the transactions contemplated hereby.

 

7          Covenants of the Company.

 

(a)          The Company shall, not later than 30 days after the date of this
Amendment, cause its accounts as Wells Fargo Bank, National Association to be
subject to an account control agreement with the Agent as the secured party
thereunder and otherwise meeting the requirements of Section 4(dd) of the
Security Agreement.

 

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(b)          The Company shall, not later than 30 days after the date of this
Amendment, deliver to the Secured Parties (as defined in the Security Agreement)
certificates of insurance identifying each of the Secured Parties as lender loss
payees, in respect of all insurance policies maintained by the Company.

 

8          Effectiveness. This Amendment will become effective upon:

 

(a)          receipt by each Series A Purchaser of a Series A Debenture, duly
executed and delivered by the Company, with a principal amount equal to the
principal amount of the Debenture (as defined in the Purchase Agreement before
giving effect to the amendments to the Purchase Agreement pursuant to this
Amendment) issued to such Series A Purchaser on the Closing Date;

 

(b)          receipt by each Series B Purchaser of a Series B Debenture, duly
executed and delivered by the Company, with a principal amount equal to the
principal amount of the Debenture (as defined in the Purchase Agreement before
giving effect to the amendments to the Purchase Agreement pursuant to this
Amendment) issued to such Series B Purchaser on the Closing Date;

 

(c)          receipt by the Purchasers of counterparts, executed by the Company
and each Purchaser, of this Amendment;

 

(d)          receipt by the Secured Parties of counterparts, executed by the
Company and each of the Secured Parties, of the Security Agreement and the
Intellectual Property Security Agreement;

 

(e)          receipt by the Purchasers of counterparts of that certain Omnibus
Amendment to 2014 Transaction Documents dated on or about the date hereof among
the Company and the purchasers identified therein, executed by the Company and
such purchasers;

 

(f)          receipt by the Purchasers of the executed legal opinion of Company
Counsel in the form of Exhibit E to the Purchase Agreement; and

 

(g)          receipt by the Purchasers of reimbursement for all expenses
incurred in connection with this Amendment and the other Transaction Documents
(including all reasonable attorneys’ fees and expenses) and invoiced to the
Company.

 

9          Exchange of Debentures. Upon the effectiveness of this Amendment
pursuant to Section 8 above, (a) each of the Purchasers shall be deemed to have
surrendered to the Company for cancellation the Debenture (as defined in the
Purchase Agreement prior to giving effect to the amendments to the Purchase
Agreement pursuant to this Amendment) issued to such Purchaser on the Closing
Date in exchange for the Debenture issued to such Purchaser pursuant to this
Amendment, and (b) each of the Debentures shall be deemed to have been issued on
the Closing Date, with interest accruing thereon beginning on the Closing Date.

 

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10          Miscellaneous. Except as expressly amended herein, all of the terms
and conditions of the Transaction Documents remain unchanged and in full force
and effect, and each Transaction Document (as modified herein) is hereby
ratified and confirmed. This Amendment may be executed in counterparts, each of
which shall constitute an original but all of which shall together constitute
one and the same Amendment. The execution of this Amendment and acceptance of
any documents related hereto shall not be deemed to be a waiver of any breach,
or Event of Default under the Transaction Documents, whether or not known to any
Purchaser and whether or not existing on the date of this Amendment. Any
determination that any provision of this Amendment or any application hereof is
invalid, illegal or unenforceable in any respect and in any instance shall not
affect the validity, legality, or enforceability of such provision in any other
instance, or the validity, legality or enforceability of any other provisions of
this Amendment. All rights and obligations hereunder, including matters of
construction, validity, and performance, shall be governed by and construed in
accordance with the law of the State of New York, without regard to the
conflicts of law provisions of the State of New York or of any other state.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties have caused this Omnibus Amendment to 2015
Transaction Documents to be duly executed and delivered by their proper and duly
authorized representatives as of the date and year first written above.

 

  COMPANY:       MELA SCIENCES, INC.       By:     

Michael R. Stewart

    Chief Executive Officer

  

[SIGNATURE PAGES OF PURCHASERS FOLLOW]

 

[Signature page to Omnibus Amendment to 2015 Transaction Documents]

 

 

[SIGNATURE PAGE OF PURCHASER TO MELA OMNIBUS AMENDMENT TO 2015 TRANSACTION
DOCUMENTS]

 

    Name of Investing Entity:   

    Signature of Authorized Signatory of Investing Entity:    

    Name of Authorized Signatory:    

    Title of Authorized Signatory:    

 

 

 

Exhibit A-1

 

Form of Series A Debenture

 

 

 

  

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: as of June 22, 2015

 

Original Conversion Price (subject to adjustment herein): $0.75

 

$_______________

 

2.25% SERIES A SENIOR SECURED CONVERTIBLE DEBENTURE

 DUE June 22, 2020

 

THIS 2.25% SERIES A SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of
duly authorized and validly issued 2.25% Series A Senior Secured Convertible
Debentures of MELA Sciences, Inc., a Delaware corporation, (the “Company”),
having its principal place of business at 50 South Buckhout Street, Suite 1,
Irvington, New York, 10533, designated as its 2.25% Series A Senior Secured
Convertible Debenture due June 22, 2020 (this debenture, the “Series A
Debenture” and, collectively with the other debentures of such series, the
“Series A Debentures”).

 

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or
its registered assigns (the “Holder”), or shall have paid pursuant to the terms
hereunder, the principal sum of $_______________ on June 22, 2020 (the “Maturity
Date”) or such earlier date as this Series A Debenture is required or permitted
to be repaid as provided hereunder, and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Series A
Debenture in accordance with the provisions hereof. This Series A Debenture is
subject to the following additional provisions:

 

Section 1.          Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Series A Debenture, (a) capitalized terms not
otherwise defined herein shall have the meanings set forth in the Purchase
Agreement and (b) the following terms shall have the following meanings:

 

“Alternate Consideration” has the meaning set forth in Section 5(e).

 

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“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against
the Company or any Significant Subsidiary thereof any such case or proceeding
that is not dismissed within 60 days after commencement, (c) the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered, (d)
the Company or any Significant Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment, (e) the
Company or any Significant Subsidiary thereof makes a general assignment for the
benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.

 

“Base Share Price” has the meaning set forth in Section 5(b).

 

“Beneficial Ownership Limitation” has the meaning set forth in Section 4(e).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Buy-In” shall have the meaning set forth in Section 4(c)(v).

 

“Capital Raised” has the meaning set forth in Section 6.

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 40% of the
voting securities of the Company (other than by means of conversion or exercise
of the Debentures and the Securities issued together with the Debentures), (b)
the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 40% of the aggregate voting power of the Company or
the successor entity of such transaction, (c) the Company sells or transfers all
or substantially all of its assets to another Person and the stockholders of the
Company immediately prior to such transaction own less than 60% of the aggregate
voting power of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within an 18 month period of more than one-half of
the members of the Board of Directors which is not approved by a majority of
those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members on the date
hereof), or (e) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth in clauses (a) through (d) above.

 

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“Closing Bid Price” means the closing bid price of the Common Stock on the
Trading Market, as reported by Bloomberg L.P.

 

“Conversion” has the meaning ascribed to such term in Section 4.

 

“Conversion Date” has the meaning set forth in Section 4(a).

 

“Conversion Price” has the meaning set forth in Section 4(b).

 

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1
attached hereto.

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of this Series A Debenture and for the payment of interest in
accordance with the terms hereof.

 

“Debentures” means the Series A Debentures and the Series B Debentures, or any
of them, as the context may require.

 

“Debenture Register” has the meaning set forth in Section 2(c).

 

“Dilutive Issuance” has the meaning set forth in Section 5(b).

 

“Dilutive Issuance Notice” has the meaning set forth in Section 5(b).

 

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

 

“Equity Conditions” means, during the period in question, (a) the Company shall
have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the Holder, if any,
(b) the Company shall have paid all liquidated damages and other amounts owing
to the Holder in respect of this Series A Debenture, (c)(i) there is an
effective Registration Statement pursuant to which the Holder is permitted to
utilize the prospectus thereunder to resell all of the shares of Common Stock
issuable pursuant to the Transaction Documents (and the Company believes, in
good faith, that such effectiveness will continue uninterrupted for the
foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to
the Transaction Documents (and shares issuable in lieu of cash payments of
interest) may be resold pursuant to Rule 144 without volume or manner-of-sale
restrictions or current public information requirements as determined by the
counsel to the Company as set forth in a written opinion letter to such effect,
addressed and acceptable to the Transfer Agent and the Holder, (d) the Common
Stock is trading on a Trading Market and all of the shares issuable pursuant to
the Transaction Documents are listed or quoted for trading on such Trading
Market (and the Company believes, in good faith, that trading of the Common
Stock on a Trading Market will continue uninterrupted for the foreseeable
future), (e) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the
shares then issuable pursuant to the Transaction Documents, (f) there is no
existing Event of Default and no existing event which, with the passage of time
or the giving of notice, would constitute an Event of Default, (g) the issuance
of the shares in question to the Holder would not violate the limitations set
forth in Section 4(a) or Section 4(d) herein, (h) there has been no public
announcement of a pending or proposed Fundamental Transaction or Change of
Control Transaction that has not been consummated, (i) the applicable Holder is
not in possession of any information provided by the Company that constitutes,
or may constitute, material non-public information and (j) for each Trading Day
in a period of 20 consecutive Trading Days prior to the applicable date in
question, the daily trading volume for the Common Stock on the principal Trading
Market exceeds $75,000 per Trading Day.

 

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“Event of Default” has the meaning set forth in Section 8(a).

 

“Excess Capital” has the meaning set forth in Section 6.

 

“Fundamental Transaction” has the meaning set forth in Section 5(e).

 

“Interest Conversion Rate” means 85% of the average of the VWAP’s for the ten
Trading Days immediately preceding the applicable Interest Payment Date.

 

“Interest Conversion Shares” has the meaning set forth in Section 2(a).

 

“Interest Notice Period” has the meaning set forth in Section 2(a).

 

“Interest Payment Date” has the meaning set forth in Section 2(a).

 

“Interest Share Amount” has the meaning set forth in Section 2(a).

 

“Late Fees” has the meaning set forth in Section 2(d).

 

“Mandatory Default Amount” means the sum of (a) the greater of (i) the
outstanding principal amount of this Series A Debenture, plus all accrued and
unpaid interest hereon, divided by the Conversion Price on the date the
Mandatory Default Amount is either (A) demanded (if demand or notice is required
to create an Event of Default) or otherwise due or (B) paid in full, whichever
has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory
Default Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, or (ii) 100% of the outstanding principal amount of
this Series A Debenture, plus 100% of accrued and unpaid interest hereon, and
(b) all other amounts, costs, expenses and liquidated damages due in respect of
this Series A Debenture.

 

“New Issue Price” has the meaning set forth in Section 5(c).

 

“New York Courts” has the meaning set forth in Section 9(d).

 

“Notice of Conversion” has the meaning set forth in Section 4(a).

 

“Original Issue Date” means June 22, 2015.

 

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“Permitted Indebtedness” means (a) the indebtedness evidenced by the Series A
Debentures and the Notes, (b) the Indebtedness existing on the Original Issue
Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement, (c)
the indebtedness evidenced by the Series B Debentures, (d) lease obligations and
purchase money indebtedness of up to $150,000, in the aggregate per year,
incurred in connection with the acquisition of capital assets and lease
obligations with respect to newly acquired or leased assets, and (e) other
indebtedness incurred in the ordinary course of business up to $250,000 at any
time outstanding.

 

“Permitted Lien” means the individual and collective reference to the following:
(a) Liens for taxes, assessments and other governmental charges or levies not
yet due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien, (c) Liens
incurred in connection with Permitted Indebtedness under clauses (a) and (b)
thereunder, and (d) Liens incurred in connection with Permitted Indebtedness
under clause (d) thereunder, provided that such Liens are not secured by assets
of the Company or its Subsidiaries other than the assets so acquired or leased.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of June
[__], 2015 among the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, among the Company and the original
Holders, in the form of Exhibit B attached to the Purchase Agreement.

 

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Holder as provided for in the Registration Rights
Agreement.

 

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

 

“Series B Debentures” means the Company’s 2.25% Series B Senior Unsecured
Debentures due June 22, 2020 issued pursuant to the Purchase Agreement.

 

“Share Delivery Date” has the meaning set forth in Section 4(c)(ii).

 

“Successor Entity” has the meaning set forth in Section 5(e).

 

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“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange (or any successors to any of the
foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by Pink OTC
Markets, Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Holders of a majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

 

Section 2.          Interest.

 

(a)       Payment of Interest in Cash or Kind. The Company shall pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Series A Debenture at the rate of 2.25% per annum, payable quarterly on
January 1, April 1, July 1 and October 1, beginning on the first such date after
the Original Issue Date, on each Conversion Date (as to that principal amount
then being converted) and on the Maturity Date (each such date, an “Interest
Payment Date”) (if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business Day), in cash
or, at the Company’s option, in duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock at the Interest Conversion Rate (the
dollar amount to be paid in shares, the “Interest Share Amount”) or a
combination thereof; provided, however, that payment in shares of Common Stock
may only occur if (i) all of the Equity Conditions have been met (unless waived
by the Holder in writing) during the 20 Trading Days immediately prior to the
applicable Interest Payment Date (the “Interest Notice Period”) and through and
including the date such shares of Common Stock are actually issued to the
Holder, (ii) the Company shall have given the Holder notice in accordance with
the notice requirements set forth below, (iii) the then applicable Conversion
Price is less than the Interest Conversion Rate and (iv) as to such Interest
Payment Date, prior to such Interest Notice Period (but not more than five (5)
Trading Days prior to the commencement of such Interest Notice Period), the
Company shall have delivered to the Holder’s account with The Depository Trust
Company a number of shares of Common Stock to be applied against such Interest
Share Amount equal to the quotient of (x) the applicable Interest Share Amount
divided by (y) the lesser of the (i) then Conversion Price and (ii) the Interest
Conversion Rate assuming for such purposes that the Interest Payment Date is the
Trading Day immediately prior to the commencement of the Interest Notice Period
(the “Interest Conversion Shares”).

 

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(b)          Company’s Election to Pay Interest in Cash or Kind. Subject to the
terms and conditions herein, the decision whether to pay interest hereunder in
cash, shares of Common Stock or a combination thereof shall be at the sole
discretion of the Company. Prior to the commencement of any Interest Notice
Period, the Company shall deliver to the Holder a written notice of its election
to pay interest hereunder on the applicable Interest Payment Date either in
cash, shares of Common Stock or a combination thereof and the Interest Share
Amount as to the applicable Interest Payment Date, provided that the Company may
indicate in such notice that the election contained in such notice shall apply
to future Interest Payment Dates until revised by a subsequent notice. During
any Interest Notice Period, the Company’s election (whether specific to an
Interest Payment Date or continuous) shall be irrevocable as to such Interest
Payment Date. Subject to the aforementioned conditions, failure to timely
deliver such written notice to the Holder shall be deemed an election by the
Company to pay the interest on such Interest Payment Date in cash. At any time
the Company delivers a notice to the Holder of its election to pay the interest
in shares of Common Stock, the Company shall timely file a prospectus supplement
pursuant to Rule 424 disclosing such election. The aggregate number of shares of
Common Stock otherwise issuable to the Holder on an Interest Payment Date shall
be reduced by the number of Interest Conversion Shares previously issued to the
Holder in connection with such Interest Payment Date.

 

(c)          Interest Calculations. Interest shall be calculated on the basis of
a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue
daily commencing on the Original Issue Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made. Payment
of interest in shares of Common Stock (other than the Interest Conversion Shares
issued prior to an Interest Notice Period) shall otherwise occur pursuant to
Section 4(c)(ii) herein and, solely for purposes of the payment of interest in
shares, the Interest Payment Date shall be deemed the Conversion Date. Interest
shall cease to accrue with respect to any principal amount converted, provided
that, the Company actually delivers the Conversion Shares within the time period
required by Section 4(c)(ii) herein. Interest hereunder will be paid to the
Person in whose name this Series A Debenture is registered on the records of the
Company regarding registration and transfers of the Debentures (the “Debenture
Register”). Except as otherwise provided herein, if at any time the Company pays
interest partially in cash and partially in shares of Common Stock to the
holders of the Debentures, then such payment of cash shall be distributed
ratably among the holders of the then-outstanding Debentures based on their (or
their predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement; provided, however, that none of foreclosure upon, any results of
foreclosure upon or any proceeds of foreclosure upon any of the Collateral
constitute payments made by the Company for purposes of this sentence.

 

(d)          Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 12%
per annum or the maximum rate permitted by applicable law (the “Late Fees”)
which shall accrue daily from the date such interest is due hereunder through
and including the date of actual payment in full. Notwithstanding anything to
the contrary contained herein, if, on any Interest Payment Date the Company has
elected to pay accrued interest in the form of Common Stock but the Company is
not permitted to pay accrued interest in Common Stock because it fails to
satisfy the conditions for payment in Common Stock set forth in Section 2(a)
herein, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 2 or paying the regularly
scheduled interest payment in cash, shall deliver, within three (3) Trading Days
of each applicable Interest Payment Date, an amount in cash equal to the product
of (x) the number of shares of Common Stock otherwise deliverable to the Holder
in connection with the payment of interest due on such Interest Payment Date
multiplied by (y) the highest VWAP during the period commencing on the Interest
Payment Date and ending on the Trading Day prior to the date such payment is
actually made. If any Interest Conversion Shares are issued to the Holder in
connection with an Interest Payment Date and are not applied against an Interest
Share Amount, then the Holder shall promptly return such excess shares to the
Company.

 

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(e)          Prepayment. Except as otherwise set forth in this Series A
Debenture, the Company may not prepay any portion of the principal amount of
this Series A Debenture without the prior written consent of the Holder.

 

Section 3.             Registration of Transfers and Exchanges.

 

(a)          Different Denominations. This Series A Debenture is exchangeable
for an equal aggregate principal amount of Series A Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No
service charge will be payable for such registration of transfer or exchange.

 

(b)          Investment Representations. This Series A Debenture has been issued
subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state securities laws and
regulations.

 

(c)          Reliance on Debenture Register. Prior to due presentment for
transfer to the Company of this Series A Debenture, the Company and any agent of
the Company may treat the Person in whose name this Series A Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Series A Debenture is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.

 

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Section 4.             Conversion.

