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EXHIBIT 10.1
 
SECURITIES EXCHANGE AGREEMENT
 
This Securities Exchange Agreement (this "Agreement") is dated as of June 6,
2017, between STRATA Skin Sciences, Inc., a Delaware corporation (the
"Company"), and each holder identified on the signature pages hereto (each,
including its successors and assigns, a "Holder" and collectively, the
"Holders").
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 3(a)(9) of the Exchange Act, the Company desires
to exchange with each Holder, and each Holder, severally and not jointly,
desires to exchange with the Company, securities of the Company for other
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Holder agree as
follows:
ARTICLE I.
DEFINITIONS
1.1          Definitions.  In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as defined
herein), and (b) the following terms have the meanings set forth in this Section
1.1:
"2.25% Debentures" means the 2.25% Senior Series A Secured Convertible
Debentures due June 30, 2021 with a Conversion Price of $3.75.
"4% Debentures" means the 4% Senior Secured Convertible Debentures due June 30,
2021 with a Conversion Price of $12.825.
"Acquiring Person" shall have the meaning ascribed to such term in Section 4.7.
"Affiliate" means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.
"Board of Directors" means the board of directors of the Company.
"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.
"Certificate of Designation" means, collectively, the Certificates of
Designation relating to the Preferred Stock, to be filed prior to the Closing by
the Company with the Secretary of State of Delaware, in the form of Exhibit A
attached hereto.
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"Closing" means the closing of the exchange of the Securities pursuant to
Section 2.1(a).
"Closing Date" means the later of (a) the 2nd Trading Day following the date
that Shareholder Approval is obtained and deemed effective and (b) the Trading
Day on which all of the Transaction Documents have been executed and delivered
by the applicable parties thereto, and all conditions precedent to (i) the
Holders' obligations to surrender the Debentures and (ii) the Company's
obligations to deliver the New Securities, in each case, have been satisfied or
waived.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
"Company Counsel" means Duane Morris LLP, with offices located at 30 S. 17th
Street, Philadelphia, Pennsylvania 19103.
"Conversion Price" shall have the meaning ascribed to such term in the
Certificate of Designation (initially $2.69, subject to adjustment therein).
"Conversion Shares" shall have the meaning ascribed to such term in the shares
of Preferred Stock.
"Debentures" shall mean, collectively, the 4% Debentures and the 2.25%
Debentures.
"EGS" means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue
of the Americas, New York, New York 10105-0302.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

"Exempt Issuance" means the issuance of (a) shares of Common Stock or options to
employees, officers, directors or consultants (provided if to consultants not
more than 100,000 in any 12 month period, subject to adjustment for reverse and
forward stock splits and the like) of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose for services rendered to the
Company or the Subsidiaries, (b) securities upon the
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exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities (other than in connection
with stock splits or combinations) or to extend the term of such securities, (c)
securities issued pursuant to acquisitions or strategic transactions approved by
a majority of the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equityholders of a Person) which
is, itself or through its subsidiaries, an operating company or an owner of an
asset in a business synergistic with the business of the Company and shall
provide to the Company additional benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
"Liens" means a lien, charge, pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning assigned to such term in
Section 3.1(b).
"Maximum Rate" shall have the meaning ascribed to such term in Section 5.17.
"Participation Maximum" shall have the meaning ascribed to such term in Section
4.11(a).
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
"Preferred Stock" means the up to 40,617 shares of the Company's Series C
Convertible Preferred Stock issued hereunder having the rights, preferences and
privileges set forth in the Certificate of Designation, in the form of Exhibit A
hereto and which have a Conversion Price equal to $2.69, subject to adjustment
therein
"Pre-Notice" shall have the meaning ascribed to such term in Section 4.11(b).
"Pro Rata Portion" shall have the meaning ascribed to such term in Section
4.11(e).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Purchase Agreement" means the Securities Purchase Agreement, dated June 22,
2015 by and between the Company and the purchasers signatory thereto.
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"Holder Party" shall have the meaning ascribed to such term in Section 4.9.
"Required Approvals" shall have the meaning ascribed to such term in Section
3.1(e).
"Required Minimum" means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
conversion in full of all shares of Preferred Stock, ignoring any conversion
limits set forth therein, and assuming that the Conversion Price is at all times
on and after the date of determination 75% of the then Conversion Price on the
Trading Day immediately prior to the date of determination.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h).
"Securities" means the shares of Preferred Stock and the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Short Sales" means all "short sales" as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include locating and/or
borrowing shares of Common Stock).
"Shareholder Approval" means such approval as may be required by the applicable
rules and regulations of the Nasdaq Stock Market (or any successor entity) from
the shareholders of the Company with respect to the transactions contemplated by
the Transaction Documents, including the issuance of all of the Underlying
Shares in excess of 19.99% of the issued and outstanding Common Stock on the
Closing Date.
"Stated Value" shall mean the stated value of the Preferred Stock which shall be
$1,000 per share.
"Subsequent Financing" shall have the meaning ascribed to such term in Section
4.11(a).
"Subsequent Financing Notice" shall have the meaning ascribed to such term in
Section 4.11(b).
"Subsidiary" means any subsidiary of the Company as set forth on Schedule 3.1(a)
and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.
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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, OTCQB or OTCQX (or any successors to
any of the foregoing).
 "Transaction Documents" means this Agreement, the Certificate of Designation,
all exhibits and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
"Transfer Agent" means Computershare Inc., and any successor transfer agent of
the Company.
"Underlying Shares" means the shares of Common Stock issued and issuable
pursuant to the terms of the Preferred Stock, without respect to any limitation
or restriction on the conversion of the shares of Preferred Stock.
"Variable Rate Transaction" shall have the meaning ascribed to such term in
Section 4.12(b).
ARTICLE II.
EXCHANGE
2.1          Exchange.  On the Closing Date, upon the terms and subject to the
conditions set forth herein, the Company agrees to exchange, and the Holders,
severally and not jointly, agree to exchange, up to an aggregate of $40,652,594
principal amount of Debentures (as of the date hereof) for shares of Preferred
Stock as determined pursuant to Section 2.2(a).  The issuance of Preferred Stock
in exchange for Debentures shall occur even if, after the date hereof, the
Debentures are converted in full.  Each Holder shall deliver to the Company the
Debentures for surrender to the Company, and the Company shall deliver to each
Holder its respective shares of Preferred Stock and Shares, and the Company and
each Holder shall deliver the other items set forth in Section 2.2 deliverable
at the Closing.  Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such
other location as the parties shall mutually agree.
2.2          Deliveries.
(a)
On or prior to the Closing Date, the Company shall deliver or cause to be
delivered to each Holder the following:

(i)
this Agreement duly executed by the Company;

(ii)
a legal opinion of Company Counsel, in the form reasonably agreed to by the
Holders;

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(iii)
a number of shares of Preferred Stock equal to (A) the number of shares of
Preferred Stock set forth next to such Holder's name as set forth on Annex I
attached hereto less (B) the quotient obtained by dividing (1) product of (y)
the number of Conversion Shares issued pursuant to conversions of such Holder's
2.25% Debentures and 4% Debentures, collectively, from the date hereof to the
Closing Date and (z) the Conversion Price ($2.69 initially) by (2) $1,000;

(iv)
an amount in cash by wire transfer in immediately available funds equal to such
all accrued and unpaid interest as of the Closing Date payable on such Holder's
Debentures; and

(v)
an officer's certificate certifying the accuracy in all material respects of the
representations and warranties of the Company contained herein and the
compliance in all material respects with the covenants of the Company contained
herein.

