Document:

ex1032.htm

    Exhibit
10.32

     

     

     

    FOURTH
AMENDMENT TO SECURITIES PURCHASE AGREEMENT

    

    This
Fourth Amendment to Securities Purchase Agreement (this “Amendment”)
is made as of the 28th day of
July 2009, by and among NewCardio, Inc., a Delaware corporation (the “Company”),
and each purchaser identified on the signature pages to that certain Securities
Purchase Agreement (the “SPA”),
dated as of  December 27, 2007, between Marine Park Holdings, Inc., a
Delaware corporation and the Purchasers identified on the signature pages
thereto (each, including its successors and assigns, a “Purchaser”
and collectively the “Purchasers”).

    

    Capitalized terms defined in the SPA
and not otherwise defined herein shall have the same meanings as ascribed to
them in the SPA.

    

    WHEREAS, by a vote of the Purchasers
holding at least 67% in interest of each class of the Securities that are issued
and outstanding, this Amendment has been approved;

    

    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 undersigned agree as follows:

    

    

    
      	
              1.  

            	
              Reference
      is made to the letter dated December 1, 2008, between Platinum-Montaur
      Life Sciences, LLC (“Platinum”) and the Company (the “Put
      Letter”).    For purposes of the Put Letter the
      term “End
      Date” is amended to read “June 30,
2010”.

            

    

    

    
      	
              2.  

            	
               Except
      as amended hereby, the SPA remains in force and
  effect.

            

    

    

    
      	
              3.  

            	
              This
      Amendment may be executed in counterparts that, together, shall have the
      same effect as if all parties signed this Amendment on the same signature
      page.

            

    

    

     

     

     

     

     

     

    [SIGNATURE PAGES TO THIS AMENDMENT TO
SECURITIES PURCHASE AGREEMENT FOLLOW]

     

     

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    

    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	NewCardio,
Inc.	 	 	2350
      Mission College Blvd.	 
	
                                 

                              	 	 	
                                Suite
      1175

                              	 
	
                                 

                              	 	 	
                                Santa
      Clara, CA 95054

                              	 
	
                                 

                              	 	 	
                                Facsimile
      Number: 775-254-5118

                              	 
	 	 	 	E-mail:
      rbrounstein@newcardio.com	 
	 	 	 	 	 
	 	 	 	 	 
	By: /s/ Richard D.
      Brounstein	 	 	 	 
	Name:
      Richard D. Brounstein	 	 	 	 
	Title:  Executive
      Vice President, CFO & Secretary	 	 	 	 

                      

                    

                  

                

              

            

          

        

      

    

     

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

     

    

    

    [PURCHASER
SIGNATURE PAGE TO AMENDMENT TO SECURITIES PURCHASE AGREEMENT]

    

     

    IN
WITNESS WHEREOF, the undersigned has caused this Amendment to Securities
Purchase Agreement to be duly executed by its authorized signatories as of the
date first indicated above.

    
    

    
       

      
        
          	
                  Name
      of Purchaser: Vision Opportunity Master Fund, Ltd.

                	 
      	 
      
	
                  Signature of Authorized
      Signatory of Purchaser: 

                	 
      	 
      
	
                  Name
      of Authorized Signatory: 

                	 
      	 
      
	
                  Title
      of Authorized Signatory: 

                	 
      	 
      
	
                  Address
      for Notice of Purchaser: c/o Vision Capital Advisors

                	 
      	 
      
	 	
                  20
      W 55th
      Street, 5th
      Fl.

                  New
      York, NY 10019

                  Attn.:  Jess
      Jones

                	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

        

      

       

      

       

    

     

     

     

     

     

     

     

     

     

     

    

    

    

    [SIGNATURE
PAGES CONTINUE]

     

     

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
 

    

    [PURCHASER
SIGNATURE PAGE TO AMENDMENT TO SECURITIES PURCHASE AGREEMENT]

    

     

    IN
WITNESS WHEREOF, the undersigned has caused this Amendment to Securities
Purchase Agreement to be duly executed by its authorized signatories as of the
date first indicated above.

     

    Name of
Purchaser: Vision Capital Advantage Fund, L.P.

    Signature of Authorized Signatory of
Purchaser: 

    Name of
Authorized Signatory: 

    Title of
Authorized Signatory: 

    Address
for Notice of Purchaser:  c/o Vision Capital Advisors

    20 W 55th Street,
5th
Fl.

    New York, NY 10019

    Attn.:  Jess Jones or Kim
Gabriel

    

    

    

    

    

    

    [PURCHASER
SIGNATURE PAGE TO AMENDMENT TO SECURITIES PURCHASE AGREEMENT]

     

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

     

    IN
WITNESS WHEREOF, the undersigned has caused this Amendment to Securities
Purchase Agreement to be duly executed by its authorized signatories as of the
date first indicated above.

     

    

    

    Name of
Purchaser: Platinum-Montaur Life Sciences, LLC

    Signature of Authorized Signatory of
Purchaser: /s/ Michael M.
Goldberg

    Name of
Authorized Signatory: Michael M. Goldberg

    Title of
Authorized Signatory: Portfolio Manager

    Address
for Notice of Purchaser:  c/o Michael Goldberg

    152 S. 57th Street,
4th
Floor

    New York, NY 10019

    

    

    
 

     

     

     

    5ex1033.htm

    Exhibit
10.33

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of July 30, 2009, between NewCardio, Inc., a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, 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 Purchaser 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 Debentures (as defined herein), and (b) the following terms have the
meanings set forth in this Section 1.1:

     

    “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.7.

     

    “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

     

    “Advance” means the
amount of funds actually advanced by the Purchasers to the Company pursuant to
the Debenture.

     

    “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.

     

    “Closing” means the
closing of the purchase and sale of the Securities on the Closing
Date.

     

    “Closing Date” means
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 Purchasers’ obligations to make the Advances at any future date and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived.

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    “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, 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.

     

    “Company Counsel”
means Sichenzia Ross Friedman Ference LLP, with offices located at 61 Broadway,
32nd
Floor, New York, NY 10006.

     

     “Debentures” means the
12% Secured Revolving Debentures due, subject to the terms therein, March 31,
2011, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached
hereto.

     

    “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

     

    “Draw-Down” means the
funding of each Advance pursuant to Section 2.1.

     

    “Draw-Down Date(s)”
means the Trading Day on which all of conditions precedent to (i) the
Purchasers’ obligations to make such Advance and (ii) the Company’s obligations
pursuant to Section 2.3, in each case, have been satisfied or
waived.

     

    “Effective Date” means
the earlier of the date that (a) all of the Warrant Shares have been registered
for resale by the holders thereof pursuant to a registration statement(s)
declared effective by the Commission and (b) all of the Warrant Shares have been
sold pursuant to Rule 144 or, after the six month anniversary of the date
hereof, may be sold pursuant to Rule 144 without the requirement for the Company
to be in compliance with the current public information required under Rule 144
and without volume or manner-of-sale restrictions.

     

    “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

     

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

    

     “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(aa).

     

    “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

     

    “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

     

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

     

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

     

    “Majority Purchaser”
means Vision Opportunity Master Fund, LTD.

     

    “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

     

    “Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

     

    “Maximum Rate” shall
have the meaning ascribed to such term in Section 5.17.

     

     “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.

     

    “PIPE Investors” shall
mean the purchasers of the Company’s securities in connection with any PIPE
Transaction.

     

    “PIPE Securities”
shall mean the convertible preferred stock and warrants purchased by the PIPE
Investors in connection with a PIPE Transaction.

     

    “PIPE Transaction”
shall mean any issuance of securities by the Company that may occur within 45
days after the date hereof.

     

    “Principal Amount”
means, at any date, an amount equal to 100% of the aggregate outstanding
Advances on such date.  The maximum Principal Amount of the Debentures
among all of the holders of the Debentures as issued pursuant to this Agreement
shall be equal to $3,000,000, in the aggregate.

     

     “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.

     

    “Public Information
Failure” shall have the meaning ascribed to such term in Section
4.3(b).

     

    “Public Information Failure
Payments” shall have the meaning ascribed to such term in Section
4.3(b).

     

    “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.10.

     

    “Registration
Statement” means a registration statement covering the resale of the
Warrants Shares by each Purchaser.

     

     “Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

     

     “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.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

    

     

    “SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

     

    “Securities” means the
Debentures, the Warrants and the Warrant Shares.

     

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

     

     “Security Agreement”
means the Security Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit C attached
hereto.

    

    “Security Documents”
shall mean the Security Agreement, the Subsidiary Guarantees and any other
documents and filing required thereunder in order to grant the Purchasers a
first priority security interest in the assets of the Company and the
Subsidiaries as provided in the Security Agreement, including all UCC-1 filing
receipts.

     

    “Series I Warrants”
means, collectively, the Series I Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable immediately and have a term of exercise equal to
five years and an exercise price equal to $0.01 per share, subject to adjustment
therein, in the form of Exhibit B
attached hereto.

     

    “Series II Warrants”
means, collectively, the Series II Common Stock purchase warrants to be
delivered to the Purchasers at each Draw-Down in accordance with Section 2.3(a)
hereof, which Warrants shall be exercisable immediately and have a term of
exercise equal to five years from the date of issuance and have an exercise
price equal to 100% of the average of the VWAPs for the five Trading Days
immediately prior to the date of issuance of each Series II Warrant, subject to
adjustment therein, in the form of Exhibit B
attached hereto.

     

     “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 the location and/or reservation of
borrowable shares of Common Stock). 

     

    “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.

     

    “Subsidiary Guarantee”
means the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in
favor of the Purchasers, in the form of Exhibit D attached
hereto.

     

    “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 AMEX, 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” means this Agreement, the Debentures, the Warrants, the
Security Agreement, the Subsidiary Guarantee, all exhibits and schedules thereto
and hereto and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

     

    “Transfer Agent” means
Action Stock Transfer Corp., the current transfer agent of the Company, with a
mailing address of 7069 S. Highland Drive, Suite 300, Salt Lake City, Utah 84121
and a facsimile number of 810.274.1099, and any successor transfer agent of the
Company.

     

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

     

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Warrants” means the
Series I Warrants and Series II Warrants.

     

    “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

     

    “WS” means Weinstein
Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York,
New York 10170-0002.

     

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1 Closing.

     

    (a) Closing. On the
Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, up to an aggregate of $3,000,000 in
Principal Amount of the Debentures.  The Company shall deliver to each
Purchaser its respective Debenture and Series I Warrants, as determined pursuant
to Section 2.2(a), and the Company and each Purchaser 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 2.4,
the Closing shall occur at the offices of WS or such other location as the
parties shall mutually agree.