 

(a)          Voluntary Conversion. At any time after the both (i) the Original
Issue Date and (ii) the earlier to occur of (1) the Company has received
shareholder approval as required by its Principal Market for the issuance of
shares of Common Stock upon conversion of this Series A Debenture and (2) six
months after the Original Issue Date (or until such later date if the Company
continues to seek shareholder approval at the request of the Holders), and until
this Series A Debenture is no longer outstanding, this Series A Debenture shall
be convertible, in whole or in part, into shares of Common Stock at the option
of the Holder, at any time and from time to time (subject to the conversion
limitations set forth in this Section 4(a) and in Section 4(d) hereof).
Notwithstanding the foregoing, if the Company has not obtained Shareholder
Approval, the Company may not issue a number of shares of Common Stock, which,
when aggregated with any shares of Common Stock issued (i) pursuant to any
Debentures issued pursuant to the Purchase Agreement (whether upon conversion or
as payment of interest), and (ii) upon prior exercise of any Warrant issued
pursuant to the Purchase Agreement, would exceed 1,622,612, subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of the Purchase Agreement (such number of shares, the “Issuable
Maximum”). The Holder and the holders of the other Debentures and Warrants
issued pursuant to the Purchase Agreement shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s
original Subscription Amount by (y) the aggregate original Subscription Amount
of all holders pursuant to the Purchase Agreement. In addition, the Holder may
allocate its pro-rata portion of the Issuable Maximum among Warrants and
Debentures held by it in its sole discretion. Such portion shall be adjusted
upward ratably in the event a Purchaser (other than the Holder) no longer holds
any Warrants or Debentures and the amount of shares issued to such Purchaser
pursuant to its Warrants and Debentures was less than such Purchaser’s pro-rata
share of the Issuable Maximum. The Holder shall effect conversions by delivering
to the Company a Notice of Conversion, the form of which is attached hereto as
Annex A (each, a “Notice of Conversion”), specifying therein the principal
amount of this Series A Debenture to be converted and the date on which such
conversion shall be effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder.
No ink-original Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Series A Debenture to the Company
unless the entire principal amount of this Series A Debenture, plus all accrued
and unpaid interest thereon, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this Series A
Debenture in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount(s) converted and the
date of such conversion(s). The Company may deliver an objection to any Notice
of Conversion within one (1) Business Day of delivery of such Notice of
Conversion. In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest error.
The Holder, and any assignee by acceptance of this Series A Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Series A Debenture, the unpaid and
unconverted principal amount of this Series A Debenture may be less than the
amount stated on the face hereof.

 

(b)          Conversion Price. The conversion price in effect on any Conversion
Date shall be equal to $0.75, subject to adjustment herein (the “Conversion
Price”).

 

(c)          Mechanics of Conversion.

 

i          Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Series A Debenture to be converted by (y) the Conversion Price.

 

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ii          Delivery of Certificate Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the “Share Delivery Date”), the Company
shall deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase Agreement)
representing the number of Conversion Shares being acquired upon the conversion
of this Series A Debenture (including, if the Company has given continuous
notice pursuant to Section 2(b) for payment of interest in shares of Common
Stock at least 20 Trading Days prior to the date on which the Notice of
Conversion is delivered to the Company, shares of Common Stock representing the
payment of accrued interest otherwise determined pursuant to Section 2(a) but
assuming that the Interest Notice Period is the 20 Trading Days period
immediately prior to the date on which the Notice of Conversion is delivered to
the Company and excluding for such issuance the condition that the Company
deliver Interest Conversion Shares as to such interest payment prior to the
commencement of the Interest Notice Period) and (B) a bank check in the amount
of accrued and unpaid interest (if the Company has elected or is required to pay
accrued interest in cash). On or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date, the Company
shall deliver any certificate or certificates required to be delivered by the
Company under this Section 4(c) electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.

 

iii          Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Series
A Debenture delivered to the Company and the Holder shall promptly return to the
Company the Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.

 

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iv          Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Series A Debenture in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Conversion Shares; provided, however, that such delivery shall
not operate as a waiver by the Company of any such action the Company may have
against the Holder. In the event the Holder of this Series A Debenture shall
elect to convert any or all of the outstanding principal amount hereof, the
Company may not refuse conversion based on any claim that the Holder or anyone
associated or affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and or enjoining conversion of all or part of this
Series A Debenture shall have been sought and obtained. In the absence of such
injunction, the Company shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion. If the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in
cash, as liquidated damages and not as a penalty, for each $1,000 of principal
amount being converted, $10 per Trading Day (increasing to $20 per Trading Day
on the third (3rd) Trading Day after such liquidated damages begin to accrue and
increasing to $40 per Trading Day on the sixth Trading Day after such damages
begin to accrue) for each Trading Day after such Share Delivery Date until such
certificates are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or declare an Event of
Default pursuant to Section 8 hereof for the Company’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.

 

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v          Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Conversion Shares which the Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any, by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Series A Debenture in a principal amount equal to the
principal amount of the attempted conversion (in which case such conversion
shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued if the Company had timely complied with
its delivery requirements under Section 4(c)(ii). 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 conversion of this Series A Debenture with
respect to which the actual sale price of the Conversion Shares (including any
brokerage commissions) giving rise to such purchase obligation was a total of
$10,000 under clause (A) 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 and, upon request of the Company, evidence of the amount of such loss.
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 conversion of this Series A Debenture as required pursuant to the
terms hereof.

  

vi          Reservation of Shares Issuable Upon Conversion. The Company
covenants that it will use its best efforts to promptly seek shareholder
approval for an amendment to its certificate of incorporation to increase the
number of authorized shares of Common Stock to permit the conversion of this
Series A Debenture in its entirety and, at all times thereafter, reserve and
keep available out of its authorized and unissued shares of Common Stock for the
sole purpose of issuance upon conversion of this Series A Debenture and payment
of interest on this Series A Debenture, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of Persons
other than the Holder (and the other holders of the Debentures), not less than
such aggregate number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion
of the then outstanding principal amount of this Series A Debenture and payment
of interest hereunder. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable and, if the Registration Statement is then
effective under the Securities Act, shall be registered for public resale in
accordance with such Registration Statement (subject to such Holder’s compliance
with its obligations under the Registration Rights Agreement).

 

24

 

 

vii          Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Series A Debenture
or payment of interest on this Series A Debenture. As to any fraction of a share
which the Holder would otherwise be entitled to purchase upon such conversion,
the Company shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.

 

viii          Transfer Taxes and Expenses. Each issuance of certificates for
shares of Common Stock on conversion of this Series A Debenture or payment of
interest under this Series A Debenture shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that, the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Series A Debenture so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid. The
Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Conversion and all fees to the Depository Trust Company (or
another established clearing corporation performing similar functions) required
for same-day electronic delivery of the Conversion Shares.

 

(d)          Holder’s Conversion Limitations. The Company shall not effect any
conversion of this Series A Debenture, and a Holder shall not have the right to
convert any portion of this Series A Debenture, to the extent that after giving
effect to the conversion set forth on the applicable Notice of Conversion, the
Holder (together with the Holder’s Affiliates, and any Persons acting as a group
together with the Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below).  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 conversion of this Series A Debenture with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which are issuable upon (i)  conversion of the
remaining, unconverted principal amount of this Series A Debenture beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or conversion of
the unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other Debentures, preferred
stock or the Warrants) beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section 4(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this Section 4(d)
applies, the determination of whether this Series A Debenture is convertible (in
relation to other securities owned by the Holder together with any Affiliates)
and of which principal amount of this Series A Debenture is convertible shall be
in the sole discretion of the Holder, and the submission of a Notice of
Conversion shall be deemed to be the Holder’s determination of whether this
Series A Debenture may be converted (in relation to other securities owned by
the Holder together with any Affiliates) and which principal amount of this
Series A Debenture is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 4(d), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of the
following: (i) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public announcement by
the Company, or (iii) a more recent written 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 a Holder, the Company shall
within two 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 Series A
Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of the Debentures held by the applicable Holder.
The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(d) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Series A Debenture.

 

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Section 5.             Certain Adjustments.

 

(a)          Stock Dividends and Stock Splits. If the Company, at any time while
this Series A Debenture is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
conversion of, or payment of interest on, the Debentures), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

 

26

 

 

 

(b)          Subsequent Equity Sales. If the Company or any Subsidiary thereof,
as applicable, at any time while this Series A Debenture is outstanding, shall
sell or grant any option to purchase, or sell or grant any right to reprice, or
otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock Equivalents,
at an effective price per share less than the Conversion Price then in effect
(such lower price, the “Base Share Price” and such issuances collectively, a
“Dilutive Issuance”) (it being understood and agreed that if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share that is less than
the Conversion Price, such issuance shall be deemed to have occurred for less
than the Conversion Price on such date of the Dilutive Issuance at such
effective price), then simultaneously with the consummation of each Dilutive
Issuance the Conversion Price shall be reduced to equal the Base Share Price.
Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be
made, paid or issued under this Section 5(b) in respect of an Exempt Issuance.
The Company shall notify the Holder, in writing, no later than the Trading Day
following the issuance or deemed issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes
of clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the
Holder is entitled to receive a number of Conversion Shares based upon the Base
Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Notice of Conversion. If the Company enters into a Variable Rate
Transaction, despite the prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion or exercise price at which such securities may
be converted or exercised. Notwithstanding anything herein to the contrary, this
Section 5(b) shall terminate and be of no further force or effect after the
later of (i) the one year anniversary of the Original Issue Date, and (ii) the
earlier of (A) six months after the effective date of the registration statement
registering all of the shares of Common Stock required to be registered pursuant
to the Registration Rights Agreement (in the event multiple registration
statements are required to register all such shares, then this provision shall
refer to the last of such registration statements to become effective), and (B)
six months after the date that all of the Warrant Shares and shares of Common
Stock issued or issuable under this Series A Debentures are freely tradable
under Rule 144 without the requirement to be in compliance with the current
public information requirements thereunder.

 

27

 

 

(c)          Subsequent Rights Offerings. If the Company, at any time while this
Series A Debenture is outstanding, shall issue rights, options or warrants to
all holders of Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share (a “New Issue Price”) that is lower than
the Conversion Price on the record date referenced below, then the Conversion
Price shall be reduced to equal such New Issue Price. Such adjustment shall be
made whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

 

(d)          Pro Rata Distributions. If the Company, at any time while this
Series A Debenture is outstanding, shall distribute to all holders of Common
Stock (and not to the Holder) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any
security, then in each such case the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then per share fair market value at such record date
of the portion of such assets or evidence of indebtedness or rights or warrants
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

 

28

 

 

(e)          Fundamental Transaction. If, at any time while this Series A
Debenture is outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of the Company
with or into another Person, (ii) the Company, directly or indirectly, effects
any sale, lease, license, assignment, transfer, conveyance or other disposition
of all or substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, (v) the
Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent conversion of this Series A Debenture,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction (without regard to any limitation in Section 4(d)
on the conversion of this Series A Debenture), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a
holder of the number of shares of Common Stock for which this Series A Debenture
is convertible immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 4(d) on the conversion of this Series A Debenture)
is convertible. For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one (1) share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Series A Debenture
following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of the
Company under this Series A Debenture and the other Transaction Documents (as
defined in the Purchase Agreement) in accordance with the provisions of this
Section 5(e) pursuant to written agreements and shall, at the option of the
holder of this Series A Debenture, deliver to the Holder in exchange for this
Series A Debenture a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Series A
Debenture which is convertible for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares
of Common Stock acquirable and receivable upon conversion of this Series A
Debenture (without regard to any limitations on the conversion of this Series A
Debenture) prior to such Fundamental Transaction, and with a conversion price
which applies the conversion price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Common Stock
pursuant to such Fundamental Transaction and the value of such shares of capital
stock, such number of shares of capital stock and such conversion price being
for the purpose of protecting the economic value of this Series A Debenture
immediately prior to the consummation of such Fundamental Transaction). Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Series A Debenture and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Series A Debenture
and the other Transaction Documents with the same effect as if such Successor
Entity had been named as the Company herein.

 

(f)          Calculations. All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 5, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

 

29

 

 

(g)          to the Holder.

 

i          Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.

 

ii         Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock, (C) the Company shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Series A Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any notice provided
hereunder constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously file
such notice with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to convert this Series A Debenture during the
20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set
forth herein.

 

30

 

 

Section 6.             Mandatory Prepayment. Notwithstanding anything herein to
the contrary, from and after the Original Issue Date until December 31, 2015, at
the end of each calendar quarter, the Company shall determine the aggregate
amount of cash received by the Company for (i) the exercise of any warrants, (i)
issuance of any capital stock or other securities exercisable for or
exchangeable into shares of capital stock and (iii) capital raised by any other
means (such aggregate amount, the “Capital Raised”). To the extent that the
Capital Raised exceeds $4 million (such excess, the “Excess Capital”), the
Company shall, within five (5) Trading Days from the end of each such calendar
quarter, send the Holder a notice indicating the amount of Capital Raised from
the Original Issue Date to date. The Holder hereof shall within five (5) Trading
Days, by notice to the Company, elect whether to receive repayment of all or
part of the Excess Capital. The Company shall pay to the Holder (and the Holders
of other Debt Securities electing to receive repayment of the Excess Capital)
the portion of the Excess Capital (less any Excess Capital previously repaid)
which equals the amount obtained by multiplying the Excess Capital by a
fraction, the numerator of which is the principal amount of this Series A
Debenture and the denominator of which is the principal amount of all Debt
Securities which have requested repayment of the Excess Capital.

 

Section 7.             Negative Covenants. As long as any portion of this Series
A Debenture remains outstanding, unless the holders of at least 67% in principal
amount of the then outstanding Debt Securities shall have otherwise given prior
written consent, the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:

 

(a)          other than Permitted Indebtedness, enter into, create, incur,
assume, guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including, but not limited to, a guarantee, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom;

 

(b)          other than Permitted Liens, enter into, create, incur, assume or
suffer to exist any Liens of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom;

 

(c)          amend its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;

 

(d)          repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or Common
Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares
as permitted or required under the Transaction Documents and (ii) repurchases of
Common Stock or Common Stock Equivalents of departing officers and directors of
the Company, provided that such repurchases shall not exceed an aggregate of
$75,000 per year for all officers and directors during the term of this Series A
Debenture;

 

(e)          repay, repurchase or offer to repay, repurchase or otherwise
acquire any Indebtedness, other than the Debt Securities if on a pro-rata basis,
other than regularly scheduled principal and interest payments as such terms are
in effect as of the Original Issue Date or otherwise permitted hereunder,
provided that such payments shall not be permitted if, at such time, or after
giving effect to such payment, any Event of Default exist or occur;

 

31

 

 

(f)          pay cash dividends or distributions on any equity securities of the
Company;

 

(g)          enter into any transaction with any Affiliate of the Company which
would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved
by a majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or

 

(h)          enter into any agreement with respect to any of the foregoing.

 

Section 8.             Events of Default.

 

(a)          “Event of Default” means, wherever used herein, any of the
following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):

 

i          any default in the payment of (A) the principal amount of any
Debenture or (B) interest, liquidated damages and other amounts owing to a
Holder on any Debenture, as and when the same shall become due and payable
(whether on a Conversion Date, an Interest Payment Date or the Maturity Date or
by acceleration or otherwise) which default, solely in the case of an interest
payment or other default under clause (B) above, is not cured within 3 Trading
Days;

 

ii         the Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (xi) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
of such failure sent by the Holder or by any other Holder to the Company and (B)
10 Trading Days after the Company has become or should have become aware of such
failure;

 

iii        a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and
not covered by clause (vi) below) and which have been filed as exhibits to the
SEC Reports on or before the Original Issue Date or are filed as exhibits to the
SEC Reports after the Original Issue Date and while this Series A Debenture
remains outstanding;

 

iv        any representation or warranty made in this Series A Debenture, any
other Transaction Documents, any written statement pursuant hereto or thereto or
any other report, financial statement or certificate made or delivered to the
Holder or any other Holder shall be untrue or incorrect in any material respect
as of the date when made or deemed made;

 

32

 

 

v          the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

vi         the Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement that (a) involves
an obligation greater than $150,000, whether such indebtedness now exists or
shall hereafter be created, and (b) results in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise
become due and payable;

 

vii        the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within five Trading Days;

 

viii        the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or in excess of
40% of its assets in one transaction or a series of related transactions
(whether or not such sale would constitute a Change of Control Transaction);

 

ix          the Initial Registration Statement (as defined in the Registration
Rights Agreement) shall not have been declared effective by the Commission on or
prior to the 120th calendar day after the Closing Date or the Company does not
meet the current public information requirements under Rule 144 in respect of
the Registrable Securities (as defined under the Registration Rights Agreement);

 

x           if, during the Effectiveness Period (as defined in the Registration
Rights Agreement), either (a) the effectiveness of the Registration Statement
lapses for any reason or (b) the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights Agreement) under
the Registration Statement for a period of more than 20 consecutive Trading Days
or 30 non-consecutive Trading Days during any 12 month period; provided,
however, that if the Company is negotiating a merger, consolidation, acquisition
or sale of all or substantially all of its assets or a similar transaction and,
in the written opinion of counsel to the Company, the Registration Statement
would be required to be amended to include information concerning such pending
transaction(s) or the parties thereto which information is not available or may
not be publicly disclosed at the time, the Company shall be permitted an
additional 10 consecutive Trading Days during any 12 month period pursuant to
this Section 7(a)(x);

 

33

 

 

xi          the Company shall fail for any reason to deliver certificates to a
Holder prior to the fifth Trading Day after a Conversion Date pursuant to
Section 4(e) or any Forced Conversion Date pursuant to Section 6 or the Company
shall provide at any time notice to the Holder, including by way of public
announcement, of the Company’s intention to not honor requests for conversions
of any Debentures in accordance with the terms hereof;

 

xii         the electronic transfer by the Company of shares of Common Stock
through the Depository Trust Company or another established clearing corporation
is no longer available or is subject to a “chill”;

 

xiii        any monetary judgment, writ or similar final process shall be
entered or filed against the Company, any subsidiary or any of their respective
property or other assets for more than $100,000, and such judgment, writ or
similar final process shall remain unvacated, unbonded or unstayed for a period
of 45 calendar days;

 

xiv        the Company shall have failed to obtain Shareholder Approval of all
items required by Section 4.11(c) of the Purchase Agreement on or prior to
November 30, 2015; or

 

xv         an Event of Default (as defined in the Notes (as defined in the
Purchase Agreement)) shall have occurred and be continuing.

 

(b)          Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Series A Debenture, plus accrued but unpaid
interest, liquidated damages and other amounts owing in respect thereof through
the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount. Commencing 5 days after
the occurrence of any Event of Default that results in the eventual acceleration
of this Series A Debenture, the interest rate on this Series A Debenture shall
accrue at an interest rate equal to the lesser of 12% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holder shall promptly surrender this Series A Debenture to
or as directed by the Company. In connection with such acceleration described
herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of this Series A Debenture until such time, if any, as the Holder receives full
payment pursuant to this Section 8(b). No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent thereon.

 

34

 

 

Section 9.             Miscellaneous.