(b)
On or prior to the Closing, each Holder shall deliver or cause to be delivered
to the Company, the following:

(i)
this Agreement duly executed by such Holder;

(ii)
such Holder's Debentures (unless fully converted prior to the Closing Date and
surrendered prior thereto); and

(iii)
UCC-3 Termination Statements.

2.3          Closing Conditions.
(a)
The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

(i)
the accuracy in all material respects (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations and
warranties of the Holders contained herein (unless as of a specific date therein
in which case they shall be accurate as of such date);

(ii)
all obligations, covenants and agreements of each Holder required to be
performed at or prior to the Closing Date shall have been performed;

(iii)
the Certificate of Designation shall have been filed and be effective with the
State of Delaware;

(iv)
Shareholder Approval shall have been obtained; and

(v)
the delivery by each Holder of the items set forth in Section 2.2(b)

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of this Agreement.
(b)
The respective obligations of the Holders hereunder in connection with the
Closing are subject to the following conditions being met:

(i)
the accuracy in all material respects (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations and
warranties of the Company contained herein (unless as of a specific date therein
in which case they shall be accurate as of such date);

(ii)
all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

(iii)
the delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

(iv)
there shall have been no Material Adverse Effect with respect to the Company
since the date hereof; and

(v)
from the date hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission  or the Company's principal Trading Market
and, at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in the
reasonable judgment of such Holder, makes it impracticable or inadvisable to
exchange for the Securities at the Closing.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1          Representations and Warranties of the Company.  Except as set forth
in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Holder as of the date hereof and as of the Closing:
(a)
Subsidiaries.  All of the direct and indirect subsidiaries of the Company are
set forth on Schedule 3.1(a).  Except as set forth on Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all of the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and

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free of preemptive and similar rights to subscribe for or purchase securities. 
If the Company has no subsidiaries, all other references to the Subsidiaries or
any of them in the Transaction Documents shall be disregarded.
(b)
Organization and Qualification.  Except as otherwise set forth on the Disclosure
Schedule, the Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted.  Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity 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
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"Material Adverse Effect") and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

(c)
Authorization; Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder.  The execution and delivery of this
Agreement and each of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Company and
no further action is required by the Company, the Board of Directors or the
Company's stockholders in connection herewith or therewith other than in
connection with the Required Approvals.  This Agreement and each other
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

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(d)
No Conflicts.  The execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which it is a party, the
issuance and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not, subject to the
Required Approvals: (i) conflict with or violate any provision of the Company's
or any Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets
of the Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or 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 Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.

(e)
Filings, Consents and Approvals.  Other than as set forth on Schedule 3.1(c),
the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the consents, waivers, authorizations,
orders, notices or filings  required pursuant to Section 4.6 of this Agreement
or listed on Schedule 3.1(e), (ii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the Securities and the
listing of the Conversion Shares for trading thereon in the time and manner
required thereby, (iii) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws and
(iv) Shareholder Approval (collectively, the "Required Approvals").

(f)
Issuance of the Securities.  The Securities are duly authorized and, when issued
and paid for in accordance with the applicable Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company.  The Underlying Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company.  The
Company has reserved from its duly authorized capital stock a number of shares
of Common Stock for issuance of the Underlying Shares at least equal to the
Required Minimum on the date hereof.

(g)
Acknowledgment Regarding Holders' Purchase of Securities.  The Company
acknowledges and agrees that each of the Holders is acting solely in the
capacity of an arm's length purchaser with respect to the Transaction Documents
and the

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transactions contemplated thereby.  The Company further acknowledges that no
Holder is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by any Holder or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Holders' receipt of the Securities.  The Company further represents to each
Holder that the Company's decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
(h)
Acknowledgment Regarding Holder's Trading Activity.  Anything in this Agreement
or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f)
and 4.15 hereof), it is understood and acknowledged by the Company that: (i)
none of the Holders has been asked by the Company to agree, nor has any Holder
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term, (ii) past or future
open market or other transactions by any Holder, specifically including, without
limitation, Short Sales or "derivative" transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company's publicly-traded securities, (iii) any Holder,
and counter-parties in "derivative" transactions to which any such Holder is a
party, directly or indirectly, may presently have a "short" position in the
Common Stock and (iv) each Holder shall not be deemed to have any affiliation
with or control over any arm's length counter-party in any "derivative"
transaction.  The Company further understands and acknowledges that (y) one or
more Holders may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the
periods that the value of the Underlying Shares deliverable with respect to
Securities are being determined, and (z) such hedging activities (if any) could
reduce the value of the existing stockholders' equity interests in the Company
at and after the time that the hedging activities are being conducted.  The
Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.

(i)
Bring-Down of Representations and Warranties.  Except as set forth on the
disclosure schedules attached hereto, all representations and warranties made by
the Company to the Purchase Agreement are accurate and complete in all material
respects as of the date hereof, unless as of a specific date therein in which
case they shall be accurate as of such date (or, to the extent representations
or warranties are qualified by materiality or Material Adverse Effect, in all
respects).

(j)
Tacking.  Subject to the truth and accuracy of the Holder's representations set
forth in Section 3.2 of this Agreement, the parties acknowledge and agree that
in accordance with Sections 3(a)(9) and 4(a)(2) and Rule 144 of the Securities
Act, the shares of Preferred Stock issued in exchange for the Debentures will
tack back to the original issue date of such Debentures pursuant to Rule 144 and
the Company agrees not to take a position to the contrary.  The Company is not
an issuer subject to Rule 144(i).

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3.2          Representations and Warranties of the Holders.    Each Holder, for
itself and for no other Holder, hereby represents and warrants as of the date
hereof and as of the Closing  Date to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of such date):
(a)
Organization; Authority.  Such Holder is either an individual or an entity duly
incorporated or formed, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation with full right, corporate,
partnership, limited liability company or similar power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder. 
Each Transaction Document to which it is a party has been duly executed by such
Holder, and when delivered by such Holder in accordance with the terms hereof,
will constitute the valid and legally binding obligation of such Holder,
enforceable against it in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

(b)
Own Account.  Such Holder is acquiring the Securities as principal for its own
account and not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this representation
and warranty not limiting such Holder's right to sell the Securities in
compliance with applicable federal and state securities laws).  Such Holder is
acquiring the Securities hereunder in the ordinary course of its business.

(c)
Holder Status.  At the time such Holder was offered the Securities, it was, and
as of the date hereof it is, and on each date on which it converts any shares of
Preferred Stock it will be an "accredited investor" as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.  Such
Holder, as of the date hereof is not, and on each date on which it converts any
shares of Preferred Stock it will not be, an Affiliate of the Company.

(d)
Experience of Such Holder.  Such Holder, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Such Holder is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

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(e)
General Solicitation.  Such Holder is not, to such Holder's knowledge,
purchasing the Securities as a result of any advertisement, article, notice or,
to the knowledge of the Holder, any other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

(f)
Certain Transactions and Confidentiality.  Other than consummating the
transactions contemplated hereunder, such Holder has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Holder, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Holder first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the foregoing, in the case of a Holder that
is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Holder's assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Holder's assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to exchange for the
Securities covered by this Agreement.  Other than to other Persons party to this
Agreement or to such Holder's representatives, including, without limitation,
its officers, directors, partners, legal and other advisors, employees, agents
and Affiliates, such Holder has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.

