Document:

Securities Purchase Agreement, dated December 30, 2004

 Exhibit 4.1 
  
 SECURITIES PURCHASE AGREEMENT 
  

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 30, 2004, by and among Modtech Holdings, Inc., a Delaware
corporation, with headquarters located at 2830 Barrett Avenue, Perris, California 92571 (the ”Company”), and the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively,
the “Buyers”). 
  
 WHEREAS: 
  
 A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act. 
  
 B. The Company has authorized a new series of senior subordinated secured convertible notes of the Company, which notes shall be convertible into the
Company’s common stock, $.01 par value per share (the “Common Stock”), in accordance with the terms of such notes. 
  
 C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate principal
amount of notes, in substantially the form attached hereto as Exhibit A (as amended or modified from time to time, collectively, the “Notes”), set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers
(which aggregate amount for all Buyers shall be $25,000,000) (as converted, collectively, the “Conversion Shares”) and (ii) warrants, in substantially the form attached hereto as Exhibit B (the “Warrants”),
to acquire up to that number of additional shares of Common Stock set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers (as exercised, collectively, the “Warrant Shares”). 
  
 D. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit C (as amended or modified from time to time, the “Registration Rights Agreement”), pursuant to
which the Company has agreed to provide certain registration rights with respect to the Conversion Shares and the Warrant Shares under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

  
 E. The Notes, the Conversion Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the “Securities”. 
  
 F. The Notes will be (i) subordinated to the Senior Indebtedness (as defined in the Notes), but will rank senior to all other outstanding and future indebtedness of the Company and its Subsidiaries other than as
permitted hereunder, (ii) secured by a perfected security interest in all of the assets of the Company and in all of the shares of capital stock and all assets of all of the Company’s current and future Subsidiaries (as hereinafter defined), as
evidenced by the Pledge 

 
and Security Agreement, in the form attached hereto as Exhibit D (as amended or modified from time to time, the “Pledge and Security
Agreement”) in favor of Amphora Limited, a company organized under the laws of the Cayman Islands, in its capacity as collateral agent (in such capacity, the “Senior Agent”) for the Buyers hereto and for the holders of the
Securities, which security interest shall be senior to all other security interests therein, except those security interests securing the Senior Indebtedness, and (iii) guaranteed by the Guarantee of all of the Company’s current and future
Subsidiaries, other than those Subsidiaries which remain inactive and have no assets, income or operations, in the form attached hereto as Exhibit E (such Guaranty, together with the Pledge and Security Agreement, as each may amended or
modified from time to time, collectively, the “Security Documents”). 
  
 NOW, THEREFORE, the Company and each Buyer hereby agree as follows: 
  
 1. PURCHASE AND SALE OF NOTES AND WARRANTS. 
  
 (a) Purchase of Notes and Warrants. 
  
 (i) Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and
each Buyer severally, but not jointly, agrees to purchase from the Company on the Closing Date (as defined below), (w) a principal amount of Notes as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers and (x)
Warrants to acquire up to that number of Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (the “Closing”). 
  
 (ii) Closing. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York
City time, on the date hereof (or such later date as is mutually agreed to by the Company and each Buyer) after notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below at the offices of Schulte
Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022. 
  
 (iii) Purchase Price. The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer at the Closing (the “Purchase Price”) shall be the amount set forth opposite such Buyer’s name in
column (5) of the Schedule of Buyers. Each Buyer shall pay $1.00 for each $1.00 of principal amount of Notes and related Warrants to be purchased by such Buyer at the Closing. 
  
 (b) Form of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for the Notes
and the Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, and (ii) the Company shall deliver to each Buyer (A) the Notes (in
the principal amounts as such Buyer shall request) which such Buyer is then purchasing and (B) the Warrants (in the amounts as such Buyer shall request) such Buyer is purchasing, in each case duly executed on behalf of the Company and registered in
the name of such Buyer or its designee. 
  

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 2. BUYER’S REPRESENTATIONS AND WARRANTIES. 
  
 Each Buyer represents and warrants with respect to only itself that:

  
 (a) No Public Sale or Distribution. Such Buyer is (i)
acquiring the Notes and the Warrants and (ii) upon conversion of the Notes and exercise of the Warrants (other than pursuant to a Cashless Exercise (as defined in the Warrants)) will acquire the Conversion Shares issuable upon conversion of the
Notes and the Warrant Shares issuable upon exercise of the Warrants, as the case may be, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities. 
  
 (b) Accredited Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

  
 (c) Reliance on Exemptions. Such Buyer understands that
the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the
Securities. 
  
 (d) Information. Such Buyer and its
advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer’s right to rely on the Company’s representations and warranties contained herein. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. 
  
 (e) No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. 
  

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 (f) Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights
Agreement: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer
shall have delivered to the Company an opinion of counsel selected by the Buyer, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a
successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person (as defined in Section 3(s)) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder. 
  
 (g)
Legends. Such Buyer understands that the certificates or other instruments representing the Notes and Warrants and, until such time as the resale of the Conversion Shares and the Warrant Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares and the Warrant Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates): 
  
 [NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]
[EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. 
  

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 The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder
of the Securities upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides
the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act, or (iii) such holder
provides the Company with reasonable assurance that the Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A. 
  
 (h) Validity; Enforcement. This Agreement, the Registration Rights Agreement and the Security Documents to which such Buyer is a party have been
duly and validly authorized, executed and delivered on behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies. 
  
 (i) Residency. Such Buyer is a
resident of that jurisdiction specified below its address on the Schedule of Buyers. 
  
 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 
  
 The Company represents and warrants to each of the Buyers that: 
  
 (a) Organization and Qualification. The Company and its “Subsidiaries” (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest) are entities duly organized and validly existing in good standing under the laws of the jurisdiction in which they are formed, and have the
requisite corporate power and authority to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to
have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, condition (financial or otherwise) or
prospects (business or financial) of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby and the other Transaction Documents (as defined below) or by the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents. The Company has no Subsidiaries except as set forth on Schedule 3(a) and each of the Company’s
Subsidiaries in existence as of the date hereof are inactive and have no assets, operations or income. 
  
 (b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Registration Rights Agreement, the Security Documents, the Irrevocable Transfer Agent 

  

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Instructions (as defined in Section 5(b)), the Warrants, application with respect to the issuance of the Letter of Credit (as defined below) and each
of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the Securities in accordance with the terms
hereof and thereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Notes and the
Warrants, the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion of the Notes, the reservation for issuance and issuance of Warrant Shares issuable upon exercise of the Warrants, and the granting of a
security interest in the Collateral (as defined in the Security Documents) have been duly authorized by the Company’s Board of Directors and (other than (i) the filing of appropriate UCC financing statements with the appropriate states and
other authorities pursuant to the Pledge and Security Agreement, and (ii) the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement) no further filing, consent, or
authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Transaction Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. 
  
 (c) Issuance of Securities. The issuance of the Notes and the Warrants are duly authorized and are free from all taxes, liens and charges with
respect to the issue thereof. As of the Closing, a number of shares of Common Stock shall have been duly authorized and reserved for issuance which equals 120% of the maximum number of shares Common Stock issuable upon conversion of the Notes and
issuable upon exercise of the Warrants. Upon issuance or conversion in accordance with the Notes or exercise in accordance with the Warrants, as the case may be, the Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The offer and issuance by
the Company of the Securities is exempt from registration under the 1933 Act. 
  
 (d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes and the Warrants, the granting of a security interest in the Collateral (as defined in the Security Documents) and reservation for issuance and issuance of the Conversion Shares and the Warrant Shares) will not
(i) result in a violation of any certificate of incorporation, certificate of formation, any certificate of designations or other constituent documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its
Subsidiaries or bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or 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 material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws 

  

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and regulations and the rules and regulations of the Nasdaq National Market (the “Principal Market”)) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. 
  
 (e) Consents. The Company is not required to obtain any consent, authorization or order of, or make any filing (other than (i) the filing of
appropriate UCC financing statements with the appropriate states and other authorities pursuant to the Pledge and Security Agreement, and (ii) the filing with the SEC of one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement) or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date, and the Company and its Subsidiaries are unaware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings pursuant to the
preceding sentence. The Company is not in violation of the listing requirements of the Principal Market and has no knowledge of any facts that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

  
 (f) Acknowledgment Regarding Buyer’s Purchase of
Securities. The Company acknowledges and agrees that each Buyer is acting solely in the capacity of arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer is
(i) an officer or director of the Company, (ii) an “affiliate” of the Company (as defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for
purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges that no Buyer 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 hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the decision of the Company and each of the Subsidiaries to enter into the Transaction Documents, as
applicable, has been based solely on the independent evaluation by the Company, its Subsidiaries and their representatives. 
  
 (g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. The Company acknowledges that it has engaged Rodman & Renshaw, LLC
as placement agent (the “Agent”) in connection with the sale of the Securities. Other than the Agent, the Company has not engaged any placement agent or other agent in connection with the sale of the Securities. 
  

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 (h) No Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and
any Person acting on 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 require registration of any of the Securities under the 1933 Act or
cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are listed or designated. 
  
 (i) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion of the Notes and the
Warrant Shares issuable upon exercise of the Warrants will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Notes in accordance with this Agreement and the
Notes and its obligation to issue the Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is, in each case, absolute and unconditional regardless of the dilutive effect, which may be substantial,
that such issuance may have on the ownership interests of other stockholders of the Company. 
  
 (j) Application of Takeover Protections; Rights Agreement. The Company and its 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 the laws of the jurisdiction of its formation or otherwise which is or
could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. 
  
 (k) SEC Documents; Financial Statements. During the two (2) years prior to the date hereof, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and
financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company has delivered to the Buyers or their respective representatives
true, correct and complete copies of the SEC Documents not available on the EDGAR system. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, 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. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting 

  

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requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents, including, without limitation,
information referred to in Section 2(d) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are
or were made, not misleading. 
  
 (l) Absence of Certain
Changes. Except as disclosed in Schedule 3(l), since September 30, 2004, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries. Since September 30, 2004, the Company has not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business, (iii) had capital expenditures, individually or in the aggregate, in excess of $100,000 or (iv) waived any material rights with respect to any Indebtedness or other rights in excess of $100,000 owed to it. The Company has not
taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would
reasonably lead a creditor to do so. The Company is not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent (as defined below). For purposes of this Section 3(l),
“Insolvent” means on a consolidated basis (i) the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined in Section 3(s)), (ii) the Company
is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) the Company intends to incur or believes that it will incur debts that would be beyond its ability to
pay as such debts mature or (iv) the Company has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted. 
  
 (m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is reasonably expected to occur with respect to the Company or its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that
would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly
announced. 
  
 (n) Conduct of Business; Regulatory Permits.
Neither the Company nor its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation or Bylaws or their organizational charter or certificate of incorporation or bylaws, respectively. 

  

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Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to
the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Since December 31, 2003, (i) the Common Stock has been designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by
the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect,
and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. 
  
 (o) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 
  
 (p) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof, except where such
noncompliance would not have, individually or in the aggregate, a Material Adverse Effect. 
  