     

    (b) Draw-Downs. On each
Draw-Down Date, upon the terms and subject to the conditions set forth herein,
each Purchaser shall deliver to the Company via wire transfer of immediately
available funds an amount equal to such Purchaser’s pro rata share of the
Advance and the Company shall deliver to each Purchaser its respective Series II
Warrants, as determined pursuant to Section 2.3, and the Company and each
Purchaser shall deliver the other items set forth in Section 2.3 deliverable at
each Draw-Down.  Upon satisfaction of the covenants and conditions set
forth in Sections 2.3 and 2.4, each Draw-Down shall occur at the offices of WS
or such other location as the parties shall mutually agree.

     

    2.2 Closing
Deliveries.

     

    (a) On or
prior to the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

     

    
      	
              (i)  

            	
              this
      Agreement duly executed by the
Company;

            

    

     

    (ii) a
Debenture with a principal amount equal to such Purchaser’s aggregate Advances,
registered in the name of such Purchaser;

     

    (iii) a Series
I Warrant registered in the name of such Purchaser to purchase up to an
aggregate number of shares of Common Stock equal to 750,000; and

     

    (iv) the
Security Agreement, duly executed by the Company and each Subsidiary, along with
all of the Security Documents, including the Subsidiary Guarantee, duly executed
by the parties thereto.

     

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

     

    
      	
              (i)  

            	
              this
      Agreement duly executed by such Purchaser;
and

            

    

     

    (ii) the
Security Agreement duly executed by such Purchaser.

     

    2.3 Draw-Down
Deliveries.

     

    (a) On or
prior to each Draw-Down Date, the Company shall deliver or cause to be delivered
to each Purchaser a Series II Warrant to purchase up to an aggregate number of
shares of Common Stock equal to 100% of such Purchaser’s Advance divided by
$1.00; and the monthly cash flow budget for the Company for both (A) the year to
date immediately preceding the date of such Advance and (B) the 12 month period
immediately following the date of such Advance.

     

    (b) On or
prior to each Draw-Down Date, each Purchaser shall deliver or cause to be
delivered to the Company such Purchaser’s Advance by wire transfer to the
account as specified in writing by the Company.

     

    2.4 Closing
Conditions.

     

    (a) The
obligations of the Company hereunder in connection with the Closing and each
Draw-Down are subject to the following conditions being met:

     

    (i) the
accuracy in all material respects on the Closing Date and on each Draw-Down Date
of the representations and warranties of the Purchasers contained herein (unless
as of a specific date therein);

     

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

     

    (iii) as to the
Closing only, delivery by each Purchaser of the items set forth in Section
2.2(b) of this Agreement; and

     

    (iv) as to
each Draw-Down only, the delivery by each Purchaser of the items set forth in
Section 2.3(b) of this Agreement.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    (b) The
respective obligations of the Purchasers hereunder in connection with the
Closing and in connection with each Draw-Down are subject to the following
conditions being met:

     

    (i) the
accuracy in all material respects when made and on the Closing Date and each
Draw-Down Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

     

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

     

    (iii) as to the
Closing only, the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;

     

    (iv) as to
each Draw-Down Date, the delivery by the Company of the item set forth in
Section 2.3(a) of this Agreement;

     

    (v) for the
Closing and each draw-Down Date, there shall have been no Material Adverse
Effect with respect to the Company since the date hereof;

     

    (vi) on each
Draw-Down Date, no Event of Default (as such term is defined in a Debenture)
shall have occurred and shall be continuing;

     

    (vii) all of
the due diligence has been completed to the satisfaction of the Majority
Purchaser at or prior to the Closing Date and each Draw-Down Date;

     

    (viii) as to the
Closing only, written confirmation of the resolution of the Put Agreement with
Platinum-Montaur Life Sciences, LLC;

     

    (ix) as of the
Closing and on each Draw-Down Date, each Purchaser shall have received a
certificate or certificates executed by the president, chief executive officer
or chief financial officer of the Company covering such matters as the
Purchasers may require, including without limitation the following: (A) all
conditions to closing contained herein have been satisfied, (B) all
representations and warranties contained herein and in the other Transaction
Documents are true and correct in all material respects, and (C) no Default or
Event of Default exists; and

     

    (x) from the
date hereof to the Closing Date and each Draw-Down Date, trading in the Common
Stock shall not have been suspended by the Commission  or the
Company’s principal Trading Market (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing Date or the Draw-Down Date), and, at any time prior to the
Closing Date and each Draw-Down 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 each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing or to make the Advance to be made on each
Draw-Down Date.

     

    2.5 Draw-Down
Conversion.  After the consummation of the PIPE Transaction, if
the Company delivers a notice requesting a Draw-Down then a copy of such request
(the “PIPE Investor
Notice”) shall be delivered to each PIPE Investor within five (5) Trading
Days after such request, , in which event, each PIPE Investor shall have the
one-time right, at that time, to elect, by written notice to such effect
delivered to the Company within five (5) Trading Days after delivery of the PIPE
Investor Notice, to exchange its PIPE Securities for the Securities, in the same
dollar amount, based upon the purchase price of such PIPE Investor’s PIPE
Securities and the principal amount of the Debenture to be
exchanged.

     

     

    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 Purchaser as of each Closing Date and the date of each
Advance:

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are 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 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.  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 nor
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 each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary 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
therewith other than in connection with the Required Approvals.  Each
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.

     

    (d) No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and thereby
to which it is a party do not and will not: (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.  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 filings required pursuant to Section 4.6 of this Agreement, (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 Warrant Shares for
trading thereon in the time and manner required thereby and (iii) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (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 other than restrictions on transfer provided
for in the Transaction Documents.  The Warrant 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
other than restrictions on transfer provided for in the Transaction
Documents.  The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to the
Warrants.

     

    (g) Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plans and pursuant to the conversion and/or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of
any stockholder, the Board of Directors or others is required for the issuance
and sale of the Securities.  Except as set forth on Schedule 3.1(g),
there are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    (h) SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The Company has never been an issuer subject to Rule
144(i) under the Securities Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

     

    (i) Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof: (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.  Except for the
issuance of the Securities contemplated by this Agreement or as set forth on
Schedule
3.1(i), no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective business,
properties, operations, assets or financial condition, that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is
made.

     

    (j) Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.  The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

     

    (k) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (l) Compliance.  Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws applicable to its business and all such laws that affect the environment,
except in each case as could not have or reasonably be expected to result in a
Material Adverse Effect.

     

    (m) Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (n) Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

     

    (o) Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (p) Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

     

    (q) Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

     

    (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of each Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     

    (s) Certain
Fees.  No brokerage or finder’s fees or commissions are or will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents.  The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by the Transaction Documents.

     

    (t) Private
Placement.  Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.

     

    (u) Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to registration under the
Investment Company Act of 1940, as amended.

     

    (v) Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company.

     

    (w) Maintenance
Requirements.  The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    (x) Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

     

    (y) Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents and except for any information
provided to Jess Jones in his capacity as a director of the Company, the Company
confirms that neither it nor any other Person acting on its behalf has provided
any of the Purchasers or their agents or counsel with any information that it
believes constitutes or might constitute material, non-public
information.  The Company understands and confirms that the Purchasers
will rely on the foregoing representation in effecting transactions in
securities of the Company.  All of the disclosure furnished by or on
behalf of the Company to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.   The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.  The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

     

    (z) No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any such
securities under the Securities Act, or (ii) any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.

     

    (aa) Solvency.  As
of the date hereof and as of the date of each Advance, Company does not intend
to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its
debt).  The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year
from the Closing Date and each Draw-Down Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (bb) Tax
Status.                                
Except for matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the Company and
each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted or
threatened against the Company or any Subsidiary.

     

    (cc) No General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general
solicitation or general advertising.  The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

     

    (dd) Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

     

    (ee) Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending December 31, 2009.

     

    (ff) Seniority.  As
of the Closing Date and each Draw-Down Date, no Indebtedness or other claim
against the Company is senior to the Debentures in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests (which is senior
only as to underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).

     

    (gg) No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction
Documents.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

    (hh) Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges
that no Purchaser 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 Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities.  The Company further
represents to each Purchaser 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.

     

    (ii) Acknowledgment Regarding
Purchaser’s
Trading Activity.  Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.13 hereof), it is
understood and acknowledged by the Company that: (i) none of the Purchasers
have been asked by the Company to agree, nor
has any Purchaser 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 Purchaser, 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 Purchaser, and counter-parties in “derivative” transactions to which
any such Purchaser is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each Purchaser 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 Purchasers 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 Warrant 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.

     

    (jj) Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

     

    (kk) Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s stock option plan
and (ii) with an exercise price at least equal to the fair market value of the
Common Stock on the date such stock option would be considered granted under
GAAP and applicable law. No stock option granted under the Company’s stock
option plan has been backdated.  The Company has not knowingly
granted, and there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.

     

    3.2 Representations and
Warranties of the Purchasers.    Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of each Closing Date and the date of each Advance to the Company
as follows (unless as of a specific date therein):

     

    (a) Organization;
Authority.  Such Purchaser is either an individual or an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership 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. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser.  Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, 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 Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and 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 Purchaser’s right to sell the
Securities pursuant to a Registration Statement or otherwise in compliance with
applicable federal and state securities laws).  Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its
business.

     

    (c) Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
any Warrants it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act.  Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.

     

    (d) Experience of Such
Purchaser.  Such Purchaser, 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 Purchaser 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.

     

    (e) General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or 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.

     

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (f) Certain
Transactions
and Confidentiality.  Other than consummating the transactions
contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Purchaser 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
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’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
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser 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 Section
3.2 shall not modify, amend or affect such Purchaser’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.

     

    (a) The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights and
obligations of a Purchaser under this Agreement.

     

    (b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

     

    [NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE] HAS
[NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH
A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

     

    The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured
parties.  Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the pledgee, secured
party or pledgor shall be required in connection therewith.  Further,
no notice shall be required of such pledge.  At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including, if the
Securities are subject to registration, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (c) Certificates
evidencing the Warrant Shares shall not contain any legend (including the legend
set forth in Section 4.1(b) hereof): (i) while a registration statement covering
the resale of such security is effective under the Securities Act, (ii)
following any sale of such Warrant Shares pursuant to Rule 144, (iii) if such
Warrant Shares are eligible for sale under Rule 144, without the requirement for
the Company to be in compliance with the current public information required
under Rule 144 as to such Warrant Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). After the delivery of any
required documentation from a Purchaser or its prime broker, the Company shall
cause its counsel to issue a legal opinion to the Transfer Agent promptly after
the Effective Date if required by the Transfer Agent to effect the removal of
the legend hereunder.  If all or any portion of a Warrant is exercised
at a time when there is an effective registration statement to cover the resale
of the Warrant Shares, or if such Warrant Shares may be sold under Rule 144 and
the Company is then in compliance with the current public information required
under Rule 144, or if such Warrant Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Warrant Shares and without volume
or manner-of-sale restrictions or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Warrant Shares shall be issued free of all legends.  The Company
agrees that following the Effective Date or at such time as such legend is no
longer required under this Section 4.1(c), it will, no later than three Trading
Days following the delivery by a Purchaser to the Company or the Transfer Agent
of a certificate representing Warrant Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.  Certificates for Warrant Shares subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.