The Company acknowledges and agrees that the representations contained in this
Section 3.2 shall not modify, amend or affect such Holder's right to rely on the
Company's representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1          Transfer Restrictions.  The shares of Common Stock underlying the
shares of Preferred Stock shall be issued free of legends.
4.2          Acknowledgment of Dilution.  The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market
conditions.  The Company further acknowledges that its obligations under the
Transaction Documents, including, without limitation, its obligation to issue
the Underlying Shares pursuant to the Transaction Documents, are unconditional
and
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absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim the
Company may have against any Holder and regardless of the dilutive effect that
such issuance may have on the ownership of the other stockholders of the
Company.
4.3          Furnishing of Information; Public Information.  Until the time that
no Holder owns Securities, the Company covenants to maintain the registration of
the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act even if the Company is not then subject to
the reporting requirements of the Exchange Act.
4.4          Integration.  The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities or that would be integrated with
the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.
4.5          Conversion and Exercise Procedures.  Each form of Notice of
Conversion included in the Certificate of Designation set forth the totality of
the procedures required of the Holders in order to convert the shares of
Preferred Stock.  Without limiting the preceding sentences, no ink-original
Notice of Exercise or Notice of Conversion shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of any Notice
of Exercise or Notice of Conversion form be required in order to convert the
shares of Preferred Stock.  No additional legal opinion, other information or
instructions shall be required of the Holders to convert their shares of
Preferred Stock.  The Company shall honor conversions of the shares of Preferred
Stock and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.
4.6          Securities Laws Disclosure; Publicity.  The Company shall, by 9:30
a.m. (New York City time) on the Trading Day immediately following the date
hereof, (a) issue a press release disclosing the material terms of the
transactions contemplated hereby and (b) file a Current Report on Form 8-K,
including the Transaction Documents as exhibits thereto, with the Commission. 
From and after the issuance of such press release, the Company represents to the
Holders that it shall have publicly disclosed all material, non-public
information delivered to any of the Holders by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the issuance of such press release, the
Company acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers, directors, agents,
employees or Affiliates on the one hand, and any of the Holders or any of their
Affiliates on the other hand, shall terminate. The Company and each Holder shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Holder shall
issue any such
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press release nor otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Holder, or
without the prior consent of each Holder, with respect to any press release of
the Company, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Holder, or include the name of any Holder in any filing
with the Commission or any regulatory agency or Trading Market, without the
prior written consent of such Holder, except: (a) as required by federal
securities law in connection with the filing of final Transaction Documents with
the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the Holders
with prior notice of such disclosure permitted under this clause (b).
4.7          Shareholder Rights Plan.  No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any Holder
is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Holder could be deemed to trigger the provisions of any
such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Holders.
4.8          Non-Public Information.  Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
which shall be disclosed pursuant to Section 4.6, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf will provide
any Holder or its agents or counsel with any information that constitutes, or
the Company reasonably believes constitutes, material non-public information,
unless prior thereto such Holder shall have consented to the receipt of such
information and agreed with the Company to keep such information confidential. 
The Company understands and confirms that each Holder shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.  To
the extent that the Company delivers any material, non-public information to a
Holder without such Holder's consent, the Company hereby covenants and agrees
that such purchaser shall not have any duty of confidentiality to Company, any
of its Subsidiaries, or any of their respective officers, directors, agents,
employees or Affiliates, or a duty to the Company, and of its Subsidiaries or
any of their respective officers, directors, agents, employees or Affiliates not
to trade on the basis of, such material, non-public information, provided that
the Holder shall remain subject to applicable law. To the extent that any notice
provided pursuant to any Transaction Document constitutes, or contains,
material, non-public information regarding the Company or any Subsidiaries, the
Company shall simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.  The Company understands and confirms that each
Holder shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.
4.9          Indemnification of Holders.   Subject to the provisions of this
Section 4.9, the Company will indemnify and hold each Holder and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each
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Person who controls such Holder (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"Holder Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Holder Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the Holder
Parties in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Holder Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Holder Party's
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such Holder Party may have with any such
stockholder or any violations by such  Holder Party of state or federal
securities laws or any conduct by such Holder Party which constitutes fraud,
gross negligence, willful misconduct or malfeasance).  If any action shall be
brought against any Holder Party in respect of which indemnity may be sought
pursuant to this Agreement, such Holder Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the defense thereof
with counsel of its own choosing reasonably acceptable to the Holder Party.  Any
Holder Party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Holder Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of such Holder Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel.  The Company will not be liable to any Holder
Party under this Agreement (y) for any settlement by a Holder Party effected
without the Company's prior written consent, which shall not be unreasonably
withheld or delayed; or (z) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Holder Party's breach of any
of the representations, warranties, covenants or agreements made by such Holder
Party in this Agreement or in the other Transaction Documents.  The
indemnification required by this Section 4.9 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or are incurred.  The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any
Holder Party against the Company or others and any liabilities the Company may
be subject to pursuant to law.
4.10        Reservation and Listing of Securities; Shareholder Approval.
(a)
The Company shall maintain a reserve of the Required Minimum from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may then be required to fulfill its obligations in
full under the Transaction Documents.

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(b)
If, on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall use commercially reasonable efforts to
amend the Company's certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event not later
than the 75th day after such date.

(c)
The Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing or quotation on such Trading Market as soon as possible
thereafter, (iii) provide to the Holders evidence of such listing or quotation
and (iv) maintain the listing or quotation of such Common Stock on any date at
least equal to the Required Minimum on such date on such Trading Market or
another Trading Market. The Company agrees to maintain the eligibility of the
Common Stock for electronic transfer through the Depository Trust Company or
another established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such other established
clearing corporation in connection with such electronic transfer.

(d)
In addition, the Company shall hold a special or annual meeting of shareholders
(which may also be at the annual meeting of shareholders) on or before September
30, 2017 for the purpose of obtaining Shareholder Approval, with the
recommendation of the Company's Board of Directors that such proposal be
approved, and the Company shall solicit proxies from its shareholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal. The Company shall use its reasonable best
efforts to obtain such Shareholder Approval. If the Company does not obtain
Shareholder Approval at the first meeting, the Company shall call a meeting
every four months thereafter to seek Shareholder Approval until the earlier of
the date Shareholder Approval is obtained or the Preferred Stock is no longer
outstanding.

4.11          Participation in Future Financing.
(a)
From the date hereof until one year from the date hereof, upon any issuance by
the Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents for cash consideration, Indebtedness or a combination of units
thereof (a "Subsequent Financing"), each Holder shall have the right to
participate in up to an amount of the Subsequent Financing equal to 50% of the
Subsequent Financing (the "Participation Maximum") on the same terms, conditions
and price provided for in the Subsequent Financing.

(b)
At least 24 hours prior to the public announcement of the Subsequent Financing,
the Company shall deliver to each Holder a written notice of its intention to

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effect a Subsequent Financing ("Pre-Notice"), which Pre-Notice shall ask such
Holder if it wants to review the details of such financing (such additional
notice, a "Subsequent Financing Notice").  Upon the request of a Holder, and
only upon a request by such Holder, for a Subsequent Financing Notice, the
Company shall promptly (and at least 12 hours prior to the announcement of the
Subsequent Financing) deliver a Subsequent Financing Notice to such Holder.  The
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder and the Person or Persons through or with whom such Subsequent
Financing is proposed to be effected and shall include a term sheet or similar
document relating thereto as an attachment.
(c)
Any Holder desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 24 hours after all of the
Holders have received the Pre-Notice (provided that such Holder shall have had
at least 12 hours (including at least 6 hours during a Trading Day) to review
the Subsequent Financing Notice) (the "Notice Termination Time") that such
Holder is willing to participate in the Subsequent Financing, the amount of such
Holder's participation, and representing and warranting that such Holder has
such funds ready, willing, and available for investment on the terms set forth
in the Subsequent Financing Notice.  If the Company receives no such notice from
a Holder as of such time, such Holder shall be deemed to have notified the
Company that it does not elect to participate.