 (q) Transactions With Affiliates. Except as set forth in the SEC Documents filed at least ten days prior to the date hereof and other than the grant of stock options disclosed on Schedule 3(q), none of
the officers, directors or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or 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 such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner. 
  
 (r) Equity Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i)
25,000,000 shares of Common Stock, of which as of the date hereof, 14,479,082 are issued and outstanding, 1,660,384 shares are reserved for issuance pursuant to the Company’s stock option and purchase plans and no shares are reserved for
issuance pursuant to 

  

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securities (other than the Notes and the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 5,000,000 shares of
preferred stock, $.01 par value per share, of which as of the date hereof none of which is issued and outstanding or reserved for issuance. All of such outstanding shares have been, or upon issuance will be, validly issued, fully paid and
nonassessable. Except as set forth in the SEC Documents filed at least ten days prior to the date hereof and except as disclosed on Schedule 3(r): (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any share capital of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements
by which the Company or any of its Subsidiaries is or may become bound to issue additional share capital of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or exchangeable for, any share capital of the Company or any of its Subsidiaries; (ii) there are no outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness (as defined in Section 3(s)) of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iii) there are no financing
statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company; (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vi) the Company does not have
any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (vii) the Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so
disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect.
Except as disclosed on Schedule 3(r): (i) none of the Company’s share capital is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; and (ii) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities. The Company has furnished to the Buyer true, correct and complete copies of the Company’s Certificate of Incorporation, as
amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto. 
  
 (s) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(s), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party 

  

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to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. Schedule 3(s) provides a detailed description of the material terms of any such outstanding Indebtedness. For purposes of this Agreement: (x) “Indebtedness” of any Person means,
without duplication (A) all indebtedness for borrowed money, (B) all obligations (other than trade payables entered into in the ordinary course of business) issued, undertaken or assumed as the deferred purchase price of property or services
including, without limitation, “capital leases” in accordance with U.S. generally accepted accounting principals, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments,
(D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has
not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency thereof. 
  
 (t) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors, except
such that if adversely determined would not be reasonably expected to have a Material Adverse Effect as set forth in Schedule 3(t). 
  
 (u) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage
sought or applied for and neither the Company nor any 

  

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such 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 at a cost that would not have a Material Adverse Effect. 
  
 (v) Employee Relations. (i) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member
of a union. No executive officer of the Company (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company. No executive
officer of the Company, 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, non-competition agreement, or any
other contract or agreement or any restrictive covenant, 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. 

 
 (ii) The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect. 
  
 (w) Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. 
  
 (x) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, service marks,
and all applications and registrations therefor, trade names, patents, patent rights, copyrights, original works of authorship, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights
(“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and which failure to so have would reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule
3(x), none of the Company’s Intellectual Property Rights have expired or terminated, or are expected to expire or terminate, within three years from the date of this Agreement. The Company does not have any knowledge of any infringement by
the Company or its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware of any facts or circumstances that might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights. 
  

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 (y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder. 
  
 (z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary. 
  
 (aa) Tax Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. No
liens have been filed and no claims are being asserted by or against the Company or any of its Subsidiaries with respect to any taxes (other than liens for taxes not yet due and payable). Neither the Company nor it Subsidiaries has recived notice of
assessment or proposed assessment of any taxes claimed to be owed by it or any other Person on its behalf. Neither the Company nor its Subsidiaries is a party to any tax sharing or tax indemnity agreement or any other agreement of a similar nature
that remains in effect. Each of the Company and its Subsidiaries has complied in all material respects with all applicable legal requirements relating to the payment and withholding of taxes and, within the time and in the manner prescribed by law,
has withheld from wages, fees and other payments and paid over to the proper governmental or regulatory authorities all amounts required. 
  
 (bb) Internal Accounting Controls. The Company and each of its 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, 

  

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(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities
is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. 
  
 (cc) Ranking of Notes. Except as set forth on Schedule 3(cc), no Indebtedness of the Company is senior to or ranks pari passu with
the Notes in right of payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise. 
  
 (dd) Form S-3 Eligibility. The Company is eligible to register the Conversion Shares and the Warrant Shares for resale by the Buyers using Form S-3
promulgated under the 1933 Act. 
  
 (ee) Manipulation of
Price. 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. 
  
 (ff)
Material Contracts. There are no material agreements or instruments to which the Company is a party or is otherwise subject, other than the Current Credit Facility (as defined in the Notes) and the leases set forth on Schedule 3(ff).

  
 (gg) Disclosure. The Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Buyers or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Buyers regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the Company 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 the light of the circumstances under which they were made, not misleading. Each press release issued by the Company during the twelve (12) months preceding the date of this Agreement did not at the time of release 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 the light of the circumstances under which they are made, not misleading. No event or circumstance
has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly announced or disclosed. 
  

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 4. COVENANTS. 
  
 (a) Best Efforts. Each party shall use its reasonable best efforts timely to satisfy each of the conditions to be
satisfied by it as provided in Sections 6 and 7 of this Agreement. 
  
 (b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date. 
  
 (c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Conversion Shares and Warrant Shares and none of the Notes or Warrants is outstanding (the “Reporting Period”), the Company shall timely file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such
termination. 
  
 (d) Use of Proceeds. The Company will use
the proceeds from the sale of the Securities for general working capital purposes, general corporate purposes and repayment of certain outstanding Indebtedness of the Company as set forth on Schedule 4(d) hereof and not for redemption or
repurchase of any equity securities. 
  
 (e) Financial
Information. Unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, the Company agrees to send the following to each Investor during the Reporting Period (i) within one (1) Business
Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K or 10-KSB, any interim reports or any consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow statements for any
period other than annual, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries, and (iii) copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the
stockholders. 
  
 (f) Listing. The Company shall use its
reasonable best efforts to promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which the Common Stock
is then listed (subject to official notice of issuance) and shall use its reasonable best efforts to maintain such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents. The Company shall use
its reasonable best efforts to 

  

 - 16 - 

 
maintain the Common Stocks’ authorization for quotation on the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action
that would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f). 
  
 (g) Fees. The Company shall reimburse Amphora Limited (a Buyer) or its
designee(s) for all reasonable costs and expenses incurred in connection with the transactions contemplated by the Transaction Documents (including all reasonable legal fees and disbursements in connection therewith, documentation and implementation
of the transactions contemplated by the Transaction Documents and due diligence in connection therewith), which amount shall be withheld by such Buyer from its Purchase Price at the Closing. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby, including, without limitation, any fees or
commissions payable to the Agent. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any
claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers. 
  
 (h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not
be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including, without limitation, Section 2(f) hereof; provided that an Investor and its pledgee shall be required to comply with the provisions of Section 2(f) hereof in order to effect a sale,
transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by an
Investor. 
  
 (i) Disclosure of Transactions and Other Material
Information. On or before 8:30 a.m., New York Time, on the first Business Day following the date of this Agreement, the Company shall file a press release and a Current Report on Form 8-K describing the terms of the transactions contemplated by
the Transaction Documents in the form required by the 1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of each of the Notes, the form of Warrant,
the Registration Rights Agreement and the Security Documents) as exhibits to such filing (including all attachments, the “8-K Filing”). From and after the filing of the 8-K Filing with the SEC, no Buyer shall be in possession of any
material, nonpublic information received from the Company, any of its Subsidiaries or any of its respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees and agents, not to, provide any Buyer, and no Buyer shall request, with any material, nonpublic information regarding the 

  

 - 17 - 

 
Company or any of its Subsidiaries from and after the filing of the 8-K Filing with the SEC without the express written consent of such Buyer. In the event
of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Buyer
shall have the right to request the Company to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents. No Buyer shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents for any such
disclosure. Subject to the foregoing, neither the Company nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company in connection with and given an opportunity to review and comment on any such press release or other public disclosure prior to its
release). Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Buyer, or include the name of any Buyer in any filing with the SEC or any regulatory agency or the Principal Market, without the prior written consent
of such Buyer, except (i) for disclosure thereof in the 8-K Filing or Registration Statement or (ii) as required by law or Principal Market regulations or any order of any court or other governmental agency, in which case the Company shall provide
such Buyer with prior notice of such disclosure. 
  
 (j)
Restriction on Redemption and Cash Dividends. So long as any Notes are outstanding, the Company shall not, directly or indirectly, redeem (other than pursuant to the terms of any employee benefit plan that does not relate to an officer or
director or an Affiliate of an officer or director which has been approved by the Board of Directors of the Company), or declare or pay any cash dividend or distribution on, the Common Stock without the prior express written consent of the holders
of Notes representing not less than a majority of the aggregate principal amount of the then outstanding Notes. 
  
 (k) Additional Notes; Variable Securities; Dilutive Issuances. So long as any Buyer beneficially owns any Securities, the Company will not issue
any Notes other than to the Buyers as contemplated hereby and the Company shall not issue any other securities that would cause a breach or default under the Notes. For long as any Notes or Warrants remain outstanding, the Company shall not, in any
manner, issue or sell any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which varies or may vary with the market price of
the Common Stock, including by way of one or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such security cannot be less than the then applicable Conversion Price (as defined in the Notes) with respect to
the Common Stock into which any Note is convertible or the then applicable Exercise Price (as defined in the Warrants) with respect to the Common Stock into which any Warrant is exercisable. For long as any Notes or Warrants remain outstanding, the
Company shall not, in any manner, enter into or affect any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance is to cause the Company to be required to issue upon conversion of any Note or exercise of any 

 

 - 18 - 

 Warrant any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon
conversion of the Notes and exercise of the Warrants without breaching the Company’s obligations under the rules or regulations of the Principal Market; provided, further, that notwithstanding the foregoing, the Company shall not
enter into or affect any Dilutive Issuance prior to receiving Stockholder Approval (as defined below). 
  
 (l) Corporate Existence. So long as any Buyer beneficially owns any Securities, the Company shall not be party to any Fundamental Transaction (as
defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes and the Warrants. 
  
 (m) Reservation of Shares. The Company shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, after the Closing Date, 120% of the number of shares of Common Stock issuable upon conversion of all of the Notes and shares of Common Stock issuable upon exercise of the Warrants. 
  
 (n) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect. 
  
 (o) Additional Issuances of Securities. 
  
 (i) For purposes of this Section 4(o), the following definitions shall
apply. 
  
 (1) “Convertible
Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for shares of Common Stock. 
  
 (2) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible
Securities. 
  
 (3) “Common Stock
Equivalents” means, collectively, Options and Convertible Securities. 
  
 (ii) From the date hereof until the date that is 30 Trading Days (as defined in the Notes) following the Effective Date (as defined in the Registration Rights Agreement) (the “Trigger Date”), the
Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its Subsidiaries’ equity or equity
equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for shares of Common
Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”). 
  

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 (iii) From the Trigger Date until the two year anniversary of the Trigger Date, the Company will not,
directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4(o)(iii). 
  
 (1) The Company shall deliver to each Buyer a written notice (the “Offer Notice”) of any proposed or intended
issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Buyers a pro rata portion of 67% of the Offered Securities allocated among such Buyers (a) based on such Buyer’s pro rata
portion of the aggregate principal amount of Notes purchased hereunder (the “Basic Amount”), and (b) with respect to each Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable
to the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”). 
  