    

    (d) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Warrant Shares (based on the VWAP of the Common Stock on the date
such Securities are submitted to the Transfer Agent) delivered for removal of
the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such damages have
begun to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend, after the delivery of any required
documentation from a Purchaser or its prime broker.  Nothing herein
shall limit such Purchaser’s right to pursue actual damages for the Company’s
failure to deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

     

    (e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the
Company that such Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.

     

    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 Warrant Shares pursuant to the Transaction Documents, are
unconditional and 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 Purchaser 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.

     

    (a) Until the
earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants
have expired, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all periodic
reports (i.e. 10-K, 10-Q and 8-Ks) 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.    As
long as any Purchaser owns Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities, including
without limitation, under Rule 144.  The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, to the extent required from time to time to enable such Person to sell
such Securities without registration under the Securities Act, including without
limitation, within the requirements of the exemption provided by Rule
144.

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

     

    (b)           At
any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities on the day of a
Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Warrant Shares pursuant to Rule 144.  The payments to which
a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to
herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.

     

    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 Exercise
Procedures.  Each of the form of Notice of Exercise included in
the Warrants set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants.  No additional legal opinion, other
information or instructions shall be required of the Purchasers to exercise
their Warrants.  The Company shall honor exercises of the Warrants and
shall deliver Warrants 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 8:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue a Current
Report on Form 8-K and press release disclosing the material terms of the
transactions contemplated hereby, and including the Transaction Documents as
exhibits thereto.  From and after the issuance of such press release,
the Company shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers 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. The Company and
each Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company
nor any Purchaser shall issue any such press release nor otherwise make any such
public statement without the prior consent of the Company, with respect to any
press release of any Purchaser, or without the prior consent of each Purchaser,
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 Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except: (a) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) 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 Purchasers 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 Purchaser 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 Purchaser 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
Purchasers.

     

    4.8 Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, and
the provision of the budgets required by Section 2.3(a), the Company covenants
and agrees that neither it, nor any other Person acting on its behalf, will
provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement with the Company
regarding the confidentiality and use of such information.  The
Company understands and confirms that each Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the
Company.

     

    4.9 Use of
Proceeds.  Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for: (a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents
or (c) the settlement of any outstanding litigation.

     

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    4.10 Indemnification of
Purchasers.   Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser 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 Person who
controls such Purchaser (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
“Purchaser
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 Purchaser 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 a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such  Purchaser of state or federal securities laws or
any conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance).  If any action shall be brought against
any Purchaser Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser 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 Purchaser Party.  Any
Purchaser 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 Purchaser 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 Purchaser 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 Purchaser Party under this Agreement (y) for any settlement by a
Purchaser 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
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.

     

    4.11 Reservation and Listing of
Securities.

     

    (a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance upon exercise of the Warrants.

     

    (b) The
Company hereby agrees to use best efforts to maintain the listing or quotation
of the Common Stock on the Trading Market on which it is currently listed, and
concurrently with each Closing, as applicable the Company shall apply to list or
quote all of the Warrant Shares on such Trading Market and promptly secure the
listing of all of the Warrant Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will then include in such application all of the Warrant
Shares, and will take such other action as is necessary to cause all of the
Warrant Shares to be listed or quoted on such other Trading Market as promptly
as possible.  The Company will then take all action reasonably
necessary to continue the listing or quotation and trading of its Common Stock
on a Trading Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.

     

    4.12 Equal Treatment of
Purchasers.  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 any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents. Further, the Company shall not make any payment of
principal on the Debentures in amounts which are disproportionate to the
respective principal amounts outstanding on the Debentures at any applicable
time.  For clarification purposes, this provision constitutes a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

     

    4.13 Certain Transactions and
Confidentiality. Each Purchaser, severally and not jointly with the other
Purchasers, 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
Purchaser, severally and not jointly with the other Purchasers, 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 Purchaser 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 Purchaser
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
Purchaser 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 Purchaser shall have any duty of confidentiality to the
Company or its Subsidiaries after the issuance of the initial press release as
described in Section 4.6.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’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 purchase
the Securities covered by this Agreement.

     

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    4.14 Limitations on PIPE
Securities. The Company shall not permit the PIPE Securities to include
any adjustment provisions pursuant to which the conversion price or exercise
price of any such PIPE Securities, or any price pursuant to which any of the
PIPE Securities shall be convertible, exchangeable or exercisable or the like,
shall adjust downward as a result of the issuance of any Series II Warrants
without the prior written consent of the Majority Purchaser. The Company shall
provide the Majority Purchaser with copies of the final versions of all
transaction documents for the PIPE Transaction that include or relate to any
such adjustment provisions.

     

     

    ARTICLE
V.

    MISCELLANEOUS

     

    5.1 Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before July 31, 2009;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

     

    5.2 Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Vision Capital Advisors, LLC (“Vision Capital”) the
non-accountable sum of $25,000 for its legal fees and expenses, none of which
has been paid prior to the Closing and of which shall be wired per the wire
instructions set forth on Schedule 5.2 attached
hereto.  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, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

     

    5.3 Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into 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 set forth on
the signature pages attached hereto 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 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.

     

    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 Purchasers holding at least a
majority in interest of the Securities then outstanding or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  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.

     

    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.

     

    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 Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser 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 “Purchasers.”

     

    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 4.10.

     

    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,
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 suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.   If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.10, the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    5.10 Survival.  The
representations and warranties contained herein shall survive each Closing and
the delivery of the Securities and the date of each Advance.

     

    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 the
other party, it being understood that both 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 Purchaser 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 Purchaser 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 an exercise of a Warrant, the applicable Purchaser shall
be required to return any shares of Common Stock subject to any such rescinded
exercise notice concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such
restored right).

     

    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 Purchasers 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 Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises 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 claim,
action or proceeding that may be brought by any Purchaser 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 Purchaser with respect to indebtedness evidenced by the
Transaction Documents, such excess shall be applied by such Purchaser 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 Purchaser’s
election.

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

     

    5.18 Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers 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 Purchaser 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 Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.  For reasons of
administrative convenience only, each Purchaser and its respective counsel have
chosen to communicate with the Company through WS.  WS does not
represent any of the Purchasers and only represents Vision Capital. The Company
has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or
requested to do so by any of the Purchasers.

     

    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 has 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 hereto. 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)

     

     

     

     

     

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

     

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

     

    
      
        
          
            
              
                
                  
                    	NEWCARDIO,
      INC.	 	 	Address
      for Notice:	 
	
                             

                          	 	 	
                            2350 Mission College
      Blvd. Suite 1175

                          	 
	
                            By: /s/ Richard
      D. Brounstein

                          	 	 	
                            Santa Clara, CA
      95054

                          	 
	
                            Name: Richard
      D. Brounstein

                          	 	 	
                            
                              Fax:
      775. 254.5118

                            

                          	 
	Title: Chief
      Financial Officer	 	 	Email:
      rbrounstain@newcardio.com	 
	
                            With
      a copy to (which shall not constitute notice):

                          	 	 	 	 
	 	 	 	 	 

                  

                

              

            

          

        

      

    

     

     

     

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

     

     

     

     

     

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

     

     

    [PURCHASER
SIGNATURE PAGES TO NWCI SECURITIES PURCHASE AGREEMENT]

    

    IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

     

    Name of
Purchaser:
_____________________________________________________________________

    Signature of Authorized Signatory of
Purchaser: ______________________________________________

    Name of
Authorized Signatory:
_____________________________________________________________

    Title of
Authorized Signatory:
______________________________________________________________

    Email
Address of Authorized Signatory:
_______________________________________________________

    Facsimile
Number of Authorized Signatory:
____________________________________________________

    Address
for Notice of Purchaser:

    

    

    

    

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

    

    

    

    

    

    Subscription
Amount: _____________

    

    [Principal
Amount (_______ x Subscription
Amount): _____________

    

    Warrant
Shares: _________________

    

    

    

    

    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
PAGES CONTINUE]

     

     

     

     

    
      
        
        

      

      
        19
a

        
          

        

      

      
        
        

      

    

     

     

     

     

    Schedule 5.2 – Wire
Instructions

    

    
      

       

      
        
          
            	
                    NAME: 

                  	
                    WEINSTEIN
      SMITH LLP OPERATING ACCOUNT

                  
	
                    BANK:

                  	
                    SIGNATURE
      BANK

                  
	 
      	
                    565
      Fifth Avenue

                  
	 
      	
                    New
      York, NY  10017

                  
	 
      	
                    Contact:
      Timothy F. Collins – (646) 822-1940

                  
	
                    ACCOUNT: 

                  	
                    1501119438

                  
	
                    ABA:

                  	
                    026013576

                  
	
                    SWIFT
      CODE: 

                  	SIGNUS33
	Reference: 	Vision
      Capital/New Cardio
	 	 

          

        

      

       

      

       

      
        
          
          

        

        
          
            21 

          

          
            

          

        

        
          
          

        

      

      NewCardio,
Inc.