(d)
If by the Notice Termination Time, notifications by the Holders of their
willingness to participate in the Subsequent Financing (or to cause their
Affiliate designees to participate) is, in the aggregate, less than the total
amount of the Subsequent Financing, then the Company may effect the remaining
portion of such Subsequent Financing on the terms and with the Persons set forth
in the Subsequent Financing Notice.

(e)
If by the Notice Termination Time, the Company receives responses to a
Subsequent Financing Notice from Holders seeking to purchase more than the
aggregate amount of the Participation Maximum, each such Holder shall have the
right to purchase its Pro Rata Portion (as defined below) of the Participation
Maximum.  "Pro Rata Portion" means the ratio of (x) the shares of Preferred
Stock issued hereunder by a Holder participating under this Section 4.11 and (y)
the sum of the shares of Preferred Stock issued hereunder all Holders
participating under this Section 4.11.

(f)
The Company must provide the Holders with a second Subsequent Financing Notice,
and the Holders will again have the right of participation set forth above in
this Section 4.11, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within ten (10) Trading Days after the date of
the initial Subsequent Financing Notice.

(g)
The Company and each Holder agree that if any Holder elects to participate in
the Subsequent Financing, the transaction documents related to the

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Subsequent Financing shall not include any term or provision whereby such Holder
shall be required to agree to any restrictions on trading as to any of the
Securities exchanged hereunder or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or in connection
with, this Agreement, without the prior written consent of such Holder.
(h)
Notwithstanding anything to the contrary in this Section 4.11 and unless
otherwise agreed to by such Holder, the Company shall either confirm in writing
to such Holder that the transaction with respect to the Subsequent Financing has
been abandoned or shall publicly disclose its intention to issue the securities
in the Subsequent Financing, in either case in such a manner such that such
Holder will not be in possession of any material, non-public information, by the
third (3rd) Business Day following delivery of the Subsequent Financing Notice. 
If by such third (3rd) Business Day, no public disclosure regarding a
transaction with respect to the Subsequent Financing has been made, and no
notice regarding the abandonment of such transaction has been received by such
Holder, such transaction shall be deemed to have been abandoned and such Holder
shall not be deemed to be in possession of any material, non-public information
with respect to the Company or any of its Subsidiaries.

(i)
Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of
an Exempt Issuance.

4.12        Subsequent Equity Sales.
(a)
Other than the issuance of up to $6,000,000 of restricted Common Stock (or
additional Preferred Stock) without registration rights on or before the Closing
Date, from the date hereof until 6 months after the Closing Date, neither the
Company nor any Subsidiary shall issue, enter into any agreement to issue or
announce the issuance or proposed issuance of any shares of Common Stock or
Common Stock Equivalents.

(b)
From the date hereof until the date that the Preferred Stock is no longer held
by the Holders, the Company shall be prohibited from effecting or entering into
an agreement to effect any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents (or a combination of units thereof)
involving a Variable Rate Transaction. "Variable Rate Transaction" means a
transaction in which the Company (i) issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price that is based
upon, and/or varies with, the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may issue securities at a
future determined price.   Any Holder shall be entitled to obtain

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injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages.
(c)
Unless Shareholder Approval has been obtained and deemed effective, neither the
Company nor any Subsidiary shall make any issuance whatsoever of Common Stock or
Common Stock Equivalents.  Any Holder shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.

(d)
Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of
an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.

4.13        Equal Treatment of Holders.  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 the
Transaction Documents unless the same consideration is also offered to all of
the parties to such Transaction Documents. Further, the Company shall not make
any payment of Stated Value or dividends on the shares of Preferred Stock in
amounts which are disproportionate to the respective principal amounts
outstanding on the shares of Preferred Stock at any applicable time.  For
clarification purposes, this provision constitutes a separate right granted to
each Holder by the Company and negotiated separately by each Holder, and is
intended for the Company to treat the Holders as a class and shall not in any
way be construed as the Holders acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
4.14        Certain Transactions and Confidentiality. Each Holder, severally and
not jointly with the other Holders, covenants that neither it, nor any Affiliate
acting on its behalf or pursuant to any understanding with it will execute any
purchases or sales, including Short Sales, of any of the Company's securities
during the period commencing with the execution of this Agreement and ending at
such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section
4.6.  Each Holder, severally and not jointly with the other Holders, covenants
that until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press release as
described in Section 4.6, such Holder will maintain the confidentiality of the
existence and terms of this transaction and the information included in the
Transaction Documents and the Disclosure Schedules.  Notwithstanding the
foregoing, and notwithstanding anything contained in this Agreement to the
contrary, the Company expressly acknowledges and agrees that (i) no Holder makes
any representation, warranty or covenant hereby that it will not engage in
effecting transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.6, (ii) no
Holder shall be restricted or prohibited from effecting any transactions in any
securities of the Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section
4.6 and (iii) no Holder shall hereby have any duty of confidentiality or duty
not to trade in the securities of the Company to the Company or its Subsidiaries
after the issuance of the initial press release as
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described in Section 4.6.  Notwithstanding the foregoing, in the case of a
Holder that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Holder's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Holder's assets, the covenant
set forth above shall only apply with respect to the portion of assets managed
by the portfolio manager that made the investment decision to exchange for the
Securities covered by this Agreement.
4.15        Form D; Blue Sky Filings.  The Company agrees to timely file a Form
D with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Holder. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Holders at the
Closing under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Holder.
4.16        Capital Changes.  Until the one year anniversary of the Effective
Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Holders holding a majority in principal amount outstanding of the shares of
Preferred Stock, provided that this Section 4.16 shall not apply in connection
with any reverse stock split of the Common Stock conducted to maintain
compliance with the listing standards of the Nasdaq Stock Market.
4.17        Registration Rights.  Except for the registration statements on Form
S-4 and S-8, until the expiration of the period set forth in Section 4.12(a),
the Company shall not file any registration statement without the consent of the
Holders.
ARTICLE V.
MISCELLANEOUS
5.1          Termination.  This Agreement may be terminated by any Holder, as to
such Holder's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Holders, by written notice to
the other parties, if the Closing has not been consummated on or before October
31, 2017; provided, however, that such termination will not affect the right of
any party to sue for any breach by any other party (or parties).
5.2          Fees and Expenses.  At the Closing, the Company has agreed to
reimburse Sabby Capital Management, LLC ("Sabby") the non-accountable sum of
$15,000 for its legal fees and expenses and due diligence.  Except as expressly
set forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.  The Company
shall pay all Transfer Agent fees (including, without limitation, any fees
required for same-day processing of any instruction letter delivered by the
Company and any conversion or exercise notice delivered
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by a Holder), stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Holders.
5.3          Entire Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto (and representations and warranties previously
given by the Company to the Holders), contain the entire understanding of the
parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules.
5.4          Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
or email attachment as set forth on the signature pages attached hereto at or
prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment as 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, (c) the second (2nd) Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and communications
shall be as set forth on the signature pages attached hereto. To the extent that
any notice provided pursuant to any Transaction Document 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.
5.5          Amendments; Waivers.  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 Company and the Holders holding at least 67% in
interest of the shares of Preferred Stock then outstanding or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought; provided, that if any amendment, modification or waiver
disproportionately and adversely impacts a Holder (or group of Holders), the
consent of such disproportionately impacted Holder (or group of Holders) shall
also be required.  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.  Any proposed amendment or waiver that
disproportionately, materially and adversely affects the rights and obligations
of any Holder relative to the comparable rights and obligations of the other
Holders shall require the prior written consent of such adversely affected
Holder. Any amendment effected in accordance with accordance with this Section
5.5 shall be binding upon each Holder and holder of Securities and the Company.
5.6          Headings.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
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5.7          Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns. 
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Holder (other than by merger).  Any
Holder may assign any or all of its rights under this Agreement to any Person to
whom such Holder assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
"Holders."
5.8          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.
5.9          Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents 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 and any other Transaction Documents (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 any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Action or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
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 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 any party hereto shall commence an Action or
Proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.9, the prevailing
party in such Action or Proceeding shall be reimbursed by the non-prevailing
party for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Action or
Proceeding.
5.10        Survival.  The representations and warranties contained herein shall
survive the Closing and the delivery of the Securities.
5.11        Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to each other party, it
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being understood that the parties need not sign the same counterpart.  In the
event that any signature is delivered by facsimile transmission or by e-mail
delivery of a ".pdf" format data file, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or ".pdf"
signature page were an original thereof.
5.12        Severability. 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.
5.13        Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Holder exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Holder may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of the conversion of a shares of
Preferred Stock, the applicable Holder shall be required to return any shares of
Common Stock subject to any such rescinded conversion notice.
5.14        Replacement of Securities.  If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
5.15        Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Holders and the Company will be entitled to specific performance under the
Transaction Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16        Payment Set Aside. To the extent that the Company makes a payment or
payments to any Holder pursuant to any Transaction Document or a Holder enforces
or exercises
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its rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
5.17        Usury.  To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any Action or Proceeding that may be brought by any Holder in
order to enforce any right or remedy under any Transaction Document. 
Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature of interest
shall not exceed the maximum lawful rate authorized under applicable law (the
"Maximum Rate"), and, without limiting the foregoing, in no event shall any rate
of interest or default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to pay under
the Transaction Documents exceed such Maximum Rate.  It is agreed that if the
maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward, unless such
application is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Holder with respect to indebtedness evidenced by the Transaction Documents, such
excess shall be applied by such Holder to the unpaid principal balance of any
such indebtedness or be refunded to the Company, the manner of handling such
excess to be at such Holder's election.
5.18        Independent Nature of Holders' Obligations and Rights.  The
obligations of each Holder under any Transaction Document are several and not
joint with the obligations of any other Holder, and no Holder shall be
responsible in any way for the performance or non-performance of the obligations
of any other Holder under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Holder pursuant
hereto or thereto, shall be deemed to constitute the Holders as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents.  Each Holder shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Holder to be joined as an additional party in any
Proceeding for such purpose.  Each Holder 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 Holder and its
respective counsel have chosen to communicate with the Company through EGS.  EGS
does not
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represent any of the Holders other than Sabby.  The Company has elected to
provide all Holders 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 Holders.
5.19        Liquidated Damages.  The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.20        Saturdays, Sundays, Holidays, etc.          If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be taken or
such right may be exercised on the next succeeding Business Day.
5.21        Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be 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 this Agreement.
5.22       WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Exchange
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