 

(a)          Notices. Any and all notices or other communications or deliveries
to be provided by the Holder hereunder, including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above, or such other
facsimile number or address as the Company may specify for such purposes by
notice to the Holder delivered in accordance with this Section 9(a). Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or sent by
a nationally recognized overnight courier service addressed to each Holder at
the facsimile number or address of the Holder appearing on the books of the
Company, or if no such facsimile number or address appears on the books of the
Company, at the principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given.

 

(b)          Absolute Obligation. Except as expressly provided herein, no
provision of this Series A Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
liquidated damages and accrued interest, as applicable, on this Series A
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Series A Debenture is a direct debt obligation of the Company.
This Series A Debenture ranks pari passu with all other Debt Securities now or
hereafter issued under the terms set forth herein.          

 

(c)          Lost or Mutilated Debenture. If this Series A Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Series A
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Series A Debenture, a new Series A Debenture for the principal amount of this
Series A Debenture so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such Series A
Debenture, and of the ownership hereof, reasonably satisfactory to the Company.

 

(d)          Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Series A Debenture shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflict of laws thereof. Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Series A Debenture and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Series A Debenture or
the transactions contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Series A Debenture, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.

 

35

 

 

(e)          Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Series A Debenture shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any other
provision of this Series A Debenture. The failure of the Company or the Holder
to insist upon strict adherence to any term of this Series A Debenture on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Series A Debenture on any other occasion. Any waiver by the Company or
the Holder must be in writing.

 

(f)          Severability. If any provision of this Series A Debenture is
invalid, illegal or unenforceable, the balance of this Series A Debenture shall
remain in effect, and if any provision is inapplicable to any Person or
circumstance, it shall nevertheless remain applicable to all other Persons and
circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal
of or interest on this Series A Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Series A Debenture, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has
been enacted.

 

36

 

 

(g)          Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief.  The remedies provided in this Series A Debenture shall be
cumulative and in addition to all other remedies available under this Series A
Debenture and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Series A
Debenture.  The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any such breach or any
such threatened breach, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall provide all
information and documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with the terms and
conditions of this Series A Debenture.

 

(h)          Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.

 

(i)          Headings. The headings contained herein are for convenience only,
do not constitute a part of this Series A Debenture and shall not be deemed to
limit or affect any of the provisions hereof.

 

(j)          Secured Obligation. The obligations of the Company under this
Series A Debenture are secured by all assets of the Company pursuant to the
Security Documents.

 

*********************

37

 

  

IN WITNESS WHEREOF, the Company has caused this Series A Debenture to be duly
executed by a duly authorized officer as of the Original Issue Date.

 

  mela sciences, inc.       By:     Michael R. Stewart   Chief Executive Officer
  Facsimile No. for delivery of Notices: (914) 291-3701

 

[Signature Page to Series A Debenture]

 

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the 2.25% Series A
Senior Secured Convertible Debenture due June 22, 2020 of MELA Sciences, Inc., a
Delaware corporation (the “Company”), into shares of Common Stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date
written below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of common stock of the Company does
not exceed the amounts specified under Section 4 of this Series A Debenture, as
determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

 

Conversion calculations:

 

Date to Effect Conversion:

 

Principal Amount of Series A Debenture to be Converted:

 

Payment of Interest in Common Stock __ yes __ no

 

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

 

Number of shares of Common Stock to be issued:

 

Signature:

 

Name:

 

Address for Delivery of Common Stock Certificates:

 

Or

 

DWAC Instructions:

 

Broker No:                              

Account No:                               

 

 

 

 

Schedule 1

 

CONVERSION SCHEDULE

 

The 2.25% Series A Senior Secured Convertible Debentures due on June 22, 2020 in
the aggregate principal amount of $____________ are issued by MELA Sciences,
Inc., a Delaware corporation. This Conversion Schedule reflects conversions made
under Section 4 of the above referenced Series A Debenture.

 

Dated: 

        Date of Conversion
(or for first entry,
Original Issue Date) Amount of
Conversion Aggregate
Principal
Amount
Remaining
Subsequent to
Conversion
(or original
Principal
Amount) Company Attest                                                          
                                                                               
     

 

 

 

 

Exhibit A-2

 

Form of Series B Debenture 

 

Exhibit A-2-1

 

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: as of June 22, 2015

Original Conversion Price (subject to adjustment herein): $0.75

 

$_______________

 

2.25% SERIES B SENIOR UNSECURED CONVERTIBLE DEBENTURE

DUE June 22, 2020

 

THIS 2.25% SERIES B SENIOR UNSECURED CONVERTIBLE DEBENTURE is one of a series of
duly authorized and validly issued 2.25% Series B Senior Unsecured Convertible
Debentures of MELA Sciences, Inc., a Delaware corporation, (the “Company”),
having its principal place of business at 50 South Buckhout Street, Suite 1,
Irvington, New York, 10533, designated as its 2.25% Series B Senior Unsecured
Convertible Debenture due June 22, 2020 (this debenture, the “Series B
Debenture” and, collectively with the other debentures of such series, the
“Series B Debentures”).

 

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or
its registered assigns (the “Holder”), or shall have paid pursuant to the terms
hereunder, the principal sum of $_______________ on June 22, 2020 (the “Maturity
Date”) or such earlier date as this Series B Debenture is required or permitted
to be repaid as provided hereunder, and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Series B
Debenture in accordance with the provisions hereof. This Series B Debenture is
subject to the following additional provisions:

 

Section 1.          Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Series B Debenture, (a) capitalized terms not
otherwise defined herein shall have the meanings set forth in the Purchase
Agreement and (b) the following terms shall have the following meanings:

 

“Alternate Consideration” has the meaning set forth in Section 5(e). 

 

Exhibit A-2-2

 

 

“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against
the Company or any Significant Subsidiary thereof any such case or proceeding
that is not dismissed within 60 days after commencement, (c) the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered, (d)
the Company or any Significant Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment, (e) the
Company or any Significant Subsidiary thereof makes a general assignment for the
benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.

 

“Base Share Price” has the meaning set forth in Section 5(b).

 

“Beneficial Ownership Limitation” has the meaning set forth in Section 4(e).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Buy-In” shall have the meaning set forth in Section 4(c)(v).

 

“Capital Raised” has the meaning set forth in Section 6.

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 40% of the
voting securities of the Company (other than by means of conversion or exercise
of the Debentures and the Securities issued together with the Debentures), (b)
the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 40% of the aggregate voting power of the Company or
the successor entity of such transaction, (c) the Company sells or transfers all
or substantially all of its assets to another Person and the stockholders of the
Company immediately prior to such transaction own less than 60% of the aggregate
voting power of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within an 18 month period of more than one-half of
the members of the Board of Directors which is not approved by a majority of
those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members on the date
hereof), or (e) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth in clauses (a) through (d) above.

 

Exhibit A-2-3

 

 

 

“Closing Bid Price” means the closing bid price of the Common Stock on the
Trading Market, as reported by Bloomberg L.P.

 

“Conversion” has the meaning ascribed to such term in Section 4.

 

“Conversion Date” has the meaning set forth in Section 4(a).

 

“Conversion Price” has the meaning set forth in Section 4(b).

 

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1
attached hereto.

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of this Series B Debenture and for the payment of interest in
accordance with the terms hereof.

 

“Debentures” means the Series A Debentures and the Series B Debentures, or any
of them, as the context may require.

 

“Debenture Register” has the meaning set forth in Section 2(c).

 

“Dilutive Issuance” has the meaning set forth in Section 5(b).

 

“Dilutive Issuance Notice” has the meaning set forth in Section 5(b).

 

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

 

“Equity Conditions” means, during the period in question, (a) the Company shall
have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the Holder, if any,
(b) the Company shall have paid all liquidated damages and other amounts owing
to the Holder in respect of this Series B Debenture, (c)(i) there is an
effective Registration Statement pursuant to which the Holder is permitted to
utilize the prospectus thereunder to resell all of the shares of Common Stock
issuable pursuant to the Transaction Documents (and the Company believes, in
good faith, that such effectiveness will continue uninterrupted for the
foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to
the Transaction Documents (and shares issuable in lieu of cash payments of
interest) may be resold pursuant to Rule 144 without volume or manner-of-sale
restrictions or current public information requirements as determined by the
counsel to the Company as set forth in a written opinion letter to such effect,
addressed and acceptable to the Transfer Agent and the Holder, (d) the Common
Stock is trading on a Trading Market and all of the shares issuable pursuant to
the Transaction Documents are listed or quoted for trading on such Trading
Market (and the Company believes, in good faith, that trading of the Common
Stock on a Trading Market will continue uninterrupted for the foreseeable
future), (e) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the
shares then issuable pursuant to the Transaction Documents, (f) there is no
existing Event of Default and no existing event which, with the passage of time
or the giving of notice, would constitute an Event of Default, (g) the issuance
of the shares in question to the Holder would not violate the limitations set
forth in Section 4(a) or Section 4(d) herein, (h) there has been no public
announcement of a pending or proposed Fundamental Transaction or Change of
Control Transaction that has not been consummated, (i) the applicable Holder is
not in possession of any information provided by the Company that constitutes,
or may constitute, material non-public information and (j) for each Trading Day
in a period of 20 consecutive Trading Days prior to the applicable date in
question, the daily trading volume for the Common Stock on the principal Trading
Market exceeds $75,000 per Trading Day.

 

Exhibit A-2-4

 

 

 

“Event of Default” has the meaning set forth in Section 8(a).

 

“Excess Capital” has the meaning set forth in Section 6.

 

“Fundamental Transaction” has the meaning set forth in Section 5(e).

 

“Interest Conversion Rate” means 85% of the average of the VWAP’s for the ten
Trading Days immediately preceding the applicable Interest Payment Date.

 

“Interest Conversion Shares” has the meaning set forth in Section 2(a).

 

“Interest Notice Period” has the meaning set forth in Section 2(a).

 

“Interest Payment Date” has the meaning set forth in Section 2(a).

 

“Interest Share Amount” has the meaning set forth in Section 2(a).

 

“Late Fees” has the meaning set forth in Section 2(d).

 

“Mandatory Default Amount” means the sum of (a) the greater of (i) the
outstanding principal amount of this Series B Debenture, plus all accrued and
unpaid interest hereon, divided by the Conversion Price on the date the
Mandatory Default Amount is either (A) demanded (if demand or notice is required
to create an Event of Default) or otherwise due or (B) paid in full, whichever
has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory
Default Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, or (ii) 100% of the outstanding principal amount of
this Series B Debenture, plus 100% of accrued and unpaid interest hereon, and
(b) all other amounts, costs, expenses and liquidated damages due in respect of
this Series B Debenture.

 

“New Issue Price” has the meaning set forth in Section 5(c).

 

“New York Courts” has the meaning set forth in Section 9(d).

 

“Notice of Conversion” has the meaning set forth in Section 4(a).

 

“Original Issue Date” means June 22, 2015. 

 

Exhibit A-2-5

 

 

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Series A
Debentures and the Notes, (b) the Indebtedness existing on the Original Issue
Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement, (c)
the indebtedness evidenced by the Series B Debentures, (d) lease obligations and
purchase money indebtedness of up to $150,000, in the aggregate per year,
incurred in connection with the acquisition of capital assets and lease
obligations with respect to newly acquired or leased assets, and (e) other
indebtedness incurred in the ordinary course of business up to $250,000 at any
time outstanding.

 

“Permitted Lien” means the individual and collective reference to the following:
(a) Liens for taxes, assessments and other governmental charges or levies not
yet due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien, (c) Liens
incurred in connection with Permitted Indebtedness under clauses (a) and (b)
thereunder, and (d) Liens incurred in connection with Permitted Indebtedness
under clause (d) thereunder, provided that such Liens are not secured by assets
of the Company or its Subsidiaries other than the assets so acquired or leased.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of June
[__], 2015 among the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, among the Company and the original
Holders, in the form of Exhibit B attached to the Purchase Agreement.

 

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Holder as provided for in the Registration Rights
Agreement.

 

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

 

“Series A Debentures” means the Company’s 2.25% Series A Senior Secured
Debentures due June 22, 2020 issued pursuant to the Purchase Agreement.

 

“Share Delivery Date” has the meaning set forth in Section 4(c)(ii).

 

“Successor Entity” has the meaning set forth in Section 5(e).

 

“Trading Day” means a day on which the principal Trading Market is open for
trading. 

 

Exhibit A-2-6

 

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange (or any successors to any of the
foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by Pink OTC
Markets, Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Holders of a majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

 

Section 2.              Interest.

 

(a)          Payment of Interest in Cash or Kind. The Company shall pay interest
to the Holder on the aggregate unconverted and then outstanding principal amount
of this Series B Debenture at the rate of 2.25% per annum, payable quarterly on
January 1, April 1, July 1 and October 1, beginning on the first such date after
the Original Issue Date, on each Conversion Date (as to that principal amount
then being converted) and on the Maturity Date (each such date, an “Interest
Payment Date”) (if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business Day), in cash
or, at the Company’s option, in duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock at the Interest Conversion Rate (the
dollar amount to be paid in shares, the “Interest Share Amount”) or a
combination thereof; provided, however, that payment in shares of Common Stock
may only occur if (i) all of the Equity Conditions have been met (unless waived
by the Holder in writing) during the 20 Trading Days immediately prior to the
applicable Interest Payment Date (the “Interest Notice Period”) and through and
including the date such shares of Common Stock are actually issued to the
Holder, (ii) the Company shall have given the Holder notice in accordance with
the notice requirements set forth below, (iii) the then applicable Conversion
Price is less than the Interest Conversion Rate and (iv) as to such Interest
Payment Date, prior to such Interest Notice Period (but not more than five (5)
Trading Days prior to the commencement of such Interest Notice Period), the
Company shall have delivered to the Holder’s account with The Depository Trust
Company a number of shares of Common Stock to be applied against such Interest
Share Amount equal to the quotient of (x) the applicable Interest Share Amount
divided by (y) the lesser of the (i) then Conversion Price and (ii) the Interest
Conversion Rate assuming for such purposes that the Interest Payment Date is the
Trading Day immediately prior to the commencement of the Interest Notice Period
(the “Interest Conversion Shares”).

 

Exhibit A-2-7

 

 

(b)          Company’s Election to Pay Interest in Cash or Kind. Subject to the
terms and conditions herein, the decision whether to pay interest hereunder in
cash, shares of Common Stock or a combination thereof shall be at the sole
discretion of the Company. Prior to the commencement of any Interest Notice
Period, the Company shall deliver to the Holder a written notice of its election
to pay interest hereunder on the applicable Interest Payment Date either in
cash, shares of Common Stock or a combination thereof and the Interest Share
Amount as to the applicable Interest Payment Date, provided that the Company may
indicate in such notice that the election contained in such notice shall apply
to future Interest Payment Dates until revised by a subsequent notice. During
any Interest Notice Period, the Company’s election (whether specific to an
Interest Payment Date or continuous) shall be irrevocable as to such Interest
Payment Date. Subject to the aforementioned conditions, failure to timely
deliver such written notice to the Holder shall be deemed an election by the
Company to pay the interest on such Interest Payment Date in cash. At any time
the Company delivers a notice to the Holder of its election to pay the interest
in shares of Common Stock, the Company shall timely file a prospectus supplement
pursuant to Rule 424 disclosing such election. The aggregate number of shares of
Common Stock otherwise issuable to the Holder on an Interest Payment Date shall
be reduced by the number of Interest Conversion Shares previously issued to the
Holder in connection with such Interest Payment Date.

 

(c)          Interest Calculations. Interest shall be calculated on the basis of
a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue
daily commencing on the Original Issue Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made. Payment
of interest in shares of Common Stock (other than the Interest Conversion Shares
issued prior to an Interest Notice Period) shall otherwise occur pursuant to
Section 4(c)(ii) herein and, solely for purposes of the payment of interest in
shares, the Interest Payment Date shall be deemed the Conversion Date. Interest
shall cease to accrue with respect to any principal amount converted, provided
that, the Company actually delivers the Conversion Shares within the time period
required by Section 4(c)(ii) herein. Interest hereunder will be paid to the
Person in whose name this Series B Debenture is registered on the records of the
Company regarding registration and transfers of the Debentures (the “Debenture
Register”). Except as otherwise provided herein, if at any time the Company pays
interest partially in cash and partially in shares of Common Stock to the
holders of the Debentures, then such payment of cash shall be distributed
ratably among the holders of the then-outstanding Debentures based on their (or
their predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement; provided, however, that none of foreclosure upon, any results of
foreclosure upon or any proceeds of foreclosure upon any of the Collateral
constitute payments made by the Company for purposes of this sentence.

 

(d)          Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 12%
per annum or the maximum rate permitted by applicable law (the “Late Fees”)
which shall accrue daily from the date such interest is due hereunder through
and including the date of actual payment in full. Notwithstanding anything to
the contrary contained herein, if, on any Interest Payment Date the Company has
elected to pay accrued interest in the form of Common Stock but the Company is
not permitted to pay accrued interest in Common Stock because it fails to
satisfy the conditions for payment in Common Stock set forth in Section 2(a)
herein, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 2 or paying the regularly
scheduled interest payment in cash, shall deliver, within three (3) Trading Days
of each applicable Interest Payment Date, an amount in cash equal to the product
of (x) the number of shares of Common Stock otherwise deliverable to the Holder
in connection with the payment of interest due on such Interest Payment Date
multiplied by (y) the highest VWAP during the period commencing on the Interest
Payment Date and ending on the Trading Day prior to the date such payment is
actually made. If any Interest Conversion Shares are issued to the Holder in
connection with an Interest Payment Date and are not applied against an Interest
Share Amount, then the Holder shall promptly return such excess shares to the
Company.

 

Exhibit A-2-8

 

 

(e)          Prepayment. Except as otherwise set forth in this Series B
Debenture, the Company may not prepay any portion of the principal amount of
this Series B Debenture without the prior written consent of the Holder.

 

Section 3.             Registration of Transfers and Exchanges.

 

(a)          Different Denominations. This Series B Debenture is exchangeable
for an equal aggregate principal amount of Series B Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No
service charge will be payable for such registration of transfer or exchange.

 

(b)          Investment Representations. This Series B Debenture has been issued
subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state securities laws and
regulations.

 

(c)          Reliance on Debenture Register. Prior to due presentment for
transfer to the Company of this Series B Debenture, the Company and any agent of
the Company may treat the Person in whose name this Series B Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Series B Debenture is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.

 

Section 4.             Conversion.