 (2) To accept an Offer, in whole or in part, such Buyer
must deliver a written notice to the Company prior to the end of the tenth (10th) Business Day after such
Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that
if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts,
subject to rounding by the Company to the extent its deems reasonably necessary. 
  
 (3) The Company shall have ten (10) Business Days from the expiration of the Offer Period above to offer, issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Buyers (the “Refused Securities”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms
and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the Offer Notice. 
  

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 (4) In the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section 4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which shall be the number or
amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities. In the event that any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyers in accordance with Section 4(o)(iii)(1) above. 
  
 (5) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities,
the Buyers shall acquire from the Company, and the Company shall issue to the Buyers, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(3) above if the Buyers have so elected,
upon the terms and conditions specified in the Offer. The purchase by the Buyers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Buyers of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to the Buyers and their respective counsel. 
  
 (6) Any Offered Securities not acquired by the Buyers or other persons in accordance with Section 4(o)(iii)(3) above may not be issued,
sold or exchanged until they are again offered to the Buyers under the procedures specified in this Agreement. 
  
 (iv) The restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall not apply in connection with the issuance of any Excluded
Securities (as defined in the Notes). 
  
 (p) Integration.
None of the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to in Section 3(h) that would require registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings. 
  
 (q)
Appointment of Collateral Agent. Amphora Limited (the “Collateral Agent”) is hereby appointed as the collateral agent for the Buyers hereunder, and each Buyer hereby authorizes the Collateral Agent (and its officers,
directors, employees and agents) to take any and all such actions on behalf of the Buyers with respect to the Collateral and the Obligations in accordance with the terms of this Agreement. The Collateral Agent shall not have, by reason hereof or any
of the other Transaction Documents, a fiduciary relationship in respect of any Buyer. Neither the Collateral Agent nor any of its officers, directors, employees and agents shall 

  

 - 21 - 

 
have any liability to any Buyer for any action taken or omitted to be taken in connection hereof except to the extent caused by its own gross negligence or
willful misconduct, and each Buyer agrees to defend, protect, indemnify and hold harmless the Collateral Agent and all of its officers, directors, employees and agents (collectively, the “Indemnitees”) from and against any losses,
damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such Indemnitee, whether direct, indirect or
consequential, arising from or in connection with the performance by such Indemnitee of the duties and obligations of Collateral Agent pursuant hereto. 
  
 (r) Participation in Right of Set-Off Under the Guaranty. If any Buyer shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of any Guaranteed Obligation (as defined in the Form of Guaranty attached as Exhibit E hereto) in excess of its ratable share of payments on account of similar obligations obtained by
all the Buyers, such Buyer shall forthwith purchase from the other Buyers such participations in such similar obligations held by them as shall be necessary to cause such purchasing Buyer to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Buyer, such purchase from each Buyer shall be rescinded and such Buyer shall repay to the purchasing Buyer the purchase
price to the extent of such recovery together with an amount equal to such Buyer’s ratable share (according to the proportion of (i) the amount of such Buyer’s required repayment to (ii) the total amount so recovered from the purchasing
Buyer of any interest or other amount paid by the purchasing Buyer in respect of the total amount so recovered). The Borrower agrees that any Buyer so purchasing a participation from another Buyer pursuant to this Section 4(r) may, to the fullest
extent permitted by law, exercise all of its rights (including the Buyer’s right of set-off) with respect to such participation as fully as if such Buyer were the direct creditor of the Borrower in the amount of such participation. 

 
 (s) Letter of Credit. 
  
 (i) The Company shall obtain an irrevocable letter of credit (the
“Letter of Credit”), in the amount of $10,000,000 issued in favor of the Senior Agent by a bank acceptable to such Senior Agent (the “Letter of Credit Bank”) and in form and substance acceptable to such Senior
Agent. The Letter of Credit shall have an expiration date that is not earlier than 100 days after the Maturity Date of the Notes (the “LC Expiration Date”). Upon the occurrence and during the continuance of an Event of Default under
(and as defined in) any of the Notes, the Senior Agent shall be entitled to draw under the Letter of Credit for the full Letter of Credit Amount (as defined in the Notes) than available thereunder, to be held by the Senior Agent as cash collateral
for and/or applied to the Obligations in accordance with the terms of (and as defined in) the Pledge and Security Agreement. The Company shall obtain such renewals, extensions or replacements of the Letter of Credit as necessary to ensure that the
Letter of Credit shall not expire prior to the LC Expiration Date (unless the Letter of Credit shall have been reduced to zero in accordance with Section 17 of the Notes prior to such date). If, at any time, the Company cannot obtain a renewal,
extension or replacement of the Letter of Credit such that the Letter of Credit will expire prior to the LC Expiration Date (a “Withdrawal Event”), the Company and the Letter of Credit Bank shall each give the Senior Agent written
notice of the occurrence of a Withdrawal Event at least forty-five (45) days prior to the then 

  

 - 22 - 

 
current expiration date of the Letter of Credit. Following a Withdrawal Event, the Senior Agent shall be entitled to draw down the Letter of Credit Amount in
its entirety (whether or not an Event of Default shall have occurred or be continuing under any of the Notes) and hold such amount as cash collateral subject to the terms of the Pledge and Security Agreement. 
  
 (ii) In the event any holder of a Note requires the Company to redeem any
Conversion Amount (as defined in the Notes) (such amount, the “Redemption Amount”) on any Optional Redemption Date (as defined in the Notes) in accordance with Section 9 of the Notes, the Senior Agent shall be entitled to, on behalf
of any such holder, draw under the Letter of Credit for payment of all or a portion of the Holder Optional Redemption Price due from the Company in connection with such Holder Optional Redemption (each as defined in the Notes). 
  
 (iii) In the event that the conditions set forth in Section 17 of the Notes
that trigger a reduction in the Letter of Credit Amount are satisfied, the Company shall promptly deliver a written notice to the Senior Agent (the “Letter of Credit Notice”), certifying as to the satisfaction of such
conditions (together with a calculation of the relevant “Profitability Target” (as defined in the Notes) and the reduction of the Letter of Credit Amount. Within 10 days of the receipt of the Letter of Credit Notice, the Senior
Agent shall issue a written instruction to the Letter of Credit Bank to request the reduction of the Letter of Credit Amount as set forth in the Letter of Credit Notice. 
  
 (t) Form S-3 Eligibility. The Company shall use its best efforts to maintain the eligibility of its registration
statement on Form S-3 so that it is available for the registration of the resale of Registrable Securities. 
  
 (u) Holding Period. For the purposes of Rule 144, the Company acknowledges that the holding period of the Conversion Shares may be tacked onto the
holding period of the Notes and the holding period of the Warrant Shares may be tacked onto the holding period of the Warrants (in the case of Cashless Exercise (as defined in the Warrants)) and the Company agrees not to take a position contrary to
this Section 4(t). 
  
 (v) Stockholder Approval. Prior to
any Dilutive Issuance (as defined in the Notes), the Company shall provide each stockholder entitled to vote at a special or annual meeting of stockholders of the Company (the “Stockholder Meeting”), a proxy statement, substantially
in the form which has been previously reviewed by the Buyers and a counsel of their choice, soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of resolutions providing for the Company’s Dilutive
Issuance in accordance with applicable law and the rules and regulations of the Principal Market (such affirmative approval being referred to herein as the “Stockholder Approval”). The Company shall not be permitted to conduct such
Dilutive Issuance without obtaining the Stockholder Approval. 
  
 (w) Guaranty. If any of the Company’s Subsidiaries in existence as of the date hereof ever become active or have assets, operations or income, or if the Company or any other Grantor (as defined in the Pledge and Security
Agreement) shall hereafter own, create or acquire any other Subsidiary that is not a Grantor hereunder or a party to the Guaranty, then, Company or such other Grantor shall promptly notify the Collateral Agent thereof and, upon the Collateral
Agent’s request, Company or such other such Grantor shall cause such Subsidiary to become a 

  

 - 23 - 

 
party to the Guaranty, in the form attached hereto as Exhibit E, as an additional “Guarantor” thereunder and a party to the Pledge and
Security Agreement as an additional “Grantor” hereunder, and to duly execute and/or deliver such opinions of counsel and other documents, in form and substance reasonably acceptable to the Collateral Agent, as the Collateral Agent shall
reasonably request with respect thereto. 
  
 (x)
Acquisitions. The Company shall not, and shall not permit any of its Subsidiaries to, acquire or enter into any agreement to acquire, whether through the acquisition of stock or assets or merger or otherwise, of any business, assets or
technologies for a period of thirty (30) days after the Closing Date; provided, however, that the Company and its Subsidiaries may make an acquisition or acquisitions that in the aggregate do not exceed $10 million. 
  
 5. REGISTER; TRANSFER AGENT INSTRUCTIONS. 
  
 (a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Notes and the Warrants, in which the Company shall record the name and address of the Person in whose name the
Notes and the Warrants have been issued (including the name and address of each transferee), the principal amount of Notes held by such Person, the number of Conversion Shares issuable upon conversion of the Notes and Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives. 
  
 (b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued at the Closing or upon conversion of the Notes or exercise of the Warrants in such amounts as specified from time to time by each Buyer to the Company upon conversion of
the Notes or exercise of the Warrants in the form of Exhibit F attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent, and that the Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(f), the Company shall permit the transfer and shall
promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the 

  

 - 24 - 

 
Company of the provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 
  
 6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. 
  
 (a) Closing Date. The obligation of the Company hereunder to issue
and sell the Notes and the related Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and
may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof: 
  
 (i) Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company. 
  
 (ii) Such Buyer and each other Buyer shall have delivered to the Company the
Purchase Price (less, in the case of Amphora Limited, the amounts withheld pursuant to Section 4(g)) for the Notes and the related Warrants and being purchased by such Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company. 
  
 (iii) The
representations and warranties of such Buyer shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date. 
  
 7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. 
  
 (a) Closing Date. The obligation of each Buyer hereunder to purchase
the Notes and the related Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior written notice thereof: 
  
 (i) The Company and, to the extent it is a party thereto, each of it Subsidiaries, shall have executed and delivered to such Buyer (i) each of the
Transaction Documents, (ii) the Notes (in such principal amounts as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement and (iii) the Warrants (in such amounts as such Buyer shall request) being
purchased by such Buyer at the Closing pursuant to this Agreement. 
  

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 (ii) Such Buyer shall have received the opinions of Paul, Hastings, Janofsky & Walker LLP, the
Company’s outside counsel, dated as of the Closing Date, in substantially the form of Exhibit G attached hereto. 
  
 (iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit F attached
hereto, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent. 
  
 (iv) The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company in such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date within 10 days of the Closing Date. 
  
 (v) The Company shall have delivered to such Buyer a certificate evidencing the Company’s qualification as a foreign corporation and good standing
issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company is qualified as a foreign corporation, as of a date within 10 days of the Closing Date. 
  
 (vi) The Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by
the Secretary of State of the State of Delaware within ten (10) days of the Closing Date. 
  
 (vii) The Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the
Company’s Board of Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the form attached hereto as Exhibit H. 
  
 (viii) The representations and warranties of the Company shall be true and
correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to
the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form attached hereto as Exhibit I. 
  
 (ix) The Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date. 
  
 (x) The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the 

  

 - 26 - 

 
SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below
the minimum listing maintenance requirements of the Principal Market. 
  
 (xi) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities. Without limiting the generality of the foregoing, the Company shall also have
obtained the consent or waiver of the Lenders (as defined below) under the documents and agreements evidencing or relating to the Senior Indebtedness, with respect to (A) the issuance of the Notes and the Warrants and (B) the granting of the
security interests in the Collateral to secure the Notes, subject to any prior perfected security interests securing the Senior Indebtedness, together with such other agreements as the Buyers shall reasonably require to ensure that the Buyers enjoy
full rights with respect to the Collateral, evidence of which shall have been provided to the Buyers. 
  
 (xii) Within six (6) Business Days prior to the Closing, the Company shall have delivered or caused to be delivered to each Buyer certified copies of UCC
financing statement search results listing any and all effective financing statements filed within five (5) years prior to such date in any applicable jurisdiction that name the Company or any of its Subsidiaries as a debtor to perfect an interest
in any of the assets thereof, together with copies of such financing statements, none of which financing statements, except for any financing statements filed with respect to the Senior Indebtedness and as otherwise agreed to in writing by the
Buyers, shall cover any of the “Collateral” (as defined in the Security Documents), and the results of searches for any effective tax liens and judgment liens filed against any such Person or its property in any applicable jurisdiction,
which results, except as otherwise agreed to in writing by the Buyers, shall not show any such effective tax liens and judgment liens. 
  
 (xiii) The Company shall have delivered the Letter of Credit, in the amount of $10,000,000 issued by the Letter of Credit Bank in favor of the Senior
Agent. 
  
 (xiv) The Company shall have entered into a standstill
agreement with Wells Fargo Bank, National Association, Union Bank of California, N.A. and Comerica Bank-California (collectively, the “Lenders”) in form and substance reasonably satisfactory to the Buyers and their respective
counsel pursuant to which the Lenders shall have agreed to refrain from exercising any remedies against the Company for a period of 90 days after the Closing Date. 
  
 (xv) The Company shall have delivered to such Buyer such other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request. 
  
 8. TERMINATION. In the event that the Closing shall not have occurred with respect to a Buyer on or before five (5) Business Days from the date hereof due to the Company’s or such Buyer’s failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party; provided, however, if this Agreement is terminated pursuant to this Section 8, the Company shall remain obligated to reimburse the non-breaching Buyers for the
amounts described in Section 4(g) above. 
  

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 9. MISCELLANEOUS. 
  
 (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the State 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, 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such 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 HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 
  
 (b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which 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; provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. 
  
 (c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this
Agreement. 
  
 (d) Severability. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction. 
  
 (e)
Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither 

  

 - 28 - 

 
the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the holders of at least a majority of the aggregate number of Registrable Securities issued and issuable hereunder, and any amendment to this Agreement made in conformity with
the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all of the holders of the applicable Securities then outstanding. No consideration 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 also is offered to all of the parties to the Transaction Documents, holders of Notes, or holders of the Warrants, as the case may be. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. 
  
 (f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be: 
  
 If to the Company: 
  
 Modtech Holdings, Inc.

 2830 Barrett Avenue 
 Perris,
California 92571 
 Telephone: (951) 943-4014 
 Facsimile: (951) 940-0427 
 Attention: Dennis Shogren, Chief Financial Officer 
  
 Copy to: 
  
 Paul, Hastings, Janofsky & Walker LLP 
 695 Town Center Drive 
 Seventeenth Floor 
 Costa Mesa, CA 92626-1924 
 Telephone: (714)
668-6200 
 Facsimile: (714) 979-1921 
 Attention: William J. Simpson, Esq. 
  

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 If to the Transfer Agent: 
  
 Mellon Investor Services LLC 
 400 S. Hope Street, 4th Floor 
 Los Angeles, California 90071 
 Telephone: (213) 553-9724 
 Facsimile: (213)
553-9735 
 Attention: Raymond Torres 
  
 If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers, 
  
 with a copy (for informational purposes only) to:

  
 Schulte Roth & Zabel LLP 
 919 Third Avenue 
 New York, New York 10022

 Telephone: (212) 756-2000 
 Facsimile: (212) 593-5955 
 Attention: Eleazer N. Klein, Esq. 
  
 or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission (C) provided by an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively; provided however that the foregoing clause (B) shall only be valid if such communication contained in the facsimile
is delivered by an overnight courier service within 24 hours of the transmission of facsimile. 
  
 (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Notes or the Warrants. The
Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the holders of at least a majority of the aggregate number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes and the Warrants). A Buyer may assign some or all of its rights hereunder without the consent
of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights. 
  
 (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 
  

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 (i) Survival. Unless this Agreement is terminated under Section 8, the representations and
warranties of the Company and the Buyers contained in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder. 
  
 (j) Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 
  
 (k) Indemnification. In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in any Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company contained in any Transaction Documents or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of any Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or (iii) the status of such Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement. 
  
 (l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 
  
 (m) Remedies. Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights 

  

 - 31 - 

 
which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it
fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled to seek
temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or other security. 
  
 (n) Payment Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder or 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, foreign,
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. 
  
 (o) Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under any Transaction Document are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any
way for the performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute
the Buyers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Buyers 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 Buyer confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such
purpose. 
  
 [Signature Page Follows] 
  

 - 32 - 

 IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written above. 
  

			
	COMPANY:
	
	MODTECH HOLDINGS, INC.
		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  
 [Signature Page to Securities Purchase Agreement] 

 IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written above. 
  

					
	BUYERS:
	
	AMPHORA LIMITED
	 	 	By:	 	 Amaranth Advisors L.L.C.,

	 	 	 	 	 Its Trading Advisor

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  
 [Signature Page to Securities Purchase Agreement] 

 SCHEDULE OF BUYERS 
  

													
	 (1)

	  	 (2)

	  	(3)

	  	 (4)

	  	(5)

	  	 (6)

	 Buyer

	  	 Address and
 Facsimile Number

	  	Aggregate
Principal
Amount of Notes

	  	 Number of
Warrant Shares

	  	Purchase Price

	  	 Legal Representative’s Address
and Facsimile Number

	 Amphora Limited
	  	c/o Amaranth Advisors L.L.C. One American Lane Greenwich, CT 06831 Attention: General Counsel Facsimile: (203) 422-3540 Telephone: (203) 422-3340 Residence: Cayman
Islands	  	$	25,000,000	  	 	  	$	25,000,000	  	 Schulte Roth & Zabel LLP 919 Third Avenue
 New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376

  

 EXHIBITS 
  

			
	Exhibit A	  	Form of Notes
		
	Exhibit B	  	Form of Warrants
		
	Exhibit C	  	Registration Rights Agreement
		
	Exhibit D	  	Form of Pledge and Security Agreement
		
	Exhibit E	  	Form of Guaranty
		
	Exhibit F	  	Irrevocable Transfer Agent Instructions
		
	Exhibit G	  	Form of Outside Company Counsel Opinion
		
	Exhibit H	  	Form of Secretary’s Certificate
		
	Exhibit I	  	Form of Officer’s CertificateForm of Senior Subordinated Secured Convertible Note, dated December 30, 2004

 Exhibit 4.2 
  
 [FORM OF SENIOR SUBORDINATED SECURED CONVERTIBLE NOTE] 
  
 NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY
TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN
THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. 
  
 MODTECH HOLDINGS, INC. 
  
 SENIOR SUBORDINATED SECURED CONVERTIBLE NOTE 
  

			
	Issuance Date: December 31, 2004	 	Principal: U.S. $25,000,000

  
 FOR VALUE
RECEIVED, Modtech Holdings, Inc., a Delaware corporation (the “Company”), hereby promises to pay to AMPHORA LIMITED or registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant
to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms
hereof) and to pay interest (“Interest”) on any outstanding Principal at the rate of 7.00% per annum (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance
Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below), the Maturity Date, acceleration, conversion, redemption or otherwise (in each case, in accordance with the terms hereof). This Senior
Subordinated Secured Convertible Note (including all Senior Subordinated Secured Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Senior Subordinated Secured Convertible Notes
issued pursuant to the Securities Purchase Agreement (as defined below) on the Closing Date (collectively, the “Notes” and such other Senior Subordinated Secured Convertible Notes, the “Other Notes”). Certain
capitalized terms used herein are defined in Section 31. 

 (1) MATURITY. On the Maturity Date, the Holder shall surrender the Note to the Company and the
Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest. The “Maturity Date” shall be December 31, 2009, as may be extended at the option of the Holder (i) in the
event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event
of Default and (ii) through the date that is ten (10) days after the consummation of a Change of Control in the event that a Change of Control is publicly announced or a Change of Control Notice (as defined in Section 5(b)) is delivered prior to the
Maturity Date. 
  
 (2) INTEREST; INTEREST RATE. Interest on
this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year comprised of twelve 30-day months and shall be payable in arrears on the first day of each January, April, July and October during the period
beginning on the Issuance Date and ending on, and including, the Maturity Date (each, an “Interest Date”) with the first Interest Date being April 1, 2005. Interest shall be payable on each Interest Date in cash. Prior to the
payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i). From and after the occurrence of an
Event of Default, the Interest Rate shall be increased to twelve and one-half percent (12.5%) (the “Default Rate”); provided, however, that the Interest Rate shall not increase to the Default Rate so long as, but only to the extent
that, (a) such Event of Default results solely from the Company’s failure to satisfy or otherwise comply with any financial covenant in accordance with Section 15(e) hereof and (b) the lenders under the Current Credit Facility agree in writing
to (i) waive each Event of Default under (and as defined in) the Current Credit Facility that results solely from the Company’s failure to satisfy or otherwise comply with any financial covenant in the Current Credit Facility that directly
corresponds to such Section 15(e) financial covenant(s) and (ii) forbear in the exercise of any rights and remedies relating to such Event of Default under the Current Credit Facility. In the event that such Event of Default is subsequently cured,
the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to
the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. 
  
 (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Company’s common stock, par value $.01 per share (the
“Common Stock”), on the terms and conditions set forth in this Section 3. 
  
 (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion
Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon 

  

 - 2 - 

 
any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount; provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved in the issue and delivery of Common Stock to any Person other than the Holder or with respect to any income tax due by the Holder with respect to such Common Stock
issued upon conversion. 
  
 (b) Conversion Rate. The
number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (such number of shares, the “Conversion
Rate”). 
  
 (i) “Conversion Amount”
means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made and (B) accrued and unpaid Interest with respect to such Principal. 
  
 (ii) “Conversion Price” means, as of any Conversion Date
(as defined below) or other date of determination a price equal to the greater of (A) the product of (x) 115% and (y) the arithmetic average of the Weighted Average Price of the Common Stock on the five (5) Trading Days commencing with the First
Trading Day after the Subscription Date and (B) $8.61, each subject to adjustment as provided herein.. 
  
 (c) Mechanics of Conversion. 
  
 (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the
Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company and (B) if required by Section 3(c)(iii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking reasonably
satisfactory to the Company with respect to this Note in the case of its loss, theft or destruction) and (C) pay any transfer taxes or other applicable taxes or duties, if any, required in connection with the issuance of shares of Common Stock to a
Person other than the Holder. On or before the first (1st) Business Day following the date of receipt of a
Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third (3rd) Business Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the
Company shall (X) provided that the Transfer Agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall
be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be 

  

 - 3 - 

 
entitled. If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than
the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new
Note (in accordance with Section 21(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion Date. 
  
 (ii) Company’s Failure to Timely Convert. If the Company shall fail to issue a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is five Business Days after the Conversion Date (a “Conversion Failure”), then (A) the Company shall pay damages to the Holder for
each day of such Conversion Failure in an amount equal to 1.5% of the product of (I) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, and (II) the
Closing Sale Price of the Common Stock on the Share Delivery Date and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Note that
has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to
this Section 3(c)(ii) or otherwise. In addition to the foregoing, if within three (3) Trading Days after the Company’s receipt of the facsimile copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder
or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount, and if on or after such Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the
Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and
other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock times (B) the Closing Bid Price on the Conversion Date. 
  
 (iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically
surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice)
requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal, Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note upon conversion. 
  

 - 4 - 

 (iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice
from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes
electing to have Notes converted on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate
principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the
number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 26. 
  
 (d) Limitations on Conversions. 
  
 (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be
issuable upon (A) conversion of the remaining, nonconverted portion of this Note 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 Notes or warrants) 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 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall
within one Business Day 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 Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may increase or
decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes.

  

 - 5 - 

 (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of
Common Stock upon conversion of this Note, and the Holder of this Note shall not have the right to receive upon conversion of this Note any shares of Common Stock (and only such shares of Common Stock), if the issuance of such shares of Common Stock
would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion or exercise, as applicable, of the Notes and Warrants without breaching the Company’s obligations under the rules or regulations of the
Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances
of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Required Holders. Until such approval or written
opinion is obtained, no purchaser of the Notes pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued in the aggregate, upon conversion or exercise, as applicable, of Notes or Warrants, shares of Common
Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of Notes issued to the Purchasers pursuant to the Securities Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to the Purchasers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the
event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall
apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Notes shall convert all of such holder’s Notes into a number of shares of Common Stock which, in
the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes then held by each such holder. 
  
 (4) RIGHTS UPON EVENT OF DEFAULT. 
  
 (a) Event of Default. Each of the following events shall constitute an “Event of Default”:

  
 (i) the failure of the applicable Registration Statement
required to be filed pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is sixty (60) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), or,
while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities (as defined in the Registration Rights 

  

 - 6 - 

 
Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive
days or for more than an aggregate of thirty (30) days in any 365-day period (other than days during an Allowable Grace Period (as defined in the Registration Rights Agreement)); 
  
 (ii) the suspension from trading or failure of the Common Stock to be listed on an Eligible Market for a period of five (5)
consecutive days or for more than an aggregate of ten (10) days in any 365-day period; 
  
 (iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within ten (10) Business Days after the applicable Conversion Date or (B) notice, written
or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a permitted request for conversion of any Notes into shares of Common Stock that is tendered
in accordance with the provisions of the Notes (other than notice delivered by the Company in good faith in connection with a dispute that is being resolved in accordance with Section 26 as to the appropriate number of shares of Common Stock to be
delivered upon conversion of the Notes so long as the Company timely delivers any shares not subject to such dispute and following the resolution of such dispute the Company delivers such appropriate number of shares to the Holder within two (2)
days of such resolution); 
  
 (iv) if at any time following the
tenth (10th) consecutive Business Day that the Holder’s Authorized Share Allocation is less than the number of
shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise); 
  
 (v) the Company’s failure to pay to the Holder any amount of Principal,
Interest or other amounts when and as due under this Note (including, without limitation, the Company’s failure to pay any redemption payments, premiums or other amounts hereunder) or any other Transaction Document (as defined in the Securities
Purchase Agreement) except, in the case of a failure to pay Interest when and as due, in which case only if such failure continues for a period of at least three (3) Business Days after written notice thereof is delivered to the Company; 

 
 (vi) any acceleration prior to maturity of any Indebtedness (as defined
in Section 3(s) of the Securities Purchase Agreement) in excess of $3,000,000 in the aggregate of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any Other Notes;

  
 (vii) the Company or any of its Subsidiaries, pursuant to or
within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it
in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that
it is generally unable to pay its debts as they become due; 
  

 - 7 - 

 (viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is
for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries; 
  
 (ix) a final judgment or judgments for the payment of money aggregating in
excess of $1,000,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days
after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $1,000,000 amount set forth above so long as the Company
provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will
receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment; 
  
 (x) the Company breaches, in any material manner, any representation, warranty, covenant (other than the covenants set forth in Section 15 of this Note)
or other term or condition of any Transaction Document, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least thirty (30) consecutive days after written notice thereof is delivered to
the Company; 
  
 (xi) any breach or failure to comply with
Section 15 of this Note; or 
  
 (xii) any Event of Default (as
defined in the Other Notes) occurs with respect to any Other Notes. 
  
 (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or any Other Note, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of
Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion
of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each
portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount to be redeemed and (y) the Redemption Premium
and (ii) the product of (A) the Conversion Rate with respect to such Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice, and (B) the Closing Sale Price of the Common Stock on the date immediately
preceding such Event of Default (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 13. 
  

 - 8 - 

 (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL. 
  
 (a) Assumption. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written
agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the
Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the
Notes held by such holder and having similar ranking to the Notes, and satisfactory to the Required Holders, (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market and (iii) the consummation of such Fundamental Transaction shall not result in the Successor Entity’s failure to satisfy the financial covenants in Section 15(e) of this Note. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of
the Company’s Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property
whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental
Transaction, as adjusted in accordance with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion
or redemption of this Note. 
  
 (b) Redemption Right. No
sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and
overnight courier to the Holder (a “Change of Control Notice”). At any time during the period (the “Change of Control Period”) beginning after the Holder’s receipt of a Change of Control Notice and
ending on the date of the consummation of such Change of Control (or, in the event a Change of Control Notice is not delivered at least ten (10) days prior to a Change of Control, at any time on or after the date which is ten (10) days prior to a
Change of Control and ending ten (10) days after the consummation of such Change of Control), the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption
Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to 

  

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redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the Company in cash at a price equal to the product of
the (i) Change of Control Premium multiplied by (ii) the greater of (x) the product of (I) the Conversion Amount being redeemed and (II) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately after the public
announcement of such proposed Change of Control by (B) the Conversion Price, (y) the Conversion Amount being redeemed and (z) the product of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of
Common Stock to be paid to the holders of the Common Stock upon consummation of the Fundamental Transaction and (II) the quotient determined by dividing (A) the Conversion Amount being redeemed by (B) the Conversion Price (the “Change of
Control Redemption Price”). Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 13 and shall have priority to payments to stockholders in connection with a Change of Control. Notwithstanding
anything to the contrary in this Section 5, until the Change of Control Redemption Price (together with any interest thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(c) (together with any interest
thereon) may be converted, in whole or in part, by the Holder into Common Stock, or in the event the Conversion Date is after the consummation of the Change of Control, shares of stock or equity interests of the Successor Entity substantially
equivalent to the Company’s Common Stock pursuant to Section 3. 
  
 (c) Change of Control Premium Upon Conversion. Upon any conversion of any Conversion Amount of this Note during the Change of Control Period, the Holder shall be entitled to receive on the applicable Conversion Date an amount in cash
equal to (i) the product of (x) the Change of Control Premium and (y) the applicable Conversion Amount minus (ii) the applicable Conversion Amount. 
  
 (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. 
  
 (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or
restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights. 
  
 (b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock
are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the
right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon 

  

 - 10 - 

 
such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of
Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable
upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding
sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion
or redemption of this Note. 
  
 (7) RIGHTS UPON ISSUANCE OF
OTHER SECURITIES. 
  
 (a) Adjustment of Conversion Price
upon Issuance of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Security or for which the Holder has a participation
right pursuant to Section 18) for a consideration per share (the “New Issuance Price”) less than a price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such issue or
sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the product of (A) the Conversion Price in effect immediately
prior to such Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the Conversion Price in effect immediately prior to such Dilutive Issuance and the number of shares of Common Stock
Deemed Outstanding immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion Price in effect immediately prior
to such Dilutive Issuance by (II) the number of shares of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable:

  
 (i) Issuance of Options. If the Company in any manner
grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such
Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of
this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such
Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company 

  

 - 11 - 

 
with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion or exchange or exercise of
any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities. 
  
 (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share
for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company
at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the “price per share for which one share of Common Stock is issuable upon such conversion or exchange or
exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon conversion or exchange or exercise of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further
adjustment of the Conversion Price shall be made by reason of such issue or sale. 
  
 (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any
Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially
granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are changed in the manner described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an
increase of the Conversion Price then in effect. 
  
 (iv)
Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the 

  

 - 12 - 

 
consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity
in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the Required Holders. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Required
Holders. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. 
  
 (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the
issue or sale of the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

  
 (vi) Until such time as the Company receives the Stockholder
Approval, no adjustment pursuant to this Section 7(a) shall cause the Conversion Price to be less than $8.57 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction) (the “Minimum
Conversion Price”). 
  
 (b) Adjustment of Conversion
Price upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. 
  
 (c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of
Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

  

 - 13 - 

 (8) COMPANY’S RIGHT OF MANDATORY REDEMPTION. 
  
 (a) Mandatory Redemption. If at any time from and after the third
anniversary of the Issuance Date (the “Mandatory Redemption Eligibility Date”), (i) the Weighted Average Price of the shares of Common Stock exceeds 175% of the Conversion Price as of the Issuance Date (subject to appropriate
adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the Issuance Date) for each of any twenty (20) consecutive Trading Days following the Mandatory Redemption Eligibility Date (the
“Mandatory Redemption Measuring Period”) and (ii) the Equity Conditions shall have been satisfied or waived in writing by the Holder from and including the Mandatory Redemption Notice Date (as defined below) through and including
the Mandatory Redemption Date (as defined below), the Company shall have the right to redeem all or any portion of the Conversion Amount then remaining under this Note as designated in the Mandatory Redemption Notice, as of the Mandatory Redemption
Date (a “Mandatory Redemption”). The portion of this Note subject to redemption pursuant to this Section 8 shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the
“Mandatory Redemption Price”) on the Mandatory Redemption Date (as defined below). The Company may exercise its right to require redemption under this Section 8(a) by delivering within not more than (2) Trading Days following
the end of such Mandatory Redemption Measuring Period a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and the Transfer Agent (the “Mandatory Redemption Notice” and
the date all of the holders received such notice is referred to as the “Mandatory Redemption Notice Date”). The Company may deliver one Mandatory Redemption Notice hereunder and the Mandatory Redemption Notice shall be irrevocable.
The Mandatory Redemption Notice shall state (A) the date on which the Mandatory Redemption shall occur (the “Mandatory Redemption Date”) which date shall be not less than thirty (30) days nor more than sixty (60) days after the
Mandatory Redemption Notice Date, and (B) the aggregate Conversion Amount of the Notes which the Company has elected to be subject to Mandatory Redemption from all of the holders of the Notes pursuant to this Section 8 (and analogous provisions
under the Other Notes) on the Mandatory Redemption Date; provided that the Company must redeem no less than $5,000,000 in Principal Amount in such Mandatory Redemption. All Conversion Amounts converted by the Holder after the Mandatory Redemption
Notice Date shall reduce the Conversion Amount of this Note required to be redeemed on the Mandatory Redemption Date. Redemptions made pursuant to this Section 8 shall be made in accordance with Section 13. 
  
 (b) Pro Rata Redemption Requirement. If the Company elects to cause a
Mandatory Redemption pursuant to Section 8(a), then it must simultaneously take the same action with respect to the Other Notes. If the Company elects to cause an Optional Redemption pursuant to Section 8(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then outstanding, then the Company shall require redemption of a Conversion Amount from each of the holders of the Notes equal to the product of (i) the aggregate Conversion
Amount of Notes which the Company has elected to cause to be redeemed pursuant to Section 8(a), multiplied by (ii) the fraction, the numerator of which is the sum of the aggregate initial principal amount of the Notes purchased by such holder and
the denominator of which is the sum of the aggregate initial principal amount of the Notes purchased by all holders (such fraction with respect to each holder is referred to as its “Redemption Allocation Percentage”, and such amount
with respect to each holder is referred 

  

 - 14 - 

 
to as its “Pro Rata Redemption Amount”). In the event that the initial holder of any Notes shall sell or otherwise transfer any of such
holder’s Notes, the transferee shall be allocated a pro rata portion of such holder’s Conversion Allocation Percentage and Redemption Allocation Percentage. 
  
 (c) Mandatory Redemption After Second Anniversary. If at any time from and after the second anniversary of the
Issuance Date and prior to the third anniversary of the Issuance Date, the Weighted Average Price of the shares of Common Stock exceeds 200% of the Conversion Price as of the Issuance Date (subject to appropriate adjustments for stock splits, stock
dividends, stock combinations and other similar transactions after the Issuance Date) for each of any twenty (20) consecutive Trading Days following the second anniversary of the Issuance Date, the Holder and the holders of the Other Notes discuss
with the Company, in good faith, the amendment of this Note and the Other Notes to provide the Company with a right to redeem the Notes at a redemption price not greater than 116% of the Conversion Amount being redeemed. Any such amendment to the
Notes shall be made in accordance with the terms of Section 19. 
  
 (9) HOLDER’S RIGHT OF OPTIONAL REDEMPTION. 
  
 (a) The Holder shall have the right, in its sole discretion to require that the Company redeem a portion of this Note (a “Holder Optional Redemption”) by delivering written notice thereof (a “Holder Optional
Redemption Notice” and, collectively with the Event of Default Redemption Notice, the Change of Control Redemption Notice and the Mandatory Redemption Notice, the “Redemption Notices” and each a “Redemption
Notice”) to the Company no later than twenty (20) Trading Days prior to any Optional Redemption Date. The Holder Optional Redemption Notice shall indicate the Conversion Amount the Holder is electing to have redeemed on such Optional
Redemption Date (the “Holder Optional Redemption Amount”); provided, however, that such Holder Optional Redemption Amount indicated shall not exceed the applicable Optional Redemption Amount. The portion of this Note subject to
redemption pursuant to this Section 9(a) shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the “Holder Optional Redemption Price” and, collectively with the Event of Default
Redemption Price, the Change of Control Redemption Price and the Mandatory Redemption Price, the “Redemption Prices” and, each a “Redemption Price”); provided, however, that, only with respect to the First
Optional Redemption Date and the Second Optional Redemption Date, in the event the Company is prohibited by the terms of the Current Credit Facility and/or the Intercreditor Agreement to redeem in cash (and the Company has not otherwise received any
necessary consent of the requisite parties thereunder to take such action) all or any portion of the Holder Optional Redemption Amount (such amount not able to be redeemed, the “Optional Redemption Shortfall Amount”), the Company
may, at its option, and so long as the Equity Conditions shall have been satisfied (or waived in writing by the Holder) during the period from and including the Company Conversion Notice Due Date through and including the applicable Optional
Redemption Date, satisfy its obligations under this Section 9 with respect to the redemption of all or any portion of such Optional Redemption Shortfall Amount by delivery of shares of Common Stock to the Holder (the “Company Conversion
Option”). If the Company exercises the Company Conversion Option, it shall deliver to the Holder an irrevocable notice no later than fifteen (15) Trading Days prior to the applicable Optional Redemption Date (the “Company

  

 - 15 - 

 
Conversion Notice Due Date”) stating (A) that the Company is exercising such conversion option and (B) the portion of the Optional Redemption
Shortfall Amount that is the subject of the Company Conversion Option (the “Company Conversion Amount”). On the day immediately following the last day of the Company Conversion Measuring Period, the Company shall provide
notice to the Holder of the applicable Company Company Conversion Price. Any Company Conversion Amount shall be converted as of the applicable Optional Redemption Date by dividing such Company Conversion Amount by the Company Conversion Price.

  
 (b) In the event there is an Optional Redemption Shortfall
Amount and the Equity Conditions shall not have been satisfied as required (or waived), the Holder may, at its option, require the Company to redeem all or any portion of the Optional Redemption Shortfall Amount (such amount, the “Holder
Optional Conversion Amount”) on the applicable Optional Redemption Date by delivering shares of Common Stock to the Holder (the “Holder Optional Conversion Option”). The Holder shall state in each Holder Optional Redemption
Notice delivered at any time when the Holder is electing the Holder Optional Conversion Option whether such Holder will exercise the Holder Optional Conversion Option in the event there is an Optional Redemption Shortfall Amount. Any Holder Optional
Conversion Amount shall be converted as of the applicable Optional Redemption Date by dividing such Holder Optional Conversion Amount by the Minimum Conversion Price. 
  
 (c) Redemptions required by this Section 9 shall be made in accordance with the provisions of Section 13 and any
conversions required by this Section upon election by the Company of the Company Conversion Option or the Holder of the Holder Optional Conversion Option shall be made in accordance with the provisions of Section 3(c). Notwithstanding anything to
the contrary in this Section 9, but subject to Section 3(d), until the Holder receives the Redemption Price and/or the shares deliverable in connection with any Company Conversion Amount or Holder Optional Conversion Amount, the Holder Optional
Redemption Amount may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3, and any such conversion shall reduce the Holder Optional Redemption Amount in the manner set forth by the Holder in the applicable
Conversion Notice. 
  

 - 16 - 

 (10) SECURITY. This Note and the Other Notes are secured to the extent and in the manner set forth
in the Security Documents (as defined in the Securities Purchase Agreement). 
  
 (11) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, 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 Note, and will at all times in good faith carry
out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. 
  
 (12) RESERVATION OF AUTHORIZED SHARES. 
  
 (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 130% of the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes, 130% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then
outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required
Reserve Amount”). The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the principal
amount of the Notes held by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a
holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which
ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. 
  
 (b) Insufficient Authorized Shares. If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then
outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized
Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a 

  

 - 17 - 

 
proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock
and to cause its board of directors to recommend to the stockholders that they approve such proposal. 
  
 (13) HOLDER’S REDEMPTIONS. 
  
 (a) Mechanics. The Company shall deliver the applicable Event of Default Redemption Price or Holder Optional Redemption Price to the Holder within
five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice or the Holder Optional Redemption Notice, as the case may be. If the Holder has submitted a Change of Control Redemption Notice in
accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change
of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise. The Company shall deliver the Mandatory Redemption Price to the Holder on the Mandatory Redemption Date. In the event of a redemption of less
than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 21(d)) representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price has not been paid. Upon the
Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 21(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing
Bid Price of the Common Stock during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided 
  
 (b) Redemption by Other Holders. Upon the Company’s receipt of
notice from any of the holders of the Other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or Section 9 (each, an “Other
Redemption Notice”), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and including the date which
is three (3) Business Days after the Company’s receipt of the Holder’s Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices
received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption
Notice and such Other Redemption Notices received by the Company during such seven Business Day period. 
  

 - 18 - 

 (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as
required by law, including, but not limited to, the General Corporation Law of the State of Delaware, and as expressly provided in this Note. 
  
 (15) COVENANTS. 
  
 (a) Rank. All payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall be senior to all other Indebtedness
of the Company and its Subsidiaries, other than Senior Indebtedness (subject to the terms of Section 16 hereof). 
  
 (b) Incurrence of Indebtedness. So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note and the Other Notes and (ii) Permitted Indebtedness. 
  
 (c) Existence of Liens. So long as this Note is outstanding, the
Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens. 
  
 (d) Restricted Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any
Permitted Indebtedness (other than the Senior Indebtedness), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect
to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing. 
  
 (e) Financial Covenants. On and after March 31, 2005, the Company shall satisfy or otherwise comply with each of the
financial covenants set forth in the Exhibit II hereto in each Fiscal Quarter. Notwithstanding the foregoing, if the Current Credit Facility is amended, restated, renewed, refunded or refinanced prior to March 31, 2005, each of the financial
covenants set forth in such amended, restated, renewed, refunded or refinanced facility shall be deemed incorporated herein by reference, with the same effect as if set forth fully herein, and the Company shall, as of the date of such amendment,
restatement, renewal, refunding or refinancing, be required to satisfy or otherwise comply with such covenants; provided, however, that for purposes of complying with this Section 15(e), each of the levels set forth in the covenants stated in the
Current Credit Facility, as currently in effect or as so amended, restated, renewed, refunded or refinanced, shall be relaxed to allow for a ten percent (10%) cushion. The Company shall (i) provide to the Holder a certificate certifying compliance
with these financial covenants, contemporaneously with the delivery of any similar compliance certificate the 

  

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Company is required to provide to the lenders or designated agent under the Current Credit Facility, and (ii) prior to or simultaneously with the delivery to
the Holder of any such compliance certificate stating that the Company has failed to satisfy any financial covenant hereunder, publicly disclose such failure. 
  

(16) SUBORDINATION TO SENIOR INDEBTEDNESS. 
  
 (a) Subordination. The indebtedness represented by this Note and the payment of any Principal, Interest, redemption amount, liquidated damages,
fees, expenses or any other amounts in respect of this Note (collectively, the “Subordinated Indebtedness”) is hereby expressly made subordinate and junior and subject in right of payment (to the extent expressly set forth in
Section 16(b) hereof) to the prior payment in full of all Senior Indebtedness of the Company now outstanding or hereinafter incurred. 
  
 (b) Payment upon Dissolution, Etc. In the event of any bankruptcy, insolvency, reorganization, receivership, composition, assignment for benefit
of creditors or other similar proceeding initiated by or against the Company or any dissolution or winding up or total or partial liquidation or reorganization in bankruptcy of the Company (each, a “Proceeding”), all principal and
interest due upon any Senior Indebtedness shall first be paid in full before the Holder shall be entitled to receive or, if received, to retain any payment or distribution on account of this Note and, during the continuance of any such Proceeding,
any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holder would be entitled with respect to any Subordinated Indebtedness but for the provisions of this Section 16
shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holder who shall have received such payment or distribution, directly to the holders of
the Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of such Senior Indebtedness held by such holder) or their representatives to the extent necessary to pay all such Senior Indebtedness in full after giving
effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holder or any holders of the Notes; provided, however, that notwithstanding anything
to the contrary, in any event the Holder shall be entitled to receive and retain any and all Junior Securities (as defined below). 
  
 (c) Certain Rights. Nothing contained in this Section 16 or elsewhere in this Note or any other Transaction Document, is intended to or shall
impair, as among the Company, its creditors including the holders of Senior Indebtedness and the Holder, the right, which is absolute and unconditional, of the Holder to convert this Note in accordance herewith. 
  
 (d) Rights of Holders Unimpaired. The provisions of this Section 16
are and are intended solely for the purposes of defining the relative rights of the Holder and the holders of Senior Indebtedness and nothing in this Section 16 shall impair, as between the Company and the Holder, the obligation of the Company,
which is unconditional and absolute, to pay to the Holder the Principal hereof (and premium, if any), accrued Interest hereon and all other Subordinated Indebtedness payable hereunder, all in accordance with the terms of this Note. 
  

 - 20 - 

 (e) Junior Securities. As used herein, “Junior Securities” means debt or equity
securities of the Company as reorganized or readjusted, or debt or equity securities of the Company or any other Person provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in
a Proceeding under any applicable law, so long as in the case of debt securities, such Junior Securities are subordinated in right of payment to all Senior Indebtedness and to whatever is issued to the holders of the Senior Indebtedness on account
of the Senior Indebtedness, to the same extent as, or to a greater extent than, the Subordinated Indebtedness is so subordinated as provided for herein. 
  
 (17) REDUCTION OF LETTER OF CREDIT AMOUNT. The Letter of Credit Amount shall be reduced by $5,000,000 or, solely as to the First Optional
Redemption Date in the event an EBITDA Reduction (as defined below) has occurred, $1,700,000, if on any Optional Redemption Date either (a) the holders of the Notes exercise the Holder Optional Redemption on an Optional Redemption Date for the
Aggregate Optional Redemption Amount or (b) (i) if the Holder Optional Redemption has not been fully exercised by each Holder on any Optional Redemption Date and (ii) (x) on the First Optional Redemption Date, the Company has been Profitable for two
(2) Calendar Quarters prior to such First Optional Redemption Date, (y) on the Second Optional Redemption Date, the Company has been Profitable for two (2) Calendar Quarters during the period beginning after the First Optional Redemption Date
through the Second Optional Redemption Date, or (z) on the Third Optional Redemption Date, the Company has been Profitable for one (1) Calendar Quarter during the period beginning after the Second Optional Redemption Date through the Third Optional
Redemption Date (each of the foregoing (x), (y) and (z), a “Profitability Target”). In the event that the holders of the Notes exercise the Holder Optional Redemption for less than the Aggregate Optional Redemption Amount on any
Optional Redemption Date and the Profitability Target for such Optional Redemption Date has not been met, the Letter of Credit Amount shall be reduced by an amount equal to the product of (1) $5,000,000 or solely as to the First Optional Redemption
Date in the event of an EBITDA Reduction (as defined below) has occurred, $1,700,000, multiplied by (2) a fraction (A) the numerator of which is the aggregate Conversion Amount redeemed by all holders on such Optional Redemption Date and (B) the
denominator of which is the Aggregate Optional Redemption Amount. In addition, in the event that the Company’s EBITDA for any twelve (12) month period reported by the Company in a Form 10-Q, Form 10-K and Form 8-K filed from and after the
Issuance Date and immediately prior to the First Optional Redemption Date is equal to or greater than $18,000,000, then the Letter of Credit Amount shall be immediately reduced by $3,330,000 (an “EBITDA Reduction”). 
  
 (18) PARTICIPATION. The Holder, as the holder of this Note, shall be
entitled to receive such dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had
held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. 
  

 - 21 - 

 (19) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called
for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Note or the Other Notes. Any change or amendment so approved shall be binding upon all existing and future
holders of this Note and any Other Notes. 
  
 (20)
TRANSFER. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the
Securities Purchase Agreement. 
  
 (21) REISSUANCE OF THIS
NOTE. 
  
 (a) Transfer. If this Note is to be
transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 21(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 21(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented
by this Note may be less than the Principal stated on the face of this Note. 
  
 (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 21(d)) representing the outstanding Principal. 
  
 (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 21(d) and in principal
amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

  
 (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new
Note being issued pursuant to Section 21(a) or Section 21(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued Interest on the Principal of this Note, from the Issuance Date. 
  

 - 22 - 

 (22) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. 
  
 (23) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this
Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note
or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the reasonable costs incurred by the
Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements. 
  
 (24) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

  
 (25) FAILURE OR INDULGENCE NOT WAIVER. No failure or
delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof
or of any other right, power or privilege. 
  
 (26) DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate or the Redemption Price, the Company shall submit
the disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the 

  

 - 23 - 

 
Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted
Average Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company’s independent, outside
accountant. The Company, at the Company’s expense, shall use its reasonable best efforts to cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of
the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error. The Company shall not be required to pay any penalty payments hereunder solely relating to the matter and the amount in dispute during the pendency of any bona fide, good faith dispute hereunder as to such matter.

  
 (27) NOTICES; PAYMENTS. 
  
 (a) Notices. Whenever notice is required to be given under this
Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. 
  
 (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful
money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the
Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the
Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be
due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date. 
  

 - 24 - 

 (28) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on
this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. 
  
 (29) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. 
  

(30) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. 
  
 (31) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: 
  
 (a) “Aggregate Optional Redemption Amount” means
$8,333,333.33. 
  
 (b) “Approved Stock Plan”
means any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer or director for services provided to the Company. 
  
 (c) “Bloomberg” means Bloomberg Financial Markets.

  
 (d) “Business Day” means any day other than
Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. 
  
 (e) “Calendar Quarter” means each of: the period beginning on and including January 1 and ending on and including March 31; the period
beginning on and including April 1 and ending on and including June 30; the period beginning on and including July 1 and ending on and including September 30; and the period beginning on and including October 1 and ending on and including December
31. 
  
 (f) “Change of Control” means any
Fundamental Transaction other than (A) a Fundamental Transaction in which holders of the Company’s voting power immediately prior to the Fundamental Transaction continue after the Fundamental Transaction to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (B) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company. 
  

 - 25 - 

 (g) “Change of Control Premium” means (i) from the Issuance Date until the eighteen
(18) month anniversary thereof, 120%, (ii) from the eighteen (18) month anniversary of the Issuance Date until the forty-second (42) month anniversary thereof, 115% and (iii) from the forty-second (42) month anniversary of the Issuance Date until
the Maturity Date, 110%. 
  
 (h) “Closing Bid
Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00
p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively,
of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 26. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period. 
  
 (i) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement. 
  
 (j) “Common Stock Deemed Outstanding” means, at any given
time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any Common Stock owned or held by or for the account of the Company or issuable upon conversion or exercise, as applicable, of the Notes and the Warrants. 
  
 (k) “Company Conversion Price” means, as of any date of
determination, that price which shall be computed as 95% of the arithmetic average of the Weighted Average Price of the Common Stock during each of the ten (10) consecutive Trading Days of the ten (10) Trading Day period commencing three (3) Trading
Days after the Company Conversion Notice Due Date (such period, the “Company Conversion Measuring Period”). 
  

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 (l) “Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for Common Stock. 
  
 (m) “Current Credit Facility” means the Credit Agreement, dated as of December 26, 2001, among the Company, as borrower, the lenders from time to time party thereto and Wells Fargo Bank, National
Association, as administrative agent, together with any amendments, restatements, renewals, refundings, refinancings or other extensions thereof. 
  
 (n) “EBITDA” means with respect to any Person for any applicable period, the Net Income of such Person and its subsidiaries for such
period, plus without duplication, the sum of the following amounts of such Person and its subsidiaries for such period and to the extent deducted in determining Net Income of such Persons for such period: (i) Net Interest Expense, (ii) income
tax expense, (iii) depreciation expense, and (iv) amortization expense. 
  
 (o) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc, the American Stock Exchange or The Nasdaq SmallCap Market. 
  
 (p) “Equity Conditions” means that each of the following
conditions is satisfied: (i) on each day during the period beginning six (6) months prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring
Period”), either (x) the Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the Registration
Rights Agreement and there shall not have been any Grace Periods (as defined in the Registration Rights Agreement) or (y) all shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants shall be eligible for sale
without restriction and without the need for registration under any applicable federal or state securities laws; (ii) on each day during the Equity Conditions Measuring Period, the Common Stock is designated for quotation on an Eligible Market and
shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting
or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the minimum listing maintenance requirements of such exchange or market; (iii) during the one (1) year
period ending on and including the date immediately preceding the applicable date of determination, the Company shall have delivered Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise of the Warrants to the holders on a
timely basis as set forth in Section 2(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections 2(a) of the Warrants; (iv) during the Equity Conditions Measuring Period, the Company shall not have failed to timely make any
payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document; (v) during the Equity Conditions Measuring Period, there shall not have occurred either (A) the public announcement of a pending, proposed or
intended Fundamental Transaction which has not been abandoned, terminated or consummated or (B) an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (vi) the Company shall have no
knowledge of any fact that would cause (x) the Registration Statements required pursuant to the 

  

 - 27 - 

 
Registration Rights Agreement not to be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement or (y) any shares of Common Stock issuable upon conversion of the Notes and shares of Common Stock issuable upon exercise of the Warrants not to be eligible for sale without restriction pursuant to Rule 144(k) and any
applicable state securities laws; (vii) the Stockholder Approval (as defined in the Securities Purchase Agreement) shall have been obtained; and (viii) the Company otherwise shall have been in material compliance with and shall not have materially
breached any provision, covenant, representation or warranty of any Transaction Document. 
  
 (q) “Excluded Securities” means any Common Stock issued or issuable: (i) in connection with any Approved Stock Plan; (ii) upon conversion of the Notes or the exercise of the Warrants; (iii) pursuant
to a bona fide firm commitment underwritten public offering at a price per share of Common Stock not less than the Conversion Price in effect at the time of such offering with a nationally recognized underwriter which generates net proceeds to the
Company of at least $20,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act and “equity lines”) (iv) in connection with any acquisition by the Company, whether through an acquisition of
stock or a merger of any business, assets or technologies the primary purpose of which is not to raise equity capital in an amount not to exceed, in the aggregate twenty percent (20%) of the outstanding shares of Common Stock in any twelve (12)
month period; and (v) upon conversion of any Options or Convertible Securities which are outstanding on the day immediately preceding the Subscription Date, provided that the terms of such Options or Convertible Securities are not amended, modified
or changed on or after the Subscription Date. 
  
 (r)
“First Optional Redemption Date” means June 30, 2006. 
  
 (s) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) be subject to an offer from another Person or group of related Persons (as
defined in Sections 13(d) and 14(d) of the Exchange Act) to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by
the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of related Persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other Person or group acquires more than the
50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common Stock. 
  
 (t) “GAAP” means United States generally accepted accounting principles, consistently applied. 
  

 - 28 - 

 (u) “Intercreditor Agreement” means that certain intercreditor agreement dated as of
the date hereof by the Company, Wells Fargo Bank, National Association, as first lien collateral agent, and Amphora Limited, as second lien collateral agent. 
  
 (v) “Letter of Credit Amount” means the amount of the letter of credit issued in favor the Senior Agent (as defined in the Securities
Purchase Agreement), which amount shall initially be $10,000,000, which amount may be reduced pursuant to Section 17 hereof. 
  
 (w) “Net Income” means, with respect to any Person for any applicable period, the net income (loss) of such Person for such period,
determined on a consolidated basis and in accordance with GAAP, but excluding from the determination of Net Income (without duplication): (i) any extraordinary or non recurring gains or losses or gains, (ii) restructuring charges, (iii) effects of
discontinued operations, and (iv) interest income. 
  
 (x)
“Net Interest Expense” means, with respect to any Person for any applicable period, gross interest expense of such Person for such period determined on a non-consolidated basis and in accordance with generally accepted accounting
principles, (including, without limitation, interest expense paid to affiliates of such Person), less (i) gains for such period on hedging agreements (to the extent not included in interest income above and to the extent not deducted in the
calculation of gross interest expense), plus (ii) the sum of (x) losses for such period on hedging agreements (to the extent not included in gross interest expense) and (y) the upfront costs or fees for such period associated with hedging
agreements (to the extent not included in gross interest expense), in each case, determined on a non-consolidated basis and in accordance with GAAP. 
  
 (y) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

  
 (z) “Optional Redemption Amount” means, with
respect to any Holder, for any Holder Optional Redemption occurring on an Optional Redemption Date an amount that does not exceed one-third of the sum of the Principal amount of this Note on the Issuance Date plus accrued and unpaid Interest on such
Principal. 
  
 (aa) “Optional Redemption Date”
means any of the First Optional Redemption Date, the Second Optional Redemption Date and the Third Optional Redemption Date. 
  
 (bb) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction. 
  
 (cc) “Permitted
Indebtedness” means (A) Senior Indebtedness and (B) Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to
the Holder and approved by the Holder in writing, and which Indebtedness does 

  

 - 29 - 

 
not provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any,
thereon until 91 days after the Maturity Date or later and (2) total interest and fees at a rate in excess of seven percent (7%) per annum. 
  
 (dd) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any
Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested
in good faith by appropriate proceedings, (iv) any Lien incurred to secure Senior Indebtedness and (v) Liens securing the Company’s obligations under the Notes. 
  
 (ee) “Person” means an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. 
  
 (ff) “Principal Market” means the Nasdaq National Market. 
  
 (gg) “Profitable” means, with respect to any Person for any applicable period, such Person having positive
Net Income for such period 
  
 (hh) “Redemption
Premium” means (i) in the case of the Events of Default described in Section 4(a)(i) - (vi) and (ix) - (xii), 110% or (ii) in the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%. 
  
 (ii) “Registration Rights Agreement” means that certain
registration rights agreement dated as of the Subscription Date by and among the Company and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Notes
and exercise of the Warrants. 
  
 (jj) “Required
Holders” means the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding. 
  
 (kk) “SEC” means the United States Securities and Exchange Commission. 
  
 (ll) “Second Optional Redemption Date” means June 30, 2007. 
  
 (mm) “Securities Purchase Agreement” means that certain
securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. 
  
 (nn) “Senior Indebtedness” means the principal of (and premium, if any), interest on, and all fees and
other amounts (including, without limitation, any reasonable out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and 

  

 - 30 - 

 
disbursements), collateral protection expenses and other reimbursement or indemnity obligations relating thereto) payable by Company under or in connection
with the Current Credit Facility provided, however, that (1) the aggregate amount of such Senior Indebtedness (taking into account the maximum amounts which may be advanced, including pursuant to any letters of credit, under the loan
documents evidencing such Senior Indebtedness) does not as of the date on which such Senior Indebtedness is incurred exceed $57,000,000 and (2) such Senior Indebtedness affirmatively provides that it will at no time, respective of the base rate
used, bear a rate of interest per annum (including commitment and similar per annum fees) in excess of LIBOR plus nine and one half percent (9.5%) per annum. 
  
 (oo) “Subscription Date” means December 30, 2004. 
  
 (pp) “Successor Entity” means the Person, which may be the Company, formed by, resulting from or surviving
any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on
an Eligible Market, Successor Entity shall mean such Person’s Parent Entity. 
  
 (qq) “Third Optional Redemption Date” means June 30, 2008. 
  
 (rr) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time). 
  
 (ss) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have
the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency). 
  
 (tt) “Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange therefor or replacement thereof. 
  
 (uu) “Weighted Average Price” means, for any security as of
any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading) as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter 

  

 - 31 - 

 
market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market
publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 26. All such determinations to
be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period. 
  
 [Signature Page Follows] 
  

 - 32 - 

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

			
	MODTECH HOLDINGS, INC.
		
	By:	 	  

	Name:	 	 
	Title:	 	 

 EXHIBIT I 
  

MODTECH HOLDINGS, INC. 
 CONVERSION
NOTICE 
  
 Reference is made to the Senior Subordinated Secured Convertible
Note (the “Note”) issued to the undersigned by Modtech Holdings, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of Common Stock par value $.01 per share (the “Common Stock”) of the Company, as of the date specified below. 
  
 Date of Conversion:
                                        
                                        
                                        
                                      
  
 Aggregate Conversion Amount to be converted:
                                        
                                        
                                 
  
 Please confirm the following information: 
  
 Conversion Price:
                                        
                                        
                                        
                                        

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

			
	Issue to:	  	  
 ____________________________________________________________________________________

	 	  	  
 ____________________________________________________________________________________

	 	  	  
 ____________________________________________________________________________________

  
 Facsimile Number:
                                        
                                        
                                        
                                      
  
 Authorization:
                                        
                                        
                                        
                                        
     
  
 By:
                                        
                                        
                                        
                                        
               
  
 Title:                                     
                                        
                                        
                                         

  
 Dated:
                                        
                                        
                                        
                                        
                           
  

Account Number:
                                        
                                        
                                        
                                        

   (if electronic book entry transfer) 
  
 Transaction Code Number:
                                        
                                        
                                        
                         
   (if electronic book entry transfer) 

 ACKNOWLEDGMENT 
  
 Delivery Via DWAC 
  
 [Company Letterhead] 
  
 Date: 
  
 Via Fax:[201-296-4491] only 
  
 Mellon Investor Services LLC 

DWAC Dept 
 85 Challenger Road, Overpeck Center 
 Ridgefield Park NJ 07660 
  

			
	Re: DWAC Issuance 001-751-60783C10	 	Control No. 2005-        

  
 Ladies and Gentlemen: 
  
 You are hereby authorized to issue and deliver the shares of Common Stock as indicated below
via DWAC. The shares are being issued to cover the conversion of Senior Subordinated Secured Convertible Notes under the Securities Purchase Agreement, dated as of December     , 2004. 
  

			
	Number of Shares:	 	                                      
                               
		
	 	 	             Original Issue or
		
	 	 	             Transfer from Treasury Account
		
	Broker Name:	 	                                      
                               
		
	Broker’s DTC Number:	 	                                      
                               
		
	Contact and Phone:	 	                                      
                               
	
	The broker will initiate the DWAC transaction on (date).

  
  
  
  
  
  
  
 Sincerely,

  
 [Company Contact Name] 
 [Title] 
  
 cc: Broker 

 ACKNOWLEDGMENT 
  
 Form for Physical Certificate 
  

[Company Letterhead] 
  
 Via Fax:[201-296-4279] only 
  
 Mellon Investor Services LLC 
 Stock Option Dept 
 85 Challenger Road, Overpeck Center 
 Ridgefield Park NJ 07660 
  

			
	Re: Option Issuance 001-751-60783C10	 	Control No. 2005-        

  
 Ladies and Gentlemen: 
  
 You are hereby authorized to issue and deliver the shares of Common Stock as indicated below
via Physical certificate. The shares are being issued to cover the conversion of Senior Subordinated Secured Convertible Notes under the Securities Purchase Agreement, dated as of December     , 2004: 
  
 Date of Certificate:
                                        
                                        
                
  
 Number of Shares:
                                        
                                        
                
  
 Optionee Name:
                                        
                                        
                     
 Social Security
Number:
                                        
                                        
        
  
 Restricted
Shares:              ̈  NO     ̈  YES (see attached legend to be affixed to certificate) 
  

Name on Certificate:
                                        
                                        
               
 Mailing Address
                                        
                                        
                      

			
	 for Certificates:
	  	                                      
                                        
                       
	 	  	                                      
                                        
                       

  
 Method of Delivery:
                                        
                                        
                 
  
 Please call [Company contact & Phone #] if you have any questions. Thank you for your assistance. 
  
 Very truly yours, 
  
 [Company Contact Name] 
 [Title] 

 EXHIBIT II 
  

FINANCIAL COVENANTS 
  
 Funded Debt Ratio. Permit the Funded Debt Ratio, as of the last day of any Fiscal Quarter, to be greater than the ratio set forth below opposite
such Fiscal Quarter: 
  

			
	 Fiscal Quarter Ending

	  	Maximum Ratio

	 Each March 31, June 30, September 30 and December 31
	  	2.20:1.00

  
 Fixed Charge
Coverage Ratio. Permit the Fixed Charge Coverage Ratio, as of the last day of any Fiscal Quarter, to be less than 1.35 to 1.00. 
  
 Current Ratio. Permit the Current Ratio (a) to be less than 1.125:1.00 at any time during any Fiscal Quarter ending March 31, June 30 or September
30 and (b) to be less than 1.215:1.00 at any time during any Fiscal Quarter ending December 31. 
  
 Tangible Net Worth. Permit Tangible Net Worth, at any time, to be less than the sum of (a) $27,000,000, plus (b) an amount equal to 45% of Net
Income earned after the Closing Date (with no deduction for a net loss in any such Fiscal Quarter) plus (c) an amount equal to 81% of the aggregate increases in Stockholders’ Equity of Borrower and its Subsidiaries after the Closing Date by
reason of the issuance and sale of capital stock of Borrower or any Subsidiary thereof (including upon any conversion of debt Securities of Borrower or any Subsidiary thereof into such capital stock). 
  
 Asset Coverage Ratio. Permit the Asset Coverage Ratio, at any time, to
be less than .0.90 to 1.00. 
  
 Maximum Lease Receivables.
Make, permit, enter or suffer to exist any lease contract pursuant to which the aggregate amount of any Lease Receivables during any Fiscal Year will exceed the amount set forth below opposite the applicable Fiscal Year: 
  

				
	 Fiscal Year Ending

	  	Maximum Lease Receivable

	 December 31, 2005
	  	$	4,400,000
	 December 31, 2006
	  	$	6,600,000

  
 Terms used in this
Exhibit II shall have the meanings ascribed to them in the Current Credit Facility as in effect on the date hereof.

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