STRATA SKIN SCIENCES, INC.
 
Address for Notice:
Frank McCaney, CEO,
Strata Skin Sciences,
100 Lakeside Drive,
Horsham, PA 19044
By:__________________________________________
     Name: Frank McCaney
     Title: President and Chief Executive Officer
 
With a copy to (which shall not constitute notice):
Duane Morris
30 S. 17th Street
Philadelphia, PA 19103
Attention: Kathleen M. Shay
 
 
Email: fmccaney@strataskin.com

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO SSKN SECURITIES EXCHANGE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Exchange
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Holder: ________________________________________________________
 
Signature of Authorized Signatory of Holder: __________________________________
 
Name of Authorized Signatory:
____________________________________________________
 
Title of Authorized Signatory:
_____________________________________________________
 
Email Address of Authorized Signatory:
_____________________________________________
 
Facsimile Number of Authorized Signatory:
__________________________________________
 
Address for Notice to Holder:

Address for Delivery of Securities to Holder (if not same as address for
notice):

Debentures to be Exchanged:  $
Shares of Preferred Stock to Be Issued:

[SIGNATURE PAGES CONTINUE]
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Annex I

 [image0.jpg]
 
 

 
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ANNEX A

STRATA SKIN SCIENCES, INC.

CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK

PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW

The undersigned, Frank McCaney, does hereby certify that:

1. He is the President and Chief Executive Officer of STRATA Skin Sciences,
Inc., a Delaware corporation (the "Corporation").

2. The Corporation is authorized to issue 10,000,000 shares of preferred stock
2,929 of which have been issued.

3. The following resolutions were duly adopted by the board of directors of the
Corporation (the "Board of Directors"):

WHEREAS, the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting of 10,000,000
shares, $0.10 par value per share, issuable from time to time in one or more
series;

WHEREAS, the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms of redemption
and liquidation preferences of any wholly unissued series of preferred stock and
the number of shares constituting any series and the designation thereof, of any
of them; and

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority
as aforesaid, to fix the rights, preferences, restrictions and other matters
relating to a series of the preferred stock, which shall consist of, up to
40,617 shares of the preferred stock which the Corporation has the authority to
issue, as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide
for the issuance of a series of preferred stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of preferred
stock as follows:
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TERMS OF PREFERRED STOCK

Section 1.          Definitions. For the purposes hereof, the following terms
shall have the following meanings:

"Affiliate" means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 of the Securities
Act.

"Alternate Consideration" shall have the meaning set forth in Section 7(e).

"Beneficial Ownership Limitation" shall have the meaning set forth in Section
6(d).

"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 6(c)(iv).

"Closing" means the closing of the purchase and sale of the Securities pursuant
to Section 2.1 of the Exchange Agreement.

"Closing Date" means the later of (a) the 2nd Trading Day following the date
that Shareholder Approval is obtained and deemed effective and (b) the Trading
Day on which all of the Transaction Documents have been executed and delivered
by the applicable parties thereto, and all conditions precedent to (i) the
Holders' obligations to surrender the Debentures and (ii) the Company's
obligations to deliver the New Securities, in each case, have been satisfied or
waived.
 "Commission" means the United States Securities and Exchange Commission.

"Common Stock" means the Corporation's common stock, par value $0.001 per share,
and stock of any other class of securities into which such securities may
hereafter be reclassified or changed.

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

"Conversion Amount" means the sum of the Stated Value at issue.

"Conversion Date" shall have the meaning set forth in Section 6(a).
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"Conversion Price" shall have the meaning set forth in Section 6(b).

"Conversion Shares" means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms
hereof.

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

"Exchange Agreement" means the Securities Exchange Agreement, dated June__,
2017, among the Corporation and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.

"Fundamental Transaction" shall have the meaning set forth in Section 7(e).

"GAAP" means United States generally accepted accounting principles.

"Holder" shall have the meaning given such term in Section 2.

"Junior Securities" means the Common Stock and all other Common Stock
Equivalents of the Corporation other than those securities which are explicitly
senior or pari passu to the Preferred Stock in dividend rights or liquidation
preference.

"Liens" means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
"Liquidation" shall have the meaning set forth in Section 4.

"New York Courts" shall have the meaning set forth in Section 8(d).

"Notice of Conversion" shall have the meaning set forth in Section 6(a).

"Original Issue Date" means the date of the first issuance of any shares of the
Preferred Stock regardless of the number of transfers of any particular shares
of Preferred Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.

 "Person" means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

"Preferred Stock" shall have the meaning set forth in Section 2.