 

(a)          Voluntary Conversion. At any time after the both (i) the Original
Issue Date and (ii) the earlier to occur of (1) the Company has received
shareholder approval as required by its Principal Market for the issuance of
shares of Common Stock upon conversion of this Series B Debenture and (2) six
months after the Original Issue Date (or until such later date if the Company
continues to seek shareholder approval at the request of the Holders), and until
this Series B Debenture is no longer outstanding, this Series B Debenture shall
be convertible, in whole or in part, into shares of Common Stock at the option
of the Holder, at any time and from time to time (subject to the conversion
limitations set forth in this Section 4(a) and in Section 4(d) hereof).
Notwithstanding the foregoing, if the Company has not obtained Shareholder
Approval, the Company may not issue a number of shares of Common Stock, which,
when aggregated with any shares of Common Stock issued (i) pursuant to any
Debentures issued pursuant to the Purchase Agreement (whether upon conversion or
as payment of interest), and (ii) upon prior exercise of any Warrant issued
pursuant to the Purchase Agreement, would exceed 1,622,612, subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of the Purchase Agreement (such number of shares, the “Issuable
Maximum”). The Holder and the holders of the other Debentures and Warrants
issued pursuant to the Purchase Agreement shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s
original Subscription Amount by (y) the aggregate original Subscription Amount
of all holders pursuant to the Purchase Agreement. In addition, the Holder may
allocate its pro-rata portion of the Issuable Maximum among Warrants and
Debentures held by it in its sole discretion. Such portion shall be adjusted
upward ratably in the event a Purchaser (other than the Holder) no longer holds
any Warrants or Debentures and the amount of shares issued to such Purchaser
pursuant to its Warrants and Debentures was less than such Purchaser’s pro-rata
share of the Issuable Maximum. The Holder shall effect conversions by delivering
to the Company a Notice of Conversion, the form of which is attached hereto as
Annex A (each, a “Notice of Conversion”), specifying therein the principal
amount of this Series B Debenture to be converted and the date on which such
conversion shall be effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder.
No ink-original Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Series B Debenture to the Company
unless the entire principal amount of this Series B Debenture, plus all accrued
and unpaid interest thereon, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this Series B
Debenture in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount(s) converted and the
date of such conversion(s). The Company may deliver an objection to any Notice
of Conversion within one (1) Business Day of delivery of such Notice of
Conversion. In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest error.
The Holder, and any assignee by acceptance of this Series B Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Series B Debenture, the unpaid and
unconverted principal amount of this Series B Debenture may be less than the
amount stated on the face hereof.

 

Exhibit A-2-9

 

 

(b)          Conversion Price. The conversion price in effect on any Conversion
Date shall be equal to $0.75, subject to adjustment herein (the “Conversion
Price”).

 

(c)          Mechanics of Conversion.

 

i          Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Series B Debenture to be converted by (y) the Conversion Price.

 

ii         Delivery of Certificate Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the “Share Delivery Date”), the Company
shall deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase Agreement)
representing the number of Conversion Shares being acquired upon the conversion
of this Series B Debenture (including, if the Company has given continuous
notice pursuant to Section 2(b) for payment of interest in shares of Common
Stock at least 20 Trading Days prior to the date on which the Notice of
Conversion is delivered to the Company, shares of Common Stock representing the
payment of accrued interest otherwise determined pursuant to Section 2(a) but
assuming that the Interest Notice Period is the 20 Trading Days period
immediately prior to the date on which the Notice of Conversion is delivered to
the Company and excluding for such issuance the condition that the Company
deliver Interest Conversion Shares as to such interest payment prior to the
commencement of the Interest Notice Period) and (B) a bank check in the amount
of accrued and unpaid interest (if the Company has elected or is required to pay
accrued interest in cash). On or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date, the Company
shall deliver any certificate or certificates required to be delivered by the
Company under this Section 4(c) electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.

 

Exhibit A-2-10

 

 

iii        Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Series
B Debenture delivered to the Company and the Holder shall promptly return to the
Company the Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.

 

iv        Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Series B Debenture in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Conversion Shares; provided, however, that such delivery shall
not operate as a waiver by the Company of any such action the Company may have
against the Holder. In the event the Holder of this Series B Debenture shall
elect to convert any or all of the outstanding principal amount hereof, the
Company may not refuse conversion based on any claim that the Holder or anyone
associated or affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and or enjoining conversion of all or part of this
Series B Debenture shall have been sought and obtained. In the absence of such
injunction, the Company shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion. If the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in
cash, as liquidated damages and not as a penalty, for each $1,000 of principal
amount being converted, $10 per Trading Day (increasing to $20 per Trading Day
on the third (3rd) Trading Day after such liquidated damages begin to accrue and
increasing to $40 per Trading Day on the sixth Trading Day after such damages
begin to accrue) for each Trading Day after such Share Delivery Date until such
certificates are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or declare an Event of
Default pursuant to Section 8 hereof for the Company’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.

 

Exhibit A-2-11

 

 

v         Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Conversion Shares which the Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any, by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Series B Debenture in a principal amount equal to the
principal amount of the attempted conversion (in which case such conversion
shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued if the Company had timely complied with
its delivery requirements under Section 4(c)(ii). 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 conversion of this Series B Debenture with
respect to which the actual sale price of the Conversion Shares (including any
brokerage commissions) giving rise to such purchase obligation was a total of
$10,000 under clause (A) 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 and, upon request of the Company, evidence of the amount of such loss.
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 conversion of this Series B Debenture as required pursuant to the
terms hereof.

 

Exhibit A-2-12

 

 

vi        Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will use its best efforts to promptly seek shareholder approval for an
amendment to its certificate of incorporation to increase the number of
authorized shares of Common Stock to permit the conversion of this Series B
Debenture in its entirety and, at all times thereafter, reserve and keep
available out of its authorized and unissued shares of Common Stock for the sole
purpose of issuance upon conversion of this Series B Debenture and payment of
interest on this Series B Debenture, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of Persons
other than the Holder (and the other holders of the Debentures), not less than
such aggregate number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion
of the then outstanding principal amount of this Series B Debenture and payment
of interest hereunder. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable and, if the Registration Statement is then
effective under the Securities Act, shall be registered for public resale in
accordance with such Registration Statement (subject to such Holder’s compliance
with its obligations under the Registration Rights Agreement).

 

Exhibit A-2-13

 

 

vii       Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Series B Debenture
or payment of interest on this Series B Debenture. As to any fraction of a share
which the Holder would otherwise be entitled to purchase upon such conversion,
the Company shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.

 

viii      Transfer Taxes and Expenses. Each issuance of certificates for shares
of Common Stock on conversion of this Series B Debenture or payment of interest
under this Series B Debenture shall be made without charge to the Holder hereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificates, provided that, the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of this Series B Debenture so converted and the
Company shall not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid. The Company shall pay all Transfer
Agent fees required for same-day processing of any Notice of Conversion and all
fees to the Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day electronic
delivery of the Conversion Shares.

 

(d)          Holder’s Conversion Limitations. The Company shall not effect any
conversion of this Series B Debenture, and a Holder shall not have the right to
convert any portion of this Series B Debenture, to the extent that after giving
effect to the conversion set forth on the applicable Notice of Conversion, the
Holder (together with the Holder’s Affiliates, and any Persons acting as a group
together with the Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below).  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 conversion of this Series B Debenture with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which are issuable upon (i)  conversion of the
remaining, unconverted principal amount of this Series B Debenture beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or conversion of
the unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other Debentures, preferred
stock or the Warrants) beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section 4(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this Section 4(d)
applies, the determination of whether this Series B Debenture is convertible (in
relation to other securities owned by the Holder together with any Affiliates)
and of which principal amount of this Series B Debenture is convertible shall be
in the sole discretion of the Holder, and the submission of a Notice of
Conversion shall be deemed to be the Holder’s determination of whether this
Series B Debenture may be converted (in relation to other securities owned by
the Holder together with any Affiliates) and which principal amount of this
Series B Debenture is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 4(d), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of the
following: (i) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public announcement by
the Company, or (iii) a more recent written 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 a Holder, the Company shall
within two 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 Series B
Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of the Debentures held by the applicable Holder.
The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(d) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Series B Debenture.

 

Exhibit A-2-14

 

 

Section 5.             Certain Adjustments.

 

(a)          Stock Dividends and Stock Splits. If the Company, at any time while
this Series B Debenture is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
conversion of, or payment of interest on, the Debentures), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

 

Exhibit A-2-15

 

 

(b)          Subsequent Equity Sales. If the Company or any Subsidiary thereof,
as applicable, at any time while this Series B Debenture is outstanding, shall
sell or grant any option to purchase, or sell or grant any right to reprice, or
otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock Equivalents,
at an effective price per share less than the Conversion Price then in effect
(such lower price, the “Base Share Price” and such issuances collectively, a
“Dilutive Issuance”) (it being understood and agreed that if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share that is less than
the Conversion Price, such issuance shall be deemed to have occurred for less
than the Conversion Price on such date of the Dilutive Issuance at such
effective price), then simultaneously with the consummation of each Dilutive
Issuance the Conversion Price shall be reduced to equal the Base Share Price.
Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be
made, paid or issued under this Section 5(b) in respect of an Exempt Issuance.
The Company shall notify the Holder, in writing, no later than the Trading Day
following the issuance or deemed issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes
of clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the
Holder is entitled to receive a number of Conversion Shares based upon the Base
Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Notice of Conversion. If the Company enters into a Variable Rate
Transaction, despite the prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion or exercise price at which such securities may
be converted or exercised. Notwithstanding anything herein to the contrary, this
Section 5(b) shall terminate and be of no further force or effect after the
later of (i) the one year anniversary of the Original Issue Date, and (ii) the
earlier of (A) six months after the effective date of the registration statement
registering all of the shares of Common Stock required to be registered pursuant
to the Registration Rights Agreement (in the event multiple registration
statements are required to register all such shares, then this provision shall
refer to the last of such registration statements to become effective), and (B)
six months after the date that all of the Warrant Shares and shares of Common
Stock issued or issuable under this Series B Debentures are freely tradable
under Rule 144 without the requirement to be in compliance with the current
public information requirements thereunder.

 

(c)          Subsequent Rights Offerings. If the Company, at any time while this
Series B Debenture is outstanding, shall issue rights, options or warrants to
all holders of Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share (a “New Issue Price”) that is lower than
the Conversion Price on the record date referenced below, then the Conversion
Price shall be reduced to equal such New Issue Price. Such adjustment shall be
made whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

 

Exhibit A-2-16

 

 

(d)          Pro Rata Distributions. If the Company, at any time while this
Series B Debenture is outstanding, shall distribute to all holders of Common
Stock (and not to the Holder) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any
security, then in each such case the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then per share fair market value at such record date
of the portion of such assets or evidence of indebtedness or rights or warrants
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

 

(e)          Fundamental Transaction. If, at any time while this Series B
Debenture is outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of the Company
with or into another Person, (ii) the Company, directly or indirectly, effects
any sale, lease, license, assignment, transfer, conveyance or other disposition
of all or substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, (v) the
Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent conversion of this Series B Debenture,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction (without regard to any limitation in Section 4(d)
on the conversion of this Series B Debenture), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a
holder of the number of shares of Common Stock for which this Series B Debenture
is convertible immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 4(d) on the conversion of this Series B Debenture)
is convertible. For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one (1) share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Series B Debenture
following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of the
Company under this Series B Debenture and the other Transaction Documents (as
defined in the Purchase Agreement) in accordance with the provisions of this
Section 5(e) pursuant to written agreements and shall, at the option of the
holder of this Series B Debenture, deliver to the Holder in exchange for this
Series B Debenture a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Series B
Debenture which is convertible for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares
of Common Stock acquirable and receivable upon conversion of this Series B
Debenture (without regard to any limitations on the conversion of this Series B
Debenture) prior to such Fundamental Transaction, and with a conversion price
which applies the conversion price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Common Stock
pursuant to such Fundamental Transaction and the value of such shares of capital
stock, such number of shares of capital stock and such conversion price being
for the purpose of protecting the economic value of this Series B Debenture
immediately prior to the consummation of such Fundamental Transaction). Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Series B Debenture and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Series B Debenture
and the other Transaction Documents with the same effect as if such Successor
Entity had been named as the Company herein.

 

Exhibit A-2-17

 

 

(f)          Calculations. All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 5, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

 

(g)          to the Holder.

 

i          Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.

 

Exhibit A-2-18

 

 

ii         Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock, (C) the Company shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Series B Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any notice provided
hereunder constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously file
such notice with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to convert this Series B Debenture during the
20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set
forth herein.

 

Exhibit A-2-19

 

 

Section 6.             Mandatory Prepayment. Notwithstanding anything herein to
the contrary, from and after the Original Issue Date until December 31, 2015, at
the end of each calendar quarter, the Company shall determine the aggregate
amount of cash received by the Company for (i) the exercise of any warrants, (i)
issuance of any capital stock or other securities exercisable for or
exchangeable into shares of capital stock and (iii) capital raised by any other
means (such aggregate amount, the “Capital Raised”). To the extent that the
Capital Raised exceeds $4 million (such excess, the “Excess Capital”), the
Company shall, within five (5) Trading Days from the end of each such calendar
quarter, send the Holder a notice indicating the amount of Capital Raised from
the Original Issue Date to date. The Holder hereof shall within five (5) Trading
Days, by notice to the Company, elect whether to receive repayment of all or
part of the Excess Capital. The Company shall pay to the Holder (and the Holders
of other Debt Securities electing to receive repayment of the Excess Capital)
the portion of the Excess Capital (less any Excess Capital previously repaid)
which equals the amount obtained by multiplying the Excess Capital by a
fraction, the numerator of which is the principal amount of this Series B
Debenture and the denominator of which is the principal amount of all Debt
Securities which have requested repayment of the Excess Capital.

 

Section 7.             Negative Covenants. As long as any portion of this Series
B Debenture remains outstanding, unless the holders of at least 67% in principal
amount of the then outstanding Debt Securities shall have otherwise given prior
written consent, the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:

 

(a)          other than Permitted Indebtedness, enter into, create, incur,
assume, guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including, but not limited to, a guarantee, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom;

 

(b)          other than Permitted Liens, enter into, create, incur, assume or
suffer to exist any Liens of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom;

 

(c)          amend its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;

 

(d)          repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or Common
Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares
as permitted or required under the Transaction Documents and (ii) repurchases of
Common Stock or Common Stock Equivalents of departing officers and directors of
the Company, provided that such repurchases shall not exceed an aggregate of
$75,000 per year for all officers and directors during the term of this Series B
Debenture;

 

(e)          repay, repurchase or offer to repay, repurchase or otherwise
acquire any Indebtedness, other than the Debt Securities if on a pro-rata basis,
other than regularly scheduled principal and interest payments as such terms are
in effect as of the Original Issue Date or otherwise permitted hereunder,
provided that such payments shall not be permitted if, at such time, or after
giving effect to such payment, any Event of Default exist or occur;

 

Exhibit A-2-20

 

 

(f)          pay cash dividends or distributions on any equity securities of the
Company;

 

(g)          enter into any transaction with any Affiliate of the Company which
would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved
by a majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or

 

(h)          enter into any agreement with respect to any of the foregoing.

 

Section 8.              Events of Default.

 

(a)          “Event of Default” means, wherever used herein, any of the
following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):

 

i          any default in the payment of (A) the principal amount of any
Debenture or (B) interest, liquidated damages and other amounts owing to a
Holder on any Debenture, as and when the same shall become due and payable
(whether on a Conversion Date, an Interest Payment Date or the Maturity Date or
by acceleration or otherwise) which default, solely in the case of an interest
payment or other default under clause (B) above, is not cured within 3 Trading
Days;

 

ii         the Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (xi) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
of such failure sent by the Holder or by any other Holder to the Company and (B)
10 Trading Days after the Company has become or should have become aware of such
failure;

 

iii        a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and
not covered by clause (vi) below) and which have been filed as exhibits to the
SEC Reports on or before the Original Issue Date or are filed as exhibits to the
SEC Reports after the Original Issue Date and while this Series B Debenture
remains outstanding;

 

iv        any representation or warranty made in this Series B Debenture, any
other Transaction Documents, any written statement pursuant hereto or thereto or
any other report, financial statement or certificate made or delivered to the
Holder or any other Holder shall be untrue or incorrect in any material respect
as of the date when made or deemed made;

 

Exhibit A-2-21

 

 

v         the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

vi        the Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement that (a) involves
an obligation greater than $150,000, whether such indebtedness now exists or
shall hereafter be created, and (b) results in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise
become due and payable;

 

vii       the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within five Trading Days;

 

viii      the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or in excess of
40% of its assets in one transaction or a series of related transactions
(whether or not such sale would constitute a Change of Control Transaction);

 

ix         the Initial Registration Statement (as defined in the Registration
Rights Agreement) shall not have been declared effective by the Commission on or
prior to the 120th calendar day after the Closing Date or the Company does not
meet the current public information requirements under Rule 144 in respect of
the Registrable Securities (as defined under the Registration Rights Agreement);

 

x          if, during the Effectiveness Period (as defined in the Registration
Rights Agreement), either (a) the effectiveness of the Registration Statement
lapses for any reason or (b) the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights Agreement) under
the Registration Statement for a period of more than 20 consecutive Trading Days
or 30 non-consecutive Trading Days during any 12 month period; provided,
however, that if the Company is negotiating a merger, consolidation, acquisition
or sale of all or substantially all of its assets or a similar transaction and,
in the written opinion of counsel to the Company, the Registration Statement
would be required to be amended to include information concerning such pending
transaction(s) or the parties thereto which information is not available or may
not be publicly disclosed at the time, the Company shall be permitted an
additional 10 consecutive Trading Days during any 12 month period pursuant to
this Section 7(a)(x);

 

Exhibit A-2-22

 

 

xi         the Company shall fail for any reason to deliver certificates to a
Holder prior to the fifth Trading Day after a Conversion Date pursuant to
Section 4(e) or any Forced Conversion Date pursuant to Section 6 or the Company
shall provide at any time notice to the Holder, including by way of public
announcement, of the Company’s intention to not honor requests for conversions
of any Debentures in accordance with the terms hereof;

 

xii        the electronic transfer by the Company of shares of Common Stock
through the Depository Trust Company or another established clearing corporation
is no longer available or is subject to a “chill”;

 

xiii       any monetary judgment, writ or similar final process shall be entered
or filed against the Company, any subsidiary or any of their respective property
or other assets for more than $100,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days;

 

xiv       the Company shall have failed to obtain Shareholder Approval of all
items required by Section 4.11(c) of the Purchase Agreement on or prior to
November 30, 2015; or

 

xv        an Event of Default (as defined in the Notes (as defined in the
Purchase Agreement)) shall have occurred and be continuing.

 

(b)          Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Series B Debenture, plus accrued but unpaid
interest, liquidated damages and other amounts owing in respect thereof through
the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount. Commencing 5 days after
the occurrence of any Event of Default that results in the eventual acceleration
of this Series B Debenture, the interest rate on this Series B Debenture shall
accrue at an interest rate equal to the lesser of 12% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holder shall promptly surrender this Series B Debenture to
or as directed by the Company. In connection with such acceleration described
herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of this Series B Debenture until such time, if any, as the Holder receives full
payment pursuant to this Section 8(b). No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent thereon.