    

    
      Cap
Table

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                               

                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
                                                                 7/23/2009

                                                              	 	 	 	 
	 
      

                                                                Stock

                                                              	 	
                                                                Authorized

                                                              	 	 	 	 	 	 	 	 	
                                                                Avialable
      for resale, i.e. "registered"

                                                              	 	 	
                                                                Shares
      

                                                                  Outstanding

                                                                  
                                                                    Fully
      Diluted

                                                                  

                                                                

                                                              	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                STOCK

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                COMMON
      STOCK - NewCardio investors

                                                              	 	 	99,000,000	 	 	 	 	 	 	 	 	
                                                                1/4/2009

                                                              	 	 	 	10,667,300	 	 	 	 
	
                                                                 -
      Marine investors

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                In
      float today

                                                              	 	 	1,554,985	 	 	 	 
	
                                                                                PREFERRED
      STOCK/converted at close

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                1/4/2009

                                                              	 	 	 	7,155,206	 	 	 	 
	
                                                                                DEBT/converted
      at close

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                1/4/2009

                                                              	 	 	 	860,031	 	 	 	 
	
                                                                                    Total
      outstanding @ reverse merger

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	20,237,522	 	 	 	 
	
                                                                Subsequent
      stock issued - dividends

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                1/4/2009

                                                              	 	 	 	277,218	 	 	 	 
	
                                                                Subsequent
      stock issued - option exercises

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                In
      float today

                                                              	 	 	315,440	 	 	 	 
	
                                                                Subsequent
      stock issued - restricted shares

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                6
      mos or 1/4/09

                                                              	 	 	3,032,599	 	 	 	 
	
                                                                                COMMON
      STOCK - NewCardio investors

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	23,862,779	 	 	 	 
	
                                                                                PREFERRED
      STOCK A, PIPE investors

                                                              	 	 	10,000,000	 	 	 	 	 	 	 	 	
                                                                S-1,
      summer'08

                                                              	 	 	-	 	 	 	 
	
                                                                                RSUs
      outstanding

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,575,000	 	 	 	 
	
                                                                                PREFERRED
      STOCK B, PIPE investors

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16,435,000	 	 	 	 
	
                                                                                    Total
      Stock :

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	41,872,779	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                RIGHTS
      TO ACQUIRE STOCK:

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                2004
      Equity Incentive Plan, 12/31/07

                                                              	 	 	10,300,106	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                    Options
      Outstanding

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                S-8,
      on exercise

                                                              	 	 	8,662,644	 	 	 	 
	
                                                                                    Options
      Available

                                                              	 	 	 	 	 	 	 	 	 	 	 	
                                                                S-8
      on issue

                                                              	 	 	 	 	 	 	 	51,230	 
	
                                                                                    Options
      Exercised or Granted Outright

                                                              	 	 	 	 	 	 	-1,586,232	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                        Plan
      Total :

                                                              	 	 	 	 	 	 	 	 	 	 	8,713,874	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                2009
      Equity Incentive Plan

                                                              	 	 	8,000,000	 	 	 	 	 	 	 	 	 	 	 	
                                                                S-8

                                                              	 	 	 	 	 	 	 	 	 
	
                                                                                    Options
      Outstanding

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0	 	 	 	 	 
	
                                                                                    RSUs
      Outstanding

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
                                                                above

                                                              	 	 	 	 	 
	
                                                                                    Reserved
      shares available

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,425,000	 
	
                                                                                    Options
      Exercised, RSUs or Granted Outright

                                                              	 	 	 	 	 	 	-1,575,000	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                        Plan
      Total :

                                                              	 	 	 	 	 	 	 	 	 	 	6,425,000	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                PIPE
      WARR ANTS, "A", "J-A", FEE

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	
                                                                1/4/09
      cashless

                                                              	 	 	5,299,790	 	 	 	 	 
	
                                                                WARR
      ANTS - GREEN SHOE

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-	 	 	 	 	 
	
                                                                WARR
      ANTS - NewCardio investors

                                                              	 	 	 	 	 	 	 	 	 	 	
                                                                1/4/2009

                                                              	 	 	 	2,373,475	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	7,673,265	 	 	 	 	 
	
                                                                                      Total
      Rights of outstanding options/warrants

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16,335,909	 	 	 	 	 
	
                                                                                      Total
      Diluted Shares (Minus Options Available):

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	58,208,688	 	 	 	 	 
	
                                                                                      Total
      including option reserves:

                                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	64,684,918	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      Schedules to Securities
Purchase Agreement

      

      

      3.1 (g)

      

      Cap table
to be furnished by separate document.

      Agreements
requiring the issuance of securities include the Company’s agreements
with

       

      
        	
                (1)  

              	
                Leerink
      Swan LLC, (2) Benchmark Company, LLC, and (3) Thomas Weisel
      Partners.

              

      

      

      3.1 (i)

      

      None

      

      3.1 (aa)

      

      None

      

      3.1 (ee)

      

      RBSM,
LLP

      

      4.9

      

      None

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      EXHIBIT A

      

      

      THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

      

      

      Original
Issue Date: ________________________

      

      $________

      

      

      12%
SECURED REVOLVING DEBENTURE

      DUE
MARCH 31, 2011

      

      THIS 12% SECURED REVOLVING DEBENTURE
is one of a series of duly authorized and validly issued 12% Secured Revolving
Debentures of NewCardio, Inc., a Delaware corporation, (the “Company”), having its
principal place of business at 2350 Mission College Blvd., Suite 1175, Santa
Clara CA 95054, designated as its 12% Secured Revolving Debenture due March 31,
2011 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the “Debentures”).

      

      FOR VALUE
RECEIVED, the Company promises to pay to ________________________ or its
registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, by the Stated Maturity, $_________,
or if less than that amount is then outstanding, 100% of the aggregate Principal
Amount of the Advances made hereunder and then outstanding and to pay interest
to the Holder on the aggregate outstanding Principal Amount of this Debenture in
accordance with the provisions hereof.  This Debenture is subject to
the following additional provisions:

      

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

      

      “Advance” means the
amount of funds actually advanced by the Holders to the Company pursuant to
Section 3(a) of this Debenture.

      

      “Advance End Date”
means June 30, 2010.

       

       

       

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

      
 

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

      

       “Change of Control
Transaction” means the occurrence after the date hereof of any of (a) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (b) the Company merges into or consolidates
with any other Person, or any Person merges into or consolidates with the
Company and, after giving effect to such transaction, the stockholders of the
Company immediately prior to such transaction own less than 66% of the aggregate
voting power of the Company or the successor entity of such transaction, (c) the
Company sells or transfers all or substantially all of its assets to another
Person and the stockholders of the Company immediately prior to such transaction
own less than 66% of the aggregate voting power of the acquiring entity
immediately after the transaction, (d) a replacement at one time or within a
three year period of more than one-half of the members of the Board of Directors
which is not approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those individuals who are
serving as members of the Board of Directors on any date whose nomination to the
Board of Directors was approved by a majority of the members of the Board of
Directors who are members on the date hereof), or (e) the execution by the
Company of an agreement to which the Company  is a party or by which
it is bound, providing for any of the events set forth in clauses (a) through
(d) above.

      

      “Debenture Register”
shall have the meaning set forth in Section 2(b).

      

      “Event of Default” shall have the
meaning set forth in Section 6(a).

      

      “Fundamental
Transaction” means any of the following transactions: (A) the Company
effects any merger or consolidation of the Company with or into another Person,
(B) the Company effects any sale of all or substantially all of its assets in
one transaction or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification 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.

      

       “Mandatory Default
Amount” means the sum of (a) the outstanding Principal Amount, plus 100%
of accrued and unpaid interest hereon, and (b) all other amounts, costs,
expenses and liquidated damages due in respect of this Debenture.

      

      “Maximum Funded
Amount” means $3,000,000, in the aggregate among all of the holders of
this Debenture as issued pursuant to the Purchase Agreement.

      

       “New York Courts”
shall have the meaning set forth in Section 7(d).

      

      “Original Issue Date”
means the date of the first issuance of the Debentures, regardless of any
transfers of any Debenture and regardless of the number of instruments which may
be issued to evidence such Debentures.

       

       

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

      
 

      “Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures and
(b) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(aa)
attached to the Purchase Agreement.

      

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

       

      “Principal Amount”
means, at any date, an amount equal to 100% of the aggregate outstanding
Advances on such date.  The maximum Principal Amount of this Debenture
among all of the holders of this Debenture as issued pursuant to the Purchase
Agreement is equal to $3,000,000, in the aggregate.

      

      “Purchase Agreement”
means the Securities Purchase Agreement, dated as of July __, 2009 among the
Company and the original Holders, as amended, modified or supplemented from time
to time in accordance with its terms.

      

      “Stated Maturity”
means March 31, 2011 or such earlier date as this Debenture is required or
permitted to be repaid as provided hereunder.

      

      “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 AMEX, 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).

      

      Section
2.                                Interest.

      

      a) Payment of Interest in
Cash. The Company shall pay interest to the Holder on the aggregate
outstanding Principal Amount at the rate of 12% per annum, in cash, on the date
that is the Stated Maturity.

      

      b) Interest
Calculations. Interest shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date until payment in full of the outstanding
Principal Amount, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been
made.  Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding
registration and transfers of this Debenture (the “Debenture
Register”).

      

      c) Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law (the “Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full. 

      

      d) Prepayment.  The
Company may prepay all or any portion of the outstanding Principal Amount upon
at least two Trading Days’ notice to the Holder by paying the outstanding
Principal Amount desired to be prepaid together with all outstanding interest
payable thereunder.  Any Principal Amount hereof that is prepaid may
not be reborrowed.

      

      e) Method of Payment.
The Company shall make all payments of the Principal Amount and interest
hereunder in accordance with the Holder’s instructions.

      

      Section
3.                                Advances. At any time
on or after September 1, 2009 (provided, however, for any Draw Down on September
1, 2009, the Company shall provide written notice to the Holder no less than 10
Trading Days prior to such date), upon the satisfaction of the conditions set
forth in the Purchase Agreement, the Company may request up to six (6) Advances
from the Holder from the Original Issue Date through the Advance End Date, in an
aggregate Principal Amount at any one time outstanding not to exceed the Maximum
Funded Amount.  The Holder shall not make an Advance if the sum of the
aggregate Principal Amount of the outstanding Advances plus the Principal Amount
of such requested Advance would exceed an amount equal to the Maximum Funded
Amount.  Each Advance shall be in an amount not greater than $500,000
and shall be made on at least ten (10) Trading Days’ prior written notice from
the Company to the Holder.  Each request for an Advance (a “Notice of Borrowing”)
shall be made by telephonic or written communication by the Company to the
Holder and shall certify that the closing conditions specified in the Purchase
Agreement shall be met on or prior to the date set for such
Advance.  The Notice of Borrowing shall specify the proposed amount of
such Advance and the Trading Day on which such Advance shall be
made.  Prior to the Trading Day on which an Advance is requested to be
made in a Notice of Borrowing, the Holder shall notify the Company whether it
will make the requested Advance, and, if the Holder states that it will not make
such Advance, shall specify the reasons therefor.  If the Holder
notifies the Company that it will make a requested Advance, then on the Trading
Day specified in the Notice of Borrowing and upon fulfillment of the applicable
terms and conditions hereof, the Holder will make the proceeds of such Advance
available to the Company by wire transfer to such account of the Company as the
Company shall specify to the Holder.  The Principal Amount of any
Advance prepaid or repaid hereunder may not be reborrowed.

       

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

      
 

      Section
4.                                Registration of Transfers
and Exchanges.

      

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

      

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

      

      c) Reliance on Debenture
Register. Prior to due presentment for transfer to the Company of this
Debenture, the Company and any agent of the Company may treat the Person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary. The
Holder’s records regarding the amount of Advances made and the amount of all
payments and prepayments made hereunder shall be conclusive, absent manifest
error.