"Permitted Indebtedness". means (a) the Indebtedness existing on the Original
Issue Date and set forth the disclosure schedule to the Exchange Agreement, if
any, (c) lease obligations and purchase money indebtedness of up to $300,000, 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 (d) other indebtedness incurred in the ordinary course of business up to
500,000 at any time outstanding.
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"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
Corporation) have been established in accordance with GAAP, (b) Liens imposed by
law which were incurred in the ordinary course of the Corporation's business,
such as carriers', warehousemen's and mechanics' Liens, statutory landlords'
Liens, and other similar Liens arising in the ordinary course of the
Corporation'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 Corporation 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 (c) thereunder, provided that such Liens are
not secured by assets of the Corporation or its Subsidiaries other than the
assets so acquired or leased

"Securities" means the Preferred Stock and the Underlying Shares.

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

"Share Delivery Date" shall have the meaning set forth in Section 6(c).

"Shareholder Approval" means such approval as may be required by the applicable
rules and regulations of the Nasdaq Stock Market (or any successor entity) from
the shareholders of the Corporation with respect to the transactions
contemplated by the Transaction Documents, including the issuance of all of the
Underlying Shares in excess of 19.99% of the issued and outstanding Common Stock
on the Closing Date.
"Stated Value" shall have the meaning set forth in Section 2, as the same may be
increased pursuant to Section 3.

"Subsidiary" means any subsidiary of the Corporation as set forth on Schedule
3.1(a) of the Exchange Agreement and shall, where applicable, also include any
direct or indirect subsidiary of the Corporation formed or acquired after the
date of the Exchange Agreement.
"Successor Entity" shall have the meaning set forth in Section 7(e).

"Trading Day" means a day on which the principal Trading Market is open for
business.
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"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 the OTC Bulletin Board (or any
successors to any of the foregoing).

"Transaction Documents" shall have the meaning set forth in the Exchange
Agreement.
"Transfer Agent" means Computershare Inc., and any successor transfer agent of
the Corporation
"Underlying Shares" means the shares of Common Stock issued and issuable upon
conversion of the Preferred Stock.
Section 2.          Designation, Amount and Par Value. The series of preferred
stock shall be designated as its Series __ Convertible Preferred Stock (the
"Preferred Stock") and the number of shares so designated shall be up to 40,617_
(which shall not be subject to increase without the written consent of a
majority of the holders of the Preferred Stock (each, a "Holder" and
collectively, the "Holders")). Each share of Preferred Stock shall have a par
value of $0.10 per share and a stated value equal to $1,000, subject to increase
set forth in Section 3 below (the "Stated Value").

Section 3.          Dividends.

a)
Holders shall be entitled to receive, and the Corporation shall pay, dividends
on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis)
to and in the same form as dividends (other than dividends in the form of Common
Stock) actually paid on shares of the Common Stock when, as and if such
dividends (other than dividends in the form of Common Stock) are paid on shares
of the Common Stock.  Other than as set forth in the previous sentence, no other
dividends shall be paid on shares of Preferred Stock; and the Corporation shall
pay no dividends (other than dividends in the form of Common Stock) on shares of
the Common Stock unless it simultaneously complies with the previous sentence.

b)
Other Securities. So long as any Preferred Stock shall remain outstanding, the
Corporation shall not redeem, purchase or otherwise acquire directly or
indirectly more than a de minimis amount of any Junior Securities other than as
to repurchases of Common Stock or Common Stock Equivalents from departing
officers or directors, and provided that, while any of the Preferred Stock
remains outstanding, such repurchases shall not exceed an aggregate of $100,000
in any fiscal year from all officers and directors.

Section 4.          Voting Rights. Except as otherwise provided herein or as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, as long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of a majority
of the then outstanding shares of the Preferred Stock, (a) alter or change
adversely the powers, preferences or rights given to the Preferred Stock or
alter or amend this
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Certificate of Designation, (b) authorize or create any class of stock ranking
as to dividends, redemption or distribution of assets upon a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
that is senior to the Preferred Stock, (c) amend its certificate of
incorporation or other charter documents in any manner that adversely affects
any rights of the Holders, (d) increase the number of authorized shares of
Preferred Stock, or (e) enter into any agreement with respect to any of the
foregoing.

Section 5.          Liquidation. Upon any liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary (a "Liquidation"), the
Holders shall be entitled to receive distributions out of the assets, whether
capital or surplus, of the Corporation on a pari passu basis with the holders of
Common Stock. The Corporation shall mail written notice of any such Liquidation,
not less than 45 days prior to the payment date stated therein, to each Holder.

Section 6.          Conversion.

a)
Conversions at Option of Holder. Each share of Preferred Stock shall be
convertible, at any time and from time to time from and after the Original Issue
Date at the option of the Holder thereof, into that number of shares of Common
Stock (subject to the limitations set forth in Section 6(d) and Section 6(e))
determined by dividing the Stated Value of such share of Preferred Stock by the
Conversion Price. Holders shall effect conversions by providing the Corporation
with the form of conversion notice attached hereto as Annex A (a "Notice of
Conversion"). Each Notice of Conversion shall specify the number of shares of
Preferred Stock to be converted, the number of shares of Preferred Stock owned
prior to the conversion at issue, the number of shares of Preferred Stock owned
subsequent to the conversion at issue and the date on which such conversion is
to be effected, which date may not be prior to the date the applicable Holder
delivers by facsimile such Notice of Conversion to the Corporation (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
to the Corporation is deemed delivered hereunder. The calculations and entries
set forth in the Notice of Conversion shall control in the absence of manifest
or mathematical error.  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 of shares
of Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the Corporation
unless all of the shares of Preferred Stock represented thereby are so
converted, in which case such Holder shall deliver the certificate representing
such shares of Preferred Stock promptly following the Conversion Date at issue. 
Shares of Preferred Stock converted into Common Stock or redeemed in accordance
with the terms hereof shall be canceled and shall not be reissued.

b)
Conversion Price.  The conversion price for the Preferred Stock shall equal
$2.69, subject to adjustment herein (the "Conversion Price").

c)
Mechanics of Conversion

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i.
  Delivery of Certificate Upon Conversion.  Not later than the earlier of (i)
three (3) Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period (as defined below) after each Conversion Date (the
"Share Delivery Date"), the Corporation shall deliver, or cause to be delivered,
to the converting Holder the number of Conversion Shares being acquired upon the
conversion of the Preferred Stock, which Conversion Shares shall be free of
restrictive legends and trading restrictions.  The Corporation shall deliver the
Conversion Shares electronically through the Depository Trust Company or another
established clearing corporation performing similar functions. As used herein,
"Standard Settlement Period" means the standard settlement period, expressed in
a number of Trading Days, on the Corporation's primary Trading Market with
respect to the Common Stock as in effect on the date of delivery of the Notice
of Conversion.

ii.
   Failure to Deliver Conversion Shares.  If, in the case of any Notice of
Conversion, such Conversion Shares 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 Corporation at any time on or before its receipt
of such Conversion Shares, to rescind such Conversion, in which event the
Corporation shall promptly return to the Holder any original Preferred Stock
certificate delivered to the Corporation and the Holder shall promptly return to
the Corporation the Conversion Shares issued to such Holder pursuant to the
rescinded Conversion Notice.

iii.
  Obligation Absolute; Partial Liquidated Damages.  The Corporation's obligation
to issue and deliver the Conversion Shares upon conversion of Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by a 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 such
Holder or any other Person of any obligation to the Corporation or any violation
or alleged violation of law by such Holder or any other person, and irrespective
of any other circumstance which might otherwise limit such obligation of the
Corporation to such Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate as a waiver by
the Corporation of any such action that the Corporation may have against such
Holder.  In the event a Holder shall elect to convert any or all of the Stated
Value of its Preferred Stock, the Corporation may not refuse conversion based on
any claim that such Holder or any one associated or affiliated with such 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 the Preferred Stock of such Holder shall
have been sought and obtained, and the Corporation posts a surety bond for the
benefit of such Holder in the amount of 150% of the Stated Value of Preferred
Stock which is subject to the injunction, which bond shall remain in effect
until the completion of arbitration/litigation of the underlying dispute and the
proceeds