 

Exhibit A-2-23

 

 

Section 9.             Miscellaneous.

 

(a)          Notices. Any and all notices or other communications or deliveries
to be provided by the Holder hereunder, including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above, or such other
facsimile number or address as the Company may specify for such purposes by
notice to the Holder delivered in accordance with this Section 9(a). Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or sent by
a nationally recognized overnight courier service addressed to each Holder at
the facsimile number or address of the Holder appearing on the books of the
Company, or if no such facsimile number or address appears on the books of the
Company, at the principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given.

 

(b)          Absolute Obligation. Except as expressly provided herein, no
provision of this Series B Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
liquidated damages and accrued interest, as applicable, on this Series B
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Series B Debenture is a direct debt obligation of the Company.
This Series B Debenture ranks pari passu with all other Debt Securities now or
hereafter issued under the terms set forth herein.

 

(c)          Lost or Mutilated Debenture. If this Series B Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Series B
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Series B Debenture, a new Series B Debenture for the principal amount of this
Series B Debenture so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such Series B
Debenture, and of the ownership hereof, reasonably satisfactory to the Company.

 

(d)          Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Series B Debenture shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflict of laws thereof. Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Series B Debenture and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Series B Debenture or
the transactions contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Series B Debenture, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.

 

Exhibit A-2-24

 

 

(e)          Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Series B Debenture shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any other
provision of this Series B Debenture. The failure of the Company or the Holder
to insist upon strict adherence to any term of this Series B Debenture on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Series B Debenture on any other occasion. Any waiver by the Company or
the Holder must be in writing.

 

(f)          Severability. If any provision of this Series B Debenture is
invalid, illegal or unenforceable, the balance of this Series B Debenture shall
remain in effect, and if any provision is inapplicable to any Person or
circumstance, it shall nevertheless remain applicable to all other Persons and
circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal
of or interest on this Series B Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Series B Debenture, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has
been enacted.

 

Exhibit A-2-25

 

 

(g)          Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief.  The remedies provided in this Series B Debenture shall be
cumulative and in addition to all other remedies available under this Series B
Debenture and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Series B
Debenture.  The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any such breach or any
such threatened breach, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall provide all
information and documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with the terms and
conditions of this Series B Debenture.

 

(h)          Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.

 

(i)          Headings. The headings contained herein are for convenience only,
do not constitute a part of this Series B Debenture and shall not be deemed to
limit or affect any of the provisions hereof.

 

(j)          Secured Obligation. The obligations of the Company under this
Series B Debenture are secured by all assets of the Company pursuant to the
Security Documents.

 

********************* 

 

Exhibit A-2-26

 

 

IN WITNESS WHEREOF, the Company has caused this Series B Debenture to be duly
executed by a duly authorized officer as of the Original Issue Date.

 

 

mela sciences, inc. 

      By:    

Michael R. Stewart
Chief Executive Officer
Facsimile No. for delivery of Notices: (914) 291-3701

 

 

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the 2.25% Series B
Senior Unsecured Convertible Debenture due June 22, 2020 of MELA Sciences, Inc.,
a Delaware corporation (the “Company”), into shares of Common Stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date
written below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of common stock of the Company does
not exceed the amounts specified under Section 4 of this Series B Debenture, as
determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

 

Conversion calculations:

 

Date to Effect Conversion:

 

Principal Amount of Series B Debenture to be Converted:

 

Payment of Interest in Common Stock __ yes __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

 

Number of shares of Common Stock to be issued:

 

Signature:

 

Name:

 

Address for Delivery of Common Stock Certificates:

 

Or

 

DWAC Instructions:

 

Broker No:                              

Account No:                               

 

 

 

 

Schedule 1

 

CONVERSION SCHEDULE

 

The 2.25% Series B Senior Unsecured Convertible Debentures due on June 22, 2020
in the aggregate principal amount of $____________ are issued by MELA Sciences,
Inc., a Delaware corporation. This Conversion Schedule reflects conversions made
under Section 4 of the above referenced Series B Debenture.

 

Dated:

        Date of Conversion
(or for first entry,
Original Issue Date) Amount of
Conversion Aggregate
Principal
Amount
Remaining
Subsequent to
Conversion
(or original
Principal
Amount) Company Attest                                                          
                                                                               
     

 

 

 

 

Exhibit B

 

Form of Subsidiary Guarantee

 

 

 

 

FORM OF SUBSIDIARY GUARANTEE

 

SUBSIDIARY GUARANTEE, dated as of __________ __, 20__ (this “Guarantee”), made
by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, the “Guarantors”), in favor of the
purchasers (the “Purchasers”) signatory to that certain Securities Purchase
Agreement dated as of June 22, 2015 (as amended, the “Purchase Agreement”) made
by and among MELA Sciences, Inc., a Delaware corporation (the “Company”) and the
Purchasers.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Purchase Agreement the Company has issued and sold to
the Purchasers the Company’s 2.25% Series A Senior Secured Convertible
Debentures due June 22, 2020 (the “Series A Debentures”), the Company’s 2.25%
Series B Senior Unsecured Convertible Debentures due June 22, 2020 (the
“Series B Debentures” and, together with the Series A Debentures, the
“Debentures”) and the Company’s 9% Senior Secured Notes (the “Notes” and,
together with the Debentures, the “Debt Securities”); and

 

WHEREAS, each Guarantor directly benefits from the extension of credit to the
Company represented by the Debt Securities.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each of the Guarantors hereby agrees with the Purchasers as
follows:

 

1             Definitions. Unless otherwise defined herein, terms defined in the
Purchase Agreement and used herein shall have the respective meanings given to
them in the Purchase Agreement. The words “hereof,” “herein,” “hereto” and
“hereunder” and words of similar import when used in this Guarantee shall refer
to this Guarantee as a whole and not to any particular provision of this
Guarantee, and Section and Schedule references are to this Guarantee unless
otherwise specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The following
terms shall have the following meanings:

 

 “Guarantee” means this Subsidiary Guarantee, as the same may be amended,
supplemented or otherwise modified from time to time.

 

“Obligations” means, in addition to all other costs and expenses of collection
incurred by the Purchasers in enforcing any of such Obligations and/or this
Guarantee, all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now or may
be hereafter contracted or acquired, or owing to, of the Company or any
Guarantor to the Purchasers, including, without limitation, all obligations
under this Guarantee, the Debentures, the Debt Securities and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith, 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 any of the Purchasers as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Debt Securities and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Company or any Guarantor from time to time
under or in connection with this Guarantee, the Debt Securities and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) 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 the Company or any Guarantor.

 

 

 

 

2              Guarantee.

 

(a)          Guarantee.

 

i            The Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantee to the Purchasers, and each of their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.

 

ii           Anything herein or in any other Transaction Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Transaction Documents shall in no event exceed the amount which
can be guaranteed by such Guarantor under applicable federal and state laws,
including laws relating to the insolvency of debtors, fraudulent conveyance or
transfer or laws affecting the rights of creditors generally (after giving
effect to the right of contribution established in Section 2(b)).

 

iii          Each Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing the guarantee contained in this Section 2 or affecting the
rights and remedies of the Purchasers hereunder.

 

iv         The guarantee contained in this Section 2 shall remain in full force
and effect until all the Obligations and the obligations of each Guarantor under
the guarantee contained in this Section 2 shall have been satisfied by
indefeasible payment in full.

 

v          No payment made by the Company, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Purchasers from
the Company, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise affect
the liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the
Obligations or any payment received or collected from such Guarantor in respect
of the Obligations), remain liable for the Obligations up to the maximum
liability of such Guarantor hereunder until the Obligations are indefeasibly
paid in full.

 

2

 

 

vi          Notwithstanding anything to the contrary in this Guarantee, with
respect to any defaulted non-monetary Obligations the specific performance of
which by the Guarantors is not reasonably possible (e.g. the issuance of the
Company’s Common Stock), the Guarantors shall only be liable for making the
Purchasers whole on a monetary basis for the Company’s failure to perform such
Obligations in accordance with the Transaction Documents.

 

(b)          Right of Contribution. Subject to Section 2(c), each Guarantor
hereby agrees that to the extent that a Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Guarantor shall be
entitled to seek and receive contribution from and against any other Guarantor
hereunder which has not paid its proportionate share of such payment. Each
Guarantor’s right of contribution shall be subject to the terms and conditions
of Section 2(c). The provisions of this Section 2(b) shall in no respect limit
the obligations and liabilities of any Guarantor to the Purchasers and each
Guarantor shall remain liable to the Purchasers for the full amount guaranteed
by such Guarantor hereunder.

 

(c)          No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Purchasers, no Guarantor shall be entitled to be subrogated to any of the rights
of the Purchasers against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Purchasers for the payment
of the Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect
of payments made by such Guarantor hereunder, until all amounts owing to the
Purchasers by the Company on account of the Obligations are paid in full. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Purchasers, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Purchasers in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Purchasers, if required), to
be applied against the Obligations, whether matured or unmatured, in such order
as the Purchasers may determine.

 

(d)          Amendments, Etc. With Respect to the Obligations. Each Guarantor
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Obligations made by the
Purchasers may be rescinded by such Purchaser, as applicable, and any of the
Obligations continued, and the Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Purchasers in accordance with the Purchase
Agreement, and the Purchase Agreement and the other Transaction Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Purchasers may deem advisable from time to time in accordance with the Purchase
Agreement, and any collateral security, guarantee or right of offset at any time
held by the Purchasers for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. None of the Purchasers shall have
any obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.

 

3

 

 

(e)          Guarantee Absolute and Unconditional. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Purchasers upon the
guarantee contained in this Section 2 or acceptance of the guarantee contained
in this Section 2; the Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between the Company and any of the Guarantors, on the one hand,
and the Purchasers, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives to the extent permitted by law diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Company or any of the Guarantors with respect to the Obligations.
Each Guarantor understands and agrees that the guarantee contained in this
Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment and performance without regard to (a) the validity or
enforceability of the Purchase Agreement or any other Transaction Document, any
of the Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Purchasers, (b) any defense, set-off or counterclaim (other than a defense
of payment or performance or fraud by the Purchasers) which may at any time be
available to or be asserted by the Company or any other Person against the
Purchasers, or (c) any other circumstance whatsoever (with or without notice to
or knowledge of the Company or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Company for the
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Purchasers may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as they may have against the Company,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Purchasers to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Company, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Company, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Purchasers against any Guarantor. For the purposes hereof, “demand” shall
include the commencement and continuance of any legal proceedings.

 

4

 

 

(f)          Reinstatement. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Purchasers upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Company or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.

 

(g)          Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Purchasers, without set-off or counterclaim in U.S. dollars
at the address set forth or referred to in the signature pages to the Purchase
Agreement.

 

3              Representations and Warranties. Each Guarantor hereby makes the
following representations and warranties to the Purchasers as of the date
hereof:

 

(a)          Organization and Qualification. The Guarantor is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
applicable jurisdiction set forth on Schedule 1, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Guarantor has no subsidiaries other than
those identified as such on the Disclosure Schedules to the Purchase Agreement.
The Guarantor is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of any of this Guaranty in any material respect, (y)
have a material adverse effect on the results of operations, assets, or
financial condition of the Guarantor or (z) adversely impair in any material
respect the Guarantor’s ability to perform fully on a timely basis its
obligations under this Guaranty (a “Material Adverse Effect”).

 

(b)          Authorization; Enforcement. The Guarantor has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Guaranty, and otherwise to carry out its obligations
hereunder. The execution and delivery of this Guaranty by the Guarantor and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Guarantor. This
Guaranty has been duly executed and delivered by the Guarantor and constitutes
the valid and binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.

 

(c)          No Conflicts. The execution, delivery and performance of this
Guaranty by the Guarantor and the consummation by the Guarantor of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or By-laws or (ii)
conflict with, constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Guarantor is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Guarantor
is subject (including Federal and State securities laws and regulations), or by
which any material property or asset of the Guarantor is bound or affected,
except in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not, individually or in the aggregate, have or result in a Material Adverse
Effect. The business of the Guarantor is not being conducted in violation of any
law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, do not have a Material
Adverse Effect.

 

5

 

 

(d)          Consents and Approvals. The Guarantor is not required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local, foreign or other governmental
authority or other person in connection with the execution, delivery and
performance by the Guarantor of this Guaranty.

 

(e)          Purchase Agreement. The representations and warranties of the
Company set forth in the Purchase Agreement as they relate to such Guarantor,
each of which is hereby incorporated herein by reference, are true and correct
as of each time such representations are deemed to be made pursuant to such
Purchase Agreement, and the Purchasers shall be entitled to rely on each of them
as if they were fully set forth herein, provided that each reference in each
such representation and warranty to the Company’s knowledge shall, for the
purposes of this Section 3, be deemed to be a reference to such Guarantor’s
knowledge.

 

4              Covenants.

 

(a)          Each Guarantor covenants and agrees with the Purchasers that, from
and after the date of this Guarantee until the Obligations shall have been
indefeasibly paid in full, such Guarantor shall take, and/or shall refrain from
taking, as the case may be, each commercially reasonable action that is
necessary to be taken or not taken, as the case may be, so that no Event of
Default (as defined in the Debentures) is caused by the failure to take such
action or to refrain from taking such action by such Guarantor.

 

(b)          So long as any of the Obligations are outstanding, unless
Purchasers holding at least 67% of the aggregate principal amount of the then
outstanding Debt Securities (the “Requisite Purchasers”) shall otherwise consent
in writing or except as otherwise expressly permitted by the Transaction
Documents, each Guarantor will not directly or indirectly on or after the date
of this Guarantee:

 

i           enter into, create, incur, assume or suffer to exist any
indebtedness for borrowed money of any kind, including but not limited to, a
guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;

 

ii          enter into, create, incur, assume or suffer to exist any liens of
any kind, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;

 

6

 

 

iii          amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of any Purchaser;

 

iv          repay, repurchase or offer to repay, repurchase or otherwise acquire
more than a de minimis number of shares of its securities or debt obligations;

 

v          pay cash dividends on any equity securities of the Company;

 

vi         enter into any transaction with any Affiliate of the Guarantor which
would be required to be disclosed in any public filing of the Company with the
Commission, unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of the Company
(even if less than a quorum otherwise required for board approval); or

 

vii        enter into any agreement with respect to any of the foregoing.

 

5              Miscellaneous.

 

(a)          Amendments in Writing. None of the terms or provisions of this
Guarantee may be waived, amended, supplemented or otherwise modified except in
writing by Requisite Purchasers provided, however, that unanimous consent of the
Purchasers shall be required for any amendment that would adversely affect any
Purchaser.

 

(b)          Notices. All notices, requests and demands to or upon the
Purchasers or any Guarantor hereunder shall be effected in the manner provided
for in the Purchase Agreement, provided that any such notice, request or demand
to or upon any Guarantor shall be addressed to such Guarantor at its notice
address set forth on Schedule 5(b).

 

(c)          No Waiver By Course Of Conduct; Cumulative Remedies. None of the
Purchasers shall by any act (except by a written instrument pursuant to Section
5(a)), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any default under the
Transaction Documents or Event of Default. No failure to exercise, nor any delay
in exercising, on the part of the Purchasers, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Purchasers of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Purchasers
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.

 

(d)          Enforcement Expenses; Indemnification.

 

i          Each Guarantor agrees to pay, or reimburse each of the Purchasers
for, all its reasonable and documented costs and expenses incurred in collecting
against such Guarantor under the guarantee contained in Section 2 or otherwise
enforcing or preserving any rights under this Guarantee and the other
Transaction Documents to which such Guarantor is a party, including, without
limitation, the reasonable fees and disbursements of counsel to each of the
Purchasers.

 

7

 

 

ii           Each Guarantor agrees to pay, and to save each of the Purchasers
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable in connection with any of the transactions
contemplated by this Guarantee.

 

iii          Each Guarantor agrees to pay, and to save each of the Purchasers
harmless from, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Guarantee to the extent the Company would
be required to do so pursuant to the Purchase Agreement and subject to the
limitations contained therein.

 

iv          The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Purchase Agreement and the
other Transaction Documents.

 

(e)          Successor and Assigns. This Guarantee shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Purchasers and their respective successors and assigns; provided that no
Guarantor may assign, transfer or delegate any of its rights or obligations
under this Guarantee without the prior written consent of the Requisite
Purchasers.

 

(f)          Set-Off. Each Guarantor hereby irrevocably authorizes the
Purchasers at any time and from time to time while an Event of Default under any
of the Transaction Documents shall have occurred and be continuing, without
notice to such Guarantor or any other Guarantor, any such notice being expressly
waived by each Guarantor, to set-off and appropriate and apply any and all
deposits, credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Purchaser to or for the credit or the account of such
Guarantor, or any part thereof in such amounts as such Purchaser may elect,
against and on account of the obligations and liabilities of such Guarantor to
the Purchasers hereunder and claims of every nature and description of the
Purchasers against such Guarantor, in any currency, whether arising hereunder,
under the Purchase Agreement, any other Transaction Document or otherwise, as
such Purchaser may elect, whether or not such Purchaser or any of the other
Purchasers has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The applicable Purchaser
shall notify such Guarantor promptly of any such set-off and the application
made by such Purchaser of the proceeds thereof, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Purchasers under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which the
Purchasers may have.

 

8

 

 

(g)          Counterparts. This Guarantee may be executed by one or more of the
parties to this Guarantee on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

 

(h)          Severability. Any provision of this Guarantee which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

(i)          Section Headings. The Section headings used in this Guarantee are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.

 

(j)          Integration. This Guarantee and the other Transaction Documents
represent the agreement of the Guarantors and the Purchasers, with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by any of the Purchasers relative to subject
matter hereof and thereof not expressly set forth or referred to herein or in
the other Transaction Documents.

 

(k)          Governing Laws. All questions concerning the construction,
validity, enforcement and interpretation of this Guarantee shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each of
the Company and the Guarantors agree that all proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Guarantee (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members, employees or
agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York, Borough of Manhattan. Each of the Company and the
Guarantors hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Guarantee and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Guarantee or the transactions
contemplated hereby.

 

9

 

 

(l)            Acknowledgements. Each Guarantor hereby acknowledges that:

 

i            it has been advised by counsel in the negotiation, execution and
delivery of this Guarantee and the other Transaction Documents to which it is a
party;

 

ii           none of the Purchasers has any fiduciary relationship with or duty
to any Guarantor arising out of or in connection with this Guarantee or any of
the other Transaction Documents, and the relationship between the Guarantors, on
the one hand, and the Purchasers, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and

 

iii          no joint venture is created hereby or by the other Transaction
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Guarantors and the Purchasers.

 

(m)         Additional Guarantors. The Company shall cause each of its
wholly-owned domestic subsidiaries formed or acquired on or subsequent to the
date hereof to become a Guarantor for all purposes of this Guarantee by
executing and delivering an Assumption Agreement in the form of Annex 1 hereto.

