Exhibit 10.2


 


NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT.  NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


ACUSPHERE,
INC.


 


Senior
Convertible Note


 


	
  Issuance Date:        , 2008

  	
   

  	
  Principal: U.S.
  $15,000,000

  



 


FOR VALUE RECEIVED, Acusphere, Inc.,
a Delaware corporation (the “Company”), hereby promises to pay to the order of Cephalon, Inc.,
a Delaware corporation, or registered and permitted assigns (“Holder”), the amount set forth
above as the Principal (the “Principal”) when due, whether on the Maturity Date (as
defined below), upon acceleration or otherwise (in each case in accordance with
the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate per annum
equal to the Interest Rate (as defined below), from the date set forth above as
the Issuance Date (the “Issuance
Date”) until the same becomes due and payable, whether on the
Maturity Date, upon acceleration or otherwise (in each case in accordance with
the terms hereof). This Senior Convertible Note (including all Senior
Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is being
issued on the Issuance Date pursuant to the Note Purchase Agreement (as defined
below).  Certain capitalized terms are
defined in Section 23.


 


(1)                                  MATURITY.  On
the Maturity Date, the Company shall pay to the Holder (the “Maturity Date Payment”) an
amount in cash representing all outstanding Principal, an amount, at the option
of the Company as described in Section 2, payable in cash or shares of
Common Stock (as defined below), representing accrued and unpaid Interest and an
amount in cash representing all accrued and unpaid Late Charges, if any.  The “Maturity Date” shall be November [    ],
2011, as may be extended at the option of the Holder in the event that, and for
so long as, an Event of Default (as defined in Section 4(a)) shall have
occurred and be continuing.


 


(2)                                  INTEREST; INTEREST RATE. 
Interest on this Note shall commence accruing on the Issuance Date and
shall be computed on the basis of a 365-day year based on actual days elapsed
and shall be payable in arrears on each November [    ]
during the period beginning on the Issuance Date and ending on, and including,
the Maturity Date and on the Maturity Date (each, an “Interest Date”) with the first Interest
Date being November [    ], 2009.  Interest shall 


 





















 


be
payable on each Interest Date, at the option of the Company, either in cash by
wire transfer or by the issuance and delivery to the Holder of a certificate,
registered in the name of the Holder or its designee, for a number of shares of
Common Stock (with fractional shares being rounded to the next higher whole
number) equal to the amount of Interest due on such Interest Payment Date
divided by the Average Closing Price on the Interest Payment Date.  Prior to the payment of Interest on the first
Interest Date, Interest on this Note shall accrue at the Interest Rate and be
payable by way of inclusion of the Interest in the Conversion Amount in
accordance with Section 3(b)(i). 
From and after the occurrence of an Event of Default, the Interest Rate
shall be increased to fifteen percent (15%) per annum as described in Section 19
below.  In the event that such Event of
Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of
such Event of Default shall continue to apply to the extent relating to the
days after the occurrence of such Event of Default through and including the
date of cure of such Event of Default.


 


(3)                                  CONVERSION OF NOTE.  At the option of the Holder, this Note shall
be convertible into (i) shares of Common Stock of the Company, par value
$.01 per share (the “Common
Stock”), (ii) the Imagify License (as defined below) or (iii) (A) a
credit in an amount equal to the Conversion Amount against any required
Regulatory Milestone Payment (as defined below) and (B) an amount payable,
at the option of the Company, in cash or by delivery of a number of shares of
Common Stock determined in accordance with Section 3(a) equal to the
excess of the Conversion Amount over the amount of the Regulatory Milestone
Payment (the “Conversion Amount Excess”), on the
terms and conditions set forth in this Section 3.


 


(a)                                  Conversion Right.  Subject to the provisions of Sections 3(c) and
3(d), at any time between the Issuance Date and 5:00 p.m. New York Time on
November [    ], 2009 (the “Conversion Deadline”), the Holder shall be entitled to
convert all but not less than all of the outstanding and unpaid Conversion
Amount (as defined below) into either (i) fully paid and nonassessable
shares of Common Stock (a “Share Conversion”)
in accordance with Sections 3(b) and 3(c), (ii) the right to enter
into the Imagify License or (iii) (A) a credit in an amount equal to
the Conversion Amount against any required Regulatory Milestone Payment and (B) at
the option of the Company, (x) cash in an amount equal to the Conversion
Amount Excess or (y) delivery to the Holder of a number of shares of
Common Stock (with fractional shares being rounded to the next higher whole
number equal to the Conversion Amount Excess divided by the Average Closing
Price on the Conversion Date (as defined below).  In the case of a Share Conversion, the
Company shall not issue any fraction of a share of Common Stock upon any
conversion.  If the issuance would result
in the issuance of a fraction of a share of Common Stock, the Company shall
round such fraction of a share of Common Stock up to the nearest whole
share.  The Company shall pay any and all
transfer, stamp and similar taxes that may be payable with respect to the
issuance and delivery of shares of Common Stock upon conversion of any
Conversion Amount; provided, that the Company shall not be responsible for the
payment of any income taxes that may be incurred by the Holder as a result of
such conversion.