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of which shall be payable to such Holder to the extent it obtains judgment.  In
the absence of such injunction, the Corporation shall issue Conversion Shares
and, if applicable, cash, upon a properly noticed conversion. If the Corporation
fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i)
on or before the Share Delivery Date applicable to such conversion, the
Corporation shall pay to such Holder, in cash, as liquidated damages and not as
a penalty, for each $5,000 of Stated Value of Preferred Stock being converted,
$50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day
and increasing to $200 per Trading Day on the sixth Trading Day after such
damages begin to accrue) for each Trading Day after the Share Delivery Date
until such Conversion Shares are delivered or Holder rescinds such conversion. 
Nothing herein shall limit a Holder's right to pursue actual damages or declare
a Triggering Event pursuant to Section 10 hereof for the Corporation's failure
to deliver Conversion Shares within the period specified herein and such 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 a Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.

iv.
  Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon
Conversion. In addition to any other rights available to the Holder, if the
Corporation fails for any reason to deliver to a Holder the applicable
Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if
after such Share Delivery Date such 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 such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a "Buy-In"),
then the Corporation shall (A) pay in cash to such Holder (in addition to any
other remedies available to or elected by such Holder) the amount, if any, by
which (x) such 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 such 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 such Holder,
either reissue (if surrendered) the shares of Preferred Stock equal to the
number of shares of Preferred Stock submitted for conversion (in which case,
such conversion shall be deemed rescinded) or deliver to such Holder the number
of shares of Common Stock that would have been issued if the Corporation had
timely complied with its delivery requirements under Section 6(c)(i). For
example, if a Holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted conversion of
shares of Preferred Stock 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 Corporation shall be required to pay such Holder $1,000.
The Holder shall provide the Corporation

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written notice indicating the amounts payable to such Holder in respect of the
Buy-In and, upon request of the Corporation, 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
Corporation's failure to timely deliver Conversion Shares upon conversion of the
shares of Preferred Stock as required pursuant to the terms hereof.

v.
  Issuance Limitations.  Notwithstanding anything herein to the contrary, if the
Corporation has not obtained Shareholder Approval, then the Corporation may not
issue, upon conversion of the Preferred Stock, a number of shares of Common
Stock which, when aggregated with any shares of Common Stock issued on or after
the Original Issue Date and prior to such Conversion Date in connection with any
conversion of Preferred Stock issued pursuant to the Exchange Agreement, that
would exceed 485,000 shares of Common Stock (subject to adjustment for forward
and reverse stock splits, recapitalizations and the like) (such number of
shares, the "Issuable Maximum").  Each Holder shall be entitled to a portion of
the Issuable Maximum equal to the quotient obtained by dividing (x) the original
Stated Value of such Holder's Preferred Stock by (y) the aggregate Stated Value
of all Preferred Stock issued on the Original Issue Date to all Holders.

vi.
  Reservation of Shares Issuable Upon Conversion. The Corporation covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Preferred Stock and payment of dividends on the Preferred Stock, 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
Preferred Stock), not less than such aggregate number of shares of the Common
Stock as shall (subject to the terms and conditions set forth in the Exchange
Agreement) be issuable (taking into account the adjustments and restrictions of
Section 7) upon the conversion of the then outstanding shares of Preferred Stock
and payment of dividends hereunder.  The Corporation covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.

vii.
  Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of the Preferred Stock.   As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Corporation 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.  The issuance of Conversion Shares on conversion
of this Preferred Stock shall be made without charge to any Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such Conversion Shares, provided that the Corporation shall

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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 Conversion Shares upon
conversion in a name other than that of the Holders of such shares of Preferred
Stock and the Corporation shall not be required to issue or deliver such
Conversion Shares unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid. 
The Corporation shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion. The Corporation 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)
Beneficial Ownership Limitation.  The Corporation shall not effect any
conversion of the Preferred Stock, and a Holder shall not have the right to
convert any portion of the Preferred Stock, to the extent that, after giving
effect to the conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder's Affiliates, and any Persons acting as a
group together with such Holder or any of such Holder's Affiliates (such
Persons, "Attribution Parties")) 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
such Holder and its Affiliates and Attribution Parties shall include the number
of shares of Common Stock issuable upon conversion of the Preferred Stock 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 Stated Value of Preferred Stock beneficially owned by
such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Corporation  subject to a limitation on conversion or exercise analogous to
the limitation contained herein (including, without limitation, the Preferred
Stock) beneficially owned by such Holder or any of its Affiliates or Attribution
Parties.  Except as set forth in the preceding sentence, for purposes of this
Section 6(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 6(d)
applies, the determination of whether the Preferred Stock is convertible (in
relation to other securities owned by such Holder together with any Affiliates
and Attribution Parties) and of how many shares of Preferred Stock are
convertible shall be in the sole discretion of such Holder, and the submission
of a Notice of Conversion shall be deemed to be such Holder's determination of
whether the shares of Preferred Stock may be converted (in relation to other
securities owned by such Holder together with any Affiliates and Attribution
Parties) and how many shares of the Preferred Stock are convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, each Holder will be deemed to represent to the Corporation
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 Corporation
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 6(d), in

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determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as stated in the most recent
of the following: (i) the Corporation's most recent periodic or annual report
filed with the Commission, as the case may be, (ii) a more recent public
announcement by the Corporation or (iii) a more recent written notice by the
Corporation or the Transfer Agent setting forth the number of shares of Common
Stock outstanding.  Upon the written or oral request of a Holder, the
Corporation shall within two Trading Days confirm orally and in writing to such
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 Corporation, including
the Preferred Stock, by such Holder or its Affiliates or Attribution Parties
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 Preferred Stock
held by the applicable Holder.  A Holder, upon notice to the Corporation, may
increase or decrease the Beneficial Ownership Limitation provisions of this
Section 6(d) applicable to its Preferred Stock provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Preferred Stock held by the
Holder and the provisions of this Section 6(d) shall continue to apply.  Any
such increase in the Beneficial Ownership Limitation will not be effective until
the 61st day after such notice is delivered to the Corporation and shall only
apply to such Holder and no other 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 6(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
Preferred Stock.

Section 7.          Certain Adjustments.

a)
Stock Dividends and Stock Splits.  If the Corporation, at any time while this
Preferred Stock 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 other Common Stock Equivalents (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Corporation
upon conversion of, or payment of a dividend on, this Preferred Stock), (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 Corporation, 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 Corporation) 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

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7(a) 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.

b)
 [RESERVED].

c)
Subsequent Rights Offerings.  In addition to any adjustments pursuant to Section
7(a) above, if at any time the Corporation grants, issues or sells any Common
Stock Equivalents or rights to purchase stock, warrants, securities or other
property pro rata to the record holders of any class of shares of Common Stock
(the "Purchase Rights"), then the Holder of will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of such Holder's Preferred
Stock (without regard to any limitations on exercise hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights (provided, however, to the extent that the Holder's right to
participate in any such Purchase Right would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).

d)
Pro Rata Distributions. During such time as this Preferred Stock is outstanding,
if the Corporation declares or makes any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a "Distribution"), at any time after
the issuance of this Preferred Stock, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the
Holder would have participated therein if the Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this Preferred
Stock (without regard to any limitations on conversion hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (provided, however, to the
extent that the Holder's right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation, then the
Holder shall not be entitled to participate in such Distribution to such extent
(or in the beneficial ownership of any shares of Common Stock as a result of
such Distribution to such extent) and the portion of such Distribution

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shall be held in abeyance for the benefit of the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).

e)
        Fundamental Transaction.  If, at any time while this Preferred Stock is
outstanding, (i) the Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation with or into
another Person, (ii) the Corporation, 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 Corporation 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 Corporation, 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, or (v) the Corporation,
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 Preferred Stock, 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 6(d)
and Section 6(e) on the conversion of this Preferred Stock), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Corporation, 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 Preferred Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) and Section 6(e)
on the conversion of this Preferred Stock).  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 share of Common Stock in such
Fundamental Transaction, and the Corporation 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 Preferred Stock following such Fundamental Transaction.  To
the extent necessary to effectuate the foregoing provisions, any successor to
the Corporation or surviving entity in such Fundamental Transaction shall file a
new Certificate of Designation with the same terms and conditions and issue to
the Holders new preferred stock consistent with the foregoing provisions and

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evidencing the Holders' right to convert such preferred stock into Alternate
Consideration.  The Corporation shall cause any successor entity in a
Fundamental Transaction in which the Corporation is not the survivor (the
"Successor Entity") to assume in writing all of the obligations of the
Corporation under this Certificate of Designation and the other Transaction
Documents (as defined in the Exchange Agreement) in accordance with the
provisions of this Section 7(e) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at
the option of the holder of this Preferred Stock, deliver to the Holder in
exchange for this Preferred Stock a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to this
Preferred Stock 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
Preferred Stock (without regard to any limitations on the conversion of this
Preferred Stock) 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 Preferred Stock
immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. 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 Certificate of Designation and
the other Transaction Documents referring to the "Corporation" shall refer
instead to the Successor Entity), and may exercise every right and power of the
Corporation and shall assume all of the obligations of the Corporation under
this Certificate of Designation and the other Transaction Documents with the
same effect as if such Successor Entity had been named as the Corporation
herein.
f)
Calculations.  All calculations under this Section 7 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 7, 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 Corporation) issued
and outstanding.

g)
Notice to the Holders.

i.
Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted
pursuant to any provision of this Section 7, the Corporation shall promptly
deliver to each Holder by facsimile or e-mail 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 Corporation shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall

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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 Corporation shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Corporation is a party, any sale or
transfer of all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property or (E) the Corporation shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Corporation, then, in each case, the Corporation shall cause to be filed
at each office or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered by facsimile or email to each
Holder at its last facsimile number or email address as it shall appear upon the
stock books of the Corporation, 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 Corporation or any
of the Subsidiaries, the Corporation shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K.  The Holder shall
remain entitled to convert the Conversion Amount of this Preferred Stock (or any
part hereof) 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.

          Section 8.          Negative Covenants.  As long as any shares of
Preferred Stock are outstanding, unless the holders of at least a majority in
Stated Value of the then outstanding shares of Preferred Stock shall have
otherwise given prior written consent, the Corporation 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;

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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, Common Stock Equivalents or
Junior Securities, 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 Corporation, provided that such repurchases shall not exceed an aggregate of
$100,000 for all officers and directors for so long as the Preferred Stock is
outstanding;

e)
pay cash dividends or distributions on Junior Securities of the Corporation;

f)
enter into any transaction with any Affiliate of the Corporation 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 Corporation (even if less than a
quorum otherwise required for board approval); or

g)
enter into any agreement with respect to any of the foregoing

Section 9.          Miscellaneous.

a)
Notices.  Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, electronically, or
sent by a nationally recognized overnight courier service, addressed to the
Corporation, at the address set forth above Attention: Frank McCaney, by email
to: fmccaney@strataskin.com, or such other email address or other address as the
Corporation may specify for such purposes by notice to the Holders delivered in
accordance with this Section 8.  Any and all notices or other communications or
deliveries to be provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile or e-mail attachment, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number, e-mail address or address of such Holder appearing on the books of the
Corporation, or if no such facsimile number, e-mail address or address appears
on the books of the Corporation, at the principal place of business of such
Holder, as set forth in the Exchange 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 e-mail attachment at the e-mail address set forth in this Section
prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading

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Day after the date of transmission, if such notice or communication is delivered
via e-mail attachment at the e-mail address set forth in this Section 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
Certificate of Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated damages,
accrued dividends and accrued interest, as applicable, on the shares of
Preferred Stock at the time, place, and rate, and in the coin or currency,
herein prescribed.

c)
Lost or Mutilated Preferred Stock Certificate.  If a Holder's Preferred Stock
certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated certificate, or in lieu of or in substitution for a lost, stolen or
destroyed certificate, a new certificate for the shares of Preferred Stock so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the ownership hereof
reasonably satisfactory to the Corporation.

d)
Governing Law.  All questions concerning the construction, validity, enforcement
and interpretation of this Certificate of Designation shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware, 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
Certificate of Designation 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 Certificate of
Designation or the transactions contemplated hereby.  If any party shall
commence an action or proceeding to enforce

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any provisions of this Certificate of Designation, 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.

e)
Waiver.  Any waiver by the Corporation or a Holder of a breach of any provision
of this Certificate of Designation 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 Certificate of Designation or a waiver by any other Holders. 
The failure of the Corporation or a Holder to insist upon strict adherence to
any term of this Certificate of Designation on one or more occasions shall not
be considered a waiver or deprive that party (or any other Holder) of the right
thereafter to insist upon strict adherence to that term or any other term of
this Certificate of Designation on any other occasion.  Any waiver by the
Corporation or a Holder must be in writing.

f)
Severability.  If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of Designation 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.

g)
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.

h)
Headings.  The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to
limit or affect any of the provisions hereof.

i)
Status of Converted or Redeemed Preferred Stock.  Shares of Preferred Stock may
only be issued pursuant to the Exchange Agreement.  If any shares of Preferred
Stock shall be converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of preferred stock and
shall no longer be designated as Series __ Convertible Preferred Stock.

*********************
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RESOLVED, FURTHER, that the, the President and Chief Executive Officer or  the
Chief Financial Officer,   and the secretary or any assistant secretary, of the
Corporation be and they hereby are authorized and directed to prepare and file
this Certificate of Designation of Preferences, Rights and Limitations in
accordance with the foregoing resolution and the provisions of Delaware law.

                IN WITNESS WHEREOF, the undersigned have executed this
Certificate this 6th day of June 2017.

   /s/ Frank McCaney ________ __________
Name:  Frank McCaney
Title: President and Chief Executive Officer

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ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED
STOCK)

The undersigned hereby elects to convert the number of shares of Series __ 
Convertible Preferred Stock indicated below into shares of common stock, par
value $0.001 per share (the "Common Stock"), of STRATA Skin Sciences, Inc., a
Delaware corporation (the "Corporation"), 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 may be required by the Corporation in accordance
with the Exchange Agreement. No fee will be charged to the Holders for any
conversion, except for any such transfer taxes.

Conversion calculations:

Date to Effect Conversion: ____________________________________________
 
Number of shares of Preferred Stock owned prior to Conversion: _______________
 
Number of shares of Preferred Stock to be Converted: _______________________
 
Stated Value of shares of Preferred Stock to be Converted: ____________________
 
Number of shares of Common Stock to be Issued: __________________________
 
Applicable Conversion Price:_________________________________________
 
Number of shares of Preferred Stock subsequent to Conversion: _______________
 
Address for Delivery: _______________________________________________
 
or
 
DWAC Instructions:
 
Broker no: _________
 
Account no: ___________
 
 
[HOLDER]
 
By:___________________________________
     Name:
     Title:

 
 
 

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