 

(n)          Release of Guarantors. Each Guarantor will be released from all
liability hereunder concurrently with the repayment in full of all amounts owed
under the Purchase Agreement, the Debentures and the other Transaction
Documents.

 

(o)          Seniority. The Obligations of each of the Guarantors hereunder rank
senior in priority to any other Indebtedness (as defined in the Purchase
Agreement) of such Guarantor.

 

(p)          WAIVER OF JURY TRIAL. EACH GUARANTOR AND, BY ACCEPTANCE OF THE
BENEFITS HEREOF, EACH OF THE PURCHASERS, HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.

 

*********************

 

(Signature Page Follows) 

 

10

 

 

IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly
executed and delivered as of the date first above written. 

        GUARANTORS:         [INSERT NAMES OF SUBSIDIARIES]         By:      
Name:     Title:

 

[Signature page to Subsidiary Guarantee]

 

 

SCHEDULE 1

 

GUARANTORS

 

The following are the names, notice addresses and jurisdiction of organization
of each Guarantor.

 

 

JURISDICTION OF
INCORPORATION

 

COMPANY OWNED BY
PERCENTAGE

       

  

 

 

 

Annex 1 to
SUBSIDIARY GUARANTEE

 

ASSUMPTION AGREEMENT, dated as of ____ __, ______ made by ___________________, a
______________ corporation (the “Additional Guarantor”), in favor of the
Purchasers, pursuant to the Purchase Agreement referred to below. All
capitalized terms not defined herein shall have the meaning ascribed to them in
such Purchase Agreement.

 

W I T N E S S E T H:

 

WHEREAS, MELA Sciences, Inc., a Delaware corporation (the “Company”) and the
Purchasers have entered into a Securities Purchase Agreement, dated as of June
22, 2015 (as amended, supplemented or otherwise modified from time to time, the
“Purchase Agreement”);

 

WHEREAS, in connection with the Purchase Agreement, the Subsidiaries of the
Company (other than the Additional Guarantor) have entered into the Subsidiary
Guarantee, dated as of [●] (as amended, supplemented or otherwise modified from
time to time, the “Guarantee”) in favor of the Purchasers;

 

WHEREAS, the Purchase Agreement requires the Additional Guarantor to become a
party to the Guarantee; and

 

WHEREAS, the Additional Guarantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee.

 

NOW, THEREFORE, IT IS AGREED:

 

1            Guarantee. By executing and delivering this Assumption Agreement,
the Additional Guarantor, as provided in Section 5(m) of the Guarantee, hereby
becomes a party to the Guarantee as a Guarantor thereunder with the same force
and effect as if originally named therein as a Guarantor and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Guarantor thereunder. The information set forth in Annex 1
hereto is hereby added to the information set forth in Schedule 1 to the
Guarantee. The Additional Guarantor hereby represents and warrants that each of
the representations and warranties contained in Section 3 of the Guarantee is
true and correct on and as the date hereof as to such Additional Guarantor
(after giving effect to this Assumption Agreement) as if made on and as of such
date.

 

2            Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 

 

 

 

 

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written. 

        [ADDITIONALGUARANTOR]         By:       Name:     Title:

  

 

 

 

Exhibit C

 

Amended and Restated Security Agreement 

 

 

 

 

AMENDED AND RESTATED
SECURITY AGREEMENT

 

This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of August 3, 2015 (this
“Agreement”), is among MELA Sciences, Inc., a Delaware corporation (the
“Company”), any Additional Debtors (as such term is defined herein and, together
with the Company, the “Debtors”), and holders identified on the signature pages
hereto (the “Secured Parties” and each, a “Secured Party”) of the Secured Debt
Securities (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, the Company has entered into that certain Securities Purchase Agreement
dated as of June 22, 2015 (as amended, the “Securities Purchase Agreement”) with
the holders identified on the signature pages thereto of (A) the Company’s 2.25%
Series A Senior Secured Convertible Debentures due June 22, 2020 (the “Series A
Debentures”), (B) the Company’s 2.25% Series B Senior Unsecured Convertible
Debentures due June 22, 2020 (the “Series B Debentures” and, together with the
Series A Debentures, the “Debentures”) and (C) the Company’s 9% Senior Secured
Notes (the “Notes” and, together with the Series A Debentures, the “Secured Debt
Securities”); capitalized terms used herein but not defined herein have the
respective meanings given to them in the Purchase Agreement;

 

WHEREAS, pursuant to the Purchase Agreement the Secured Parties have severally
extended to the Company the loans evidenced by the Secured Debt Securities; and

 

WHEREAS, the Debtors as of the date hereof are parties to that certain Security
Agreement dated as of June 22, 2015 (the “Existing Security Agreement”) entered
into pursuant to the Purchase Agreement.

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree to amend and restate in its
entirety the Existing Security Agreement as follows:

 

1              Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

 

 

 

 

(a)          “Collateral” means the collateral in which the Secured Parties are
granted a security interest by this Agreement and includes the following
personal property of the Debtors, whether presently owned or existing or
hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):

 

i          All goods, including, without limitation, (A) all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality control devices
and other equipment of every kind and nature and wherever situated, together
with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with any Debtor’s businesses and all improvements thereto; and (B)
all inventory;

 

ii         All contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock or other
securities, other than Excluded Property, rights under any of the Organizational
Documents, agreements related to the Pledged Securities, licenses, distribution
and other agreements, computer software (whether “off-the-shelf”, licensed from
any third party or developed by any Debtor), computer software development
rights, leases, franchises, customer lists, quality control procedures, grants
and rights, goodwill, Intellectual Property and income tax refunds;

 

iii        All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising, goods,
equipment, motor vehicles and trucks which any of the same may represent, and
all right, title, security and guaranties with respect to each account,
including any right of stoppage in transit;

 

iv        All documents, letter-of-credit rights, instruments and chattel paper;

 

v         All commercial tort claims;

 

vi        All deposit accounts and all cash (whether or not deposited in such
deposit accounts);

 

vii       All investment property and all ownership and/or other equity
interests in each Subsidiary, including, without limitation, the Subsidiary
Equity Interests, and, in each case, all certificates representing such shares
and/or equity interests and, in each case, all rights, options, warrants, stock,
other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing
and all rights arising thereunder or in connection therewith, including, but not
limited to, all dividends, interest and cash, other than Excluded Property
(collectively, the “Pledged Securities”);

 

2

 

 

viii      All supporting obligations; and

 

ix         All files, records, books of account, business papers, and computer
programs; and

 

x          the products and proceeds of all of the foregoing.

 

Notwithstanding the foregoing, (A) nothing herein shall be deemed to constitute
the grant of a security interest in, or an assignment of, any asset (i) in which
a security interest or assignment is void by operation of applicable law, or is
otherwise prohibited by applicable law (in each case to the extent that such
applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the
UCC or other similar applicable law), or (ii) subject to any governmental
permit, approval or license not related to Intellectual Property, if and to the
extent that a security interest therein, or assignment thereof, is prohibited by
or in violation of (x) any applicable law, or (y) a term, provision or condition
of any such governmental permit, approval or license (unless in each case, such
applicable law, term, provision or condition would be rendered ineffective with
respect to the creation of such security interest pursuant to Sections 9-406,
9-407, 9-408 or 9-409 of the UCC); provided, however, that to the extent
permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such asset
and (B) the Collateral does not include any Excluded Property.

 

(b)          “Commencement Notice” means a written notice, given by any Secured
Party to the other Secured Parties in accordance with the notice provisions set
forth in the Purchase Agreement, pursuant to which such Secured Party notifies
the other Secured Parties (i) of the existence of one or more Events of Default,
including a reasonably detailed description of each such Event of Default, and
(ii) of such Secured Party’s intent to commence the exercise of one or more of
the remedies provided for under this Agreement with respect to all or any
portion of the Collateral as a consequence thereof, including a reasonably
detailed description of the remedial action such Secured Party proposes to take.

 

(c)          “Event of Default” has the meaning ascribed to such term in the
Debentures.

 

(d)          “Excluded Property” means 35% of the equity interests in any
Subsidiary organized in a jurisdiction outside of the United States.

 

(e)          “Intellectual Property” means the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

 

3

 

 

(f)          “Liens” has the meaning ascribed to such term in the Purchase
Agreement.

 

(g)          “Majority in Interest” means, at any time of determination, the
majority in interest (based on then-outstanding principal amounts of Debt
Securities at the time of such determination) of the Secured Parties.

 

(h)          “Necessary Endorsement” means undated stock powers endorsed in
blank or other proper instruments of assignment duly executed and such other
instruments or documents as the Agent may reasonably request.

 

(i)          “Obligations” means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint or several) due or to
become due, or that are now or may be hereafter contracted or acquired, or owing
to, of any Debtor to the Secured Parties, under this Agreement, the Secured Debt
Securities, the Subsidiary Guarantee (to be entered into pursuant to the terms
of the Purchase Agreement by any Additional Debtors) (the “Guarantee”), the
other Transaction Documents and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, 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 any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time. Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and interest
on the Secured Debt Securities and the loans extended pursuant thereto; (ii) any
and all other fees, indemnities, costs, obligations and liabilities of the
Debtors from time to time under or in connection with this Agreement, the
Secured Debt Securities, the Guarantee, the other Transaction Documents and any
other instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) 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 any Debtor. Notwithstanding the
foregoing or any other provision in this Agreement, the obligations of the
Company pursuant to the Series B Debentures, and the obligations of any
Addtinoal Debtor pursuant to the Guarantee in respect of the obligations of the
Company pursuant to the Series B Debentures, do not constitute Obligations.

 

4

 

 

(j)          “Organizational Documents” means with respect to any Debtor, the
documents by which such Debtor 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 Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).

 

(k)          “Permitted Liens” has the meaning ascribed to such term in the
Debentures.

 

(l)          “Permitted Secured Party” means, with respect to the exercise of
any remedy provided for under this Agreement, any Secured Party that has
delivered a Commencement Notice with respect to the exercise of such remedy to
the other Secured Parties and has not received a Veto Notice with respect
thereto within the Veto Period (other than a Commencement Notice as to which the
Veto Period does not apply); provided, however, there shall only be a single
Permitted Secured Party that may exercise any specific remedy at any one time
(it being agreed that if a Commencement Notice is delivered by more than one
Secured Party with respect to any remedy provided for under this Agreement, then
the first Secured Party to deliver a Commencement Notice and not receive a Veto
Notice within the Veto Period shall be the only Secured Party that may exercise
such remedy).

 

(m)          “Pledged Interests” has the meaning ascribed to such term in
Section 4(j).

 

(n)          “Pledged Securities” has the meaning ascribed to such term in
Section 1(a).

 

(o)          “Significant Secured Party” means, on any date of determination,
any Secured Party holding twenty-five percent (25%) or more of the aggregate
principal amount of Secured Debt Securities outstanding on such date.

 

(p)          “Veto Notice” means, with respect to any Commencement Notice (other
than a Commencement Notice as to which the Veto Period does not apply), a
written notice given by any Significant Secured Party to the other Secured
Parties in accordance with the notice provisions set forth in the Purchase
Agreement pursuant to which such Significant Secured Party notifies the other
Secured Parties of its objection to the commencement of the remedial action
specified in such Commencement Notice and certifies that, to the best of its
knowledge, it is a Significant Secured Party.

 

(q)          “Veto Period” means, with respect to any Commencement Notice (other
than a Commencement Notice given by a Significant Secured Party at a time when
such Significant Secured Party is the only the Significant Secured Party), the
period of ten (10) consecutive calendar days following the delivery of such
Commencement Notice to the Secured Parties.

 

5

 

 

(r)           “UCC” means the Uniform Commercial Code of the State of New York
and or any other applicable law of any state or states which has jurisdiction
with respect to all, or any portion of, the Collateral or this Agreement, from
time to time.

 

2              Grant of Security Interest in Collateral. As an inducement for
the Secured Parties to extend the loans evidenced by the Secured Debt Securities
and to secure the complete and timely payment, performance and discharge in
full, as the case may be, of all of the Obligations, each Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Parties a security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (a “Security Interest” and, collectively, the
“Security Interests”).

 

3              Delivery of Certain Collateral. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent any and all certificates and other instruments or documents
representing any of the Collateral, together with all Necessary Endorsements. If
and when the Collateral includes Pledged Securities, each Debtor shall deliver
or cause to be delivered to the Agent any and all certificates and other
instruments representing or evidencing such Pledged Securities, together with
all Necessary Endorsements and each Organizational Document governing such
Pledged Securities.

 

4              Representations, Warranties, Covenants and Agreements of the
Debtors. Except as set forth under the corresponding section of the disclosure
schedules delivered to the Secured Parties concurrently herewith (the
“Disclosure Schedules”), which Disclosure Schedules shall be deemed a part
hereof, each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:

 

(a)          Each Debtor has the requisite corporate, partnership, limited
liability company or other entity power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The execution,
delivery and performance by each Debtor of this Agreement and the filings
contemplated herein have been duly authorized by all necessary action on the
part of such Debtor and no further action is required by such Debtor. This
Agreement has been duly executed by each Debtor. This Agreement constitutes the
legal, valid and binding obligation of each Debtor, enforceable against each
Debtor 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 and by
general principles of equity.

 

(b)          The Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily at the
offices of its attorneys or accountants) or places where Collateral is stored or
located, except as set forth on Schedule 4.(b) attached hereto. Except as
disclosed on Schedule 4.(b), (i) no Debtor owns any real property and (ii) none
of the Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.

 

(c)          Except for Permitted Liens, each of the Debtors is the sole owner
of the Collateral it purports to own (except for non-exclusive licenses granted
by any Debtor in the ordinary course of business), free and clear of any Liens
and is fully authorized to grant the Security Interests. Except as set forth on
Schedule 4.(c) attached hereto, there is not on file in any governmental or
regulatory authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that will be filed in favor of the Secured Parties
pursuant to this Agreement) covering or affecting any of the Collateral. Except
as set forth on Schedule 4.(c) attached hereto and except pursuant to this
Agreement, as long as this Agreement shall be in effect, the Debtors shall not
execute and shall not knowingly permit to be on file in any such office or
agency any other financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Parties pursuant to the
terms of this Agreement).

 

6

 

 

(d)          No written claim has been received that any material portion of
Collateral or any Debtor’s use of any material portion of Collateral violates
the rights of any third party. There has been no adverse decision to any
Debtor’s claim of ownership rights in or exclusive rights to use the Collateral
in any jurisdiction or to any Debtor’s right to keep and maintain such
Collateral in full force and effect, and there is no legal proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened in
writing before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.

 

(e)          Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and its
Collateral at the locations set forth on Schedule 4.(b) attached hereto and may
not relocate such books of account and records or tangible Collateral unless it
delivers to the Secured Parties at least 10 days prior to such relocation (i)
written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate financing
statements under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security Interests to
create in favor of the Secured Parties a valid, perfected and continuing
perfected first priority lien in the Collateral, subject to Permitted Liens.

 

(f)          This Agreement creates in favor of the Secured Parties a valid
security interest in the Collateral located in the United States, subject only
to Permitted Liens, securing the payment and performance of the Obligations.
Upon making the filings described in this Agreement, all security interests
created hereunder in any Collateral located in the United States which may be
perfected by filing Uniform Commercial Code financing statements will have been
duly perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation
of the Intellectual Property Security Agreement (as defined in Section 4(p)
hereof) with respect to copyrights and copyright applications in the United
States Copyright Office referred to in paragraph (m), the execution and delivery
of deposit account control agreements satisfying the requirements of Section
9-104(a)(2) of the UCC with respect to each deposit account of the Debtors, and
the delivery of the certificates and other instruments provided in Section 3, no
action is necessary to create, perfect or protect the security interests created
hereunder in Collateral located in the United States. Without limiting the
generality of the foregoing, except for the filing of said financing statements,
the recordation of said Intellectual Property Security Agreement and the
execution and delivery of said deposit account control agreements, no consent of
any third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for (i) the execution, delivery and performance of this Agreement, (ii)
the creation or perfection of the Security Interests created hereunder in the
Collateral located in the United States or (iii) the enforcement of the rights
of the Agent and the Secured Parties hereunder, other than consents from holders
of Permitted Liens obtained in writing and delivered to the Secured Parties
prior to the date of this Agreement.

 

7

 

 

(g)          Each Debtor hereby authorizes each of the Secured Parties to file
one or more financing statements under the UCC, with respect to the Security
Interests, with the proper filing and recording agencies in any jurisdiction
deemed proper by it.

 

(h)          The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any court,
governmental body or arbitrator or any applicable law, rule or regulation
applicable to any Debtor or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any material
agreement, or credit facility, to which any Debtor is a party or by which any
property or asset of any Debtor is bound or affected. If any, all required
consents (including, without limitation, from stockholders or creditors of any
Debtor) necessary for any Debtor to enter into and perform its obligations
hereunder have been obtained.

 

(i)          The capital stock and other equity interests listed on Schedule
4.(i) hereto (the “Subsidiary Equity Interests”) represent all of the capital
stock and other equity interests of the Subsidiaries, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Debtors.
All of the Subsidiary Equity Interests are validly issued, fully paid and
nonassessable. Each Debtor that is indicated on Schedule 4.(i) to be the owner
of Subsidiary Equity Interests is the legal and beneficial owner of such
Subsidiary Equity Interests, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens.

 

(j)          The ownership and other equity interests in partnerships and
limited liability companies (if any) included in the Collateral (the “Pledged
Interests”) by their express terms do not provide that they are securities
governed by Article 8 of the UCC and are not held in a securities account or by
any financial intermediary.

 

(k)          Except for Permitted Liens, each Debtor shall at all times maintain
the liens and Security Interests provided for hereunder as valid and perfected
first priority liens and security interests in the Collateral located in the
United States in favor of the Secured Parties until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 14 hereof.
Each Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Secured Parties. At the request of any of the Secured
Parties, each Debtor will authorize each of the Secured Parties at any time or
from time to time as reasonably necessary one or more financing statements
pursuant to the UCC in form reasonably satisfactory to the Secured Parties and
will pay the cost of filing the same in all public offices wherever filing is,
or is deemed by the Secured Parties to be, necessary to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Agent from time to time, upon reasonable
request, such releases and/or subordinations of claims and liens which may be
required to maintain the priority of the Security Interests hereunder.

 

8

 

 

(l)          No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for non-exclusive
licenses granted by a Debtor in its ordinary course of business, sales of
inventory by a Debtor in its ordinary course of business and other Collateral
which is no longer useful or material to a Debtor’s business) without the prior
written consent of a Majority in Interest.

 

(m)          Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order, subject to
ordinary wear and tear, and shall not operate or locate any such Collateral (or
cause to be operated or located) in any area excluded from insurance coverage.