 


(b)                                 Conversion Rate For Share Conversion.  In connection with a Share Conversion, the
number of shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to Section 3(a) shall be the greater of (i) the
amount determined by dividing (x) such Conversion Amount by (y) the
Conversion Price and (ii) such number of shares of Common 


 


2





















 


Stock as shall represent immediately after giving effect to such
conversion 51% of the Common Stock Deemed Outstanding.


 


(i)                                     “Conversion Amount”
means the sum of (A) the Principal, (B) accrued and unpaid Interest
with respect to such Principal and (C) accrued and unpaid Late Charges with
respect to such amount being converted.


 


(ii)                                  “Conversion Price”
means, as of any Conversion Date (as defined below) or other date of
determination, and subject to adjustment as provided herein, U.S.$0.486.


 


(c)                                  Mechanics of Conversion.


 


(i)                                     Share Conversion Notice.  To convert any Conversion Amount into shares
of Common Stock on any Conversion Date,
the Holder shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of
an executed notice of conversion in the form attached hereto as Exhibit A (the “Share
Conversion Notice”)
to the Company’s chief executive officer and chief financial officer, with a
copy by facsimile or email to:


 


Lawrence S. Wittenberg, Esq.


Goodwin Procter LLP


Exchange Place


Boston, Massachusetts 02129


Email:  lwittenberg@goodwinprocter.com


Fax: (617) 523-1231


 


and (B) physically surrender the Note to the Company for
cancellation in connection with such conversion.


 


(ii)                                  Share Delivery. On or before
the first Business Day following the date of receipt of a Share Conversion
Notice in connection with a Share Conversion, the Company shall transmit by
facsimile a confirmation of receipt of such Share Conversion Notice to the
Holder and the Transfer Agent.  On or
before the third Business Day following the later of (A) the date of
receipt of a Share Conversion Notice and the Company’s receipt of the Note from
the Holder and (B) the expiration of any applicable waiting period under
the HSR Act (as defined below) (the “Share Delivery Date”), the Company shall issue and deliver
to such address of the Holder as is set forth in the Note Purchase Agreement or
such other address as specified in the Share Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares
of Common Stock to which the Holder shall be entitled. The Person entitled to
receive the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date.


 


(d)                                 Deliveries in
Connection with the Imagify License.  To convert this Note into the right to enter
into the Imagify License on any Conversion Date, the Holder shall (A) transmit
by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m.,
New York Time, on such date, a letter signed by an authorized officer of the
Holder electing to convert this Note into the 


 


3





















 


Imagify License in accordance with the terms of the Note (the “Imagify Conversion
Notice”) to the Company’s chief executive officer and chief
financial officer, with a copy by facsimile or email to:


 


Lawrence S. Wittenberg, Esq.


Goodwin Procter LLP


Exchange Place


Boston, Massachusetts 02129


Email:  lwittenberg@goodwinprocter.com


Fax: (617) 523-1231


 


and (B) physically surrender the Note to the Company for
cancellation in connection with such conversion.  No later than the second Business Day
following the later of (A) the date of receipt of such Imagify Conversion
Notice and the Company’s receipt of the Note from the Holder and (B) the
expiration of any applicable waiting period under the HSR Act, the Company
shall delivery to the Holder duly executed original copies of (i) the Imagify
License, (ii) the Assignment Agreement (as defined below) and (iii) the
Trademark License (as defined below).


 


(e)                                  Deliveries in
Connection with the Regulatory Milestone Payment Credit.  To convert this Note into the right to
receive a credit against any required Regulatory Milestone Payment and the
amount of cash, if any, specified in Section 3(a) on any Conversion
Date, the Holder shall (A) transmit by facsimile (or otherwise deliver),
for receipt on or prior to 11:59 p.m., New York Time, on such date, a
letter signed by an authorized officer of the Holder electing to convert this
Note into a credit towards the Regulatory Milestone Payment plus the amount of
cash, if any specified in Section 3(a) in accordance with the terms
of the Note (the “Regulatory Milestone
Payment Notice”)
to the Company’s chief executive officer and chief financial officer, with a
copy by facsimile or email to:


 


Lawrence S. Wittenberg, Esq.


Goodwin Procter LLP


Exchange Place


Boston, Massachusetts 02129


Email:  lwittenberg@goodwinprocter.com


Fax: (617) 523-1231


 


and (B) physically surrender the Note to the Company for
cancellation in connection with such conversion.  No later than the second Business Day
following the later of (A) the date of receipt of such Regulatory
Milestone Payment Notice and the Company’s
receipt of the Note from the Holder and (B) the expiration of any
applicable waiting period under the HSR Act, the Company
shall deliver to the Holder (1) a duly executed original copy of a
confirmation of the satisfaction of all of the Holder’s obligations with
respect to the Regulatory Milestone Payment and (2) at the option of the
Company, (x) a cash payment, by wire transfer to the account specified by
the Holder, in an amount equal to the Conversion Amount Excess, or (y) a
certificate registered in the name of the Holder or its designee, for a number
of shares of Common Stock (with fractional shares being rounded to the next
higher whole number) equal to the Conversion Amount Excess divided by the
Average Closing Price on the Conversion Date.