      

      Section
5.                                   Negative Covenants.
As long as any portion of this Debenture remains outstanding, unless the holders
of at least a majority in Principal Amount of the then outstanding Debentures
shall have otherwise given prior written consent, the Company shall not, and
shall not permit any of the Subsidiaries to, directly or
indirectly:

      

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

      

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

      

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

      

      d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than as to (i) the
Warrant Shares as permitted or required under the Transaction Documents and (ii)
repurchases of Common Stock or Common Stock Equivalents of departing officers
and directors of the Company, provided that such repurchases shall not exceed an
aggregate of $100,000 for all officers and directors during the term of this
Debenture;

      

      e) repay, repurchase or offer to repay, repurchase or
otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata
basis;

      

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

      

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

      

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

      

      Section
6.                                Events of
Default.

      

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

      

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

       

       

       

      
        
          
          

        

        
          A-4

          
            

          

        

        
          
          

        

      

      
 

      ii. the
Company shall fail to observe or perform any other covenant or agreement
contained in the Debentures which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days
after the Company has become or should have become aware of such
failure;

      

      iii. a default
or event of default (subject to any grace or cure period provided in the
applicable agreement, document or instrument) shall occur under (A) any of the
Transaction Documents or (B) any other material agreement, lease, document or
instrument to which the Company or any Subsidiary is obligated (and not covered
by clause (vi) below);

      

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

      

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

      

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

      

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

      

      viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33% of its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);

      

      ix. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or other
assets for more than $50,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.

      

      b) Remedies Upon Event of
Default. If any Event of Default occurs, the outstanding Principal Amount
of this Debenture, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the
Mandatory Default Amount.  Commencing 5 days after the occurrence of
any Event of Default that results in the eventual acceleration of this
Debenture, the interest rate on this Debenture shall accrue at an interest rate
equal to the lesser of 18% per annum or the maximum rate permitted under
applicable law.  Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Debenture to or as directed by
the Company.  In connection with such acceleration described herein,
the Holder need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable
law.  Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment
pursuant to this Section 6(b).  No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.

      

      Section
7.                                Miscellaneous.

      

      a) Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder shall be in writing and delivered personally, by facsimile, or
sent by a nationally recognized overnight courier service, addressed to the
Company, at the address set forth above, or such other facsimile number or
address as the Company may specify for such purposes by notice to the Holder
delivered in accordance with this Section 7(a).  Any and all notices
or other communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to each Holder at the
facsimile number or address of the Holder appearing on the books of the Company,
or if no such facsimile number or address appears on the books of the Company,
at the principal place of business of such Holder, as set forth in the Purchase
Agreement.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given.

      

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

       

       

       

      
        
          
          

        

        
          A-5

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

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

      

      f) 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.

      

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

      

      h) Assumption.  Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Debenture and the other Transaction Documents pursuant
to written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new debenture of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Debenture,
including, without limitation, having a principal amount and interest rate equal
to the Principal Amount and the interest rate of this Debenture and having
similar ranking to this Debenture, which shall be satisfactory to the Holder
(any such approval not to be unreasonably withheld or delayed).  The
provisions of this Section 7(h) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.

      

      i) Amendment.  This
Debenture and all Debentures may be modified or amended or the provisions hereof
waived with the written consent of the Company and Holders holding Debentures at
least equal to a majority of the aggregate then outstanding Principal Amount of
all Debentures.

      

      j) Secured Obligation.
The obligations of the Company under this Debenture are secured by all assets of
the Company and each Subsidiary pursuant to the Security Agreement, dated as of
the date hereof between the Company, the Subsidiaries and the Secured Parties
(as defined therein).

      

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

      

      

       

      (Signature
Pages Follow)

       

       

       

      
        
          
          

        

        
          A-6

          
            

          

        

        
          
          

        

      

       

       

      IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a
duly authorized officer as of the date first above indicated.

       

       

      
        
          	 	NEWCARDIO,
INC.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	
                  Facsimile
      No. for delivery of Notices: _______________

                	 

        

      

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          A-7

          
            

          

        

        
          
          

        

      

    

     

     

    
      EXHIBIT B

       

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

      

      SERIES
[I/II]

      

      COMMON
STOCK PURCHASE WARRANT

      

       NEWCARDIO,
INC.

       

       

      Warrant
Shares:
_______                                                                                                Initial
Exercise Date: _____________

      

       

      THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, _____________ (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from NewCardio, Inc., a
Delaware corporation (the “Company”), up to
______ shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

       

      Section
1.                                Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated July ____, 2009, among the Company and the purchasers signatory
thereto.

       

      Section
2.                                Exercise.

       

      a) Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank.  Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Trading Days of the date
the final Notice of Exercise is delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The
Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases.  The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice.  In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the absence
of manifest error. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

       

      b) Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $____1, subject to adjustment hereunder (the “Exercise
Price”).

       

       

      
        
          
          

        

        
          B-1

          
            

          

        

        
          
          

        

      

       

       

       

      c) Cashless
Exercise.  This Warrant may also be exercised at such time by
means of a “cashless exercise” in which the Holder shall be entitled to receive
a certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

       

      
        	
                 
      

              	
                 (A)
      = the VWAP on the Trading Day immediately preceding the date on which
      Holder elects to exercise this Warrant by means of a “cashless exercise,”
      as set forth in the applicable Notice of
  Exercise;

              

      

      

      
        	
                 
      

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

              

      

      

      
        	
                                                         
      

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

              

      

      

      Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
2(c).

      

      d) Exercise Limitations.
The Company shall not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any portion of this Warrant, pursuant to Section
2 or otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other  Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 2(d), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith.   To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
periodic or annual report, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(d).  Any
such increase or decrease will not be effective until the 61st day
after such notice is delivered to the Company.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(d) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
this Warrant.

       

       

      ____________________________

      
        1 As to
the Series I, $0.01. As to the Series II, 100% of the average of the VWAPs for
the five Trading Days immediately prior to the date of
issuance.

      

       

      
        
          
          

        

        
          B-2

          
            

          

        

        
          
          

        

      

       

      e) Mechanics of
Exercise.

       

      i. Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is then a participant in such system and either (A) there is an
effective Registration Statement permitting the issuance of the Warrant Shares
to or resale of the Warrant Shares by the Holder or (B) the shares are eligible
for resale by the Holder without volume or manner-of-sale limitations pursuant
to Rule 144, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise by the date that is three (3) Trading Days
after the latest of (A) the delivery to the Company of the Notice of Exercise
Form, (B) surrender of this Warrant (if required), and (C) payment of the
aggregate Exercise Price as set forth above (including by cashless exercise, if
permitted) (such date, the “Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the first date on which all of the foregoing have been delivered to the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of
such shares, having been paid.  If the Company fails for any reason to
deliver to the Holder certificates evidencing the Warrant Shares subject to a
Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to
the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000
of Warrant Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day after such
liquidated damages begin to accrue) for each Trading Day after such Warrant
Share Delivery Date until such certificates are delivered or Holder rescinds
such exercise.

       

      ii. Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

       

      iii. Rescission
Rights.  If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.

       

      iv. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

       

      v. No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

       

      vi. Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

       

       

       

      
        
          
          

        

        
          B-3

          
            

          

        

        
          
          

        

      

       

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

       

      f) Forced Exercise
Provision.  Subject to the provisions of Section 2(d) and this
Section 2(f), if, the VWAP for each of 20 consecutive Trading Days (the “Measurement Period,”
which 20 consecutive Trading Day period shall not have commenced until after the
Effective Date) exceeds $______2 (subject to adjustment for forward and reverse
stock splits, recapitalizations, stock dividends and the like after the Initial
Exercise Date), and (ii) the Holder is not in possession of any information that
constitutes, or might constitute, material non-public information which was
provided by the Company, then the Company may, within 1 Trading Day of the end
of such Measurement Period, force the exercise of all or any portion of this
Warrant pursuant to Section 2(c) for which a Notice of Exercise has not yet been
delivered (such right, a “Forced Exercise”) for
consideration equal to $.001 per Share.  To exercise this right, the
Company must deliver to the Holder an irrevocable written notice (a “Forced Exercise
Notice”), indicating therein the portion of unexercised portion of this
Warrant to which such notice applies.  If the conditions set forth
below for such Forced Exercise are satisfied from the period from the date of
the Forced Exercise Notice through and including the Forced Exercise Date (as
defined below), then any portion of this Warrant subject to such Forced Exercise
Notice for which a Notice of Exercise shall not have been received by the Forced
Exercise Date will be cancelled at 6:30 p.m. (New York City time) on the tenth
Trading Day after the date the Forced Exercise Notice is received by the Holder
(such date and time, the “Forced Exercise
Date”).  Any unexercised portion of this Warrant to which the
Forced Exercise Notice does not pertain will be unaffected by such Forced
Exercise Notice.  In furtherance thereof, the Company covenants and
agrees that it will honor all Notices of Exercise with respect to Warrant Shares
subject to a Forced Exercise Notice that are tendered through 6:30 p.m. (New
York City time) on the Forced Exercise Date.  The parties agree that
any Notice of Exercise delivered following a Forced Exercise Notice which calls
less than all the Warrants shall first reduce to zero the number of Warrant
Shares subject to such Forced Exercise Notice prior to reducing the remaining
Warrant Shares available for purchase under this Warrant.  Subject
again to the provisions of this Section 2(f), the Company may deliver subsequent
Forced Exercise Notices for any portion of this Warrant for which the Holder
shall not have delivered a Notice of Exercise.  Notwithstanding
anything to the contrary set forth in this Warrant, the Company may not deliver
a Forced Exercise Notice (and any such Forced Exercise Notice shall be void),
unless, from the beginning of the Measurement Period through the Forced Exercise
Date, (1) the Company shall have honored in accordance with the terms of this
Warrant all Notices of Exercise delivered by  6:30 p.m. (New York City
time) on the Forced Exercise Date, and (2) the Common Stock shall be listed or
quoted for trading on the Trading Market, and (3) there is a sufficient number
of authorized shares of Common Stock for issuance of all Securities under the
Transaction Documents, and (5) the issuance of the shares shall not cause a
breach of any provision of Section 2(d) herein.  The Company’s right
to force the exercise of the Warrants under this Section 2(f) shall be exercised
ratably among the Holders based on each Holder’s initial purchase of
Warrants.

       

      Section
3.                                Certain
Adjustments.

       

      a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (B) subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(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.

       

      ______________________________

      
        2 300% of
the then Exercise Price.

      

       

      
        
          
          

        

        
          B-4

          
            

          

        

        
          
          

        

      

       

      b) [Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced to the Base Share
Price; provided, however, after the
consummation of the PIPE Transaction, the Exercise Price shall not adjust
pursuant to this Section 3(b) if the conversion price for the PIPE Securities is
equal to or greater than the weighted average price of all Series II Warrants
then outstanding. Additionally, the number of Warrant Shares issuable hereunder
shall be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be equal to
the aggregate Exercise Price prior to such adjustment (such adjustment, the
“Warrant Share
Adjustment”).  Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued.  Notwithstanding
the foregoing, no adjustments shall be made, paid or issued under this Section
3(b) in respect of an Exempt Issuance.  The Company shall notify the
Holder in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this Section 3(b),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise. For purposes of this Section 3(b),
an “Exempt
Issuance” shall mean the issuance of (a) shares of Common Stock or
options to employees, consultants, officers or directors 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 (provided,
however, any issuances to consultants pursuant to this clause (a) shall not
exceed 250,000 shares in any 12 month period), (b) securities upon the exercise
or exchange of any securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of the Purchase
Agreement, provided that such securities have not been amended since the date of
the Purchase Agreement or the date of any Subsequent Closing to increase the
number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities, provided, the any subsequent issuance of
Series II Warrants at price below the prior issuance of any other Series II
Warrants shall be a Dilutive Issuance for purposes of this paragraph but shall
not trigger a Warrant Share Adjustment, and (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 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.]3

       

      c) [Subsequent Rights
Offerings.  If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the VWAP at the record date
mentioned below, then the Exercise Price shall be multiplied by a fraction, of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.]3

       

      d) [Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.]3

       

      _________________________

      
        3 As to
the Series II Warrants ONLY.

      

       

       

       

      
        
          
          

        

        
          B-5

          
            

          

        

        
          
          

        

      

       

       

      e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification 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 (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise 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 Company shall apportion the
Exercise 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 exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(e)
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. [Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market, the
Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder’s option, exercisable at any time concurrently
with or within 30 days after the consummation of the Fundamental Transaction, an
amount of cash equal to the value of this Warrant as determined in accordance
with the Black Scholes Option Pricing Model obtained from the “OV” function on
Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of
the Common Stock for the Trading Day immediately preceding the date of
consummation of the applicable  Fundamental Transaction, (ii) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of this Warrant as of the date of consummation of
the applicable Fundamental Transaction and (iii) an expected volatility equal to
the 100 day volatility obtained from the “HVT” function on Bloomberg L.P.
determined as of the Trading Day immediately following the public announcement
of the applicable Fundamental Transaction.]4

       

      f) Calculations. All
calculations under this Section 3 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 3,
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
treasury shares, if any) issued and outstanding.

       

      g) Voluntary Adjustment By
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

       

      h) Notice to
Holder.

       

      i. Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

       

      ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 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 mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  The Holder is
entitled to exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice.

       

      Section
4.                                Transfer of
Warrant.

       

      a) Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

       

      ______________________________

      
        4 As to
the Series II Warrants ONLY.

      

       

      
        
          
          

        

        
          B-6

          
            

          

        

        
          
          

        

      

       

      b) New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.

       

      c) Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

       

      d) Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be
either (i) registered pursuant to an effective
registration statement under the Securities
Act and under applicable state securities
or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current public
information requirements pursuant to Rule 144, the Company may require, as a condition of allowing
such transfer, that the Holder or transferee of this Warrant, as the case
may be, comply with the provisions of
Section 5.7 of the Purchase Agreement.

       

      Section
5.                                Miscellaneous.

       

      a) No Rights as Shareholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(i).

       

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

       

      c) 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.

       

      d) Authorized
Shares.

       

      The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.  The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

       

      Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant.

       

      Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

       

      e) Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

       

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

       

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

       

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

       

       

       

      
        
          
          

        

        
          B-7

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

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

       

      l) Amendment.  This
Warrant may be modified or amended or the provisions hereof waived only with the
written consent of the Company and the Holders of at least a majority of the
Warrants then outstanding, except as to the Exercise Price or the Termination
Date, which may not be amended or waived as to this Warrant without the consent
of the Holder of this Warrant.

       

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

       

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

       

      

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

       

       

       

       

       

      
        
          
          

        

        
          B-8

          
            

          

        

        
          
          

        

      

       

      
 

      

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.

       

      
        
          
            
              
                
                  	NEWCARDIO,
INC.	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                          /s/

                        	 	 	
                           

                        	 
	
                          Name

                        	 	 	
                           

                        	 
	
                          Title 

                        	 	 	
                           

                        	 

                

              

            

          

        

      
        

      

       

       

       

      
        
          
          

        

        
          B-9

          
            

          

        

        
          
          

        

      

       

       

      
 

      NOTICE
OF EXERCISE

      

      TO:                      NEWCARDIO,
INC.

      

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

       

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

       

      [  ]
in lawful money of the United States; or

       

      [ ] [if
permitted] the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
2(c).

       

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

       

      _______________________________

      

      

      The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

      

      _______________________________

      

      _______________________________

      

      _______________________________

      

      (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

      

      [SIGNATURE
OF HOLDER]

      

      Name of
Investing Entity:
________________________________________________________________________

      Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

      Name of
Authorized Signatory:
___________________________________________________________________

      Title of
Authorized Signatory:
____________________________________________________________________

      Date:
________________________________________________________________________________________

      

      

      

      
        
          
          

        

        
          B-10

          
            

          

        

        
          
          

        

      

      

       

      ASSIGNMENT
FORM

      

      (To
assign the foregoing warrant, execute

      this form
and supply required information.

      Do not
use this form to exercise the warrant.)

      

      

      

      FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

       

      

      _______________________________________________
whose address is

      

      _______________________________________________________________.

      

      

      

      _______________________________________________________________

      

      Dated:  ______________,
_______

      

      

      Holder’s
Signature:                                       _____________________________

      

      Holder’s
Address:                                         _____________________________

      

                                
_____________________________

      

      

      

      Signature
Guaranteed:  ___________________________________________

      

      

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

      

       

       

       

       

       

       

      
        
          
          

        

        
          B-11

          
            

          

        

        
          
          

        

      

    

     

     

    
      EXHIBIT
C

      

      SECURITY
AGREEMENT

      

                  This
SECURITY AGREEMENT, dated as of July __, 2009 (this “Agreement”), is among
NewCardio, Inc., a Delaware corporation (the “Company”), all of the
Subsidiaries of the Company (such subsidiaries,
the “Guarantors” and together with the Company, the “Debtors”) and the
holders of the Company’s 12% Secured Revolving
Debentures (collectively, the “Debentures”) signatory hereto,
their endorsees, transferees and assigns (collectively, the “Secured
Parties”).

      

      W
I T N E S S E T H:

      

                  WHEREAS,
pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to extend the loans to the Company evidenced by
the Debentures;

      

                  WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof
(the “Guarantee”), the Guarantors have jointly and severally agreed to
guarantee and act as surety for payment of such Debentures; and

      

                  WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
this Agreement and to grant the Secured Parties, pari passu with each other
Secured Party and through the Agent (as defined in Section 18 hereof), a
security interest in certain property of such Debtor to secure the prompt
payment, performance and discharge in full of all of the Company’s obligations
under the Debentures and the Guarantors’ obligations under the
Guarantee.

      

                  NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

      

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

      

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

      

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

      

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

       

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

      

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

      

      (v)           All
commercial tort claims;

      

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

      

      (vii)          All
investment property;

      

      (viii)         All
supporting obligations; and

      

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

      

      (x)           the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.

       

       

      
        
          
          

        

        
          C-1

          
            

          

        

        
          
          

        

      

       

      
 

      Without limiting the generality of the foregoing, the
“Collateral” shall include all
investment property and general intangibles
respecting ownership and/or other equity interests in each Guarantor, including,
without limitation, the shares of capital stock and the other equity interests
listed on Schedule H hereto (as the same may be modified from time to time pursuant to the terms hereof), and
any other shares of capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the future, and, in each
case, all certificates representing such shares and/or equity
interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged
Securities, including, but not limited to, all dividends, interest and
cash.

       

      Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such
asset.

      

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

      

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

      

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

      

      (e)                    “Obligations” means
all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now or may
be hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Debentures, the Guarantee and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the generality of the foregoing, the
term “Obligations” shall include, without limitation: (i) principal of, and
interest on the Debentures and the loans extended pursuant thereto; (ii) any and
all other fees, indemnities, costs, obligations and liabilities of the Debtors
from time to time under or in connection with this Agreement, the Debentures,
the Guarantee and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any
Debtor.

      

      (f)                    “Organizational
Documents” means with respect to any Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

      

      (g)                    “Pledged Interests”
shall have the meaning ascribed to such term in Section 4(j).

      

      (h)                    “Pledged Securities”
shall have the meaning ascribed to such term in Section 4(i).

      

      (i)                    “UCC” means the
Uniform Commercial Code of the State of New York and or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time.  It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense.  Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.

       

       

       

      
        
          
          

        

        
          C-2

          
            

          

        

        
          
          

        

      

      
 

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

      

                 3.           Delivery of Certain
Collateral.  Contemporaneously or
prior to the execution of this Agreement, each Debtor shall deliver or cause to be delivered to the
Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in
each case, together with all Necessary Endorsements.  The Debtors are,
contemporaneously with the execution hereof, delivering to Agent, or have
previously delivered to Agent, a true and correct copy of each Organizational
Document governing any of the Pledged Securities.

      

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

      

      (a)   Each
Debtor has the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor.  This Agreement has been duly
executed by each Debtor.  This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

      

       (b)           The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  Except as specifically set forth on Schedule A, each
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Debentures).  Except as
disclosed on Schedule
A, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.

      

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

      

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

      

      (e)           Each
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.

      

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

       

       

       

      
        
          
          

        

        
          C-3

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

       (i)             The capital stock and other equity interests listed on
Schedule
H hereto (the “Pledged
Securities”) represent all of
the capital stock and other equity interests of the Guarantors, and
represent all capital stock and other
equity interests owned, directly or indirectly, by the Company.  All
of the Pledged Securities are validly issued, fully paid and nonassessable, and
the Company is the legal and beneficial owner of the Pledged
Securities, free and clear of any lien, security interest or other
encumbrance except for the security interests created by this Agreement and
other Permitted Liens (as defined in the Debentures).  

      

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

      

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

      

      (l)                    No
Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by a
Debtor in its ordinary course of business and sales of inventory by a Debtor in
its ordinary course of business, which shall be deemed to be free and clear of
the security interests created by this Agreement, except for any security
interest in the proceeds therefrom to the extent permitted by law) without the
prior written consent of a Majority in
Interest.

      

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

      

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

       

       

       

      
        
          
          

        

        
          C-4

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

      (q)                    Each
Debtor shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.