 

(n)          Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including Collateral
hereafter acquired, 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 entities and otherwise as is prudent
for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof. Each Debtor shall cause each insurance policy
issued in connection herewith to provide, and the insurer issuing such policy to
certify to the Secured Parties, that (a) the Secured Parties will be named as
lender loss payees and additional insureds under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Secured Parties and
such cancellation or material change shall not be effective as to the Secured
Parties for at least thirty (30) days after receipt by the Secured Parties of
such notice, unless the effect of such change is to extend or increase coverage
under the policy; and (c) the Secured Parties 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. If no Event
of Default exists and if the aggregate insurance policy proceeds arising out of
any claim or series of related claims do not exceed $100,000, loss payments in
each instance will be applied by the Debtors to the repair and/or replacement of
property with respect to which the loss was incurred to the extent reasonably
feasible, and any loss payments or the balance thereof remaining, to the extent
not so applied, shall be payable to the Debtors; provided, however, that
payments received by the Debtors after an Event of Default occurs and is
continuing or in excess of $100,000 for any occurrence or series of related
occurrences shall be paid to the Secured Parties and, if received by the
Debtors, shall be held in trust for the Secured Parties and immediately paid
over to the Secured Parties unless otherwise directed in writing by the Secured
Parties. Copies of such policies or the related certificates, in each case,
naming the Secured Parties as lender loss payee and additional insured shall be
delivered to the Secured Parties at least annually and at the time any new
policy of insurance is issued.

 

(o)          Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Parties promptly, in sufficient detail, of any
material adverse change in the Collateral as a whole, and of the occurrence of
any event which would have a material adverse effect on the value of the
Collateral as a whole or on the Secured Parties’ security interest therein.

 

9

 

 

(p)          Each Debtor shall promptly execute and deliver to the Secured
Parties such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates and
assurances and take such further action as any Secured Party may from time to
time reasonably request to perfect, protect or enforce the Secured Parties’
security interest in the Collateral including, without limitation, if
applicable, the execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property (“Intellectual Property Security
Agreement”) in which the Secured Parties have been granted a security interest
hereunder, substantially in a form reasonably acceptable to the Secured Parties,
which Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof.

 

(q)          Each Debtor shall permit the Secured Parties and their respective
representatives and agents to inspect the Collateral during normal business
hours and upon at least two (2) Business Day’s prior notice, and to make copies
of records pertaining to the Collateral as may be reasonably requested by the
Secured Parties from time to time.

 

(r)          Each Debtor shall take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of
action and accounts receivable in respect of the Collateral.

 

(s)          Each Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any Collateral and of any other information
received by such Debtor that may reasonably be expected to materially and
adversely affect the value of the Collateral as a whole, the Security Interest
or the rights and remedies of the Secured Parties hereunder.

 

(t)          All information heretofore, herein or hereafter supplied to the
Agent or the Secured Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of the date
furnished.

 

(u)          The Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any rights and
franchises material to its business.

 

(v)          No Debtor will change its name, type of organization, jurisdiction
of organization, organizational identification number (if it has one), legal or
corporate structure, or identity, unless it provides at least 10 days prior
written notice to the Secured Parties of such change and, at the time of such
written notification, such Debtor provides any financing statements or fixture
filing necessary to perfect and continue the perfection of the Security
Interests granted and evidenced by this Agreement.

 

(w)          Except in the ordinary course of business, no Debtor will consign
any of its inventory or sell any of its inventory on bill and hold, sale or
return, sale on approval, or other conditional terms of sale without the consent
of the Secured Parties, which consent shall not be unreasonably withheld.

 

10

 

 

(x)          No Debtor will relocate its chief executive office to a new
location without (i) providing 30 days prior written notification thereof to the
Secured Parties and (ii) providing any financing statements or fixture filings
necessary to perfect and continue the perfection of the Security Interests
granted and evidenced by this Agreement.

 

(y)          Each Debtor was organized and remains organized solely under the
laws of the state set forth next to such Debtor’s name in Schedule 4.(y)
attached hereto, which Schedule 4.(y) sets forth each Debtor’s organizational
identification number or, if any Debtor does not have one, states that one does
not exist.

 

(z)          (i) The actual name of each Debtor is the name set forth in
Schedule 4.(y) attached hereto; (ii) no Debtor has any trade names except as set
forth on Schedule 4.(z) attached hereto; (iii) no Debtor has used any name other
than that stated in the preamble hereto or as set forth on Schedule 4.(z) for
the preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule 4.(z).

 

(aa)          At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the secured party to perfect the security interest created hereby,
the applicable Debtor shall deliver such Collateral to the Agent.

 

(bb)          Each Debtor, in its capacity as issuer, shall comply with any and
all orders and instructions of the Secured Parties regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, no Debtor shall enter into any agreement with any
person or entity other than the Secured Parties that would confer “control”,
within the meaning of Article 8 of the UCC, of any Pledged Interests.

 

(cc)          Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not possible,
then to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement. To the extent that
any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

 

(dd)          If there is any investment property or deposit account included as
Collateral that (i) can be perfected by “control” through an account control
agreement, and (ii) at any time has a balance (in either cash or value of
investment property, or both) exceeding $25,000, the applicable Debtor shall
cause such an account control agreement, in form and substance in each case
satisfactory to the Secured Parties, to be entered into and delivered to the
Secured Parties, unless the Major Investors waive the foregoing requirement with
respect to any such investment property or deposit account otherwise
constituting Collateral; provided, that (x) as of the date of this Agreement,
Debtor is not required to provide an account control agreement over the account
maintained by Debtor with J.P. Morgan in Germany as of the date of this
Agreement (the “Germany Account”), (y) Debtor shall notify the Agent at any time
that the Germany Account has a balance (in either cash or value of investment
property, or both) exceeding $1,000,000 (a “Germany Account Notice”), and (z)
Debtor shall cause an account control agreement, in form and substance
satisfactory to the Secured Parties, to be entered into and delivered to the
Secured Parties in respect of the Germany Account upon instructions from the
Secured Parties to do so given by the Secured Parties to Debtor at any time
after Debtor is obligated to deliver a Germany Account Notice pursuant to the
preceding clause (y).

 

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(ee)          To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying letter
of credit to consent to an assignment of the proceeds thereof to the Secured
Parties.

 

(ff)          To the extent that any Collateral is in the possession of any
third party, the applicable Debtor shall join with the Agent in notifying such
third party of the Secured Parties’ security interest in such Collateral and
shall use commercially reasonable efforts to obtain an acknowledgement and
agreement from such third party with respect to the Collateral, in form and
substance reasonably satisfactory to the Agent.

 

(gg)          If any Debtor shall at any time hold or acquire a commercial tort
claim, such Debtor shall promptly notify the Secured Parties in a writing signed
by such Debtor of the particulars thereof and grant to the Secured Parties in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent.

 

(hh)           Each Debtor shall immediately provide written notice to the Agent
of any and all accounts which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the perfected
status of the Security Interests in such accounts and proceeds thereof, shall
execute and deliver to the Agent an assignment of claims for such accounts and
cooperate with the Agent in taking any other steps required, in its judgment,
under the Federal Assignment of Claims Act or any similar federal, state or
local statute or rule to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof.

 

(ii)          Each Debtor shall cause each wholly-owned Subsidiary that is
organized in a jurisdiction within the United States to promptly become a party
hereto (an “Additional Debtor”), by executing and delivering an Additional
Debtor Joinder in substantially the form of Annex A attached hereto and comply
with the provisions hereof applicable to the Debtors. Concurrent therewith, the
Additional Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver such opinions
of counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably request. Upon delivery
of the foregoing to the Agent, the Additional Debtor shall be and become a party
to this Agreement with the same rights and obligations as the Debtors, for all
purposes hereof as fully and to the same extent as if it were an original
signatory hereto and shall be deemed to have made the representations,
warranties and covenants set forth herein as of the date of execution and
delivery of such Additional Debtor Joinder, and all references herein to the
“Debtors” shall be deemed to include each Additional Debtor.

 

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(jj)          Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Secured Debt Securities.

 

(kk)        Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each issuer of
Pledged Securities to register the pledge of the applicable Pledged Securities
in the name of the Secured Parties on the books of such issuer. Further, except
with respect to certificated securities delivered to the Agent, the applicable
Debtor shall deliver to Secured Parties an acknowledgement of pledge (which,
where appropriate, shall comply with the requirements of the relevant UCC with
respect to perfection by registration) signed by the issuer of the applicable
Pledged Securities, which acknowledgement shall confirm that: (a) it has
registered the pledge on its books and records; and (b) at any time directed by
Secured Parties during the continuation of an Event of Default, such issuer will
transfer the record ownership of such Pledged Securities into the name of any
designee of Secured Parties, will take such steps as may be necessary to effect
the transfer, and will comply with all other instructions of Secured Parties
regarding such Pledged Securities without the further consent of the applicable
Debtor.

 

(ll)          In the event that, upon an occurrence of an Event of Default,
Secured Parties shall sell all or any of the Pledged Securities to another party
or parties (herein called the “Transferee”) or shall purchase or retain all or
any of the Pledged Securities, each Debtor shall, to the extent applicable: (i)
deliver to the Secured Parties or the Transferee, as the case may be, the
articles of incorporation, bylaws, minute books, stock certificate books,
corporate seals, deeds, leases, indentures, agreements, evidences of
indebtedness, books of account, financial records and all other Organizational
Documents and records of the Debtors and their direct and indirect subsidiaries;
(ii) use its best efforts to obtain resignations of the persons then serving as
officers and directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use its best efforts to obtain any
approvals that are required by any governmental or regulatory body in order to
permit the sale of the Pledged Securities to the Transferee or the purchase or
retention of the Pledged Securities by the Secured Parties and allow the
Transferee or the Secured Parties to continue the business of the Debtors and
their direct and indirect subsidiaries.

 

(mm)      Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the
United States Copyright Office all of its material copyrights, (ii) cause the
security interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property on a quarterly basis.

 

(nn)          Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as the Secured
Parties may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Parties to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.

 

13

 

 

(oo)          Schedule 4.(oo) attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights, and
domain names owned by any of the Debtors as of the date hereof. Schedule 4.(oo)
lists all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All United States
material patents and trademarks of the Debtors have been duly recorded at the
United States Patent and Trademark Office and all material copyrights of the
Debtors have been duly recorded at the United States Copyright Office.

 

(pp)          Except as set forth on Schedule 4.(pp) attached hereto, none of
the account debtors or other persons or entities obligated on any of the
Collateral is a governmental authority covered by the Federal Assignment of
Claims Act or any similar federal, state or local statute or rule in respect of
such Collateral.

 

(qq)          Until the Obligations shall have been paid and performed in full
(other than inchoate indemnification obligations), the Company covenants that it
shall promptly cause any Additional Debtor to enter into a Subsidiary Guarantee
in favor of the Secured Parties in the form of Exhibit G to the Purchase
Agreement.

 

5              Effect of Pledge on Certain Rights. The parties hereto agree
that, if any of the Collateral subject to this Agreement consists of nonvoting
equity or ownership interests (regardless of class, designation, preference or
rights) that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), the pledge of such
equity or ownership interests pursuant to this Agreement or the enforcement of
any of the Secured Parties’ rights hereunder shall not be deemed to be the type
of event which would trigger such conversion rights, notwithstanding any
provisions in the Organizational Documents or agreements to which any Debtor is
subject or to which any Debtor is party.

 

6              Defaults. The following events shall be “Events of Default”:

 

(a)          The occurrence of an Event of Default under the Secured Debt
Securities;

 

(b)          Any representation or warranty of any Debtor in this Agreement
shall prove to have been incorrect in any material respect when made;

 

(c)          The failure by any Debtor to observe or perform any of its
obligations hereunder for ten (10) days after delivery to such Debtor of notice
of such failure by or on behalf of any Secured Party unless such default is
capable of cure but cannot be cured within such time frame and such Debtor is
all commercially reasonable efforts to cure same in a timely fashion; or

 

(d)          Any provision of this Agreement is at any time for any reason
declared to be null and void, any Debtor contests the validity or enforceability
of this Agreement, any Debtor governmental authority having jurisdiction over
any Debtor commences any proceeding seeking to establish the invalidity or
unenforceability of this Agreement, or any Debtor denies that any Debtor has any
liability or obligation purported to be created under this Agreement.

 

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7              Duty To Hold In Trust.

 

(a)          Upon the occurrence of any Event of Default and at any time
thereafter that such Event of Default remains continuing, each Debtor shall,
upon receipt of any revenue, income, dividend, interest or other sums subject to
the Security Interests, whether payable pursuant to the Secured Debt Securities
or otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Parties, pro rata in proportion to their
respective then currently outstanding principal amount of Secured Debt
Securities, for application to the satisfaction of the Obligations (and if any
Secured Debt Securities are not outstanding, pro-rata in proportion to the
initial purchases of the remaining Secured Debt Securities).

 

(b)          If any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business on
the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.

 

8              Rights and Remedies Upon Default.

 

(a)          Upon the occurrence of any Event of Default and at any time
thereafter that such Event of Default remains continuing, the Secured Parties,
acting through the Agent, shall have the right to exercise all of the remedies
conferred hereunder and under the Secured Debt Securities, and the Secured
Parties, shall have all the rights and remedies of a secured party under the
UCC. Without limitation, the Agent, for the benefit of the Secured Parties,
shall have the following rights and powers:

 

i           The Agent shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is or may be placed and
remove the same, and each Debtor shall assemble the Collateral and make it
available to the Agent at places which the Agent shall reasonably select,
whether at such Debtor’s premises or elsewhere, and make available to the Agent,
without rent, all of such Debtor’s respective premises and facilities for the
purpose of the Agent taking possession of, removing or putting the Collateral in
saleable or disposable form.

 

ii          Upon notice to the Debtors by Agent, all rights of each Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease. Upon such notice, Agent shall have the right to receive, for the ratable
benefit of the Secured Parties, any interest, cash dividends or other payments
on the Collateral and, at the option of Agent, to exercise in such Agent’s
discretion all voting rights pertaining thereto. Without limiting the generality
of the foregoing, Agent shall have the right (but not the obligation) to
exercise all rights with respect to the Collateral as it were the sole and
absolute owner thereof, including, without limitation, to vote and/or to
exchange, at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or other
readjustment concerning or involving the Collateral or any Debtor or any of its
direct or indirect subsidiaries.

 

15

 

 

iii          The Agent shall have the right to use the Collateral and shall have
the right to assign, sell, lease or otherwise dispose of and deliver all or any
part of the Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Agent may deem commercially
reasonable, all without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any Debtor or right
of redemption of a Debtor, which are hereby expressly waived. Upon each such
sale, lease, assignment or other transfer of Collateral, the Agent, for the
ratable benefit of the Secured Parties, may, unless prohibited by applicable law
which cannot be waived, purchase all or any part of the Collateral being sold,
free from and discharged of all trusts, claims, right of redemption and equities
of any Debtor, which are hereby waived and released.

 

iv         The Agent shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Agent, for the ratable benefit of the Secured Parties, and to
enforce the Debtors’ rights against such account debtors and obligors.

 

v          The Agent may (but is not obligated to) direct any financial
intermediary or any other person or entity holding any investment property to
transfer the same to the Agent (or the Agent’s designee), for the ratable
benefit of the Secured Parties.

 

vi         The Agent may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the name of the Secured
Parties or any designee or any purchaser of any Collateral.

 

16

 

 

(b)          The Agent shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The Agent
may sell the Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the Collateral on credit,
the Debtors will only be credited with payments actually made by the purchaser.
In addition, each Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent’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 the Agent to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Agent, for the ratable benefit
of the Secured Parties an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Debtor) to use, license or
sublicense following an Event of Default, any Intellectual Property now owned or
hereafter acquired by such Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

 

(d)          Notwithstanding anything in this Agreement to the contrary, each
Secured Party agrees that it will not, and will not authorize the Agent to,
exercise any remedy provided for under this Agreement with respect to all or any
portion of the Collateral unless such Secured Party is a Permitted Secured Party
(provided that the foregoing shall not prevent any Secured Party from commencing
or participating in any Insolvency Proceeding or taking any action (other than
with respect to the Collateral) to enforce the payment or performance of any
Debtor’s obligations under any of the Secured Debt Securities or other
Transaction Documents). This Section 8(d) is not intended to confer any rights
or benefits upon the Debtors, or any of them (other than pursuant to the last
sentence of this Section 8(d)), or any other Person except Secured Parties, and
no Person (including any or all Debtors) other than Secured Parties shall have
any right to enforce any of the provisions of this Section 8(d) (other than
pursuant to the last sentence of this Section 8(d)). The Debtors, or any of
them, may presume, conclusively, that any action that any Secured Party takes
under this Agreement has been authorized and approved by the other Secured
Parties.

 

9              Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder or from payments made on account
of any insurance policy insuring any portion of the Collateral shall be applied
first, to the expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like (including, without limitation, any taxes, fees
and other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys’ fees and expenses incurred by the Agent in enforcing the
Secured Parties’ rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Secured Debt Securities at the time of any such determination), and to the
payment of any other amounts required by applicable law, after which the Secured
Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 12% per annum or the lesser amount permitted by
applicable law (the “Default Rate”), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency. To the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.

 

17

 

 

10              Securities Law Provision. Each Debtor recognizes that Secured
Parties may be limited in their ability to effect a sale to the public of all or
part of the Pledged Securities by reason of certain prohibitions in the
Securities Act of 1933, as amended, or other federal or state securities laws
(collectively, the “Securities Laws”), and may be compelled to resort to one or
more sales to a restricted group of purchasers who may be required to agree to
acquire the Pledged Securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Debtor agrees that sales
so made may be at prices and on terms less favorable than if the Pledged
Securities were sold to the public, and that the Secured Parties have no
obligation to delay the sale of any Pledged Securities for the period of time
necessary to register the Pledged Securities for sale to the public under the
Securities Laws. Each Debtor shall cooperate with Secured Parties in its attempt
to satisfy any requirements under the Securities Laws (including, without
limitation, registration thereunder if requested by Agent) applicable to the
sale of the Pledged Securities by Agent.

 

11              Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors will also, upon demand, pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Agent, for the benefit of the
Secured Parties, may incur in connection with the creation, perfection,
protection, foreclosure, collection or enforcement of the Security Interest and
the preparation, administration, continuance, amendment or enforcement of this
Agreement and pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel, which the Agent, for
the benefit of the Secured Parties, and the Secured Parties may incur in
connection with (i) the enforcement of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, or (iii) the exercise or enforcement of any of the rights of
the Secured Parties under the Secured Debt Securities. Until so paid, any fees
payable hereunder shall be added to the principal amount of the Secured Debt
Securities and shall bear interest at the Default Rate.