 


4





















 


(f)                                    If the
expiration of any applicable waiting period under the HSR Act with respect to a
conversion of the Note shall not have occurred within sixty (60) days following
the delivery of the Share Conversion Notice, the Imagify Conversion Notice or
the Regulatory Milestone Payment Notice, as applicable, the Purchaser shall
have the right to withdraw such Share Conversion Notice, Imagify Conversion
Notice or Regulatory Milestone Payment Notice, as applicable, by delivery of
written notice to the Company within five (5) Business Days after the
expiration of such sixty (60) day period and, without waiving or limiting any
other rights of the Holder hereunder (including the right to convert the Note
pursuant to the terms hereof), the conversion of this Note shall be deemed not
to have occurred and the Note shall be deemed to remain outstanding.


 


(4)                                  RIGHTS UPON EVENT OF DEFAULT.


 


(a)                                  Event of Default.  Each of the following events shall constitute
an “Event of Default”:


 


(i)                                     the Company’s
failure to pay to the Holder any amount of Principal, Interest, Late Charges or
other amounts when and as due under this Note, except, in the case of a failure
to pay Interest and Late Charges when and as due, in which case only if such
failure continues for a period of at least three (3) Business Days;


 


(ii)                                  the Company or
any of its Subsidiaries (as defined in the Note Purchase Agreement) shall fail
to make any payment due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) on any other Indebtedness (as defined in the
Note Purchase Agreement) in excess of $50,000 and such failure shall continue
after the applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness; or any other default or event under any
agreement or instrument relating to any such Indebtedness in excess of $50,000
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
Indebtedness in excess of  $50,000 or any
such Indebtedness in excess of $50,000 shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof;


 


(iii)                               any
representation or warranty made by the Company in any Transaction Agreement (as
defined in the Note Purchase Agreement) shall prove to have been untrue in any
material respect when made or deemed to be made or any event occurs, or
condition or state of facts comes into existence, which, if such event,
condition or state of facts had occurred or been in existence on the date
hereof, would have caused the representations and warranties contained clauses (i) (except
for the words “all without challenge of any kind” contained therein), (ii) (except
for the words “has not been cancelled or abandoned and” contained therein) and (v) (except
with respect to the transactions contemplated by the Transaction Agreements (as
defined in the Note Purchase Agreement)) of the first sentence of Section 3.20(e) of
the Note Purchase Agreement to be untrue in any material respect as of the date
hereof;


 


5





















 


(iv)                              default by the
Company in the due observance or performance or any covenant or agreement
contained in any Transaction Agreement and such default shall continue for
twenty (20) Business Days after written notice thereof to the Company by the
Holder;


 


(v)                                 the Company or
any of its Subsidiaries shall (i) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator or similar official (a “Custodian”) for itself or for a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii) become
unable, or admit in writing its inability, to pay its debts as they become due,
(iv) voluntarily or involuntarily dissolve, liquidate or wind up its
affairs, or (v) take action for the purpose of effecting any of the
foregoing;


 


(vi)                              a proceeding
under any bankruptcy, reorganization, arrangement of debts, insolvency or
receivership law (collectively, “Bankruptcy Law”)
is filed by or against the Company or any of its Subsidiaries, or the Company
or any of its Subsidiaries takes any action to authorize any of the foregoing
matters, and in the case of any such proceeding instituted against the Company
or any of its Subsidiaries (but not instituted by the Company or any of its
Subsidiaries), either such proceeding shall remain undismissed or unstayed for
a period of 30 days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee or other similar official for the Company or
any of its Subsidiaries or any substantial part of its property) shall be
granted or shall occur;


 


(vii)                           except in
connection with those matters set forth on Schedule 4(a)(vii) hereto, a
final, non-appealable judgment or series of judgments for the payment of money
aggregating in excess of $50,000 is rendered against the Company or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within sixty (60) days after the expiration of such stay; provided,
however, that any judgment which is covered by insurance or an indemnity from a
credit worthy party shall not be included in calculating the $50,000 amount set
forth above so long as the Company provides the Holder as promptly as
practicable with a written statement from such insurer or indemnity provider
(which written statement shall be in a form reasonably satisfactory to the
Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company will receive the proceeds of such insurance or
indemnity in the time frame provided under the applicable insurance policy;


 


(viii)                        any breach or
failure in any respect to comply with Section 7 of this Note;


 


(ix)                                any of the
Governmental Approvals or any other consent or approval necessary for the
continuing operation of the Company or any of its Subsidiaries shall cease to
be in full force and effect; provided, that a failure to secure approval of the
Imagify Product (as defined in the Note Purchase Agreement) by the Food and
Drug Administration shall not be considered a default under this paragraph;


 


(x)                                   For any reason
any Transaction Agreement shall not be in full force and effect or shall not be
enforceable in accordance with its terms, or any security interest or lien
granted pursuant thereto shall fail to be perfected or to have its intended
priority, or any party thereto 


 


6





















 


other than the Holder shall contest the validity of any Lien granted
under, or shall disaffirm its obligations under any Transaction Agreement;


 


(xi)                                an ERISA Event
described in clause (b) of the definition thereof shall have occurred or
any other ERISA Event shall have occurred that, when taken together with all
other such ERISA Events, could reasonably be expected to result in liability of
the Company and its ERISA Affiliates in an aggregate amount exceeding $50,000;


 


(xii)                             any material
portion of the Collateral (as defined in the Security Agreement) shall be
transferred or otherwise disposed of, either voluntarily or involuntarily, in
any manner not permitted by the Security Agreement or shall be lost, stolen,
damaged or destroyed and such loss, theft, damage or destruction is not covered
materially by insurance; or


 


(xiii)                          for any reason,
the Company or any of its material Subsidiaries ceases to operate its business
or ceases to own any of its Governmental Approvals necessary for the continuing
conduct of its business.


 


(b)                                 Rights Upon an Event of Default.


 


(i)                                     If an Event of
Default has occurred with respect to this Note and the Holder has provided
written notice to the Company of such Event of Default, the unpaid principal of
this Note shall bear interest at a rate of fifteen percent (15%) per annum from
the occurrence and during the continuance of such Event of Default.  Upon the occurrence of an Event of Default,
except in the case of the events described in paragraphs (v) and (vi) above:  (X) the Holder may, by written notice to
the Company, accelerate the maturity of this Note whereupon the entire amount
of Principal, together with all accrued and unpaid Interest thereon and all
other liabilities of the Company hereunder, shall become due and payable
immediately; provided, however, that with respect to an Event of Default
described in paragraph (v) or (vi) above, this Note, and all such
Principal, Interest and other liabilities of the Company hereunder shall
automatically become due and payable without presentment, demand, notice of
nonperformance, protest, notice of protest or notice of dishonor, all of which
are expressly waived by the Company and (Y) the Holder may exercise all or
any other remedies provided in the Note Purchase Agreement or the Security
Agreement or available at law or equity.


 


(ii)                                  Demand,
presentment, protest and notices of nonpayment, protest, dishonor and
acceptance are hereby waived by the Company. 
The Company also waives the benefit of all valuation, appraisal and
exemption laws and the posting of any bond required of the Holder in connection
with any judicial process to realize on the Collateral, to enforce any judgment
or other court order entered in favor of the Holder or to enforce by specific
performance, temporary restraining order, or preliminary or permanent
injunction, this Note or any other Transaction Agreement.  The Company waives the right, if any, to the
benefit of, or to direct the application of, any Collateral.  The Company hereby acknowledges that the Holder
has no obligation to resort to any Collateral or make claim against any other
Person before seeking payment or performance from the Company.


 


(iii)                               In addition to
any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of 


 


7





















 


any Event of Default, the Holder is hereby authorized at any time or
from time to time, without notice to the Company or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and to
apply any and all balances held by it at any of its offices for the account of
the Company (regardless of whether such balances are then due to the Company)
and any other properties or assets any time held or owing by the Company to or
for the credit or for the account of the Company against and on account of any
of the Secured Obligations (as defined in the Security Agreement) then due.  The Company hereby agrees that the foregoing
provisions are intended to be construed so as to satisfy the requirements of Section 553
of the Federal Bankruptcy Code or amendments thereto (including any requirement
of mutuality of obligations therein).


 


(5)                                  RIGHTS UPON CORPORATE EVENTS.  In addition to and not in substitution for
any other rights hereunder (but not in duplication of any adjustment made
pursuant to Section 6), prior to the consummation of any transaction
pursuant to which all holders of outstanding shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate
provision to insure that the Holder will thereafter have the right to receive
upon a conversion of this Note for shares of Common Stock (i.e.
not into the right to enter into the Imagify License or receive a credit
against any required Regulatory Milestone Payment), (i) in addition to the
shares of Common Stock receivable upon such conversion, such securities or
other assets to which the Holder would have been entitled with respect to such
shares of Common Stock had such shares of Common Stock been held by the Holder
upon the consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in
lieu of the shares of Common Stock otherwise receivable upon such conversion,
such securities or other assets received by the holders of shares of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the terms of conversion set forth in Section 3.
Provision made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Holder. 
The provisions of this Section 5 shall apply similarly and equally
to successive Corporate Events and shall be applied without regard to any
limitations on the conversion of this Note.


 


(6)                                  RIGHTS UPON ISSUANCE OF OTHER SECURITIES.


 


(a)                                  Adjustment of Conversion Price upon Issuance of shares of Common Stock.  If and whenever during the period beginning
on after the Issuance Date, the Company issues or sells, or in accordance with
this Section 6(a) is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding shares of Common Stock
deemed to have been issued or sold by the Company in connection with any
Excluded Security) for a consideration per share less than a price (the “Applicable Price”)
equal to the Conversion Price in effect immediately prior to such issue or sale
(the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the
product of (A) the Applicable Price and (B) the quotient determined
by dividing (1) the sum of (I) the product derived by multiplying the
Applicable Price times the number of shares of Common Stock Deemed Outstanding
immediately prior to such Dilutive Issuance plus 


 


8





















 


(II) the consideration, if any, received (or deemed to be
received) by the Company upon such Dilutive Issuance, by (2) the product
derived by multiplying (I) the Applicable Price by (II) the number of
shares of Common Stock Deemed Outstanding immediately after such Dilutive
Issuance.  For purposes of determining
the adjusted Conversion Price under this Section 6(a), the following shall
be applicable:


 


(i)                                     Issuance of Options.  If the Company in any manner grants or sells
any Options and the lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion or exchange
or exercise of any Convertible Securities issuable upon exercise of such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 6(a)(i), the “lowest price per share for which
one share of Common Stock is issuable upon the exercise of any such Option or
upon conversion or exchange or exercise of any Convertible Securities issuable
upon exercise of such Option” shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect to
any one share of Common Stock upon granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange or exercise of any Convertible
Security issuable upon exercise of such Option. No further adjustment of the
Conversion Price shall be made upon the actual issuance of such share of Common
Stock or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such share of Common Stock upon conversion or
exchange or exercise of such Convertible Securities.


 


(ii)                                  Issuance of Convertible Securities.  If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share
of Common Stock is issuable upon such conversion or exchange or exercise
thereof is less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the Company
at the time of the issuance of sale of such Convertible Securities for such
price per share.  For the purposes of
this Section 6(a)(ii), the “price per share for which one share of Common
Stock is issuable upon such conversion or exchange or exercise” shall be equal
to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon
the issuance or sale of the Convertible Security and upon the conversion or
exchange or exercise of such Convertible Security.  No further adjustment of the Conversion Price
shall be made upon the actual issuance of such share of Common Stock upon
conversion or exchange or exercise of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of the Conversion Price had been or are to be made
pursuant to other provisions of this Section 6(a), no further adjustment
of the Conversion Price shall be made by reason of such issue or sale.


 


(iii)                               Change in Option Price or Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exchange or exercise of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable or
exercisable for shares of Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or 


 


9





















 


changed conversion rate, as the case may be, at the time initially
granted, issued or sold. For purposes of this Section 6(a)(iii), if the
terms of any Option or Convertible Security that was outstanding as of the
Issuance Date are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change.  No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.


 


(iv)                              Calculation of Consideration Received.  In case any Option or Convertible Securities
are issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options or Convertible Securities by the
parties thereto, the Options or Convertible Securities will be deemed to have
been issued for a consideration of $.01. 
If any shares of Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount received by
the Company therefor.  If any shares of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the closing sale price of such
securities (if then traded on a national securities exchange or
over-the-counter market) on the date of receipt.  If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities,
as the case may be.  The fair value of
any consideration other than cash or securities will be determined jointly by
the Company and the Holder.  If such
parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “Valuation Event”), the fair
value of such consideration will be determined within five (5) Business
Days after the tenth day following the Valuation Event by an independent,
nationally recognized appraiser jointly selected by the Company and the
Holder.  The determination of such
appraiser shall be deemed binding upon all parties absent manifest error.  The fees and expenses of such appraiser shall
be borne by the party whose determination or fair value most differs from such
appraiser’s determination.


 


(v)                                 Record Date.  If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.


 


(b)                                 Adjustment of Conversion Price upon Subdivision or Combination of
shares of Common Stock.  If the Company at any time on or after the
Issuance Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding 


 


10





















 


shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision will be proportionately
reduced.  If the Company at any time on
or after the Issuance Date combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.


 


(c)                                  Other Events.  If any event occurs of the type contemplated
by the provisions of this Section 6 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 6.


 


(7)                                  RESERVATION OF AUTHORIZED SHARES.


 


(a)                                  Reservation.  The Company initially shall reserve out of
its authorized and unissued shares of Common Stock a number of shares of Common
Stock for the Note equal to the maximum number of shares of Common Stock into
which the Conversion Amount of the Note is convertible as of the Issuance
Date.  So long as the Note is outstanding,
the Company shall take all action necessary to reserve and keep available out
of its authorized and unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the Note, the number of shares of Common Stock
as shall from time to time be necessary to effect the conversion of the Note
pursuant to Section 3 (the “Required Reserve Amount”).


 


(b)                                 Insufficient Authorized Shares.  If at any time while the Note remains
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Note at least a number of shares of Common
Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then
the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company
to reserve the Required Reserve Amount for the Note.  Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall take all
necessary actions to obtain stockholder approval of an increase in the number of
authorized shares of Common Stock.  In
connection with a meeting of stockholders, the Company shall provide each
stockholder with a proxy statement and shall use its reasonable best efforts to
solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its Board of Directors to recommend to the
stockholders that they approve such proposal.


 


(8)                                  VOTING RIGHTS.  The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to
applicable laws of the State of Delaware, and as expressly provided in this
Note.


 


11




















 


(9)                                  RANK; ADDITIONAL INDEBTEDNESS; LIENS.


 


(a)                                  Rank.  No
Indebtedness of the Company or its Subsidiaries shall rank senior to the
payments due under this Note without the prior written consent of the
Purchaser.


 


(b)                                 Incurrence of Indebtedness.  So long as this Note is outstanding, the
Company shall not, and the Company shall not permit any of its Subsidiaries to,
directly or indirectly, incur or guarantee, assume or suffer to exist any
Indebtedness, other than (i) the Indebtedness evidenced by this Note and (ii) Permitted
Indebtedness.


 


(c)                                  Existence of Liens.  So long as this Note is outstanding, the
Company shall not, and the Company shall not permit any of its Subsidiaries to,
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries (collectively, “Liens”) other than Permitted Liens.


 


(d)                                 Restricted Payments.  Except with respect to the dividend payments
on the Company’s 6.5% Convertible Exchangeable Preferred Stock outstanding on
the date hereof, as set forth in the Company’s certificate of incorporation,
the Company shall not, and the Company shall not permit any of its Subsidiaries
to, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or
in part, whether by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of any Permitted Indebtedness
except for payments of principal or interest required pursuant to Permitted
Indebtedness described under clause (i) or (ii) of the definition of
Permitted Indebtedness, whether by way of payment in respect of principal of
(or premium, if any) or interest on, such Indebtedness if at the time such
payment is due or is otherwise made or, after giving effect to such payment, an
Event of Default has occurred and is continuing.


 


(10)                            PARTICIPATION.  The Holder, as the holder of this Note, shall
be entitled to such dividends paid and distributions made to the holders of
shares of Common Stock to the same extent as if the Holder had converted this
Note into shares of Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions.  Payments under the preceding sentence shall
be made concurrently with the dividend or distribution to the holders of shares
of Common Stock.  The provisions of this Section 10
shall not operate in duplicate of Section 5 or Section 6 hereof and
with respect to cash dividends, Section 10 shall control.


 


(11)                            CHANGE TO TERMS OF THE NOTE.  Any amendment, supplement or modification of
or to any of the provisions of this Note shall be effective only if it is made
in writing and signed by the Company and the Holder.


 


(12)                            TRANSFER. 
Prior to and including the Conversion Deadline, this Note may not be
offered, sold, assigned or transferred by the Holder, other than to an
Affiliate (as defined in the Note Purchase Agreement) without the prior written
consent of the Company.  After the
Conversion Deadline, this Note may be offered, sold, assigned or transferred by
the Holder without the consent of the Company.


 


12





















 


(13)                            REISSUANCE OF THIS NOTE.


 


(a)                                  Transfer. 
If this Note is to be transferred in accordance with Section 12,
the Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 13(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 13(d)) to the Holder representing the outstanding
Principal not being transferred.


 


(b)                                 Lost, Stolen or Mutilated Note.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with Section 13(d))
representing the outstanding Principal.


 


(c)                                  Note Exchangeable for Different Denominations.  This Note is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Note or
Notes (in accordance with Section 13(d) and in principal amounts of
at least $500,000) representing in the aggregate the outstanding Principal of
this Note, and each such new Note will represent such portion of such
outstanding Principal as is designated by the Holder at the time of such
surrender.


 


(d)                                 Issuance of New Notes.  If the Company is required to issue a new
Note pursuant to the terms of this Note, such new Note (i) shall be of
like tenor with this Note, (ii) shall represent, as indicated on the face
of such new Note, the Principal remaining outstanding (or in the case of a new
Note being issued pursuant to Section 13(a) or Section 13(c),
the Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance,
does not exceed the Principal remaining outstanding under this Note immediately
prior to such issuance of new Notes), (iii) shall have an issuance date,
as indicated on the face of such new Note, which is the same as the Issuance
Date of this Note, (iv) shall have the same rights and conditions as this
Note and (v) shall represent accrued Interest and Late Charges (if any) on
the Principal and Interest of this Note, from the Issuance Date.


 


(14)                            REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF.  The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and the other Transaction Agreements at law
or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the Holder’s right to pursue
actual and consequential damages for any failure by the Company to comply with
the terms of this Note.  Amounts set
forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the Holder
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Holder and that
the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to seek an injunction restraining any
breach, 


 


13





















 


without the necessity of showing economic
loss and without any bond or other security being required.


 


(15)                            PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (i) this Note is placed in the hands
of an attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (ii) there
occurs any bankruptcy, reorganization, receivership of the Company or other
proceedings affecting Company creditors’ rights and involving a claim under
this Note, then the Company shall pay the documented costs incurred by the
Holder for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, but
not limited to, attorneys’ fees and disbursements.


 


(16)                            SECURITY
AGREEMENT. The payment of Principal, Interest and all other liabilities of
the Company hereunder is secured by a security interest in certain collateral
of the Company as described in the Security Agreement (as defined below).


 


(17)                            CONSTRUCTION; HEADINGS.  This Note shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
person as the drafter hereof.  The
headings of this Note are for convenience of reference and shall not form part
of, or affect the interpretation of, this Note.


 


(18)                            FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.


 


(19)                            NOTICES; PAYMENTS.


 


(a)                                  Notices. 
Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with Section 12.3
of the Note Purchase Agreement.  The
Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Note, including in reasonable detail a description of
such action and the reason therefore. 
Without limiting the generality of the foregoing, the Company will give
written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least twenty (20) days prior to
the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B) with
respect to any pro rata subscription offer to holders of shares of Common Stock
or (C) for determining rights to vote with respect to any transaction
described in Section 5, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.


 


(b)                                 Payments. 
Whenever any payment of cash is to be made by the Company to the Holder
pursuant to this Note, such payment shall be made in lawful money of the United
States of America by wire transfer of immediately available funds to the bank
account specified by the Holder to the Company in writing prior to such
payment. Whenever any amount expressed to be 


 


14





















 


due by the terms of this Note is due on any
day which is not a Business Day, the same shall instead be due on the next succeeding
day which is a Business Day.  Any amount
of Principal which is not paid when due shall result in a late charge being
incurred and payable by the Company in an amount equal to interest on such
amount at the rate of 15% per annum from the date such amount was due until the
same is paid in full (“Late
Charge”).


 


(20)                            CANCELLATION. 
After all Principal, accrued Interest and other amounts at any time owed
on this Note has been paid in full, whether by payment of cash or upon the
conversion of the Note as set forth in Section 3, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.


 


(21)                            WAIVER OF NOTICE. 
To the extent permitted by law, the Company hereby waives demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note and the
Note Purchase Agreement.


 


(22)                            GOVERNING LAW. 
This Note shall be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation and performance
of this Note shall be governed by, the internal laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of Delaware.


 


(23)                            CERTAIN DEFINITIONS.  For purposes of this Note, the following
terms shall have the following meanings:


 


(a)                                  “Assignment Agreement” means the Assignment Agreement between
the Company and the Purchaser, in the form of Exhibit B.


 


(b)                                 “Average Closing Price” means the average closing price of
the Common Stock on the Nasdaq Stock Market or such other national securities
exchange or trading system on which the Common Stock is then principally traded
during the ten (10) trading day period immediately prior to the date in
question.


 


(c)                                  “Benefit Plan” means any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA
or Section 412 of the Tax Code or Section 307 of ERISA, and in
respect of which the Company or any ERISA Affiliate is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an “employer”
as defined in Section 3(5) of ERISA.


 


(d)                                 “Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.


 


(e)                                  “Common Stock Deemed
Outstanding” means, at any given time, the number of shares of
Common Stock actually outstanding at such time, plus the number of shares of
Common Stock issuable upon the exercise or conversion of all outstanding
Options or Convertible Securities, such number to be determined in the manner
set forth in Section 6(a)(i) and 6(a)(ii), regardless of whether the
Options or Convertible Securities are actually exercisable 


 


15





















 


at such time, but excluding (i) any
shares of Common Stock owned or held by or for the account of the Company, (ii) solely
for purposes of Section 6 and not for purposes of Section 3, shares
of Common Stock issuable upon conversion of this Note and (iii) any shares
of Common Stock issuable upon the conversion of any Options having an exercise
price per share of Common Stock into which such Option is convertible (or, in
the case of Options to subscribe for or purchase Convertible Securities, having
an aggregate exercise price in connection with any conversion into such
Convertible Securities and any further conversion into Common Stock) that is
greater than the greater of (i) 3 times the Average Closing Price of the
Common Stock on the date in question or (ii) $8.00 (appropriately adjusted
for any event of the type described in Section 6(b))


 


(f)                                    “Conversion Date” means the date, which shall be prior to the
Conversion Deadline, on which this Note is converted in accordance with Section 3(a).


 


(g)                                 “Convertible Securities”
means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of Common Stock.


 


(h)                                 “ERISA” mean the Employee Retirement Income Security Act of
1974, as amended from time to time, regulations promulgated thereunder and any
successor thereto.


 


(i)                                     “ERISA Affiliate” means any entity (whether or not
incorporated) that, together with the Company is treated as a single employer
under Section 414(b) or (c) of the Tax Code, or solely for
purposes of Section 302 of ERISA and Section 412 of the Tax Code, is
treated as a single employer under Section 414 of the Tax Code.


 


(j)                                     “ERISA Event” means (a) any “reportable event”, as
defined in Section 4043 of ERISA or the regulations issued thereunder,
with respect to a Benefit Plan (other than an event for which the 30-day notice
period is waived); (b) the existence with respect to any Benefit Plan of
an “accumulated funding deficiency” (as defined in Section 412 of the Tax
Code or Section 302 of ERISA), whether or not waived; (c) the filing
pursuant to Section 412(d) of the Tax Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Benefit Plan; (d) the incurrence by the Company or any of
its ERISA Affiliates of any liability under Title IV of ERISA with respect
to the termination of any Benefit Plan or the withdrawal or partial withdrawal
of the Company or any of its ERISA Affiliates from any Benefit Plan or
Multiemployer Plan; (e) the receipt by the Company or any of its ERISA
Affiliates from the PBGC or a plan administrator of any notice relating to the
intention to terminate any Benefit Plan or Plans or to appoint a trustee to
administer any Benefit Plan; (f) the adoption of any amendment to a
Benefit Plan that would require the provision of security pursuant to Section 401(a)(29)
of the Tax Code or Section 307 of ERISA; (g) the receipt by the
Company or any of its ERISA Affiliates of any notice, or the receipt by any
Multiemployer Plan from the Company or any of its ERISA Affiliates of any
notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA; (h) the
occurrence of a “prohibited transaction” involving a Benefit Plan with respect
to which the Company or any of the Subsidiaries is a “disqualified person”
(within the meaning of Section 4975 of the Tax Code) or with respect to
which the Company or any such Subsidiary could 


 


16





















 


otherwise be liable; or (i) any other
event or condition with respect to a Benefit Plan or Multiemployer Plan that
could result in liability of the Company or any Subsidiary of the Company.


 


(k)                                  “Governmental Approval” means any license, permit or
certificate of public convenience and necessity issued or required to be issued
to the Company or any of its Subsidiaries by any Governmental Authority.


 


(l)                                     “Governmental Authority” means any United States federal,
state, local or other political subdivision thereof and any United States or
foreign entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.


 


(m)                               “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.


 


(n)                                 “Interest Rate”
means 8.00% per annum, subject to adjustment pursuant to Section 2.


 


(o)                                 “Imagify License” means the License Agreement between the
Company and the Purchaser, in the form attached hereto as Exhibit C.


 


(p)                                 “Late Charges” has the meaning given such term in Section 19(b).


 


(q)                                 “Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.


 


(r)                                    “Note Purchase Agreement” means the Note Purchase Agreement
dated as of October 24, 2008 by and between the Company and the Purchaser.


 


(s)                                  “Options” means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.


 


(t)                                    “Permitted Indebtedness”
means (i) the Indebtedness set forth in Schedule 3.12 of the Company
Disclosure Letter (as defined in the Note Purchase Agreement under the heading “Loan
Agreements”), (ii) trade payables incurred in the ordinary course of
business, (iii) other Indebtedness not exceeding $2 million in the
aggregate at any one time outstanding and (iv) any other Indebtedness
consented in writing by the Purchaser.


 


(u)                                 “Permitted Liens”
means (i) any Lien for taxes not yet due or delinquent or being contested
in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting principals in the
United States (“GAAP”), (ii) any statutory Lien arising in the ordinary
course of business by operation of law with respect to a liability that is not
yet due or delinquent, other than any Lien imposed by ERISA, (iii) any
Lien created by operation of law, such as materialmen’s liens, mechanics’ liens
and other similar liens, arising in the ordinary course of business with
respect to a liability that is not yet due or delinquent and for which adequate
reserves have been established in accordance with GAAP, (iv) Liens (A) upon
or in any equipment acquired or held by the Company or any of its Subsidiaries
to secure the purchase price of such equipment or indebtedness incurred solely 


 


17





















 


for the purpose of financing the acquisition
or lease of such equipment, or (B) existing on such equipment at the time
of its acquisition, provided that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clause (iv) above; provided,
that any extension, renewal or replacement Lien shall be limited to the
property encumbered by the existing Lien and the principal amount of the
Indebtedness being extended, renewed or refinanced does not increase, (vi) leases
or subleases and licenses and sublicenses granted to others in the ordinary
course of the Company’s business, not interfering in any material respect with
the business of the Company and its Subsidiaries taken as a whole, (vii) Liens
arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default, (viii) Liens securing the Company’s
obligations under the Notes,  (ix) Liens
arising out of pledges or deposits under workmen’s compensation laws,
unemployment insurance, old age pensions, or other social security benefits
other than any Lien imposed by ERISA, (x) Liens incurred or deposits made
in the ordinary course of business to secure surety bonds provided that such
Liens shall extend only to cash collateral for such surety bonds and (xi) Liens
listed on Schedule 1.1(b) of the Company Disclosure Letter (as defined in
the Note Purchase Agreement).


 


(v)                                 “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.


 


(w)                               “Purchaser” means Cephalon, Inc., a Delaware
corporation.


 


(x)                                   “Regulatory Milestone Payment” means the $15,000,000 payment
to be paid by the Purchaser pursuant to Section 2.9 of the Celecoxib
License Agreement (as defined in the Note Purchase Agreement).


 


(y)                                 “Security Agreement” means the Security Agreement dated as of
          , 2008 by and
between the Company and the Purchaser.


 


(z)                                   “Tax Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time.


 


(aa)                            “Trademark License” means the Trademark License between the
Company and the Purchaser in the form as attached to the Imagify License.


 


(bb)                          “Transfer  Agent” means
American Stock Transfer & Trust Company.


 


(cc)                            “Withdrawal Liability” means liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of
Title IV of ERISA.


 


[Signature Page Follows]


 


18

















 


IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date
set out above.


 


	
   

  	
   

  	
  ACUSPHERE,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  



 

















 


EXHIBIT
A


 


ACUSPHERE,
INC.

CONVERSION NOTICE


 


Reference is made to the Senior Convertible
Note (the “Note”)
issued to the undersigned by [COMPANY] (the “Company”).  In accordance with and pursuant to the Note,
the undersigned hereby elects to convert the Conversion Amount (as defined in
the Note) of the Note indicated below into shares of Common Stock of the
Company, par value $.01 per share (the “Common Stock”), as of the date specified below.


 


	
   

  	
  Date of Conversion:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Conversion Amount to be converted:

  	
   

  	
   

  
					



 


Please confirm the following information:


 


	
   

  	
  Conversion Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Number of shares of Common Stock to be issued:

  	
   

  	
   

  
					



 


Please issue the shares of Common Stock into
which the Note is being converted in the following name and to the following
address:


 


	
   

  	
  Issue to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile Number:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorization:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
       By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
               Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Account Number:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (if electronic book entry transfer)

  
	
   

  	
   

  
	
   

  	
  Transaction Code Number:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (if electronic book entry transfer)

  
													



 




















 


ACKNOWLEDGMENT


 


The Company hereby acknowledges
this Conversion Notice and hereby directs
                  
to issue the above indicated number of shares of Common Stock in accordance
with the Transfer Agent Instructions dated 
                      
from the Company acknowledged and agreed to by
                              .


 


	
   

  	
  ACUSPHERE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


Exhibit B


 


Assignment Agreement


 

















 


Exhibit C


 


Imagify License


 

















 


Schedule 4(a)(vii)


 


Litigation


 


Claim filed by Miguel Torres
with the Commonwealth of Massachusetts – Commission Against Discrimination (MCAD),
Claim No. 08BEM01015