      

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

      

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

      

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

      

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

      

      (v)                    No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.

      

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

      

      (x)                    No
Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and
so long as, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.

      

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

      

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

      

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

      

                 (bb)                      Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and instructions of Agent regarding the Pledged Interests consistent
with the terms of this Agreement without the further consent of any Debtor as
contemplated by Section 8-106 (or any successor section) of the
UCC.  Further, each Debtor agrees that it shall not enter into a similar
agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or
entity.

       

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

      

      (dd)                    If
there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Agent, to be entered into and
delivered to the Agent for the benefit of the Secured Parties.

      

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

       

       

       

      
        
          
          

        

        
          C-5

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

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

      

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

      

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

      

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

      

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

       

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

      

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

      

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

      

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

       

       

      
        
          
          

        

        
          C-6

          
            

          

        

        
          
          

        

      

       

      
 

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

      

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

      

      (a)   The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;

      

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

      

      (c)   The
failure by any Debtor to observe or perform any of its obligations hereunder for
five (5) days after delivery to such Debtor of notice of such failure by or on
behalf of a Secured Party unless such default is capable of cure but cannot be
cured within such time frame and such Debtor is using best efforts to cure same
in a timely fashion; or

      

      (d)   If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.

      

                  7.              Duty To Hold In
Trust.

      

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

      

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

      

                  8.              Rights and Remedies Upon
Default.

      

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

      

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

      

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

      

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

      

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

      

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

      

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

       

       

      
        
          
          

        

        
          C-7

          
            

          

        

        
          
          

        

      

       

      
 

                 (b)           The Agent shall comply with
any applicable law in connection with a disposition of Collateral and such
compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.  The Agent may sell the
Collateral without giving any warranties
and may specifically disclaim such warranties.  If the Agent sells any
of the Collateral on credit, the Debtors will only be credited with payments
actually made by the purchaser.  In addition, each Debtor waives any
and all rights that it may have to a judicial hearing in advance of the enforcement
of any of the Agent’s rights and remedies hereunder, including, without
limitation, its right following an Event of Default to take immediate possession
of the Collateral and to exercise its rights and remedies with
respect thereto.

       

      (c)           For the purpose of enabling the Agent to further
exercise rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Agent, for the
benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.

      

                  9.              Applications of Proceeds. The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 18%
per annum or the lesser amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Parties to collect
such deficiency.  To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

      

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

       

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

      

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

       

       

       

      
        
          
          

        

        
          C-8

          
            

          

        

        
          
          

        

      

       

      
 

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

      

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

      

      15.
           Power of Attorney; Further
Assurances.

      

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

      

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

      

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

      

                  16.                       Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Debentures).

      

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

      

                 18.           Appointment of Agent. The
Secured Parties hereby appoint Vision Capital Advisors, LLC to act as their
agent (“Vision
Capital” or “Agent”) for purposes
of exercising any and all rights and remedies of the Secured Parties
hereunder. The Agent shall have the rights, responsibilities and immunities
set forth in Annex
B hereto.

      
 

      
        
          
          

        

        
          C-9

          
            

          

        

        
          
          

        

         

         

      

                  19.              Miscellaneous.

      

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

      

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

      

      (c)           This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtors and the Secured
Parties holding a majority of the principal amount of Debentures then
outstanding, or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought.

      

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

      

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

      

      (f)
           This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company and the
Guarantors may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Secured Party (other than by
merger).  Any Secured Party may assign any or all of its rights under
this Agreement to any Person (as defined in the Purchase Agreement) to whom such
Secured Party assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred Obligations, by
the provisions of this Agreement that apply to the “Secured
Parties.”

      

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

      

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

       

       

       

      
        
          
          

        

        
          C-10

          
            

          

        

        
          
          

        

      

       

      
 

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

      

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

      

      (k)           Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Debentures, the
Purchase Agreement (as such term is defined in the Debentures) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.

      

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

      

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

      

      [SIGNATURE
PAGES FOLLOW]

       

       

       

       

      
        
          
          

        

        
          C-11

          
            

          

        

        
          
          

        

      

       

      

      

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

       

      
        
          
            
              
                
                  	NEWCARDIO,
INC.	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                          /s/

                        	 	 	
                           

                        	 
	
                          Name

                        	 	 	
                           

                        	 
	
                          Title 

                        	 	 	
                           

                        	 

                

              

            

          

        

      

       

       

      
        
          
            
              
                	 INSERT NAMES OF
      SUBSIDIARIES]	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                        /s/

                      	 	 	
                         

                      	 
	
                        Name

                      	 	 	
                         

                      	 
	
                        Title 

                      	 	 	
                         

                      	 

              

            

          

        

      

      

      

      

      

                            [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

       

      
        
          
          

        

        
          C-12

          
            

          

        

        
          
          

        

      

       

       

       

       

       

       

       

      [SIGNATURE
PAGE OF HOLDERS TO NWCI SA]

      

                 Name
of Investing Entity:
___________________________________________________

       Signature of Authorized Signatory of Investing
entity: ____________________________

       Name
of Authorized Signatory:
_______________________________________________

       Title
of Authorized Signatory:
________________________________________________

       

       

       

      
 

      [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

      

      

      

      
        
          
          

        

        
          C-13

          
            

          

        

        
          
          

        

      

      
 

      

      SCHEDULE
A

      

      

      Principal
Place of Business of Debtors:

      

      

      Locations
Where Collateral is Located or Stored:

      

       

      
 

      SCHEDULE
B

      

       

      

      SCHEDULE
C

      

      

      

      

      SCHEDULE
D

      Legal
Names and Organizational Identification Numbers

      

      

      

      

      SCHEDULE
E

      Names;
Mergers and Acquisitions

      

      

      

      SCHEDULE
F

      Intellectual
Property

      

      

      

      SCHEDULE
G

      Account
Debtors

      

      

      

      SCHEDULE
H

      Pledged
Securities

      

      
 

      
        
          
          

        

        
          C-14

          
            

          

        

        
          
          

        

      

       

       

      ANNEX
A

      to

      SECURITY

      AGREEMENT

      

      
        	
                 
      

              	
                FORM
      OF ADDITIONAL DEBTOR JOINDER

              

      

      

      Security
Agreement dated as of June ___, 2009 made by

      NewCardio,
Inc.

      and its
subsidiaries party thereto from time to time, as Debtors

      to and in
favor of

      the
Secured Parties identified therein (the “Security
Agreement”)

      

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

      

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

      

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

      

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

      

      
        	
                 
      

              	 

      

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

      

      
        	 	
                [Name
      of Additional Debtor]

              

      

      

      
        	 	
                By:

              

      

      
        	 	
                Name:

              

      

      
        	 	
                Title:

              

      

      

      
        	 	
                Address:

              

      

      

      

      

      

      

      
        	
                 
      

              	
                Dated:

              

      

       

       

       

      
        
          
          

        

        
          C-15

          
            

          

        

        
          
          

        

      

      
 

      [ANNEX B

      to

      SECURITY

      AGREEMENT

      

      THE
AGENT

      

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

      

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

      

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

      

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

       

      
        
          
          

        

        
          C-16

          
            

          

        

        
          
          

        

      

       

       

      
 

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

      

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

      

                            7.  Resignation by the Agent.

      

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

      

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

      

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

      

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

      

      

      
        
          
          

        

        
          C-17

          
            

          

        

        
          
          

        

      

    

     

     

    
      SCHEDULE
A

      

      

      Principal
Place of Business of Debtors:

      2350
Mission College Blvd., Suite 1175, Santa Clara CA 95054

      

      Locations
Where Collateral is Located or Stored:

      2350
Mission College Blvd., Suite 1175, Santa Clara CA 95054

      212 Carnegie Center, Suite 206A,
Princeton NJ 08540

      

      

      SCHEDULE
B

      

      N/A

      

      

      SCHEDULE
C

      

      N/A

      

      

      SCHEDULE
D

      Legal
Names and Organizational Identification Numbers

      

      
        	
                a.  

              	
                NewCardio,
      Inc. #20-1826789

              

      

      
        	
                b.  

              	
                NewCardio
      Technologies, Inc. #26-1967215

              

      

      

      

      SCHEDULE
E

      Names;
Mergers and Acquisitions

      

      M&A:
Marine Park Holdings, Inc., formerly EP Floors, Inc.

      

       

       

       

       

      
        
          
          

        

        
          C-18

          
            

          

        

        
          
          

        

      

      
 

      SCHEDULE
F

      Intellectual
Property

      Patents

      

      
        
          
            
              
                
                  
                    
                      
                        	
                                App
      Number/

                                Filing
      Date

                              	 
      	
                                Brief
      Summary

                                (Products
      Covered)

                              	 
      	
                                Status

                              
	
                                PCT/

                                YU2004/

                                00020

                                08/20/04

                              	 
      	
                                Cordless
      recording and telecommunication of three special ECG leads and their
      processing (CardioBipTM)

                              	 
      	
                                International
      Application now being examined in the US, China, Japan, Korea and the
      European Union (EU)

                                First
      EU Patent Office Action 12/07: All 33 claims allowable

                                EU
      Certificate of Patent Grant issued 2/08

                                EU
      Patent expires 08/2024

                              
	
                                PCT/

                                US2005/

                                001239

                                1/16/
      05

                              	 
      	
                                Visual
      3-D  presentation of ECG data (VisualECGTM,
      QTinnoTM)

                              	 
      	
                                International
      Application now being examined in the China, Japan, Korea and the European
      Union (EU)

                              
	
                                 

                                US
      11/

                                036,930

                                16
      Jan 04

                              	 
      	
                                Visual
      3-D  presentation of ECG data (VisualECGTM,
      QTinnoTM)

                              	 
      	
                                 

                                US
      Patent Application covering same subject matter as

                                PCT/US2005/001239
      International Application

                                US
      Patent No. 7,266,408 issued 4 Sept 2007

                                US
      Patent Expires 01/2025

                                Application
      for grant of additional claims (Divisional US Patent
      Application)  filed 31 August 2007

                              
	
                                PCT/

                                US2008/

                                009308

                                31
      Jul 08

                              	 
      	
                                Quantitative
      assessment of cardiac electrical events (QTinnoTM)

                              	 
      	
                                Priority
      to US Provisional Application filed 1 Aug 07

                                No
      Patent Office Actions yet received

                              
	
                                US
      12/ 184,068

                                31
      Jul 08

                              	 
      	
                                Device
      and methods for evaluating cardiac electrical events (QTinnoTM)

                              	 
      	
                                Priority
      to US Provisional Application filed 1 Aug 07

                                No
      Patent Office Actions yet received

                              
	
                                US
      Patent Application

                              	 
      	
                                System
      for quantitative assessment of cardiac electrical events

                              	 
      	
                                US
      Patent Application filed with US PTO on 12 June 2009. Application #
      12484153

                              
	
                                US
      Patent Application

                              	 
      	
                                Method
      for quantitative assessment of cardiac electrical events

                              	 
      	
                                US
      Patent Application filed with US PTO on 12 June 2009. Application #
      12484156

                              

                      

                    

                  

                

              

            

          

        

      

      

      

      

      

      

      Trademarks

      

      
        
          	
                  Serial
      NumberFiling

                	
                  Filing
      Date

                	
                  Desription

                
	
                  77720929

                	
                  April
      23, 2009

                	
                  NewCardio

                
	
                  77720941

                	
                  April
      23, 2009

                	
                  Qtinno

                
	
                  77720950

                	
                  April
      23, 2009

                	
                  Visual3Dx

                
	
                  77720969

                	
                  April
      23, 2009

                	
                  CardioBip

                
	
                  77721668

                	
                  April
      24, 2009

                	
                  NewCardio
      Logo

                
	
                  77721684

                	
                  April
      24, 2009

                	
                  CardioBip
      Logo

                
	
                  77721695

                	
                  April
      24, 2009

                	
                  Qtinno
      Logo

                
	
                  77721705

                	
                  April
      24, 2009

                	
                  Visual3Dx
      Logo

                

        

      

      

      Domains

      Newcardio.com

      Newcardiotest.com

      newcardiotest.com

      

      

      

      

      

      
        
          
          

        

        
          C-19

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
G

      Account
Debtors

      

      N/A

      

      SCHEDULE
H

      Pledged
Securities

      

      shares of
NewCardio Technologies, Inc.

       

       

       

       

       

       

      
        
          
          

        

        
          C-20

          
            

          

        

        
          
          

        

      

    

     

    
      EXHIBIT
D

      

      SUBSIDIARY
GUARANTEE

      

      SUBSIDIARY
GUARANTEE, dated as of July __, 2009 (this “Guarantee”), made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the “Guarantors”), in
favor of the purchasers signatory (together with their permitted assigns, the
“Purchasers”)
to that certain Securities Purchase Agreement, dated as of the date hereof,
between NewCardio, Inc., a Delaware corporation (the “Company”) and the
Purchasers.

       

      

      W
I T N E S S E T H:

      

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and between the Company and the Purchasers (the “Purchase Agreement”),
the Company has agreed to sell and issue to the Purchasers, and the Purchasers
have agreed to purchase from the Company the Debentures, subject to the terms
and conditions set forth therein; and

      

      WHEREAS, each Guarantor will directly
benefit from the extension of credit to the Company represented by the issuance
of the Debentures; and

      

      NOW, THEREFORE, in consideration of the
premises and to induce the Purchasers to enter into the Purchase Agreement and
to carry out the transactions contemplated thereby, each Guarantor hereby agrees
with the Purchasers as follows:

      

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

      

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

      

                   “Obligations” means,
in addition to all other costs and expenses of collection incurred by Purchasers
in enforcing any of such Obligations and/or this Guarantee, all of the
liabilities and obligations (primary, secondary, direct, contingent, sole, joint
or several) due or to become due, or that are now or may be hereafter contracted
or acquired, or owing to, of the Company or any Guarantor to the Purchasers,
including, without limitation, all obligations under this Guarantee, the
Debentures and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case, whether now
or hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Purchasers as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time.  Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and interest
on the Debentures and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Company or
any Guarantor from time to time under or in connection with this Guarantee, the
Debentures and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Company or any
Guarantor.

       

       

      
        
          
          

        

        
          D-1

          
            

          

        

        
          
          

        

      

      
 

      2. Guarantee.

      

      (a) Guarantee.

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

      (d) Amendments, Etc. With
Respect to the Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by the Purchasers may be rescinded by
the Purchasers and any of the Obligations continued, and the Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Purchasers, and
the Purchase Agreement and the other Transaction Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Purchasers may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Purchasers for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The
Purchasers shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by them as security for the Obligations or for the
guarantee contained in this Section 2 or any property subject
thereto.

       

       

      
        
          
          

        

        
          D-2

          
            

          

        

        
          
          

        

      

      
 

      (e) Guarantee Absolute and
Unconditional. Each Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Purchasers upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Company and
any of the Guarantors, on the one hand, and the Purchasers, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives
to the extent permitted by law diligence,

      presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment and
performance without regard to (a) the validity or enforceability of the Purchase
Agreement or any other Transaction Document, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Purchasers, (b) any
defense, set-off or counterclaim (other than a defense of payment or performance
or fraud by Purchasers) which may at any time be available to or be asserted by
the Company or any other Person against the Purchasers, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Company
or such Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Company for the Obligations, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy or in
any other instance. When making any demand hereunder or otherwise pursuing its
rights and remedies hereunder against any Guarantor, the Purchasers may, but
shall be under no obligation to, make a similar demand on or otherwise pursue
such rights and remedies as they may have against the Company, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Purchasers to make any such demand, to pursue such other rights or
remedies or to collect any payments from the Company, any other Guarantor or any
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Company, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Purchasers against any
Guarantor. For the purposes hereof, “demand” shall include the commencement and
continuance of any legal proceedings.

      

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

      

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

      

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

      

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

      

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

      

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

       

       

      
        
          
          

        

        
          D-3

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

      (f) Foreign
Law.  Each Guarantor has consulted with appropriate foreign
legal counsel with respect to any of the above representations for which
non-U.S. law is applicable. Such foreign counsel have advised each applicable
Guarantor that such counsel knows of no reason why any of the above
representations would not be true and accurate. Such foreign counsel were
provided with copies of this Subsidiary Guarantee and the Transaction Documents
prior to rendering their advice.

      

      4. Covenants.

      

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

      

      (b) So long
as any of the Obligations are outstanding, unless Purchasers holding at least a
majority of the aggregate principal amount of the then outstanding Debentures
shall otherwise consent in writing, each Guarantor will not directly or
indirectly on or after the date of this Guarantee:

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

      5. Miscellaneous.

      

      (a) Amendments in
Writing. None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except in writing by the
Purchasers.

      

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

      

      (c) No Waiver By Course Of
Conduct; Cumulative Remedies. The Purchasers shall not by any act (except
by a written instrument pursuant to Section 5(a)), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default under the Transaction Documents or Event of Default.
No failure to exercise, nor any delay in exercising, on the part of the
Purchasers, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Purchasers of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Purchasers would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

      

      (d) Enforcement Expenses;
Indemnification.

      

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

      

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

      

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

       

       

       

      
        
          
          

        

        
          D-4

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

      (l) Acknowledgements.  Each
Guarantor hereby acknowledges that:

      

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

      

      (ii) the
Purchasers have no fiduciary relationship with or duty to any Guarantor arising
out of or in connection with this Guarantee or any of the other Transaction
Documents, and the relationship between the Guarantors, on the one hand, and the
Purchasers, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and

      

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

      

      (m) Additional
Guarantors.  The Company shall cause each of its subsidiaries
formed or acquired on or subsequent to the date hereof to become a Guarantor for
all purposes of this Guarantee by executing and delivering an

      Assumption
Agreement in the form of Annex 1 hereto.

      

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

      

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

      

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

      

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

      

      

      
        
          
          

        

        
          D-5

          
            

          

        

        
          
          

        

      

       

      (Signature
Pages Follow)

      

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

       

       

      
        
          
            
              
                	[SUBSIDIARY]	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                        /s/

                      	 	 	
                         

                      	 
	
                        Name

                      	 	 	
                         

                      	 
	
                        Title 

                      	 	 	
                         

                      	 

              

            

          

        

                               

      

      

      
        
          
          

        

        
          D-6

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
1

      

      GUARANTORS

      

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

      

      
         

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	 
      	 
      	 	
                                        COMPANY

                                      
	 
      	
                                        JURISDICTION
      OF 

                                      	 	
                                        OWNED
      BY

                                      
	 
      	
                                        INCORPORATION  

                                      	 	
                                        PERCENTAGE

                                      
	 
      	 
      	 	 
      
	 
      	 
      	 	 
      
	 	 	 	 
	 	 	 	 
	 
      	 
      	 	 
      
	 	 	 	 
	 	 	 	 
	 	 	 	 

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

         

                         

        
          
            
            

          

          
            D-7

            
              

            

          

          
            
            

          

        

        

      

      Annex
1 to

      SUBSIDIARY
GUARANTEE

      

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

      

                                                 W
I T N E S S E T H :

      

                 WHEREAS,
NewCardio, Inc., a Delaware corporation (the “Company”) and the
Purchasers have entered into a Securities Purchase Agreement, dated as of June
___, 2009 (as amended, supplemented or otherwise modified from time to time, the
“Purchase
Agreement”);

      

                 WHEREAS,
in connection with the Purchase Agreement, the Subsidiaries of the Company
(other than the Additional Guarantor) have entered into the Subsidiary
Guarantee, dated as of July ____, 2009 (as amended, supplemented or otherwise
modified from time to time, the “Guarantee”) in favor
of the Purchasers;

      

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

      

                 WHEREAS,
the Additional Guarantor has agreed to execute and

      deliver
this Assumption Agreement in order to become a party to the
Guarantee;

      

                                      NOW, THEREFORE, IT IS
AGREED:

      

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

      

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

                        IN
WITNESS WHEREOF, the undersigned has caused this Assumption

      Agreement
to be duly executed and delivered as of the date first above
written.

       

       

      
        
          
            
              
                	[ADDITIONAL
      GUARANTOR]	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                        /s/

                      	 	 	
                         

                      	 
	
                        Name

                      	 	 	
                         

                      	 
	
                        Title 

                      	 	 	
                         

                      	 

              

            

          

        

      

                                                

       

      
        
          
          

        

        
          D-8

          
            

          

        

        
          
          

        

      

    

     

    
      SCHEDULE
1

      And
SCHEDULE 5(b)

      

      GUARANTORS

      

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

       

       

         

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	 
      	 
      	 	
                                                      COMPANY

                                                    
	 
      	
                                                      JURISDICTION
      OF 

                                                    	 	
                                                      OWNED
      BY

                                                    
	 
      	
                                                      INCORPORATION  

                                                    	 	
                                                      PERCENTAGE

                                                    
	 
      	 
      	 	 
      
	 	 	 	 
	NewCardio
      Technologies, Inc.   	Delaware 	 	100%
	2350
      Mission College Blvd., Suite 1175, Santa Clara CA 95054	 
      	 	 
      
	 	 	 	 
	 	 	 	 
	 	 	 	 

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      

      
 

       

      D-9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}]]