 

12              Responsibility for Collateral. The Debtors assume all
liabilities and responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) neither the
Agent nor any Secured Party (i) has any 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, or (ii) has any obligation to clean-up or
otherwise prepare the Collateral for sale, and (b) each Debtor shall remain
obligated and liable under each contract or agreement included in the Collateral
to be observed or performed by such Debtor thereunder. Neither the Agent nor any
Secured Party shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Agent or any Secured Party of any payment relating to any of the Collateral, nor
shall the Agent or any Secured Party be obligated in any manner to perform any
of the obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Secured Party 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 the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.

 

18

 

 

13              Security Interests Absolute. All rights of the Secured Parties
and all of the Obligations are absolute and unconditional, irrespective of: (a)
any lack of validity or enforceability of this Agreement, the Secured Debt
Securities or any agreement entered into in connection with the foregoing, or
any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Secured Debt Securities or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guarantee, or any other
security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part of
the Security Interests granted hereby. Until the Obligations shall have been
paid and performed in full (other than inchoate indemnification obligations),
the rights of the Secured Parties shall continue even if the Obligations are
barred for any reason, including, without limitation, the running of the statute
of limitations or bankruptcy. Each Debtor expressly waives presentment, protest,
notice of protest, demand, notice of nonpayment and demand for performance. In
the event that at any time any transfer of any Collateral or any payment
received by the Secured Parties hereunder shall be deemed by final order of a
court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Parties,
then, in any such event, each Debtor’s obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to require the Secured Parties
to proceed against any other person or entity or to apply any Collateral which
the Secured Parties may hold at any time, or to marshal assets, or to pursue any
other remedy.

 

14              Term of Agreement. This Agreement and the Security Interests
shall terminate on the date on which all payments under the Secured Debt
Securities have been paid in full and all other Obligations have been paid or
discharged (other than inchoate indemnification obligations); provided, however,
that all indemnities of the Debtors contained in this Agreement (including,
without limitation, Annex B hereto) shall survive and remain operative and in
full force and effect regardless of the termination of this Agreement.

 

19

 

 

15             Power of Attorney; Further Assurances.

 

(a)          Each Debtor authorizes the Agent, and does hereby make, constitute
and appoint the Agent and its officers, agents, successors or assigns with full
power of substitution, as such Debtor’s true and lawful attorney-in-fact, with
power, in the name of the Agent or such Debtor, to, after the occurrence and
during the continuance of an Event of Default, (i) endorse any note, checks,
drafts, money orders or other instruments of payment (including payments payable
under or in respect of any policy of insurance) in respect of the Collateral
that may come into possession of the Agent; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or express bill,
bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on or
threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; (v) to
transfer any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of the Agent, and at
the expense of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts and things
which the Agent deems necessary to protect, preserve and realize upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement and the Secured Debt Securities all as fully and
effectually as the Debtors might or could do; and each Debtor hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the Obligations
(other than inchoate indemnification obligations) shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a party.
Without limiting the generality of the foregoing, after the occurrence and
during the continuance of an Event of Default, each Secured Party is
specifically authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and the
United States Copyright Office.

 

(b)          On a continuing basis, each Debtor will make, execute, acknowledge,
deliver, file and record, as the case may be, with the proper filing and
recording agencies in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule 4.(y) attached hereto, all such instruments,
and take all such action as may reasonably be requested by the Agent, to perfect
the Security Interests granted hereunder and otherwise to carry out the intent
and purposes of this Agreement, or for assuring and confirming to the Agent the
grant or perfection of a perfected security interest in all the Collateral under
the UCC.

 

(c)          Each Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Agent’s discretion, to
take any action and to execute any instrument which the Agent may deem necessary
or advisable to accomplish the purposes of this Agreement, including the filing,
in its sole discretion, of one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of
such Debtor where permitted by law, which financing statements may (but need
not) describe the Collateral as “all assets” or “all personal property” or words
of like import, and ratifies all such actions taken by the Agent. This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.

 

20

 

 

16             Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement.

 

17             Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Agent shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties’ rights and
remedies hereunder.

 

18             Appointment of Agent. The Secured Parties hereby appoint Broadfin
Capital, LLC (“Broadfin”) to act as their agent (in such capacity, the “Agent”)
for purposes of exercising any and all rights and remedies of the Secured
Parties hereunder. Such appointment shall continue until revoked in writing by a
Majority in Interest, at which time a Majority in Interest shall appoint a new
Agent, provided that Broadfin may not be removed as Agent unless Broadfin
Healthcare Master Fund, Ltd. then holds less than $1,000,000 in principal amount
of Secured Debt Securities; provided, further, that such removal may occur only
if the other Secured Parties then hold, in the aggregate, not less than an
aggregate of $1,000,000 in principal amount of Secured Debt Securities. The
Agent has the rights, responsibilities and immunities set forth in Annex A
hereto.

 

19             Miscellaneous.

 

(a)          No course of dealing between the Debtors, on the one hand, and the
Secured Parties, on the other hand, nor any failure to exercise, nor any delay
in exercising, on the part of the Secured Parties, any right, power or privilege
hereunder or under the Secured Debt Securities shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

 

(b)          All of the rights and remedies of the Secured Parties with respect
to the Collateral, whether established hereby or by the Secured Debt Securities
or by any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or concurrently.

 

(c)          This Agreement, together with the exhibits and schedules hereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into this Agreement and the exhibits and schedules hereto. No provision
of this Agreement may be waived, modified, supplemented or amended except in a
written instrument signed, in the case of an amendment, by the Debtors and the
Secured Parties holding 67% or more of the principal amount of Secured Debt
Securities then outstanding, or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought; provided, however,
unanimous consent shall be required for any amendment that would adversely
affect any Secured Parties.

 

21

 

 

(d)          If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

(e)          No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right.

 

(f)          This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. No Debtor may assign
this Agreement or any rights or obligations hereunder without the prior written
consent of each Secured Party (other than by merger). Any Secured Party may
assign any or all of its rights under this Agreement to any Person (as defined
in the Purchase Agreement) to whom such Secured Party assigns or transfers any
Obligations, provided such transferee agrees in writing to be bound, with
respect to the transferred Obligations, by the provisions of this Agreement that
apply to the “Secured Parties.”

 

(g)          Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order to carry out
the provisions and purposes of this Agreement.

 

(h)          Except to the extent mandatorily governed by the jurisdiction or
situs where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Except to the extent mandatorily governed by the jurisdiction or situs
where the Collateral is located, each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Secured Debt Securities (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Except to the extent mandatorily governed by the
jurisdiction or situs where the Collateral is located, each Debtor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.

 

22

 

 

(i)          This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that
any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(j)          All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder.

 

(k)          Each Debtor shall indemnify, reimburse and hold harmless the Agent
and the Secured Parties and their respective partners, members, shareholders,
officers, directors, employees and agents (and any other persons with other
titles that have similar functions) (collectively, “Indemnitees”) 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 the Secured Debt Securities, the Purchase Agreement
or any other agreement, instrument or other document executed or delivered in
connection herewith or therewith.

 

(l)          Nothing in this Agreement shall be construed to subject Agent or
any Secured Party to liability as a partner in any Debtor or any of its direct
or indirect subsidiaries that is a partnership or as a member in any Debtor or
any of its direct or indirect subsidiaries that is a limited liability company,
nor shall Agent or any Secured Party be deemed to have assumed any obligations
under any partnership agreement or limited liability company agreement, as
applicable, of any such Debtor or any of its direct or indirect subsidiaries or
otherwise, unless and until the any such Secured Party exercises its right to be
substituted for such Debtor as a partner or member, as applicable, pursuant
hereto.

 

23

 

 

(m)          To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the consent, approval
or action of any partner or member, as applicable, of any Debtor or any direct
or indirect subsidiary of any Debtor or compliance with any provisions of any of
the Organizational Documents, the Debtors hereby grant such consent and approval
and waive any such noncompliance with the terms of said documents.

 

[SIGNATURE PAGES FOLLOW] 

 

24

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Security Agreement to be duly executed on the day and year first above written. 

        MELA SCIENCES, INC.         By:       Michael R. Stewart     Chief
Executive Officer

 

[SIGNATURE PAGES OF SECURED PARTIES FOLLOW] 

 

[Signature Page to Amended and Restated Security Agreement]

 

 

[SIGNATURE PAGE OF SECURED PARTY TO MELA AMENDED AND RESTATED SECURITY
AGREEMENT] 

    Name of Investing Entity:  

    Signature of Authorized Signatory of Investing Entity:  

    Name of Authorized Signatory:  

    Title of Authorized Signatory:  

 

 

 

 

 

ANNEX A
to
SECURITY
AGREEMENT

 

FORM OF ADDITIONAL DEBTOR JOINDER

 

to that certain Amended and Restated Security Agreement dated as of July [●],
2015 made by MELA Sciences, Inc. (the “Company”) and its subsidiaries party
thereto from time to time, as Debtors, to and in favor of the Secured Parties
identified therein (the “Security Agreement”), relating to the Company’s 2.25%
Series A Senior Secured Convertible Debentures due June 22, 2020 and the
Company’s 9% Senior Secured Notes

 

Reference is made to the Security Agreement as defined above; capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in, or by reference in, the Security Agreement.

 

The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above, the undersigned shall (a) be
an Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTIES, A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
TRIAL PROVISIONS SET FORTH THEREIN.

 

Attached hereto are supplemental and/or replacement Schedules to the Security
Agreement, as applicable.

 

The undersigned shall deliver an executed copy of this Joinder to the Secured
Parties, and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

 

 

 

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned.  

        [INSERT NAMES OF ADDITIONAL DEBTORS]         By:       Name:     Title:
        Dated: ______ __, 20__

 

 

 

 

ANNEX B
to
SECURITY
AGREEMENT

 

THE AGENT

 

1             Appointment. The Secured Parties (all capitalized terms used
herein and not otherwise defined shall have the respective meanings provided in
the Amended and Restated Security Agreement to which this Annex B is attached
(the “Agreement”)), by their acceptance of the benefits of the Agreement, hereby
designate Broadfin Capital, LLC (“Broadfin”) as the Agent to act as specified
herein and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document (as such term is defined in the
Purchase Agreement) and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent may perform any of its duties hereunder by or
through its agents or employees.

 

2             Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Agent nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss, unless caused solely by its or their gross negligence
or willful misconduct as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in
respect of any Debtor or any Secured Party; and nothing in the Agreement or any
other Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.

 

3             Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Secured Party, to the extent it deems appropriate, has made
and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Company and its subsidiaries in
connection with such Secured Party’s investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Company and its
subsidiaries, and of the value of the Collateral from time to time, and the
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other information
with respect thereto, whether coming into its possession before any Obligations
are incurred or at any time or times thereafter. The Agent shall not be
responsible to the Debtors or any Secured Party for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority or sufficiency of the Agreement or any other
Transaction Document, or for the financial condition of the Debtors or the value
of any of the Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Agreement or any other Transaction Document, or the financial condition of
the Debtors, or the value of any of the Collateral, or the existence or possible
existence of any default or Event of Default under the Agreement, the Debentures
or any of the other Transaction Documents.

 

 

 

 

4              Certain Rights of the Agent. The Agent shall have the right to
take any action with respect to the Collateral, on behalf of all of the Secured
Parties. To the extent practical, the Agent shall request instructions from the
Secured Parties with respect to any material act or action (including failure to
act) in connection with the Agreement or any other Transaction Document, and
shall be entitled to act or refrain from acting in accordance with the
instructions of a Majority in Interest; if such instructions are not provided
despite the Agent’s request therefor, the Agent shall be entitled to refrain
from such act or taking such action, and if such action is taken, shall be
entitled to appropriate indemnification from the Secured Parties in respect of
actions to be taken by the Agent; and the Agent shall not incur liability to any
person or entity by reason of so refraining. Without limiting the foregoing, (a)
no Secured Party shall have any right of action whatsoever against the Agent as
a result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (is) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law.

 

5              Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, e-mail or telecopy message, cablegram, radiogram, order or
other document or telephone message signed, sent or made by the proper person or
entity, and, with respect to all legal matters pertaining to the Agreement and
the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it. Anything to the contrary notwithstanding, the
Agent shall have no obligation whatsoever to any Secured Party to assure that
the Collateral exists or is owned by the Debtors or is cared for, protected or
insured or that the liens granted pursuant to the Agreement have been properly
or sufficiently or lawfully created, perfected, or enforced or are entitled to
any particular priority.

 

6              Indemnification. To the extent that the Agent is not reimbursed
and indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, in proportion to their principal amounts of
Debentures then held, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for those
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction to have resulted solely from the Agent’s own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent,
the Agent may require each Secured Party to deposit with it sufficient sums as
it determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.

 

2

 

 

7              Resignation by the Agent.

 

(a)          The Agent may resign from the performance of all its functions and
duties under the Agreement and the other Transaction Documents at any time by
giving 30 days’ prior written notice (as provided in the Agreement) to the
Debtors and the Secured Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below.

 

(b)          Upon any such notice of resignation, the Secured Parties, acting by
a Majority in Interest, shall appoint a successor Agent hereunder.

 

(c)          If a successor Agent shall not have been so appointed within said
30-day period, the Agent shall then appoint a successor Agent who shall serve as
Agent until such time, if any, as the Secured Parties appoint a successor Agent
as provided above. If a successor Agent has not been appointed within such
30-day period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.

 

8             Rights with respect to Collateral. Each Secured Party agrees with
all other Secured Parties and the Agent (i) that it shall not, and shall not
attempt to, exercise any rights with respect to its security interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the Agent
or any of the other Secured Parties in respect of the Collateral or its rights
hereunder (other than any such action arising from the breach of this Agreement)
and (ii) that such Secured Party has no other rights with respect to the
Collateral other than as set forth in this Agreement and the other Transaction
Documents. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
and the retiring Agent shall be discharged from its duties and obligations under
the Agreement. After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex B shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.

 

3

 

 

Exhibit D

 

Amended and Restated Intellectual Property Security Agreement

 

 

 

 

AMENDED AND RESTATED
INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This Amended and Restated Intellectual Property Security Agreement (this
“Agreement”), entered into as of August 3, 2015 is among (i) MELA Sciences,
Inc., a Delaware corporation (the “Company”), any Additional Debtors (as such
term is defined herein and, together with the Company, the “Debtors”) and (ii)
holders identified on the signature pages hereto (the “Secured Parties” and
each, a “Secured Party”) of the Secured Debt Securities (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, the Company has entered into that certain Securities Purchase Agreement
dated as of June 22, 2015 (as amended, the “Securities Purchase Agreement”) with
the holders identified on the signature pages thereto of (A) the Company’s 2.25%
Series A Senior Secured Convertible Debentures due June 22, 2020 (the “Series A
Debentures”), (B) the Company’s 2.25% Series B Senior Unsecured Convertible
Debentures due June 22, 2020 (the “Series B Debentures” and, together with the
Series A Debentures, the “Debentures”) and (C) the Company’s 9% Senior Secured
Notes (the “Notes” and, together with the Series A Debentures, the “Secured Debt
Securities”);

 

WHEREAS, pursuant to the Purchase Agreement the Secured Parties have severally
extended to the Company the loans evidenced by the Secured Debt Securities;

 

WHEREAS, the Debtors as of the date hereof are parties to that certain
Intellectual Property Security Agreement dated as of June 22, 2015 (the
“Existing Intellectual Property Security Agreement”) entered into pursuant to
the Purchase Agreement; and

 

WHEREAS, each of the Debtors and the Secured Parties are party to that certain
Amended and Restated Security Agreement (the “Security Agreement”) dated as of
the date hereof and entered into pursuant to the Purchase Agreement. Capitalized
terms used herein but not defined herein have the respective meanings given to
them in the Security Agreement.

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree to amend and restate in its
entirety the Existing Intellectual Property Security Agreement as follows:

 

AGREEMENT

 

1              Grant of Security Interest. To secure the Obligations, each of
the Debtors grants and pledges to the Secured Parties a security interest in all
such Debtor’s right, title and interest in, to and under its intellectual
property (all of which, for all of the Debtors, collectively, the “Intellectual
Property Collateral”), including, without limitation, the following:

 

(a)          Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret, now or hereafter existing, created, acquired or
held, including without limitation those set forth on Exhibit A attached hereto
(collectively, the “Copyrights”);

 

 

 

 

(b)          Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;

 

(c)          Any and all design rights that may be available to such Debtor now
or hereafter existing, created, acquired or held;

 

(d)          All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications set forth on Exhibit B attached hereto
(collectively, the “Patents”);

 

(e)          Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
all business goodwill connected with and symbolized by such trademarks,
including without limitation those set forth on Exhibit C attached hereto, but
excluding any intent to use trademark application to the extent that, and solely
during the period in which, the grant of a security interest therein would
impair, under applicable federal law, the registerability of such application or
the validity or enforceability of the registrations issuing from such
application (collectively, the “Trademarks”);

 

(f)          Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

 

(g)          All licenses or other rights to use any of the Copyrights, Patents,
or Trademarks and all license fees and royalties arising from such use to the
extent permitted by such license or rights;

 

(h)          All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and

 

(i)          All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.

 

2              Recordation. Each of the Debtors authorizes the Commissioner for
Patents, the Commissioner for Trademarks and the Register of Copyrights and any
other government officials to record and register this Agreement with the United
States Patent and Trademark Office and the United States Copyright Office, as
applicable, upon request by any of the Secured Parties.

 

2

 

 

3              Transaction Documents. This Agreement has been entered into
pursuant to and in conjunction with the Purchase Agreement. The provisions of
the Purchase Agreement shall supersede and control over any conflicting or
inconsistent provision herein. The rights and remedies of the Secured Parties
with respect to the Intellectual Property Collateral are as provided by the
Transaction Documents (as defined in the Purchase Agreement), and nothing in
this Agreement shall be deemed to limit such rights and remedies.

 

4              Execution in Counterparts. 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. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile or in electronic (i.e., “pdf” or
“tif” format) shall be effective as delivery of a manually executed counterpart
of this Agreement.

 

5              Successors and Assigns. This Agreement will be binding on and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.

 

6              Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of this Agreement), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper or is an inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law. If either party shall commence an action, suit or proceeding to enforce any
provisions of this Agreement, then, in addition to the obligations of the
Company under the Purchase Agreement, the prevailing party in such action, suit
or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

 

[Signature pages follow.]

 

3

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Intellectual Property Security Agreement to be duly executed as of the day and
year first above written. 

        MELA SCIENCES, INC.         By:       Michael R. Stewart     Chief
Executive Officer

 

 

 

 

[SIGNATURE PAGE OF SECURED PARTY TO MELA AMENDED AND RESTATED INTELLECTUAL
PROPERTY SECURITY AGREEMENT] 

    Name of Investing Entity:   

    Signature of Authorized Signatory of Investing Entity:    

    Name of Authorized Signatory:    

    Title of Authorized Signatory: