Document:

Form of Note

 Exhibit 4.2 
  

FORM OF NOTE 
  
 THE SECURITIES REPRESENTED HEREBY 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 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM 
  
 ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING
SECTION 3(b) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, MAY BE LESS THAN THE AMOUNT SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(b) OF THIS NOTE. 
  
 [THE COMPANY MAY PLACE THE FOLLOWING PARAGRAPH ON THE FACE OF EACH NOTE HELD BY OR
TRANSFERRED TO AN “AFFILIATE” (AS DEFINED IN RULE 501(B) OF REGULATION D UNDER THE SECURITIES ACT) OF THE COMPANY:] 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT. 
  
 JAMESON INNS, INC. 
  
 7.0% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2010 
  

			
	 No.:[            ]
	 	$[                    ]

	CUSIP	No.: 470457 AA 0 

  
 THIS 7.0% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE 2010 (this “Note”) is one of a duly authorized issue of Notes of Jameson Inns, Inc., a
corporation duly organized and existing under the laws of the State of Georgia (the “Company”), designated as its 7.0% Convertible Senior Subordinated Notes Due 2010, in an aggregate principal amount of up to Thirty-Five Million United
States Dollars ($35,000,000) (the “Notes”). For value received, the Company hereby promises to pay to
[                            ], or registered assigns (the “Holder”), the principal sum of
[                    ] United States Dollars
($[                    ]) and any accrued and unpaid interest thereon on September 30, 2010 (the “Maturity Date”) and to pay
interest (an “Interest Payment”) on the principal sum outstanding from time to time under this Note, at the rate per annum specified in the title of this Note, accrued from the date of issuance 
  

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 of this Note and due and payable semi-annually on June 30 and December 31 of each year (each, an “Interest
Payment Date”), commencing December 31, 2005. If an Interest Payment Date is not a Business Day (as defined below), then the Interest Payment shall be due and payable on the Business Day immediately following such Interest Payment Date.
Interest Payments will be paid to the Person (as defined below) in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the record date (as defined below) for such Interest Payment on the Notes Register
(as defined in Section 6 of this Note). In the event that any Note or portion thereof is called for redemption and the redemption date is subsequent to a record date with respect to any Interest Payment Date and prior to such Interest Payment
Date, interest on such Note will be paid upon presentation and surrender of such Note as provided in Section 2 of this Note. Any accrued and unpaid interest which is not paid within five (5) Business Days of the Interest Payment Date on
which such payment of interest was due shall bear interest at the rate of 12% per annum from such Interest Payment Date until the same is paid in full (or, if less, the maximum interest rate then permitted by applicable law) (the “Default
Interest”). 
  
 This Note is one of a series of Notes issued
in connection with the transactions described in that certain Securities Purchase Agreement dated as of September 29, 2005, by and between the Company and the parties listed on the Schedule of Buyers attached thereto as Schedule I (as such
agreement may be amended, supplemented and modified from time to time as provided in such agreement, the “Securities Purchase Agreement”) and certain other related documents and agreements including, without limitation, the Transaction
Documents (as defined below). The Conversion Shares (as defined below) issued upon conversion of this Note and the Holder hereof and thereof shall be entitled to all of the rights and privileges set forth in the Transaction Documents. 
  
 SECTION 1. Definitions. Terms not defined herein have
the meanings ascribed to them in the Securities Purchase Agreement. The following terms as used in this Note shall have the following meanings: 
  
 (a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are required by law
to remain closed. 
  
 (b) “Common Stock” means
(i) the common stock, $0.10 par value per share, of the Company, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock. 
  
 (c) “Conversion Price” shall be equal to $2.77, subject to further
adjustment as hereinafter provided. 
  
 (d) “Conversion
Shares” means all shares of Common Stock into which this Note is convertible pursuant to Section 3 of this Note. 
  
 (e) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable or
exercisable for Common Stock. 
  
 (f) “Maturity Date”
means September 30, 2010 or, if such date does not fall on a Business Day or on a Trading Day, then the next Business Day. 
  

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 (g) “Option” means any rights, warrants or options to subscribe for or purchase or otherwise
acquire Common Stock or Convertible Securities. 
  
 (h)
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or association and a government or any department or agency thereof. 
  
 (i) “Predecessor Note” of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for purposes of this definition, any Note authenticated and delivered under Section 10 of this Note in lieu of a lost, destroyed or stolen Note
shall be deemed to evidence the same debt as the lost, destroyed or stolen Note. 
  
 (j) “Principal Market” means The Nasdaq National Market (“NASDAQ”) or if the Common Stock is not traded on NASDAQ then the principal securities exchange or trading market for the Common Stock.

  
 (k) “Registration Rights Agreement” means that
certain Registration Rights Agreement, dated as of September 29, 2005, between the Company and the initial purchasers of the Notes, as such agreement may be amended, supplemented and modified from time to time in a writing signed by all of the
signatories thereto. 
  
 (l) “record date” means, with
respect to any Interest Payment Date, the 4th day of the month in which an Interest Payment Date shall occur, whether or not such date is a Business Day. 
  
 (m) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 
  
 (n) “Shelf Registration Statement” means the Shelf Registration
Statement contemplated by the Registration Rights Agreement. 
  
 (o) “Trading Day” means (x) a day on which the Principal Market is open for business or (y) if the applicable security is not so listed on a Principal Market or admitted for trading or quotation, a Business Day.

  
 (p) “Transaction Documents” means the Securities
Purchase Agreement, the Registration Rights Agreement, the Notes and each of the other agreements entered into by the parties hereto and thereto in connection with the transactions contemplated by the Securities Purchase Agreement. 
  
 SECTION 2. Redemption. 
  
 (a) Redemption Price. From and after September 30, 2008, the Company may, at its option, redeem all or part of
the Notes, upon notice as set forth in Section 2(b) of this Note, and at a redemption price equal to One Thousand United States Dollars ($1,000) per One Thousand United States Dollars ($1,000) principal amount of the Notes to be redeemed, plus
accrued and unpaid interest thereon, if any, to, but excluding, the date of redemption; provided that, to the 
  

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 extent that the Shelf Registration Statement is required by the terms of the Registration Rights Agreement to still
remain effective as of the Notice Date, the Shelf Registration Statement is effective and available during the 30 day period prior to the Notice Date. 
  
 (b) Notice of Redemption. In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Notes in
accordance with the right reserved so to do, the Company shall give notice of such redemption to Holders of the Notes to be redeemed a notice of such redemption not less than thirty (30) days and not more than sixty (60) days before the
date fixed for redemption to such Holders at their last addresses as they shall appear upon the Notes Register (the date of such notice, the “Notice Date”). Such notice shall be irrevocable. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure to duly give such notice to the Holder of any Notes designated for redemption in whole or in part, or any
defect in such notice, shall not affect the validity of the proceedings for the redemption of any other Notes. In the case of any redemption of Notes prior to the expiration of any restriction on such redemption provided in the terms of this Note,
the Company shall provide in such notice to Holders evidence of compliance with any such restriction. 
  
 Each such notice of redemption shall specify the aggregate principal amount of Notes to be redeemed, the “CUSIP” number or numbers of such
Notes, the date fixed for redemption, the redemption price at which Notes are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Notes, that interest accrued to, but excluding, the date
fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portion thereof to be redeemed will cease to accrue. Such notice shall also state the current Conversion Price and the date on
which the right to convert such Notes or portions thereof into Common Stock will expire. In case this Note is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon surrender of this Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be issued. 
  
 On or prior to the redemption date specified in the notice of redemption given as provided in this Section 2(b), the
Company will deposit with one or more paying agents (or, if the Company is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 5 of this Note) an amount of money sufficient to redeem on the redemption
date all the Notes (or portions thereof) so called for redemption (other than those theretofore surrendered for conversion into Common Stock) at the appropriate redemption price, together with accrued interest to, but excluding, the date fixed for
redemption; provided, however, that if such payment is made on the redemption date it must be received by the paying agent by 1:00 p.m. New York time, on such date. If this Note when called for redemption is converted pursuant hereto, any money
deposited with the paying agent or so segregated and held in trust for the redemption of the Note shall be paid to the Company upon its request, or, if then held by the Company, shall be discharged from such trust. 
  
 If less than all the Notes are to be redeemed Notes shall be redeemed pro
rata based on the principal amount of the Notes then outstanding. The Company may, if and whenever it shall so elect, by delivery of instructions signed on its behalf by any authorized officer, instruct any 
  

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 paying agent to call all or any part of the Notes for redemption and to give notice of redemption in the manner set forth
in this Section 2(b), such notice to be in the name of the Company or its own name as such paying agent may deem advisable. In any case in which notice of redemption is to be given by any such paying agent, the Company shall deliver or cause to
be delivered to, or permit to remain with, such paying agent, such Note Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the paying agent to give any notice by mail that may be required under
the provisions of this Section 2(b). 
  
 (c) Payment Upon
Redemption. If notice of redemption has been given as above provided, the Notes or portion of Notes with respect to which such notice has been given shall, unless converted into Common Stock pursuant to the terms of this Note, become due and
payable on the date and at the place or places stated in such notice at the applicable redemption price and interest accrued to, but excluding, the date fixed for redemption, and on and after said date (unless the Company shall default in the
payment of such Notes at the redemption price and interest accrued to, but excluding, said date) interest on the Notes or portion of Notes so called for redemption shall cease to accrue and such Notes shall cease after the close of business on the
Business Day next preceding the date fixed for redemption to be convertible into Common Stock and to be entitled to any benefit or security under this Note, and the holders thereof shall have no right in respect of such Notes except the right to
receive the redemption price thereof and unpaid interest to, but excluding, the date fixed for redemption. On presentation and surrender of such Notes at a place of payment specified in said notice, the said Notes or the specified portions thereof
to be redeemed shall be paid and redeemed by the Company at the applicable redemption price and interest accrued thereon to, but excluding, the date fixed for redemption; provided, however, that, if the applicable redemption date is an Interest
Payment Date, the semi-annual payment of interest becoming due on such date shall be payable to the holders of such Notes registered as such on the relevant record date. 
  
 Upon presentation of any Note redeemed in part only, the Company shall execute and deliver to the Holder, at its own
expense, a new Note or Notes, of authorized denominations, in principal amount equal to the unredeemed portion of the Notes so presented. 
  
 If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne by the Note and such Note shall remain convertible into Common Stock until the principal and premium, if any, shall have been paid or duly provided for. 
  
 SECTION 3. Conversion of Note. 
  
 (a) Right to Convert. Subject to and upon compliance with the
provisions of this Note, the Holder of any Note shall have the right, at his option, at any time following the date of original issuance of the Notes and prior to the close of business on September 30, 2010 (except that, with respect to any
Note or portion of a Note that shall be called for redemption, such right to convert shall terminate at the close of business on the Business Day next preceding the date fixed for redemption of such Note or portion of a Note unless the Company shall
default in payment due upon redemption thereof), to convert the principal amount of any such Note, or any portion of such principal amount which is One Thousand United States Dollars ($1,000) or an 
  

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 integral multiple thereof, into that number of fully paid and non-assessable shares of Common Stock (as such shares shall
then be constituted) obtained by dividing the principal amount of the Note or portion thereof surrendered for conversion by the Conversion Price in effect at such time, by surrender of the Note so to be converted in whole or in part in the manner
provided in Section 2(b) of this Note. A Note with respect to which a Holder has delivered a notice in accordance with Section 8(b) of this Note regarding such Holder’s election to require the Company to repurchase such Holder’s
Notes following the occurrence of a Repurchase Event (as defined in Section 8(c)) may be converted in accordance with this Section 3 only if such Holder withdraws such notice by delivering a written notice of withdrawal to the Company
prior to the close of business on the last Business Day prior to the day fixed for repurchase. 
  
 (b) Exercise of Conversion Privilege; Issuance of Common Stock on Conversion. In order to exercise the conversion privilege with respect to any Note in definitive form, the Holder of any such Note to be
converted in whole or in part shall (i) transmit via facsimile (or otherwise physically deliver) a copy of a properly completed Conversion Notice in the form attached hereto as Exhibit A (the “Conversion Notice”),
(ii) provide copies of the Conversion Notice via facsimile to the Company’s transfer agent, Registrar and Transfer Company, P.O. Box 664, Cranford, New Jersey 07016 and the Company’s legal counsel, Lynnwood R. Moore, Jr.,
Conner & Winters, LLP, 3700 First Place Tower, 15 East Fifth Street, Tulsa, Oklahoma, 74103 918-586-5711, ,(iii) wire to the Company in accordance with wire transfer instructions provided by the Company in writing to the Holder from time to
time, the funds, if any, required by the last paragraph of this Section 3(b), (iv) if required by this Section 3(b), surrender this Note, duly endorsed, to an overnight courier service for delivery to the Company as soon as
practicable (or such security, indemnity or other items required by the Company in accordance with Section 10 of this Note in the case of the loss, theft or destruction of this Note) and (v) shall provide such additional documentation or
certification as the Company may reasonably request to the office or agency specified in the Conversion Notice that the Holder elects to convert this Note or such portion thereof. The Conversion Notice shall also state the name or names (with
address) in which the shares of Common Stock which shall be issuable on such conversion shall be issued, and shall be accompanied by transfer taxes, if required pursuant to Section 4 of this Note. 
  
 The Company shall use its best efforts to, within three (3) Business
Days after the Conversion Date (as defined below) with respect to any Note, subject to compliance with any restrictions on transfer if shares issuable on conversion are to be issued in a name other than that of the Holder (as if such transfer were a
transfer of the Note or Notes (or portion thereof) so converted), cause its transfer agent to issue and deliver to such Holder at the address specified in the Conversion Notice (a) a Certificate, registered in the name of the Holder or its
designee, for the number of full shares of Common Stock issuable upon the conversion of such Note or portion thereof in accordance with the provisions of this Section 3, or, at the holder’s request, a written statement that the transfer
agent has recorded, through its book-entry system, the Holder as the record owner of such shares of Common Stock on the books and records of the Company maintained by the transfer agent as the registrar of the Common Stock or, at the holder’s
request, 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 The Depository Trust Company (“DTC”) through its Deposit Withdrawal At
Custodian system and (b) a check or cash in respect of any fractional interest in respect of a share of Common Stock arising upon such conversion, as provided in Section 3(d). In case any Note of a denomination greater than One Thousand
United 
  

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 States Dollars ($1,000) shall be surrendered for partial conversion, the Company shall execute and deliver to the Holder
of the Note so surrendered, without charge to him, a new Note or Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note. 
  
 Subject to Section 9, if the Company shall not have delivered the number
of shares of Common Stock issued upon conversion of Notes by any Holder within five (5) Business Days after the Conversion Date with respect to such Notes, the Company shall pay liquidated damages to such Holder in the amount of one-half
percent (0.5%) per month of the outstanding principal amount of Notes so converted by such Holder. 
  
 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 principal amount represented by this Note is being converted in accordance with this Section 3 or (B) the Holder has provided the Company with
prior written notice (which notice may be included in a Conversion Notice) requesting this Note be reissued upon the surrender of this Note to the Company. Each Note surrendered for conversion shall, unless the shares issuable on conversion are to
be issued in the same name as the registration of such Note, be duly endorsed by, or be accompanied by instruments of transfer (including a broker’s letter regarding compliance with the prospectus delivery requirement, if applicable) in form
satisfactory to the Company duly executed by the Holder or its duly authorized attorney. The Holder and the Company shall maintain records showing the principal converted or paid and the dates of such conversions or payments 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. 
  
 The conversion shall be deemed to have been effected as to any such Note (or portion thereof) on the date on which the requirements set forth above in
this Section 3(b) have been satisfied as to such Note (or portion thereof) (such date, the “Conversion Date”), and the person in whose name any shares of Common Stock shall be issuable upon such conversion shall be deemed to have
become on the Conversion Date the Holder of record of the shares represented thereby; provided, however, that any such surrender on any date when the stock transfer books of the Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such Note shall
be surrendered. For purposes of determining satisfaction of the requirement set forth above with respect to the Conversion Date for any Note, any facsimile required to be sent shall be deemed to have been sent on a given day if such facsimile was
sent before 5:00 p.m., New York time, on such date, to the number listed above and a confirmation of transmission of such facsimile is obtained. 
  
 The Company shall pay in cash, on any Note or portion thereof surrendered for conversion during the period from the close of business on any Interest
Payment Date to which interest has been fully paid through the close of business on the Business Day preceding the record date for the next such Interest Payment Date, accrued and unpaid interest, if any, to, but excluding, the date of conversion
and liquidated damages, if any. Subject to Section 9, any such payment of interest shall be made with respect to such Note within ten (10) Business Days after 
  

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 the Conversion Date. Notwithstanding the foregoing, any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any Interest Payment Date to which interest has been fully paid through the close of business on the Business Day next preceding such Interest Payment Date shall (unless such Note or portion
thereof being converted shall have been called for redemption pursuant to a redemption notice mailed to the Holders in accordance with Section 2(b) of this Note or shall have become due prior to such Interest Payment Date as a result of a
Repurchase Event) be accompanied by payment, in immediately available funds or other funds acceptable to the Company, of an amount equal to the interest otherwise payable on such Interest Payment Date on the principal amount being converted;
provided, however, that no such payment need be made if there shall exist at the time of conversion a default in the payment of interest on the Notes. Except as provided in this Section 3(b), no adjustment shall be made for interest accrued on
any Note converted or for dividends on any shares issued upon the conversion of such Note as provided in this Section 3. 
  
 (c) Cash Payments in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon
conversion of Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount
of the Notes (or specified portions thereof to the extent permitted hereby) so surrendered for conversion. If any fractional share of stock otherwise would be issuable upon the conversion of any Note or Notes, the Company shall calculate and pay a
cash adjustment in lieu of such fractional share at the current market value thereof to the Holder of Notes. For the purposes of this Section 3(c), the current market value of a share of Common Stock shall be the Closing Sale Price (determined
as provided in Section 3(d)(6) of this Note) on the first Trading Day immediately preceding the day on which the Notes (or specified portions thereof) are deemed to have been converted; provided, however, that if the Common Stock is not listed
on a Principal Market or quoted, then the Closing Sale Price shall be determined in good faith by the Company’s Board of Directors. 
  
 (d) Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time by the Company as follows: 
  
 (1) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which (i) the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in
Section 3(d)(6) of this Note) fixed for such determination and (ii) the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction in the Conversion
Price to become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described in this Section 3(d)(1) is declared but not so paid or made, the Conversion Price
shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. 
  

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 (2) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. 
  
 (3) In case the Company shall issue rights, warrants or options to all holders of its outstanding shares of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 3(d)(6) of this Note) on the Record Date fixed for the determination of stockholders entitled to
receive such rights, warrants or options, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Record Date by a
fraction of which (i) the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the Record Date plus the number of shares that the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such Current Market Price, and of which (ii) the denominator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock so offered for subscription or purchase. Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of stockholders
entitled to receive such rights, warrants or options. To the extent that shares of Common Stock are not delivered pursuant to such rights, warrants or options, upon the expiration or termination of such rights, warrants or options the Conversion
Price shall be readjusted to the Conversion Price that would then be in effect had the adjustments made upon the issuance of such rights, warrants or options been made on the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights, warrants or options are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such date fixed for the determination of stockholders entitled
to receive such rights, warrants or options had not been fixed. In determining whether any rights, warrants or options entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights, warrants or options, the value of such consideration, if other than cash, to be determined in good faith by
the Company’s Board of Directors. 
  
 (4) In case the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company (other than any dividends or distributions to which Section 3(d)(1) of this Note applies) or evidences of its
indebtedness or other assets (including securities, but excluding (1) any rights, warrants or options referred to in Section 3(d)(3) of this Note and (2) dividends and distributions paid exclusively in cash (except as set forth in
Section 3(d)(5) of this Note (the foregoing hereinafter in this Section 3(d)(4) called the “Additional Securities”)), unless the Company elects to reserve such Additional Securities for distribution to the Holders upon conversion
of the Notes so that 
  

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 any such Holder converting Notes will receive upon such conversion, in addition to the shares of Common Stock to which
such Holder is entitled, the amount and kind of such Additional Securities which such Holder would have received if such Holder had converted its Notes into Common Stock immediately prior to the Record Date for such distribution of the Notes then,
in each such case, the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date with respect to such
distribution by a fraction of which (i) the numerator shall be the Current Market Price on such date less the fair market value (as determined in good faith by the Company’s Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) on such date of the portion of the Additional Securities so distributed applicable to one share of Common Stock and (ii) the denominator shall be such Current Market Price, such reduction to become effective
immediately prior to the opening of business on the day following the Record Date; provided, however, that in the event the then fair market value (as so determined) of the portion of the Additional Securities so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Note (or any
portion thereof) the amount of Common Stock such Holder would have received had such Holder converted such Note (or portion thereof) immediately prior to such Record Date. In the event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Company’s Board of Directors determines the fair market value of any distribution
for purposes of this Section 3(d)(4) by reference to the actual or when issued trading market for any securities comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period (the
“Reference Period”) used in computing the Current Market Price pursuant to Section 3(d)(6) of this Note to the extent possible, unless the Company’s Board of Directors determines in good faith that to do so would not be in the
best interest of the Holder. 
  
 In the event that the Company
implements a new stockholder rights plan, such rights plan shall provide that, upon conversion of the Notes, the Holders will receive, in addition to the Common Stock issuable upon such conversion, the rights issued under such rights plan (as if the
Holder had converted the Notes prior to implementing the rights plan and notwithstanding the occurrence of an event causing such rights to separate from the Common Stock at or prior to the time of conversion). Any distribution of rights, warrants or
options pursuant to a stockholder rights plan complying with the requirements set forth in the immediately preceding sentence of this paragraph shall not constitute a distribution of rights, warrants or options for the purposes of this
Section 3(d)(4). 
  
 Rights, warrants or options distributed
by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company’s capital stock (either initially or under certain circumstances), which rights, warrants or options, until the
occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common
Stock, shall be deemed not to have been distributed for purposes of this Section 3(d)(4) (and no adjustment to the Conversion Price under this Section 3(d)(4) will be required) until the occurrence of the earliest Trigger Event. If such
right or warrant is subject to 
  

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 subsequent events, upon the occurrence of which such right or warrant shall become exercisable to purchase different
securities, evidences of indebtedness or other assets or entitles the holder to purchase a different number or amount of the foregoing or to purchase any of the foregoing at a different purchase price, then the occurrence of each such event shall be
deemed to be the date of issuance and record date with respect to a new right or warrant (and a termination or expiration of the existing right or warrant without exercise by the holder thereof). In addition, in the event of any distribution (or
deemed distribution) of rights, warrants or options, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto, that resulted in an adjustment to the Conversion Price under this Section 3(d)(4),
(1) in the case of any such rights, warrants or options that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect
to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of Common Stock with respect to such rights, warrants or options (assuming
such holder had retained such rights, warrants or options), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights, warrants or options all of which shall have expired or been
terminated without exercise, the Conversion Price shall be readjusted as if such rights, warrants or options had never been issued. 
  
 For purposes of this Section 3(d)(4) and Sections 3(d)(1) and (3) of this Note, any dividend or distribution to which this Section 3(d)(4)
is applicable that also includes shares of Common Stock, or rights, warrants or options to subscribe for or purchase shares of Common Stock to which Sections 3(d)(1) or 3(d)(3) of this Note applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights, warrants or options other than such shares of Common Stock or rights, warrants or options to which Section 3(d)(3) of this Note applies (and any
Conversion Price reduction required by this Section 3(d)(4) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights, warrants or
options (and any further Conversion Price reduction required by Sections 3(d)(1) and (3) of this Note with respect to such dividend or distribution shall then be made, except (A) the Record Date of such dividend or distribution shall be
substituted as “the date fixed for the determination of stockholders entitled to receive such dividend or other distribution,” “Record Date fixed for such determination” and “Record Date” within the meaning of
Section 3(d)(1) of this Note and as “the date fixed for the determination of stockholders entitled to receive such rights, warrants or options,” “the Record Date fixed for the determination of the stockholders entitled to receive
such rights, warrants or options” and “such Record Date” within the meaning of Section 3(d)(3) of this Note and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding
at the close of business on the date fixed for such determination” within the meaning of Section 3(d)(1) of this Note. 
  
 (5) In case the Company shall, by dividend or otherwise, distribute cash to all holders of its Common Stock (excluding any cash that is distributed upon a
merger or consolidation to which Section 3(e) of this Note applies or as part of a distribution referred to in Section 3(d)(4) of this Note), then, immediately after the close of business on the record Date for the distribution, the
Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Record Date by a fraction (i) the numerator of which shall be
equal to the 
  

 11 

 Current Market Price on the Record Date less an amount equal to the quotient of (x) the amount distributed and
(y) the number of shares of Common Stock outstanding on the Record Date and (ii) the denominator of which shall be equal to the Current Market Price on such date; provided, however, that in the event the portion of the cash so distributed
applicable to one (1) share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the
right to receive upon conversion of a Note (or any portion thereof) the amount of cash such Holder would have received had such Holder converted such Note (or portion thereof) immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such dividend or distribution had not been declared. 
  
 (6) For purposes of this Section 3(d), the following terms shall have
the meaning indicated: 
  
 (A) “Closing Sale Price”
with respect to any securities on any day shall mean the closing sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in each case on the Nasdaq
National Market or New York Stock Exchange, as applicable, or, if such security is not listed or admitted to trading on such National Market or Exchange, on the principal national security exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of such security on the over-the-counter market on
the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or if not so available, in such manner as furnished by any New York Stock Exchange member firm selected from time to
time by the Board of Directors for that purpose, whose determination shall be conclusive. 
  
 (B) “Current Market Price” shall mean the average of the daily Closing Sale Prices per share of Common Stock for the ten (10) consecutive Trading Days immediately prior to the date in question;
provided, however, that (1) if the “ex” date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to
Section 3(d)(1), (2), (3), (4) or (5) of this Note occurs during such ten (10) consecutive Trading Days, the Closing Sale Price for each Trading Day prior to the “ex” date for such other event shall be adjusted by
multiplying such Closing Sale Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event, (2) if the “ex” date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 3(e)(1), (2), (3), (4) or (5) of this Note occurs on or after the “ex” date for the issuance or distribution requiring such
computation and prior to the day in question, the Closing Sale Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Closing Sale Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result of such other event, and (3) if the “ex” date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any
adjustment required pursuant to clause (1) or (2) of this proviso, the Closing Sale Price for each Trading Day on or after such “ex” date shall be adjusted by adding thereto the 
  

 12 

 amount of any cash and the fair market value (as determined in good faith by the Company’s Board of Directors in a
manner consistent with any determination of such value for purposes of Section 3(d)(4) of this Note, whose determination shall be conclusive) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to
one share of Common Stock as of the close of business on the day before such “ex” date. For purposes of this paragraph, the term “ex” date, (1) when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades regular way on the Principal Market without the right to receive such issuance or distribution and (2) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on
which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective. Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called
for pursuant to this Section 3(d), such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 3(d) and to avoid unjust or inequitable results as determined in good
faith by the Board of Directors. 
  
 (C) “Fair market
value” shall mean the amount which a willing buyer would pay a willing seller in an arm’s length transaction. 
  
 (D) “Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination
of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). 
  
 (E) “Trading Day” shall mean (x) if the applicable security is listed or admitted for trading on the New
York Stock Exchange or another national security exchange, a day on which the New York Stock Exchange or such other national security exchange, as applicable, is open for business or (y) if the applicable security is quoted on Nasdaq, a day on
which trades may be made thereon or (z) if the applicable security is not so listed, admitted for trading or quoted, a Business Day. 
  
 (7) The Company may make such reductions in the Conversion Price, in addition to those required by Sections 3(d)(1), (2), (3), (4) or (5) of
this Note, as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or
from any event treated as such for income tax purposes. 
  
 (8) To
the extent permitted by applicable law, the Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least twenty (20) days, the reduction is irrevocable during the period and the Board
of Directors shall have made a determination that such reduction would be in the best interests of the Company, which determination shall be conclusive and described in a Board Resolution; provided, however, that the Company may not reduce the
Conversion Price pursuant to this Section 3(d)(8) if, as a result of such reduction, the rules of the Principal Market would require approval of the 
  

 13 

 stockholders of the Company for the issuance of a number of shares of Common Stock greater in the aggregate than 19.99%
of the number of shares of Common Stock outstanding immediately prior to the Closing Date. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to the Holder of each Note at his last address appearing
on the Note Register a notice of the reduction at least five (5) days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect.

  
 (9) No adjustment in the Conversion Price shall be required
under this Section 3(d) unless such adjustment would require an increase or decrease of at least one percent (1%) in such price; provided, however, that any adjustments which by reason of this Section 3(d)(9) are not required to be
made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3 shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case
may be. No adjustment need be made for a change in the par value or no par value of the Common Stock. 
  
 (10) Subject to Section 3(d)(9), whenever the Conversion Price is adjusted as provided in this Section 3(d), the Company shall promptly prepare
a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to the Holder of each Note
at his last address appearing on the Note Register, within twenty (20) days of the effective date of such adjustment. Failure to deliver such notice shall not effect the legality or validity of any such adjustment. 
  
 (11) In any case in which this Section 3(d) provides that an adjustment
shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any Note converted after such Record Date and before the occurrence of such event the
additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such
Holder any amount in cash in lieu of any fraction pursuant to Section 3(c) of this Note. 
  
 (12) For purposes of this Section 3(d), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. 
  
 (e) Effect of Reclassification, Consolidation, Merger or Sale. Subject
to the provisions of Section 8, if any of the following events occur, namely (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger or combination of the Company with another person as a result of which holders of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange for such Common Stock (other than as a result of a change in name, a change in par value or a change in the jurisdiction of incorporation), (iii) any statutory exchange as
a result of which holders of Common Stock 
  

 14 

 generally shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or
in exchange for such Common Stock (such transaction, a “Statutory Exchange”), or (iv) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other person as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing person, as the case may be,
shall execute and deliver to the Holder a successor Note providing that such Note shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, Statutory Exchange, sale or conveyance by a holder of a number of shares of Common Stock issuable upon conversion of such Notes (assuming, for such purposes, a sufficient number of authorized shares of
Common Stock available to convert all such Notes) immediately prior to such reclassification, change, consolidation, merger, combination, Statutory Exchange, sale or conveyance assuming such holder of Common Stock did not exercise his rights of
election, if any, that holders of Common Stock who were entitled to vote or consent to such transaction had as to the kind or amount of securities, cash or other property receivable upon such consolidation, merger, combination, Statutory Exchange,
sale or conveyance (provided that, if the kind or amount of securities, cash or other property receivable upon such consolidation, merger, combination, Statutory Exchange, sale or conveyance is not the same for each share of Common Stock in respect
of which such rights of election shall not have been exercised (“non-electing share”), then for the purposes of this Section 3(e) the kind and amount of securities, cash or other property receivable upon such consolidation, merger,
combination, Statutory Exchange, sale or conveyance for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Such successor Note shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3. If, in the case of any such reclassification, change, consolidation, merger, combination, Statutory Exchange, sale or conveyance, the stock
or other securities and assets receivable thereupon by a holder of shares of Common Stock include shares of stock or other securities and assets of a person other than the successor or purchasing person, as the case may be, in such reclassification,
change, consolidation, merger, combination, Statutory Exchange, sale or conveyance, then such successor Note shall also be executed by such other person and shall contain such additional provisions to protect the interests of the Holders of the
Notes as the Company’s Board of Directors shall reasonably consider necessary by reason of the foregoing, including to the extent practicable the provisions providing for the repurchase rights set forth in Section 8 of this Note.

  
 The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations, sales and conveyances. 
  
 If this Section 3(e) applies to any event or occurrence, Section 3(d) of this Note shall not apply. 
  
 (f) Reservation of Shares; Shares to be Fully Paid; Listing of Common
Stock. The Company shall provide, free from preemptive rights, out of its authorized but unissued shares or shares held in treasury, reserved for the purpose of issuance, no less than one hundred five percent (105%) of the number of shares
of Common Stock needed to provide for the issuance of the Conversion Shares upon conversion of all of the Notes without regard to any limitations on conversion. 
  

 15 

 The Company will not, by amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder. Without
limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock issuable upon conversion of this Note above the Conversion Price then in effect, (ii) will take all such actions as may
be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon conversion of this Note and (iii) will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issuable after the conversion of all of the Notes would exceed the total number of shares of Common Stock then authorized by the Company’s certificate of incorporation and available
for the purpose of issue upon such exercise. 
  
 The Company
covenants that all shares of Common Stock issuable upon conversion of the Notes will be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof. 
  
 The Company is obligated to register the resale of the shares of Common Stock
issuable upon conversion of the Notes under the Securities Act pursuant to the Registration Rights Agreement. The shares of Common Stock issuable upon conversion of the Notes shall constitute Registrable Securities (as such term is defined in the
Registration Rights Agreement). Each Holder of Notes shall be entitled to all of the benefits afforded to a Holder of any such Registrable Securities under the Registration Rights Agreement and such Holder, by its acceptance of this Note, agrees and
shall agree to be bound by and to comply with the terms and conditions of the Registration Rights Agreement applicable to such Holder as a Holder of such Registrable Securities. 
  
 The Company shall use commercially reasonable efforts to promptly secure the listing of the shares of Common Stock issuable
upon exercise of this Note upon the Principal Market (subject to official notice of issuance upon exercise of this Note) and shall use commercially reasonable efforts to maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the exercise of this Note; and the Company shall use commercially reasonable efforts to list on the Principal Market or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the Company issuable upon conversion of the Notes if and so long as any shares of the same class shall be listed on such Principal Market or automated quotation system. The Company shall
pay all fees and expenses in connection with satisfying its obligations under this Section 3(f). 
  
 (g) Notice to Holders Prior to Certain Actions. In case: 
  

(1) the Company shall declare a dividend (or any other distribution) on its Common Stock; or 
  

 16 

 (2) the Company shall authorize the granting to the holders of its Common Stock of rights, warrants or
options to subscribe for or purchase any share of any class or any other rights, warrants or options; or 
  
 (3) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock or a change from
no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company;
or 
  
 (4) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company; 
  
 the Company shall
mail to each Holder of Notes at his address appearing on the Note Register as promptly as possible but in any event at least fifteen (15) days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or
rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to
give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. 
  
 (h) Holder Not Deemed a Stockholder. Except as otherwise specifically
provided herein, prior to the Holder’s receipt of Common Stock upon conversion of this Note, the Holder of this Note shall not be entitled, as such, to any rights of a stockholder of the Company, including, without limitation, the right to vote
or to consent to any action of the stockholders of the Company, to receive dividends or other distributions, to exercise any preemptive right or to receive dividends or other distributions, to exercise any preemptive right or to receive any notice
of meetings of stockholders of the Company, and shall not be entitled to receive any notice of any proceedings of the Company. In addition, nothing contained in this Note shall be construed as imposing any liabilities on such Holder to purchase any
securities (upon exercise of this Note or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. 
  
 (i) [ INCLUDE EITHER OF THE FOLLOWING PARAGRAPHS ONLY BASED UPON HOLDER’S ELECTION UNDER SECTION 2(k) OF PURCHASE
AGREEMENT] [Conversion Limitation. The Holder hereby agrees that in no event will it convert, and the Company will not honor any conversion request presented to it that requests the conversion of, any of the Notes in excess of the number of
such Notes upon the conversion of which (x) the number of shares of Common Stock beneficially owned by such Holder (other than the shares which would otherwise be deemed beneficially owned except for being subject to a limitation on conversion
analogous to the limitation contained in this Section 
  

 17 

 3(i)) plus (y) the number of shares of Common Stock issuable upon the conversion of such Notes would be equal to or
exceed 9.99% of the number of shares of Common Stock then issued and outstanding (after giving effect to such conversion), it being the intent of the Company and the Holder that the Holder not be deemed at any time to have the power to vote or
dispose of greater than 9.99% of the number of shares of Common Stock issued and outstanding. As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). To the extent that the limitation contained in this Section 3(i) applies (and without limiting any rights the Company may otherwise have), the Company may rely on the Holder’s determination of whether the Notes
are convertible pursuant to the terms hereof, the Company having no obligation whatsoever to verify or confirm the accuracy of such determination, and the submission of the Conversion Notice by the Holder shall be deemed to be the Holder’s
representation that the Notes specified therein are convertible pursuant to the terms hereof. The Company shall, within two Business Days of receipt of a written request from the Holder, inform the Holder of the number of shares of Common Stock
outstanding as of the most recent practicable date. The Company acknowledges that the Holder may, in accordance with Rule 13d-1(j) of the Exchange Act, in determining the number of shares of Common Stock outstanding, rely upon information in the
Company’s most recent quarterly, annual or current report filed with the Commission. By written notice to the Company, a Holder may increase or decrease the maximum percentage stated in this paragraph to any other percentage specified in such
notice; provided, that any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and provided further that in no event shall the percentage stated in this Section exceed 9.99%.
Nothing contained herein shall be deemed to restrict the right of a Holder to convert the Notes at such time as the conversion thereof will not violate the provisions of this Section 3(i). ] 
  
 [Each Holder hereby agrees that in no event will it convert, and the Company
will not honor any conversion request presented to it that requests the conversion of, any of the Notes in excess of the number of such Notes upon the conversion of which (x) the number of shares of Common Stock beneficially owned by such
Holder (other than the shares which would otherwise be deemed beneficially owned except for being subject to a limitation on conversion analogous to the limitation contained in this Section 3(i)) plus (y) the number of shares of Common
Stock issuable upon the conversion of such Notes, would be equal to or exceed 4.99% of the number of shares of Common Stock then issued and outstanding (after giving effect to such conversion), it being the intent of the Company and the Holder that
the Holder not be deemed at any time to have the power to vote or dispose of greater than 4.99% of the number of shares of Common Stock issued and outstanding. As used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To the extent that the limitation contained in this Section 3(i) applies (and without limiting any rights the Company may otherwise have), the
Company may rely on the Holder’s determination of whether the Notes are convertible pursuant to the terms hereof, the Company having no obligation whatsoever to verify or confirm the accuracy of such determination, and the submission of the
Conversion Notice by the Holder shall be deemed to be the Holder’s representation that the Notes specified therein are convertible pursuant to the terms hereof. The Company shall, within two Business Days of receipt of a written request from
the Holder, inform the Holder of the number of shares of Common Stock outstanding as of the most recent practicable date. The Company acknowledges that the Holder may, in accordance with Rule 13d-1(j) of the Exchange Act, in determining the number
of shares of Common Stock 
  

 18 

 outstanding, rely upon information in the Company’s most recent quarterly, annual or current report filed with the
Commission. By written notice to the Company, a Holder may increase or decrease the maximum percentage stated in this paragraph to any other percentage specified in such notice; provided, that any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company and provided further that in no event shall the percentage stated in this paragraph exceed 4.99%. Nothing contained herein shall be deemed to restrict the right of a Holder to
convert the Notes at such time as the conversion thereof will not violate the provisions of this Section 3(i).] 
  
 (j) Adjustment to Conversion Price Following Certain Changes of Control  
  
 (1) In case (A) a Change in Control occurs as defined in clause (iii) of the definition thereof (disregarding, for
purposes of this Section 3(j), the proviso at the end of such definition), (B) 10% or more of the consideration received by holders of Common Stock in connection with such Change in Control consists of cash or securities or other property
that is not traded or scheduled to be traded immediately following such transaction on a U.S. national securities exchange or Nasdaq and (C) a holder elects to convert its Notes, pursuant to this Section 3, on or prior to
September 30, 2008, the number of shares of Common Stock to be issued for any such Notes surrendered for conversion shall be increased by a number of additional shares of Common Stock (the “Additional Shares”) as described below.

  
 (2) The number of Additional Shares will be determined by
reference to the table attached as Schedule A hereto, based on the effective date of such Change in Control (the “Effective Date”) and the price (the “Stock Price”) paid per share of Common Stock in such corporate transaction. If
holders of Common Stock receive only cash in such corporate transaction, the Stock Price shall be the cash amount paid per share. Otherwise, the Stock Price shall be the average of the Closing Sale Prices of Common Stock on the five Trading Days up
to but not including the Effective Date of the Change in Control. 
  
 (3) The Stock Prices set forth in the first row of the table in Schedule A hereto will be adjusted as of any date on which the Conversion Price of the Securities is adjusted pursuant to Section 3(d). The adjusted Stock Price will equal
the Stock Price applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Price as so adjusted and the denominator of which is the Conversion Price immediately prior to such adjustment giving
rise to the Stock Price adjustment. If an adjustment is made to the Conversion Price pursuant to Section 3(d), the number of Additional Shares will be adjusted by multiplying such amount by a fraction, the numerator of which is the Conversion
Price immediately prior to such adjustment and the denominator of which is the Conversion Price as so adjusted. 
  
 (4) The exact Stock Prices and Effective Dates may not be set forth in the table in Schedule A, in which case: 
  
 (A) if the Stock Price is between two Stock Price amounts in the table or
the Effective Date is between two Effective Dates in the table, the number of Additional Shares will be determined by a straight-line interpolation between the number of Additional Shares set forth for the higher and lower Stock Price amounts and
the two dates, as applicable, based on a 365-day year, 
  

 19 

 (B) if the Stock Price is equal to or in excess of $5.89 per share, subject to adjustments set forth in
Section 3(d), no Additional Shares will be issued upon conversion, and 
  
 (C) if the Stock Price is less than $2.26 per share, subject to adjustments set forth in Section 3(d), no Additional Shares will be issued upon conversion. 
  
 SECTION 4. Taxes. 
  
 (a) Taxes on Shares Issued. The issue of stock certificates on conversions of Notes shall be made without charge to
the converting Holder for any tax in respect of the issue thereof. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of stock in any name other than that of
the Holder of any Note converted, and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid. 
  
 (b) Notwithstanding any other provision of this Note or any other Transaction Document, for income tax purposes, any assignee or transferee shall agree that the Company and the Company’s Transfer Agent shall be
permitted to withhold from any amounts payable to such assignee or transferee any taxes required by law to be withheld from such amounts. Unless exempt from the obligation to do so, each assignee or transferee shall execute and deliver to the
Company or the Company’s transfer agent, as applicable, properly completed Form W-8 or W-9, indicating that such assignee or transferee is not subject to back-up withholding for United States Federal income tax purposes. Each assignee or
transferee that does not deliver such a form pursuant to the preceding sentence shall have the burden of proving to the Company’s reasonable satisfaction that it is exempt from such requirement. 
  
 SECTION 5. Covenants. 
  
 (a) Payment of Principal, Premium and Interest. The Company will duly and punctually pay or cause to be paid the
principal of (and premium, if any) and interest on this Note at the places, at the respective times and in the manner provided herein. Liquidated damages paid pursuant to Section 3(b) of this Note, if any, shall be paid at the times and in the
manner provided herein for payment of principal, premium and interest within ten (10) Business Days of the date from which such liquidated damages accrued pursuant to Section 3(b) of this Note. Each installment of interest on the Notes due
on any Interest Payment Date may be paid by mailing checks for the interest payable to or upon the written order of the Holders of Notes entitled thereto as they shall appear on the Notes Register; provided, however, that, with respect to any Holder
of Notes with an aggregate principal amount equal to or in excess of Five Hundred Thousand United States Dollars ($500,000), at the request of such Holder in writing to the Company, interest on such Holder’s Notes shall be paid by wire transfer
in immediately available funds in accordance with the wire transfer instructions supplied by such Holder from time to time to the paying agent (if any) or the Company at least five (5) Business Days prior to the applicable record date.

  

 20 

 (b) Paying Agents. The Company may, from time to time, appoint one or more paying agents for the
Notes, and shall cause each such paying agent to execute and deliver to the Company an instrument pursuant to which such agent shall agree with the Company that it will hold all sums held by it as such agent for the payment of the principal of (and
premium, if any) or interest on the Notes (whether such sums have been paid to it by the Company or by any other obligor of such Notes) in trust for the benefit of the Holders entitled thereto. If the Company shall act as its own paying agent with
respect to the Notes, it will on or before each due date of the principal of (and premium, if any) or interest on the Notes, set aside, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay such
principal (and premium, if any) or interest so becoming due on Notes until such sums shall be paid to such Holders or otherwise disposed of as herein provided and will promptly notify the Holders of such action, or any failure (by it or any other
obligor on such Notes) to take such action. Whenever the Company shall have one or more paying agents for the Notes, it will, prior to each due date of the principal of (and premium, if any) or interest on any Notes, deposit with the paying agent a
sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Holders entitled to such principal, premium or interest, and the Company will promptly notify the Holders of
this action or failure so to act. 
  
 (c) Information Requirement.
Within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it
is not subject to Section 13 or 15(d) under the Exchange Act, make available to any holder or beneficial holder of Notes or any Common Stock issued upon conversion thereof, in each case which continue to be Restricted Securities, in
connection with any sale thereof and any prospective purchaser of Notes or such Common Stock from such holder or beneficial holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any holder or
beneficial holder of the Notes or such Common Stock and it will take such further action as any holder or beneficial holder of such Notes or such Common Stock may reasonably request in connection with qualification of such sale for exemption from
registration under Rule 144A. 
  
 (d) Extension, Stay and Usury
Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law that
would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance
of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. 
  
 (e) Issuance of Additional Convertible Debt. The Company shall not issue or agree to issue any indebtedness for borrowed money that is both
(i) convertible or exchangeable for Common Stock or any other equity securities of the Company and (ii) senior in right of payment to the Notes. 
  

 21 

 (f) Corporate Existence: Subject to Section 3(e), the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its corporate existence, rights (by charter and statutory) and franchises. 
  
 SECTION 6. Registration of Transfer and Exchange. 
  
 (a) Notes may be exchanged upon presentation thereof at the principal executive offices of the Company (or such other office or agency of the Company as
it may designate in writing to the Holder hereof) for other Notes of authorized denominations, and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto as provided
in Section 4 of this Note. In respect of any Notes so surrendered for exchange, the Company shall execute and deliver in exchange therefor the Note or Notes that the Holder making the exchange shall be entitled to receive, bearing numbers not
contemporaneously outstanding. 
  
 (b) The Company shall maintain
at its principal executive offices (or such other office or agency of the Company as it may designate in writing to the Holder hereof) a register (the “Notes Register”), in which the Company shall record the name and address of the Person
in whose name this Note has been issued, as well as the name and address of each transferee. The Company may treat the Person in whose name any Note is registered on the Notes Register as the owner and Holder thereof for all purposes,
notwithstanding any notice to the contrary, but in all events recognizing any transfers made in accordance with the terms of this Note. 
  
 (c) Upon surrender for registration of transfer of any Note to the Company at the principal executive offices of the Company (or such other office or
agency of the Company as it may designate in writing to the Holder hereof), and satisfaction of the requirements for such transfer set forth in this Section 6, the Company shall execute and deliver in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required under this Section 6. 
  
 All Notes presented or surrendered for exchange or registration of transfer,
as provided in this Section 6, shall be accompanied by a notice substantially in the form attached hereto as Exhibit C (the “Notice of Transfer”), duly executed by the registered Holder or by such Holder’s duly authorized
attorney in writing. 
  
 Prior to and as a condition to any sale
or transfer of a Note or the Common Stock issued upon conversion thereof that bears either or both of the restrictive legends set forth in Section 6(d) of this Note, respectively (other than pursuant to a registration statement that has been
declared effective under the Securities Act), such transferee shall, unless the Company otherwise agrees in writing, furnish to the Company a signed letter containing representations and agreements relating to restrictions on transfer substantially
in the form set forth in Exhibit D attached to this Note (the “Form of Transfer Letter of Representations”). 
  

 22 

 (d) Every Note that bears or is required under this Section 6(d) to bear the legends set forth below
(together with any Common Stock issued upon conversion of the Notes and required to bear such legends set forth below, collectively, the “Restricted Securities”) shall be subject to the restrictions on transfer set forth in this
Section 6(d) (including the legends set forth below), unless such restrictions on transfer shall be waived by written consent of the Company, and the Holder of each such Restricted Security, by such Holder’s acceptance thereof, agrees to
be bound by all such restrictions on transfer. As used in this Section 6(d), the term “transfer” encompasses any sale, transfer or other disposition whatsoever of any Restricted Security. Notwithstanding the foregoing, the Notes may
be pledged in connection with a bona fide margin account or other loan secured by the Notes hereunder, and no Holder effecting a pledge of Notes shall be required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Note, including, without limitation, this Section 6(d); provided, however, that in order to make any sale, transfer or assignment of Notes, such Holder and its pledgee makes such disposition in accordance with or
pursuant to a registration statement or an exemption under the Securities Act. 
  
 Any certificate evidencing a Note (and all securities issued in exchange therefor or substitution thereof, including Common Stock, if any, issued upon conversion thereof) shall bear a restrictive legend in the
following form: 
  
 THE SECURITIES REPRESENTED HEREBY 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 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES. 

 
 In addition, any Note or Conversion Shares held by or transferred to an
“affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) of the Company may be stamped or imprinted with a legend substantially in the following form: 
  
 THE SECURITIES REPRESENTED HEREBY ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF
RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. 
  
 The
legends set forth above shall be removed and the Company (in the case of Notes) or 
  

 23 

 the transfer agent (in the case of Conversion Shares) shall issue a new Note or Notes of like tenor and aggregate
principal amount, or a certificate or certificates representing Conversion Shares, as appropriate, without such legends to the Holder of the Note(s) or Conversion Shares upon which they are stamped, (i) if such Note(s) or Conversion Shares are
registered for resale under the Securities Act and are transferred or sold pursuant to such registration, (ii) if, in connection with a sale transaction, such holder provides the Company with an opinion of counsel reasonably acceptable to the
Company to the effect that a public sale, assignment or transfer of the Note(s) or Conversion Shares may be made without registration under the Securities Act, or (iii) upon expiration of the two (2)-year period under Rule 144(k) promulgated
under the Securities Act (or any successor rule) if the holder of the Securities has not been an “affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) during the preceding three (3) months. In the event
Rule 144(k) (or any successor rule) is amended to change the two (2)-year period, the reference in the preceding sentence shall be deemed to be a reference to such changed period, provided that such change shall not become effective if it is
otherwise prohibited by, or would otherwise cause a violation of, the then-applicable federal securities laws. 
  
 SECTION 7. Events of Default. The following shall constitute “Events of Default”: 
  
 (a) any Event of Default under any other Note; or 
  
 (b) the Company shall default in the payment when due of (i) any
installment of interest or liquidated damages as provided in Section 3(b) of this Note upon any of the Notes, and such default shall continue for thirty (30) calendar days after the due date thereof, (ii) the principal of and premium,
if any, on any of the Notes, either at maturity or in connection with any redemption, by declaration or otherwise, or (iii) a default in the payment of the Repurchase Price in respect of any Note on the repurchase date therefor in accordance
with the provisions of Section 8 of this Note; or 
  
 (c) any
of the representations or warranties made by the Company herein or in the Transaction Documents shall be false or misleading in any material respect at the time made and such condition (to the extent capable of being cured) shall continue uncured
for a period of ten (10) Business Days after notice from the Holders of not less than twenty percent (20%) in aggregate principal amount of the Notes then outstanding of such condition; or 
  
 (d) the Company shall fail to duly observe or perform any of the covenants on
the part of the Company in the Transaction Documents, (including without limitation, failure on the part of the Company to provide a written notice of a Repurchase Event in accordance with Section 8(b) of this Note) and such failure shall
continue for thirty (30) days after notice by the Holders of not less than twenty percent (20%) in aggregate principal amount of the Notes then outstanding; or 
  
 (e) the Company or any Subsidiary shall fail to make any payment at maturity, including any applicable grace period, in
respect of indebtedness of, or guaranteed or assumed by, the Company or any Subsidiary, in a principal amount then outstanding in excess of One Million Five Hundred Thousand United States Dollars ($1,500,000), and the continuance of such failure for
a period of fifteen (15) days after there shall have been given, by registered or certified mail, to the Company by the Holders of not less than twenty percent (20%) in aggregate 
  

 24 

 principal amount of the Notes then outstanding, a written notice specifying such default and requiring the Company to
cause such default to be cured or waived and stating that such notice is a “Notice of Default” hereunder; or 
  
 (f) the Company or any Subsidiary shall default with respect to any Indebtedness of, or guaranteed or assumed by, the Company or any Subsidiary, which
default results in the acceleration of Indebtedness in a principal amount then outstanding in excess of One Million Five Hundred Thousand United States Dollars ($1,500,000), and such Indebtedness shall not have been discharged or such acceleration
shall not have been rescinded or annulled for a period of fifteen (15) days after there shall have been given, by registered or certified mail, to the Company by the Holders of not less than twenty percent (20%) in aggregate principal
amount of the Notes then outstanding, a written notice specifying such default and requiring the Company to cause such Indebtedness to be discharged or cause such default to be cured or waived or such acceleration to be rescinded or annulled and
stating that such notice is a “Notice of Default” hereunder; or 
  
 (g) the Company or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or 
  
 (h) an involuntary case or other proceeding shall be commenced against the
Company or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) consecutive days; or 
  
 (i) the Company shall fail to issue the Additional Shares, if any, to be
issued pursuant to Section 3(j); or 
  
 (j) the Company shall
fail to deliver shares of Common Stock required to be delivered upon conversion of this Note in accordance with Section 3 of this Note within (10) Business Days of the applicable Conversion Date. 
  
 Unless an Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default), upon the occurrence of an Event of Default, and for so long as such Event of Default shall be continuing, at the option of and (except in the case of clause (i) above)
on notice by the Holder to the Company in writing and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any other instruments contained to the contrary notwithstanding to the extent permitted by applicable law, and the Holder may immediately, and 
  

 25 

 without expiration of any further period of grace, enforce any and all of the Holder’s rights and remedies provided
herein or any other rights or remedies afforded by law. In such event the principal of and premium, if any, on all the Notes and the interest accrued thereon (including liquidated damages and the Registration Delay Payments to the extent accrued and
unpaid) shall be due and payable immediately, anything in this Note contained to the contrary notwithstanding. If an Event of Default specified in Section 7(g) or (h) of this Note occurs and is continuing with respect to the Company, the
principal of all the Notes and the interest accrued thereon shall be immediately due and payable. In addition to the foregoing, upon an Event of Default, the rate of interest on this Note shall, to the maximum extent of the law, be increased by five
percent (5%) per annum (i.e., from 5.50% to 10.50% per annum). Any such interest which is not paid when due shall, to the maximum extent permitted by law, accrue interest until paid at the rate from time to time applicable to interest on
the Notes as to which the Event of Default has occurred. The Company shall within three (3) Business Days notify each Holder of Notes at their last address in the Notes Register upon becoming aware of the occurrence of any default or Event of
Default (whether or not waived by any other Holder of Notes) or of any action taken by any Holder of Notes with respect to the occurrence of any Event of Default, and shall deliver to the Holders a statement specifying such default or Event of
Default and the action the Company has taken, is taking or proposes to take with respect thereto. 
  
 (k) Collection of Indebtedness and Suits for Enforcement. 
  

(1) The Company covenants that (i) in case it shall default in the payment of any installment of interest on any of the Notes as and when the same
shall have become due and payable, and such default shall have continued for a period of thirty (30) days, or (ii) in case it shall default in the payment of the principal of (or premium, if any, on) any of the Notes when the same shall
have become due and payable, whether upon maturity of the Notes or upon redemption, repurchase or upon declaration or otherwise, then, upon demand of the Holders of not less than twenty percent (20%) in aggregate principal amount of the Notes
then outstanding, the Company will pay to the Holders of the Notes, the whole amount that then shall have been become due and payable on all such Notes for principal (and premium, if any) or interest, or all of the foregoing, as the case may be,
with interest upon the overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) upon overdue installments of interest at the rate per annum expressed in the Notes; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and expenses of collection. Until such demand by the Holders, the Company may pay the principal of and premium, if any, and interest on the Notes to the Holders, whether or not
the Notes are overdue. 
  
 (2) If the Company shall fail to pay
such amounts forthwith upon such demand, the Holders of not less than twenty percent (20%) in aggregate principal amount of the Notes then outstanding shall be entitled and empowered to institute any action or proceedings at law or in equity
for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon the Notes and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or other obligor upon the Notes, wherever situated. 
  

 26 

 (3) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment,
arrangement, composition or judicial proceedings affecting the Company, or its creditors or property, the Holders of not less than twenty percent (20%) in aggregate principal amount of the Notes then outstanding shall have power to,
irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether any demand has been made by the Holders pursuant to the provisions of this
Section 7, shall be entitled and empowered, to intervene in such proceedings and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Notes, and for any additional amount
that may become due and payable by the Company after the date of institution of such proceedings and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents and to take such other actions as it may deem
necessary or advisable in order to have the claims of the Holders allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies
or other property payable or deliverable on any such claims, and to distribute the same. 
  
 Nothing contained herein shall be deemed to authorize any Holder to authorize or consent to or accept or adopt on behalf of any other Holder any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof or to authorize another Holder to vote in respect of the claim of any other Holder in any such proceeding. 
  
 (l) Application of Moneys Collected. Any moneys collected pursuant to this Section 7 shall be applied in the following order, in case of the
distribution of such moneys on account of principal (or premium, if any) or interest, upon presentation of the Notes, and notation thereon the payment, if only partially paid, and upon surrender thereof if fully paid: 
  
 FIRST: To the payment of all Senior Indebtedness of the Company if and to
the extent required by Section 9 of this Note; and 
  
 SECOND: To the payment of the amounts then due and unpaid upon Notes for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively. 
  
 (m) Limitation on Suits. No Holder of any Note shall have any right by virtue or by availing of any provision of this Note to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this Note or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless the Holders of not less than twenty percent (20%) in aggregate
principal amount of the Notes then outstanding shall have determined to institute such action, suit or proceeding. 
  
 Notwithstanding anything contained herein to the contrary, the right of any Holder of any Note to receive payment of the principal of (and premium, if
any) and interest on such Note, as therein provided, on or after the respective due dates expressed in such Note (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment 
  

 27 

 on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such
Holder, and by accepting a Note hereunder it is expressly understood, intended and covenanted by the taker and Holder of every Note with every other such taker and Holder, that no one or more Holders of Notes shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Note to affect, disturb or prejudice the rights of the Holders of any other of such Notes, or to obtain or seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Note, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Notes. For the protection and enforcement of the provisions of this Section 7(k), each and every Holder and
shall be entitled to such relief as can be given either at law or in equity. 
  
 (n) Rights and Remedies Cumulative; Delay or Omission Not Waiver. 
  
 (1) All powers and remedies given by this Section 7 to the Holders of Notes shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any other powers and remedies available to the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Note or otherwise established with
respect to such Notes. 
  
 (2) No delay or omission of any Holder
of any of the Notes to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or on acquiescence therein;
and, subject to the provisions of Section 7(k) of this Note, every power and remedy given by this Section 7 or by law to the Holders of Notes may be exercised from time to time, and as often as shall be deemed expedient, by the Holders of
Notes. 
  
 (o) Control by Holders of Notes. The Holders of
a majority in aggregate principal amount of the Notes at the time outstanding (determined in accordance with Section 12(g) of this Note), shall have the right to direct the time, method and place of conducting any proceeding for any remedy;
provided, however, that such direction shall not be in conflict with any rule of law or with this Note or be unduly prejudicial to the rights of Holders of Notes at the time outstanding. The Holders of a majority in aggregate principal amount of the
Notes at the time outstanding (determined in accordance with Section 12(g) of this Note) affected thereby may on behalf of the Holders of all of the Notes waive any past default in the performance of any of the covenants contained herein and
its consequences, except a default in the payment of the principal of (or premium, if any) or interest on, any of the Notes as and when the same shall become due by the terms of such Notes otherwise than by acceleration. Upon any such waiver, the
default covered thereby shall be deemed to be cured for all purposes of this Note and the Company and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon. 
  
 (p) Undertaking to Pay Costs. The Company and each Holder of any Notes, by such Holder’s acceptance thereof, shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any
right or remedy under the Notes, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any
party 
  

 28 

 litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit instituted by any Holder of Notes, or group of Holders of Notes holding more than twenty percent (20%) in aggregate principal amount of the Notes then outstanding
(determined in accordance with Section 12(f) of this Note), or to any suit instituted by any Holder of Notes for the enforcement of the payment of the principal of or interest on (or liquidated damages or Registration Delay Payments with
respect to) any Note, on or after the respective due dates expressed in such Note or to any suit for the enforcement of the right to convert any Note in accordance with the provisions of Section 3 of this Note. 
  
 SECTION 8. Repurchase Upon a Repurchase Event. 
  
 (a) Repurchase Right. If, at any time prior to September 30,
2010 there shall occur a Repurchase Event (as defined in Section 8(c)), then each Holder shall have the right, at such Holder’s option, to require the Company to repurchase all of such Holder’s Notes, or any portion thereof (in
principal amounts of One Thousand United States Dollars ($1,000) or integral multiples thereof), on the date (the “repurchase date”) that is forty (40) calendar days after the date of the Company Notice (as defined in
Section 8(b) below) of such Repurchase Event (or, if such 40th day is not a Business Day, the next succeeding Business Day). Such repurchase shall be made in cash at a price equal to one hundred and five percent (105%) of the principal
amount of Notes such Holder elects to require the Company to repurchase, together with accrued interest, if any, to the repurchase date (the “Repurchase Price”). Notwithstanding anything in this Section 8 to the contrary, if a
redemption date pursuant to Section 2 of this Note shall occur prior to any repurchase date established pursuant to a Company Notice under Section 8(b) of this Note, provided that the Company shall have deposited or set aside an amount of
money sufficient to redeem such Notes as set forth in Section 2(b) of this Note on or before such repurchase date, all such Notes shall be redeemed pursuant to Section 2 of this Note and the repurchase rights hereunder shall have no
effect. 
  
 (b) Notices; Method of Exercising Repurchase Right,
Etc. 
  
 (1) Unless the Company shall have theretofore called
for redemption all of the outstanding Notes and deposited or set aside an amount of money sufficient to redeem such Notes on the redemption date as set forth in Section 2(b) of this Note, on or before the tenth (10th) calendar day after
the occurrence of a Repurchase Event, the Company shall mail to all Holders of record of the Notes a notice (the “Company Notice”) in the form as prepared by the Company of the occurrence of the Repurchase Event and of the repurchase right
set forth herein arising as a result thereof. The Company Notice shall contain the following information: 
  
 (A) a brief description of the Repurchase Event; 
  
 (B) the repurchase date; 
  
 (C) the CUSIP number(s) of the Note(s) subject to the repurchase right; 
  
 (D) the date by which the repurchase right must be exercised; 
  

 29 

 (E) the last date by which the election to require repurchase, if submitted, must be revoked;

  
 (F) the Repurchase Price; 
  
 (G) a description of the procedure which a Holder must follow to exercise a
repurchase right; 
  
 (H) the Additional Shares, if any, to be
issued pursuant to Section 3(j); and 
  
 (I) the Conversion
Price then in effect, the date on which the right to convert the principal amount of the Notes to be repurchased will terminate and the place or places where Notes may be surrendered for conversion. 
  
 No failure of the Company to give the foregoing notices or defect therein shall limit any
Holder’s right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Notes. 
  
 (2) To exercise a repurchase right, a Holder shall deliver to the Company on or before the close of business on the thirty-fifth (35th) day after the
Company Notice was mailed (i) written notice to the Company (or agent designated by the Company for such purpose) of the Holder’s exercise of such right in substantially the form attached hereto as Exhibit B (the “Repurchase
Notice”), which Repurchase Notice shall set forth the name of the Holder, the principal amount of the Notes to be repurchased, a statement that an election to exercise the repurchase right is being made thereby, and (ii) the Notes with
respect to which the repurchase right is being exercised, duly endorsed for transfer to the Company. Election of repurchase by a Holder shall be revocable at any time prior to, but excluding, the repurchase date, by delivering written notice to that
effect to the Company prior to the close of business on the Business Day prior to the repurchase date. 
  
 (3) If the Company fails to repurchase on the repurchase date any Notes (or portions thereof) as to which the repurchase right has been properly
exercised, then the principal of such Notes shall, until paid, bear interest to the extent permitted by applicable law from the repurchase date at the rate borne by the Note and each such Note shall be convertible into Common Stock in accordance
with Section 3 of this Note (without giving effect to Section 8(b)(2) of this Note) until the principal of such Note shall have been paid or duly provided for. 
  
 (4) Any Note that is to be repurchased only in part shall be surrendered duly endorsed for transfer to the Company and
accompanied by appropriate evidence of genuineness and authority satisfactory to the Company duly executed by the Holder thereof (or his attorney duly authorized in writing), and the Company shall execute and deliver to the Holder of such Note
without service charge, a new Note or Notes, containing identical terms and conditions, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal
of the Note so surrendered. 
  
 (5) On or prior to the repurchase
date, the Company shall deposit with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust as 
  

 30 

 provided in Section 5 of this Note) the Repurchase Price in cash for payment to the Holder on the repurchase date;
provided that if payment is to be made in cash and such cash payment is to be made on the repurchase date, it must be received by the paying agent, as the case may be, by 1:00 p.m., New York time, on such date. 
  
 (6) If the Company is unable to repurchase on the repurchase date all of the
Notes (or portions thereof) as to which the repurchase right has been properly exercised, the aggregate amount of Notes the Company may repurchase shall be allocated pro rata among each Note (or portion thereof) surrendered for repurchase, based on
the principal amount of such Note (or portion thereof), in proportion to the aggregate amount of Notes surrendered for repurchase. 
  
 (7) All Notes delivered for repurchase shall be canceled by the Company. 
  
 (c) Certain Definitions. For purposes of this Section 8: 
  
 (1) the term “beneficial owner” shall be determined in accordance
with Rule 13d-3 and 13d-5, as in effect on the date of the original execution of this Note, promulgated by the Securities and Exchange Commission pursuant to the Exchange Act; 
  
 (2) the term “person” or “group” shall include any syndicate or group which would be deemed to be a
“person” under Section 13(e) and 14(d) of the Exchange Act as in effect on the date of the original execution of this Note; and 
  
 (3) the term “Continuing Director” means at any date a member of the Company’s Board of Directors (i) who was a member of such board
on the date of the Securities Purchase Agreement or (ii) who was nominated or elected by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Company’s Board
of Directors was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or such lesser number comprising a majority of a nominating committee if authority for such
nominations or elections has been delegated to a nominating committee whose authority and composition have been approved by at least a majority of the directors who were continuing directors at the time such committee was formed. (Under this
definition, if the Board of Directors of the Company as of the date of this Note were to approve a new director or directors and then resign, no Change in Control would occur even though all of the current members of the Board of Directors would
thereafter cease to be in office). 
  
 (4) the term
“Repurchase Event” means a Change in Control or a Termination of Trading. 
  
 (5) a “Change in Control” shall be deemed to have occurred when (i) any “person” or “group” (as such terms are used in Sections 13(e) and 14(d) of the Exchange Act) is or becomes the
beneficial owner of shares representing more than fifty percent (50%) of the combined voting power of the then outstanding securities entitled to vote generally in elections of directors of the Company (the “Voting Stock”);
(ii) approval by the stockholders of the Company of any plan or proposal for the liquidation, dissolution or winding up of the Company; (iii) (A) the Company consolidates with or merges into any other corporation or any other
corporation merges into the Company, and in the case of any such transaction, the outstanding 
  

 31 

 Common Stock of the Company is changed or exchanged into other assets or securities as a result, unless the stockholders
of the Company immediately before such transaction own, directly or indirectly immediately following such transaction, at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the Voting Stock immediately before such transaction, (B) the Company conveys, transfers or leases all or substantially all of its assets to any person (other than a
wholly-owned subsidiary as a result of which the Company becomes a holding company) or (C) all or substantially all of the Common Stock is acquired in one or more transactions that result in the Common Stock no longer being registered under the
Exchange Act; or (iv) any time Continuing Directors do not constitute a majority of the Board of Directors of the Company (or, if applicable, a successor corporation to the Company); provided that a Change in Control shall not be deemed to have
occurred if at least ninety percent (90%) of the consideration (excluding cash payments for fractional shares) in the transaction or transactions constituting the Change in Control consists of (and the capital stock into which the Notes would
be convertible consists of) shares of capital stock that are, or upon issuance will be, traded on The New York Stock Exchange, Inc., the American Stock Exchange, Inc. or The Nasdaq National Market or SmallCap Market. 
  
 (6) the term “Termination of Trading” means that the Common Stock
is not authorized for quotation or listing on The New York Stock Exchange, Inc., the American Stock Exchange, Inc. or The Nasdaq National Market or SmallCap Market. 
  
 SECTION 9. Subordination of Notes 
  
 (a) Subordination to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Note, by his or her acceptance thereof, likewise
covenants and agrees, that all Notes shall be issued subject to the provisions of this Section 9 and to the extent and in the manner hereinafter set forth in this Section 9, the indebtedness represented by the Notes and the payment of the
principal amount and interest thereon, liquidated damages or any other amounts in respect of each and all of the Notes are hereby expressly made subordinate and junior and subject in right of payment to the prior payment in full of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. “Senior Indebtedness” means the principal of, and premium, if any, and interest on, fees, costs and expenses in connection with and other amounts due under (i) all
obligations of the Company with respect to any unsubordinated secured or unsecured debt facilities or commercial paper facilities with banks, insurance companies or other institutional lenders providing for unsubordinated revolving credit loans,
unsubordinated term loans, unsubordinated notes, unsubordinated factoring or other receivables financing or unsubordinated letters of credit or other unsubordinated credit facilities, (ii) principal of, and interest on any indebtedness or
obligations of others of the kinds described in (i) above assumed or guaranteed in any manner by the Company, (iii) deferrals, renewals, extensions and refundings of any such indebtedness or obligations described in (i) and
(ii) above, in each case unless the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that the same is not senior in right of payment to the Notes. Senior Indebtedness includes, with
respect to the foregoing, interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not post-filing interest is allowed in such proceeding. Notwithstanding the foregoing,
“Senior Indebtedness” with respect to any Note shall not include indebtedness of the Company evidenced by the other Notes, which shall rank equally and ratably with such Note. 
  

 32 

 (b) No Payment if Default in Senior Indebtedness. No payment on account of principal of or
interest on the Notes shall be made, and no Notes shall be redeemed or purchased directly or indirectly by the Company (or any of its Subsidiaries), if at the time of such payment or purchase or immediately after giving effect thereto, (i) a
default in the payment of principal, premium, if any, interest, rent or other obligations in respect of any Senior Indebtedness occurs and is continuing (a “Payment Default”), unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or (ii) the Company shall have received notice (a “Payment Blockage Notice”) from the holder or holders of Senior Indebtedness that there exists under such Senior Indebtedness a default, which
shall not have been cured or waived, permitting the holder or holders thereof to declare Senior Indebtedness in an aggregate amount equal to or in excess of One Million Five Hundred Thousand United States Dollars ($1,500,000) due and payable, but
only for the period (the “Payment Blockage Period”) commencing on the date of receipt of the Payment Blockage Notice and ending on the earlier of (a) the date such default shall have been cured or waived, or (b) 180 days after
the date of receipt of the Payment Blockage Notice. 
  
 The
Company shall promptly provide written notice to the Holders of (i) the occurrence of a Payment Default, and the date thereof, (ii) the date a Payment Default has been cured or waived or ceases to exist, (iii) the receipt of a Payment
Blockage Notice and the date of such notice and (iv) the termination of a Payment Blockage Period, if such period terminates as a result of the cure or waiver of a default under Senior Indebtedness, 
  
 The Company shall resume payments on and distributions in respect of the
Notes, including any past scheduled payments of the principal of (and premium, if any) and interest on such Notes to which the Holders of the Notes would have been entitled but for the provisions of this Section 9(b) in the case of a Payment
Default, on the date upon which such Payment Default is cured or waived or ceases to exist. In addition, notwithstanding clauses (i) and (ii), unless the holders of Senior Indebtedness in an aggregate amount equal to or in excess of Two Million
United States Dollars ($2,000,000) shall have accelerated the maturity of such Senior Indebtedness, the Company shall resume payments on the Note after the end of each Payment Blockage Period. Not more than one Payment Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of defaults with respect to Senior Indebtedness during such period. 
  
 (c) Payment upon Dissolution, Etc. 
  
 (1) 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 of the Company (being hereinafter referred to as a “Proceeding”), the Holders of the Notes agree that they shall, upon
request of a holder of Senior Indebtedness, and at their own expense take all reasonable actions (including but not limited to the execution and filing of documents and the giving of testimony in any Proceeding, whether or not such testimony could
have been compelled by process) necessary to prove the full amount of all their claims in any 
  

 33 

 Proceeding, and the Holders of the Notes shall not waive any claim in any Proceeding without the written consent of such
Holder. If a holder of a Note does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in this paragraph at least thirty (30) days before the expiration of the time to file such claim, the
holders of any Senior Indebtedness or their representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders. 
  
 (2) The Holders shall retain the right to vote and otherwise act with respect to the claims under their Notes (including, without limitation, the right to
vote to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension); provided that any Holder shall not vote with respect to any such plan or take any other action in any way so as to
contest the Holders’ obligations and agreements set forth in this Section. 
  
 (3) Upon payment or distribution to creditors in a Proceeding of assets of the Company of any kind or character, whether in cash, property or securities, all principal and interest due upon any Senior Indebtedness
shall first be paid in full before any Holders of the Notes shall be entitled to receive or, if received, to retain any payment or distribution on account of the Notes, and upon 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 any Holders of the Notes would be entitled except for the provisions of this Section 9 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 any Holders of the Notes 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 any Holders of the Notes. 
  
 (d) Payments on Notes. Subject to Section 9(c) of this Note, the Company may make payments of the principal of, and any interest or premium
on, the Notes, if at the time of payment, and immediately after giving effect thereto, (i) there exists no Payment Default or a Payment Blockage Period and (ii) the Company is permitted to make payments under Section 9(c) of this
Note. 
  
 (e) Subrogation. Subject to payment in full of
all Senior Indebtedness, the Holders (together with the holders of any other indebtedness of the Company that is subordinated in right of payment to payment in full of all Senior Indebtedness, that is not subordinated in right of payment to the
Notes, and that by its terms grants such right of subrogation to the holders thereof) shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of the assets of the Company made on such Senior
Indebtedness until all principal and interest on the Notes shall be paid in full; and for purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which any Holders of
the Notes would be entitled except for the subordination provisions of this Section 9(e) shall, as between the Holders of the Notes and the Company and/or its creditors other than the holders of the Senior Indebtedness, be deemed to be a
payment on account of the Senior Indebtedness. 
  

 34 

 (f) Remedies. Notwithstanding any contrary provisions of this Note or the Notes, no Holder of the
Notes shall take or continue any action or exercise any remedies under or with respect to the Notes if (i) there exists a Payment Default or (ii) the Company is prohibited from making payments under Section 9(c) of this Note. Nothing
in this Section 9 shall prevent any Holder from exercising any right of conversion, or exercising any remedies or taking or continuing any action in connection therewith, pursuant to Section 3(a) of this Note. 
  
 (g) Rights of Holders Unimpaired. The provisions of this
Section 9 are and are intended solely for the purposes of defining the relative rights of the Holders of the Notes and the holders of Senior Indebtedness and nothing in this Section 9 shall impair, as between the Company and any Holders of
the Notes, the obligation of the Company, which is unconditional and absolute, to pay to the Holders of the Notes the principal thereof (and premium, if any) and interest thereon, in accordance with the terms of the Notes. Nothing in this
Section 9 shall impair the rights of the Holders to convert the Notes in accordance with Section 3. 
  
 (h) Holders of Senior Indebtedness. These provisions regarding subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior Indebtedness; such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are hereby made obligees under such provisions to the same extent as
if they were named therein, and they or any of them may proceed to enforce such subordination. The Holders shall execute and deliver to any holder of Senior Indebtedness any such instrument as such holder of Senior Indebtedness may reasonably
request in order to confirm the subordination of the Notes to such Senior Indebtedness upon the terms set forth in this Note. The holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to any of the
Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provisions of the Notes, (i) change the manner, terms or place of payment of, or renew or alter, any Senior Indebtedness, or otherwise
amend or supplement the same, (ii) sell, exchange or release any collateral mortgaged, pleaded or otherwise securing the Senior Indebtedness, (iii) release any person liable in any manner for the Senior Indebtedness and (iv) exercise
or refrain from exercising any rights against the Company or any other person. 
  
 (i) In the event that notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including, without limitation, by way of
setoff or otherwise) prohibited by the provisions of this Section 9 shall be received by the Holders before all Senior Indebtedness is paid in full, such payment or distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of Senior Indebtedness or their representative or representatives, as their respective interests may appear, as calculated by the Company, for application to, or to be held as collateral for, the payment of any Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. 
  
 SECTION 10. Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become
mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute and deliver a new Note bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu
of and in substitution 
  

 35 

 for the Note so destroyed, lost or stolen. In every case, the applicant for a substituted Note shall furnish to the
Company such security or indemnity as may be required by the Company to save it harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company evidence to its satisfaction of the destruction, loss or
theft of the applicant’s Note and of the ownership thereof. Upon the issuance of any substituted Note, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto
and any other expenses connected therewith. In case any Note that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Note, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated Note) if the applicant for such payment shall furnish to the Company such security or indemnity as the Company may require to save it harmless, and, in case of destruction, loss or
theft, evidence to the satisfaction of the Company of the destruction, loss or theft of such Note and of the ownership thereof. 
  
 Every replacement Note issued pursuant to the provisions of this Section shall constitute an additional contractual obligation of the Company whether or
not the mutilated, destroyed, lost or stolen Note shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Note equally and proportionately with any and all other Notes duly issued hereunder. All
Notes shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes, and shall preclude (to the extent lawful) any and all
other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. 
  
 SECTION 11. Notices. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Note 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 (evidenced by mechanically or
electronically generated receipt by the sender’s facsimile machine); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the
same. If notice is to be sent to the Company, the Holder shall use its reasonable best efforts to provide additional copies to the individuals listed below; provided, however, that the failure of such Holder to send such additional copies shall in
no way limit the effectiveness of any notice sent to the Company as provided for below. The addresses and facsimile numbers for such communications shall be: 
  

 36 

 If to the Company: 
  
 Jameson Inns, Inc. 
 8 Perimter Center East, Suite 8050 
 Atlanta, Georgia 30346-1604 
 Telephone: (770) 901-9020 
 Facsimile: (770) 901-9203 
 Attention: Craig R. Kitchin 
  
 with a copy to: 
  
 Conner &
Winters, LLP 
 3700 First Place Tower 
 15 East Fifth Street 
 Tulsa, Oklahoma, 74103 
 Telephone: (918) 586-5711 
 Facsimile: (918) 586-8548 
 Attention: Lynnwood R. Moore, Jr. 
  
 If to the Transfer Agent: 
  
 Registrar
and Transfer Company, 
 10 Commerce Drive 
 Cranford, NJ 07016 
 Telephone: (908) 497-2300 
 Facsimile: (908) 497-2310 
 Attention: Henry Farrell 
  
 If to a Holder of this Note, to it at the address and facsimile number set forth on the Schedule of Buyers attached as Exhibit A to the Securities
Purchase Agreement, with copies to such Holder’s representatives as set forth on such Schedule of Buyers, or at such other address and facsimile as shall be set forth on the Notes Register maintained by the Company upon the issuance or transfer
of this Note. Each party may by written notice to the other party change its address or facsimile number. 
  
 SECTION 12. Miscellaneous Provisions. 
  
 (a) Successors and Assigns. All of the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not.

  
 (b) Amendments. This Note and any term hereof may be
amended, changed, waived, discharged, or terminated only by an instrument in writing signed by the Company and the Holders of not less than fifty percent (50%) in aggregate principal amount of the Notes then outstanding. Such amendment, change,
waiver, discharge or termination shall be binding on the Company and all of the Holder’s assignees and transferees; provided, however, that, without the written consent of all of the Holders of the Notes, no such action may extend the Maturity
Date, 
  

 37 

 or reduce the rate or extend the time of payment of interest thereon (except in the case of a Payment Blockage Period),
or reduce the principal amount thereof or premium, if any, thereon, or reduce any amount payable on redemption or repurchase thereof, impair, or change in any respect adverse to the Holders, the obligation of the Company to repurchase any Note at
the option of the holder upon the happening of a Repurchase Event, or change the currency in which the Notes are payable, or impair or change in any respect adverse to the Holders the right to convert the Notes into Common Stock subject to the terms
set forth herein, or reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such amendment or supplemental indenture. No waivers of any term, condition or provision of this Note in any one or more instances
shall be deemed to be or construed as a further or continuing waiver of any such term, condition or provision. 
  
 (c) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation 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. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting 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 Note 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. If any provision of this Note shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the remainder of this Note in that jurisdiction or the validity or enforceability of any provision of this Note in any other jurisdiction. 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 HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 
  
 (d) Payments on Business Days. In any case where the date of maturity
of principal or interest of this Note or the date of redemption of this Note shall not be a Business Day, then payment of principal (and premium, if any) or interest of this Note may be made on the next succeeding Business Day with the same force
and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date. 
  
 (e) Separability. In case any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid or illegal or unenforceable provision had never been contained
herein. 
  

 38 

 (f) Descriptive Headings. The headings of this Note are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. 
  
 (g)
Certain Notes Owned by Company Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent or waiver under this Note, the Notes that are owned by the Company or
any other obligor on the Notes or by any Person directly or indirectly controlling or controlled by or under common control with the Company or any other obligor on the Notes shall be disregarded and deemed not to be outstanding for the purpose of
any such determination. 
  
 (h) No Waivers. No failure on
the part of the Holder to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other
or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time. 
  

 39 

 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of day and year first
above written. 
  

			
	“COMPANY”
	
	JAMESON INNS, INC.
		
	 By:
	 	  

	 Its:
	 	  

 SCHEDULE A 
  

The following table sets forth the number of Additional Shares to be received per $1,000 principal amount of Notes. 
  

																		
	 	  	 	  	Effective Date

	 % Step

	  	Stock Price

	  	9/28/2005

	  	3/30/2006

	  	9/30/2006

	  	3/30/2007

	  	9/30/2007

	  	3/30/2008

	  	9/30/2008

	 0%
	  	$	2.26	  	129.554	  	121.672	  	111.143	  	101.660	  	92.068	  	81.271	  	81.271
	 10%
	  	$	2.49	  	110.165	  	101.984	  	91.275	  	81.089	  	69.943	  	54.724	  	41.046
	 20%
	  	$	2.71	  	95.059	  	86.802	  	76.164	  	65.703	  	53.771	  	37.279	  	7.525
	 30%
	  	$	2.94	  	83.096	  	74.915	  	64.520	  	54.092	  	41.959	  	25.349	  	0.000
	 40%
	  	$	3.16	  	73.484	  	65.480	  	55.439	  	45.255	  	33.332	  	17.419	  	0.000
	 50%
	  	$	3.39	  	65.658	  	57.897	  	48.274	  	38.468	  	27.017	  	12.268	  	0.000
	 60%
	  	$	3.62	  	59.210	  	51.729	  	42.558	  	33.206	  	22.375	  	8.976	  	0.000
	 70%
	  	$	3.84	  	53.838	  	46.658	  	37.948	  	29.086	  	18.940	  	6.889	  	0.000
	 80%
	  	$	4.07	  	49.317	  	42.444	  	34.190	  	25.825	  	16.373	  	5.563	  	0.000
	 90%
	  	$	4.29	  	45.476	  	38.908	  	31.094	  	23.215	  	14.432	  	4.709	  	0.000
	 100%
	  	$	4.52	  	42.183	  	35.912	  	28.517	  	21.102	  	12.942	  	4.144	  	0.000
	 110%
	  	$	4.75	  	39.337	  	33.351	  	26.351	  	19.371	  	11.780	  	3.755	  	0.000
	 120%
	  	$	4.97	  	36.858	  	31.144	  	24.512	  	17.935	  	10.857	  	3.474	  	0.000
	 130%
	  	$	5.20	  	34.683	  	29.226	  	22.935	  	16.729	  	10.109	  	3.260	  	0.000
	 140%
	  	$	5.42	  	32.761	  	27.547	  	21.571	  	15.705	  	9.492	  	3.088	  	0.000
	 150%
	  	$	5.65	  	31.053	  	26.065	  	20.382	  	14.824	  	8.973	  	2.944	  	0.000
	 160%
	  	$	5.88	  	29.525	  	24.750	  	19.335	  	14.059	  	8.528	  	2.819	  	0.000

 EXHIBIT A TO NOTE 
  
 FORM OF CONVERSION NOTICE 
  
 To: Jameson Inns, Inc. 
  
 The undersigned registered owner of this Note hereby irrevocably exercises the option to convert this Note, or the portion hereof (which is One Thousand
United States Dollars ($1,000) principal amount or an integral multiple thereof) below designated, into shares of Common Stock in accordance with the terms of the Note, and directs that the shares issuable and deliverable upon such conversion,
together with any check in payment for fractional shares and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any
portion of this Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of
interest accompanies this Note. 
  
 Dated:
                     
  

	
	  

 
	  

 Signature(s)

  

	
	  

	 Signature Guarantee

	
	Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or Notes to be delivered, other than to and in the name of the registered holder.
	 

  

 A-1 

	
	Fill in for registration of shares if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder:
	  
  

	 (Name)

	  
  

	 (Street Address)

	  
  

	 (City, State and Zip Code)

  
 Please print name and address 
  

	
	Principal amount to be converted (if less than all):
	
	$            ,000
	  
  

	Social Security or Other Taxpayer Identification
Number

  

 A-2 

 EXHIBIT B TO NOTE 
  
 FORM OF REPURCHASE NOTICE 
  
 To: Jameson Inns, Inc. 
  
 The undersigned registered owner of this Note hereby acknowledges receipt of a notice from Jameson Inns, Inc. (the “Company”) as to the
occurrence of a Repurchase Event with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is One Thousand United States Dollars ($1,000) principal amount or
an integral multiple thereof) below designated, in accordance with the terms of the Note, together with accrued interest (including liquidated damages pursuant to Section 3(b) of the Note or Registration Delay Payments, if any) to, but
excluding, such date, to the registered holder hereof. 
  
 Dated:                      
  

	
	  
  

	  
  

	 Signature(s)

	  
  

	Social Security or Other Taxpayer Identification Number
	
	Principal amount to be repaid (if less than all):
	
	 $            ,000

	
	NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change
whatever.

  

 B-1 

 EXHIBIT C TO NOTE 
  
 FORM OF NOTICE OF TRANSFER 
  
 For value received                      hereby
sell(s), assign(s) and transfer(s) unto                      (Please insert social security or Taxpayer Identification Number of assignee) the
within Note, and hereby irrevocably constitutes and appoints                      attorney to transfer the said Note on the books of the
Company, with full power of substitution in the premises. 
  
 In
connection with any transfer of the within Note (unless such Note is being transferred pursuant to a registration statement that has been declared effective under the Securities Act), the undersigned confirms that such Note is being transferred:

  

	 	•	 	*To Jameson Inns, Inc. or a subsidiary thereof; or 

  

	 	•	 	*To an “accredited investor” within the meaning of Rule 501(a) of the Securities Act pursuant to and in compliance with the Securities Act; or 

  

	 	•	 	*In an offshore transaction pursuant to and in compliance with Regulation S under the Securities Act; or 

  

	 	•	 	*Pursuant to and in compliance with Rule 144 under the Securities Act; 

  
 and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an “affiliate” of the Company as defined in Rule 144
under the Securities Act (an “Affiliate”): 
  

	 	•	 	*The transferee is an Affiliate of the Company. 

  

	
	 Dated:
                    

	  

	  
  

	 Signature(s)

	  
  

	 Signature Guarantee

	
	Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or Notes to be delivered, other than to and in the name of the registered holder.
	 

  

 C-1 

 NOTICE: The signature on the conversion notice, the option to elect repurchase upon a Repurchase Event or
the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. 
  

 C-2 

 EXHIBIT D TO NOTE 
  
 FORM OF TRANSFER LETTER OF REPRESENTATIONS 
  
 (TO BE DELIVERED BY HOLDER 
 UPON CERTAIN TRANSFERS OF NOTES WITHOUT 
 EFFECTIVE REGISTRATION STATEMENT) 
  
 We are delivering this letter in connection with the sale or transfer to us
of 7.0% Convertible Senior Subordinated Notes due 2010 of Jameson Inns, Inc., a Georgia corporation (the “Company”) other than pursuant to a registration statement that has been declared effective under the Securities Act of 1933, as
amended (the “Securities Act”). 
  
 We hereby confirm
that: 
  
 (i) we are an “accredited investor” within
the meaning of Rule 501(a) under the Securities Act; 
  
 (ii) any
purchase or receipt of the Notes by us will be for investment purposes and for our own account, not as a nominee or agent; 
  
 (iii) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing or
receiving the Notes; 
  
 (iv) we do not have need for liquidity in
our investment in the Notes, we have the ability to bear the economic risks of our investment in the Notes for an indefinite period of time and we are able to afford the complete loss of our investment in the Notes; 
  
 (v) we are not acquiring the Notes with a view to any distribution thereof in
a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction, and we have no present intention of selling, granting any participation in, or otherwise distributing
the same; 
  
 (vi) we have had access to such information
regarding the Company necessary in order for us to make an informed decision and any such information which we have requested have been made available for us or our attorney, accountant, or advisor; and 
  
 (vii) we or our attorney, accountant, or advisor have had a reasonable
opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the business, management and financial affairs of the Company and the terms and conditions of the acquisition by us of the Notes
and all such questions have been answered to our full satisfaction, and we have acquired sufficient information about the Company to make an informed and knowledgeable decision to acquire the Notes. 
  
 We understand that the Notes have not been registered under the Securities
Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Notes, that such Notes may be offered, resold, pledged or otherwise transferred only (i) in accordance with an exemption from the registration
requirements of the Securities Act, (ii) to the Company or (iii)
  

 D-1 

 pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of
any State of the United States or any other applicable jurisdiction. We agree that we will furnish the Company an opinion of counsel reasonably acceptable to the Company, if the Company so requests, that the foregoing restrictions on transfer have
been complied with. We understand that the Company will not be required to accept for registration of transfer any Notes, except upon presentation of evidence satisfactory to it, including an opinion of counsel reasonably acceptable to the Company
if the Company so requests, that the foregoing restrictions on transfer have been complied with. 
  
 We acknowledge that the Company and others will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. 
  

			
	  
  

	(Name)	 	 
		
	By:	 	  

	Name:	 	 
	Title:	 	 
		
	Address:	 	  

	  

  

 D-2SECURITIES PURCHASE AGREEMENT

 Exhibit 10.1 
  

  
 JAMESON INNS, INC., 
  
 as the Company 
  
 and 
  
 BUYERS, 
  
 as defined herein 
  
 SECURITIES PURCHASE AGREEMENT 
  
 Dated as of September 29, 2005 
  
 7.0 % Convertible Senior Subordinated Notes due 2010 
  

 SECURITIES PURCHASE AGREEMENT 
  
 THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of September 29, 2005, by and among
Jameson Inns, Inc., a Georgia corporation (the “Company”), and the Buyers listed on the Schedule of Buyers attached hereto as Schedule 1 (individually, a “Buyer” and, collectively, the “Buyers”). 
  
 THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis
of the following facts, intentions and understandings: 
  
 A.
In accordance with the terms and conditions of this Agreement, the Company has agreed to issue and sell, and the Buyers have severally agreed to purchase in the aggregate, Thirty-Five Million United States Dollars ($35,000,000) principal amount
of the Company’s 7.0% Convertible Senior Subordinated Notes due 2010 (such Convertible Senior Subordinated Notes, substantially in the form attached as Exhibit A hereto, as such form of Note may be amended, modified or supplemented from
time to time in accordance with the terms thereof, the “Notes”), which shall be convertible into shares of the common stock, $0.10 par value per share (the “Common Stock”), of the Company (as converted, the “Conversion
Shares”). 
  
 B. 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 B (as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof, the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide the Buyers with the benefit of certain registration rights under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the “Securities Act”) and applicable state securities laws, on the terms and subject to the conditions set forth therein. 
  
 NOW THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows: 
  
 SECTION 1. Purchase and Sale of Notes. 
  
 (a) Purchase of Notes. Subject to the satisfaction (or waiver, to the extent permitted by applicable law) of the conditions set forth in Sections 5
and 6 of this Agreement, the Company shall issue and sell to each Buyer, and each Buyer severally and not jointly agrees to purchase from the Company, the respective principal amount of Notes set forth opposite such Buyer’s name on the Schedule
of Buyers attached hereto as Schedule 1 (the “Closing”). The Company shall issue to each Buyer One Thousand United States Dollars ($1,000) principal amount of the Notes for each One Thousand United States Dollars ($1,000) tendered
by each such Buyer. 
  
 (b) The Closing. The date and time
of the Closing (the “Closing Date”) shall be 10:00 a.m., Eastern Standard Time, on September 30, 2005, subject to the satisfaction (or waiver, to the extent permitted by applicable law) of the conditions set forth in Sections 5
and 6 of this Agreement. The Closing shall occur on the Closing Date at the offices of Conner & Winters, LLP, 3700 First Place Tower, 15 East Fifth Street, Tulsa, OK 74103-4344. 

 (c) Form of Payment. On the Closing Date, (i) each Buyer shall pay the Company for the Notes
to be issued and sold to such Buyer on the Closing Date, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions attached hereto on Schedule A, and (ii) the Company shall issue to
each Buyer properly authenticated Notes (in the denominations of not less than One Thousand United States Dollars ($1,000) as such Buyer shall reasonably request) representing the principal amount of Notes which such Buyer is then purchasing
hereunder, duly executed on behalf of the Company and registered in the name of such Buyer. 
  
 SECTION 2. Buyer’s Representations and Warranties. Each Buyer represents and warrants to the Company with respect to only itself that as of the date hereof: 
  
 (a) Investment Purpose. Such Buyer is acquiring the Notes for its own
account for investment only 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 from registration under the Securities Act; provided, however, that
by making the representations herein, such Buyer does not agree to hold any of the Notes and the Conversion Shares (collectively, the “Securities”) for any minimum or other specific term and reserves the right to dispose of the Securities
at any time; provided, further, that such disposition shall be in accordance with or pursuant to a registration statement or an exemption under the Securities Act. 
  
 (b) Accredited Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act as of the date of this Agreement and was not organized for the specific purpose of acquiring the Securities. 
  
 (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 the United States federal and state securities laws and that the Company is relying 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 and in the applicable Note in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities. 
  
 (d) Information. Such Buyer believes it (i) has been furnished
with or believes it has had full access to all of the information that it considers necessary or appropriate for deciding whether to purchase the Securities, including a copy of the Confidential Private Placement Memorandum (as defined below) and
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by such Buyer, (ii) has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the Offering, (iii) can bear the economic risk of a total loss of its investment in the Securities and (iv) has such knowledge and experience in business and financial matters
so as to enable it to understand the risks of and form an investment decision with respect to its investment in the Securities. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall limit, modify, amend or affect the Company’s representations and warranties contained in this Agreement or any other Transaction Document and the Buyer’s right to rely thereon. 
  

 2 

 (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. 
  
 (f) Transfer or
Resale. Such Buyer understands that, except as provided in the Registration Rights Agreement, the Securities have not been registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred without registration under the Securities Act or an exemption therefrom and that, in the absence of an effective registration statement under the Securities Act, such Securities may only be sold under certain circumstances as set forth
in the Securities Act. In that connection, such Buyer is aware of Rule 144 under the Securities Act and the restrictions imposed thereby. 
  
 (g) Legends. 
  
 (1) Such Buyer understands that, until the expiration of the holding period applicable to sales thereof under Rule 144(k) (or any successor provision),
any certificate evidencing such Notes (and all securities issued in exchange therefor or in substitution thereof, other than Common Stock, if any, issued upon conversion thereof, which shall bear the legend set forth in Section 2(g)(2) of this
Agreement, if applicable) shall bear a legend (a “Securities Act Legend”) in substantially the following form: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES. 
  
 The Company may place the following legend (an “Affiliate Legend”) on any Note, as appropriate, held by or transferred to an
“affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) of the Company: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT. 
  

 3 

 The legends set forth above shall be removed and the Company shall issue a new Note, as appropriate, of
like tenor and aggregate principal amount or number of shares, as appropriate, and which shall not bear the restrictive legends required by this Section 2(g)(1), (i) if such Notes are registered for resale under the Securities Act and are
transferred or sold pursuant to such registration, (ii) if, in connection with a sale transaction, such holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that such sale, assignment or
transfer of the Notes may be made without registration under the Securities Act, or (iii) upon expiration of the two-year period under Rule 144(k) of the Securities Act (or any successor rule) if the holder of the Securities has not been an
“affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) during the preceding three (3) months. 
  
 (2) Such Buyer understands that any stock certificate representing Conversion Shares shall bear a legend in substantially the following form (unless
(i) the resale of such Conversion Shares has been registered pursuant to an effective registration statement, (ii) such Conversion Shares have been transferred or sold pursuant to the exemption from registration provided by Rule 144 under
the Securities Act, (iii) such Conversion Shares may be transferred pursuant to Rule 144(k) under the Securities Act, or (iv) unless otherwise agreed by the Company in writing with written notice to the transfer agent): 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES. 
  
 The Company may instruct the transfer agent to place the following legend on
any certificate evidencing shares of Common Stock held by or transferred to an “affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) of the Company: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR
PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
A VALID EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. 
  
 The legends set forth above shall be removed and the Company shall issue the relevant Securities without such legends to the holder of the Securities upon which it is stamped, (i) if such Securities are registered for resale under the
Securities Act, (ii) if, in connection with a sale transaction, such holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that such sale, assignment or transfer of the Securities may be made
without registration under the Securities Act, or (iii) upon expiration of the two-year 
  

 4 

 period under Rule 144(k) of the Securities Act (or any successor rule) if the holder of the Securities has not been an
“affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) during the preceding three (3) months. 
  
 (3) Such Buyer understands that, in the event Rule 144(k) as promulgated under the Securities Act (or any successor rule) is amended to change the
two-year or three-month periods under Rule 144(k) (or the corresponding periods under any successor rule), (i) each reference in Sections 2(g)(1) and 2(g)(2) of this Agreement to “two (2) years” or the “two-year period”
and to “three (3) months” shall be deemed for all purposes of this Agreement to be references to such changed period or periods, and (ii) all corresponding references in the Notes shall be deemed for all purposes to be references
to the changed period or periods, provided that such changes shall not become effective if they are otherwise prohibited by, or would otherwise cause a violation of, the then-applicable federal securities laws. 
  
 (h) Authorization; Enforcement; Validity. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of such Buyer and are valid and binding agreements of such Buyer enforceable against such Buyer in accordance with their terms, subject as to
enforceability to general principles of equity and to 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 country or state specified in its address on the Schedule of Buyers attached hereto as Schedule 1. 
  
 (j) No Conflicts. The execution and performance of this Agreement and the Registration Rights Agreement do not conflict with any agreement to which
such Buyer is a party or is bound thereby, any court order or judgment addressed to such Buyer, or the constituent documents of such Buyer, except for those conflicts that would not, individually or in the aggregate, have a material adverse effect
on the Buyer’s authority or ability to perform its obligations under this Agreement or the Registration Rights Agreement. 
  
 (k) Conversion/ Limitation. (A) Subject to such Buyer’s election on the signature pages hereto to be governed by this
Section 2(k)(A), such Buyer hereby agrees that in no event will it convert, and the Company will not honor any conversion request presented to it that requests the conversion of, any of the Notes in excess of the number of such Notes upon the
conversion of which (x) the number of shares of Common Stock beneficially owned by such Buyer (other than the shares which would otherwise be deemed beneficially owned except for being subject to a limitation on conversion or exercise analogous
to the limitation contained in this Section 2(k)(A)) plus (y) the number of shares of Common Stock issuable upon the conversion of such Notes would be equal to or exceed 9.99% of the number of shares of Common Stock then issued and
outstanding (after giving effect to such conversion or exercise), it being the intent of the Company and such Buyer that a Buyer electing to be governed by this Section 2(k)(A) not be deemed at any time to have the power to vote or dispose of
greater than 9.99% of the number of shares of Common Stock issued and outstanding. As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “Exchange Act”). To the 
  

 5 

 extent that the limitation contained in this Section 2(k)(A) applies (and without limiting any rights the Company
may otherwise have), the Company may rely on such Buyer’s determination of whether the Notes are convertible pursuant to the terms hereof, the Company having no obligation whatsoever to verify or confirm the accuracy of such determination, and
the submission of the Conversion Notice (as that term is defined in the Note) by such Buyer shall be deemed to be such Buyer’s representation that the Notes specified therein are convertible or exercisable pursuant to the terms hereof. Nothing
contained herein shall be deemed to restrict the right of such Buyer to convert the Notes at such time as the conversion or exercise thereof will not violate the provisions of this Section 2(k)(A). By written notice to the Company, such Buyer
may increase or decrease the maximum percentage stated in this paragraph to any other percentage specified in such notice; provided, that any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to
the Company and provided further that in no event shall the percentage stated in this paragraph exceed 9.99%. Notwithstanding anything herein to the contrary, this Section 2(k)(A) shall not apply to a Buyer unless the Buyer has elected to be
governed by this Section by so indicating on the signature page. 
  
 (B) Subject to such Buyer’s election on the signature pages hereto to be governed by this Section 2(k)(B), such Buyer hereby agrees that in no event will it convert, and the Company will not honor any conversion request presented
to it that requests the conversion of, any of the Notes in excess of the number of such Notes, upon the conversion of which (x) the number of shares of Common Stock beneficially owned by such Buyer (other than the shares which would otherwise
be deemed beneficially owned except for being subject to a limitation on conversion analogous to the limitation contained in this Section 2(k)(B)) plus (y) the number of shares of Common Stock issuable upon the conversion of such
Notes would be equal to or exceed 4.99% of the number of shares of Common Stock then issued and outstanding (after giving effect to such conversion), it being the intent of the Company and such Buyer that a Buyer electing to be governed by this
Section 2(k)(B) not be deemed at any time to have the power to vote or dispose of greater than 4.99% of the number of shares of Common Stock issued and outstanding. As used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation contained in this Section 2(k)(B) applies (and without limiting any rights the Company may otherwise have), the Company may rely on such Buyer’s determination of
whether the Notes are convertible pursuant to the terms hereof, the Company having no obligation whatsoever to verify or confirm the accuracy of such determination, and the submission of the Conversion Notice (as that term is defined in the Note) by
such Buyer shall be deemed to be such Buyer’s representation that the Notes specified therein are convertible or exercisable pursuant to the terms hereof. Nothing contained herein shall be deemed to restrict the right of such Buyer to convert
the Notes at such time as the conversion or exercise thereof will not violate the provisions of this Section 2(k)(B). By written notice to the Company, such Buyer may increase or decrease the maximum percentage stated in this paragraph to any
other percentage specified in such notice; provided, that any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and provided further that in no event shall the percentage stated
in this paragraph exceed 4.99%. Notwithstanding anything herein to the contrary, this Section 2(k)(B) shall not apply to a Buyer unless the Buyer has elected to be governed by this Section by so indicating on the signature page. 
  

 6 

 (l) Additional Acknowledgement. Each Buyer acknowledges that it has independently evaluated the
merits of the transactions contemplated by this Agreement, the Notes and the Registration Rights Agreement, that it has independently determined to enter into the transactions contemplated hereby and thereby, that it is not relying on any advice
from or evaluation by any other Buyer, and that it is not acting in concert with any other Buyer in purchasing the Securities offered hereunder. 
  
 The representations and warranties of a Buyer made in this Section 2 are made solely for the purpose of permitting the Company to make a
determination that the offer and sale of the Notes pursuant to this Agreement complies with applicable U.S. federal and state securities laws and not for any other purpose. Accordingly, the Company shall not rely on such representations and
warranties for any other purpose. 
  
 SECTION 3.
Representations and Warranties of the Company. The Company represents and warrants to JMP Securities LLC (“JMP”) and each of the Buyers that as of the date hereof: 
  
 (a) Organization and Qualification. The Company and its Subsidiaries (as defined below) are corporations, statutory
business trusts, partnerships or limited liability companies, as applicable, duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated or organized, and have the requisite corporate,
trust, partnership or limited liability company power and authorization to own their properties and to carry on their business as now being conducted. Copies of the Company’s Articles of Incorporation and Bylaws, and all amendments thereto,
have been filed as exhibits to the Company’s SEC Documents (as defined in Section 3(f) of this Agreement), are in full effect and have not been modified. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation,
statutory business trust, partnership or limited liability company to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted and proposed to be 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 have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on
(i) the business, properties, assets, operations, results of operations or condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or (iii) the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined below). “Subsidiary” means any entity in
which the Company, directly or indirectly, owns or controls a majority of the ordinary voting power, capital stock or other equity or similar interests. The Company’s “Subsidiaries” are set forth on Schedule 3(a). 

 
 (b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Notes, and the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 4(q) of this Agreement)
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 and sell the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction Documents by the Company 
  

 7 

 and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the
issuance and repayment of the Notes, the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion thereof and the registration for resale of the Registrable Securities (as such term is defined in the Registration
Rights Agreement), have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required of the Company’s Board of Directors or shareholders. The Transaction Documents have been duly executed and
delivered by the Company. The Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except (i) as rights to indemnification and contribution may be
limited by federal or state securities laws and policies underlying such laws and (ii) as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. 
  
 (c) Capitalization. Except for any shares issuable upon exercise of options issued pursuant to employee benefit plans disclosed in the
Company’s SEC Documents, the capitalization of the Company is as described in the Company’s SEC Documents. All of the Company’s outstanding shares have been, or upon issuance will be, validly issued and are fully paid and
nonassessable and were issued in accordance with applicable federal and state securities laws. The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed for trading on The Nasdaq National Market.
Except for rights created pursuant to the Transaction Documents and as set forth in the SEC Documents, (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances
created by the Company; (ii) 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, any shares of capital stock 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 shares of capital stock 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, any shares of capital stock of the Company or any of its Subsidiaries (other
than any such options, warrants, scrip, rights, calls, commitments, securities, understandings and arrangement outstanding under plans disclosed in the SEC Documents); (iii) there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound, except for the debt securities, notes credit
agreement and credit facilities disclosed in SEC Documents (the “Debt Agreements”); (iv) there are no financing statements securing obligations in any amounts greater than Fifty Thousand United States Dollars ($50,000), singly, or Two
Hundred Fifty Thousand United States Dollars ($250,000) in the aggregate, filed in connection with the Company or any of its Subsidiaries except for those filed in respect of the Debt Agreements; (v) other than rights under the Registration
Rights Agreement, dated as of January 2, 2004, by and among the Company and each of the persons listed on Exhibit A thereto, all of which rights have been waived by the holders thereof, there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of its securities under the Securities Act; (vi) 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, 
  

 8 

 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; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement;
(viii) the Company does not have any stock appreciation rights or “phantom” stock plans or agreements or any similar plan or agreement; (ix) 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 reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole; and (x) the Company does not have outstanding stockholder purchase rights or “poison pill” or any similar
arrangement in effect giving any person or entity the right to purchase any equity interest in the Company upon the occurrence of certain events. 
  
 (d) Issuance of Securities. The Securities are duly authorized and, upon issuance in accordance with the terms of the applicable Transaction
Documents, shall be (i) validly issued, fully paid and non-assessable and (ii) free from all taxes, liens and charges with respect to the issuance thereof, other than any liens or encumbrances created by or imposed by the Buyers, and shall
not be subject to preemptive rights or other similar rights of shareholders of the Company. As of the Closing, at least 13,898,918 shares of Common Stock (subject to adjustment pursuant to the Company’s covenant set forth in Section 4(e)
of this Agreement) will have been duly authorized and reserved for issuance upon conversion of the Notes. Upon conversion or issuance in accordance with the terms of the Notes, the Conversion Shares will be validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the issue thereof, other than any liens or encumbrances created by or imposed by the Buyers, with the holders being entitled to all rights accorded to a holder of Common
Stock. Subject to the accuracy of the representations and warranties of each of the Buyers in this Agreement, the issuance by the Company of the Securities is exempt from registration under the Securities Act and applicable state securities laws.

  
 (e) 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 reservation for issuance and issuance
of the Conversion Shares) will not (i) result in a violation of the Company’s Articles of Incorporation or Bylaws; (ii) other than as set forth on Schedule 3(e), 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 agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, except
for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of 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. Neither the Company nor any of its Subsidiaries is in violation of any material term of or in default under its Articles of Incorporation, Bylaws or their organizational
charter or bylaws, respectively. Neither the Company nor any of its 
  

 9 

 Subsidiaries is in violation of any term of or in default under any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except where such violations and defaults would not have or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not have or reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect. Except as specifically contemplated by this Agreement, as required under the Securities Act or as required by Blue Sky filings (but only to the extent that such filings
may be made after the Closing), the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency or other person or
entity in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents. 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 date hereof and copies of such consents, authorizations, orders, filings and registrations have been delivered to the Buyers. The Company is not in violation of the listing
requirements of the Principal Market, and has no actual knowledge of any facts which could reasonably be expected to lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. The Company and its
Subsidiaries are not in violation of any covenants or other terms of its outstanding indebtedness for borrowed money which have a Material Adverse Effect. The Company and its Subsidiaries are currently unaware of any facts or circumstances which
might give rise to any of the foregoing events set forth in this paragraph. 
  
 (f) SEC Documents; Financial Statements. Since January 1, 2002, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and
Exchange Commission (the “Commission”) pursuant to the reporting requirements of the Exchange Act, (all of the foregoing filed prior to or on the date hereof and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of the date of filing of such SEC Documents, each such SEC Document, as it may have been subsequently amended by filings made by the
Company with the Commission prior to the date hereof, complied in all material respects with the requirements of the Exchange Act applicable to such SEC Document and did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the circumstances under which they are or 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 requirements and published rules and regulations of the Commission with respect thereto. Such financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied in the United States (“GAAP”), 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), correspond to the books and records of the Company and fairly present in all material respects the financial position of the Company and its
Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended. Ernst & Young LLP are independent accountants as required by the Exchange Act. The Company is not aware of any issues raised by
the 
  

 10 

 Commission with respect to any of the SEC Documents. No other written 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 circumstances under which they are or were made, not misleading. The Company satisfies the requirements for registration of the resale of the Registrable Securities on Form S-3 and does
not have any knowledge or reason to believe that it does not satisfy such requirements or have any knowledge of any fact which would reasonably result in its not satisfying such requirements. The Company is not required to file and will not be
required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to the date hereof and to which the Company is a party or by which the Company is bound which has not been previously filed as an exhibit to its
reports filed with the Commission under the Exchange Act, except for those Transaction Documents required to be filed upon execution and delivery. Except for the issuance of the Notes contemplated by this Agreement, no event, liability, development
or circumstance has occurred or exists, or is currently contemplated 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 and which has not been publicly disclosed. The Company has no reason to believe that its independent auditors will withhold their consent to the inclusion of their audit opinion concerning
the Company’s financial statements which shall be included in the Registration Statement (as such term is defined in the Registration Rights Agreement). 
  
 (g) Absence of Litigation. Except as disclosed in the section titled “Legal Proceedings” in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2004, there is no action, suit, proceeding, inquiry or investigation (“Material Litigation”) before or by any court, public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened in writing against the Company or any of its Subsidiaries or any of the Company’s or the Subsidiaries’ officers or directors in their capacities as such that has or
would reasonably be expected to have a Material Adverse Effect. The Company believes it has set aside on its books provisions reasonably adequate for the payment of all judgments, damages, costs, and expenses arising out of its pending Material
Litigation and has appropriately accounted for such reserves under GAAP. 
  
 (h) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has, directly or indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder 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, nor will the Company or any of its Subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other offerings. 
  
 (i) Intellectual Property Rights. The Company and its Subsidiaries own, possess, license or can acquire or make use of on reasonable terms, adequate rights or licenses to use all trademarks, trade names,
trade dress, service marks, service mark registrations, service names, 
  

 11 

 patents, patent rights, copyrights, inventions, technology licenses, approvals, governmental authorizations, trade
secrets, and other intellectual property rights (collectively, “Intellectual Property”) necessary to conduct their respective businesses as now conducted and as currently contemplated to be conducted by them as described in the SEC
Documents, except where the failure to currently own or possess Intellectual Property does not and would not reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries do not have any knowledge of any infringement by
the Company or its Subsidiaries of Intellectual Property rights of others, or of any development of similar or identical trade secrets or technical information by others. There is no claim, action or proceeding being made by the Company or its
Subsidiaries regarding the Intellectual Property rights of the Company or its Subsidiaries or to the Company’s knowledge, brought or currently threatened against the Company or its Subsidiaries regarding the Intellectual Property rights of or
the use of any Intellectual Property by the Company or its Subsidiaries of any third party that, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect. 
  
 (j) 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 are commensurate with similarly situated companies engaged in similar businesses as the Company and its Subsidiaries. 
  
 (k) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted (the “Permits”), except where the failure to
possess such Permits does not and would not reasonably be expected to have a Material Adverse Effect and neither the Company nor any of its Subsidiaries has received any written notice of proceedings relating to the revocation or material
modification of any such Permit. 
  
 (l) Tax Status. The
Company and each of its Subsidiaries (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and all such tax returns are accurate and complete
in all material respects, (ii) has paid all taxes and other governmental assessments and charges due with respect to the periods covered by such returns, reports and declarations, except those being contested in good faith and for which the
Company has made appropriate reserves on its books in accordance with GAAP, and (iii) has paid or set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns,
reports or declarations (referred to in clause (i) above) apply. Except as disclosed in the SEC Documents, there are no unpaid taxes or assessments for tax deficiencies that are individually or in the aggregate material in amount claimed to be
due by the taxing authority of any jurisdiction, and the Company knows of no basis for any such claim, and there are no audits in progress with respect to any tax returns, no extension of time is in force with respect to any date on which any tax
return was or is to be filed, and no waiver or agreement is in force for the extension of time for the assessment or payment of any tax. Except as disclosed in the SEC Documents, all provisions for tax liabilities of the Company and each of its
Subsidiaries have been disclosed in the Company’s financial statements and made in accordance with GAAP consistently applied, and all liabilities for taxes of the Company and each of its Subsidiaries attributable to periods prior to or ending
on the Closing Date have been adequately disclosed in the Company’s financial statements. 
  

 12 

 (m) Application of Takeover Protections. 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 Articles of
Incorporation, the laws of the state of its incorporation or the laws of any other state which is applicable to the Buyers as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of
the Securities and the Buyers’ ownership, voting (to the extent applicable) or disposition of the Securities. 
  
 (n) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company or any Subsidiary used any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the United States Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 
  
 (o) Confidential Private Placement Memorandum. The information
supplied by the Company for inclusion or incorporation by reference in the Confidential Private Placement Memorandum dated as of September 28, 2005 (the “Confidential Private Placement Memorandum”) in connection with the Offering does
not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. If, at any
time prior to the Closing Date, any event with respect to the Company shall occur which is required to be described in the Confidential Private Placement Memorandum, such event shall be so described, and an appropriate amendment or supplement shall
be prepared by the Company. 
  
 (p) Transactions With
Affiliates. Other than the grant of stock options granted pursuant to the Company’s employee benefit plans and other than as disclosed in the SEC Documents, 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 in connection with the provision of services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any 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, such that the transaction would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated
under the Securities Act. 
  

 13 

 (q) Brokers and Finders. Except for fees payable to JMP as placement agent, no brokers, finders or
financial advisory fees or commissions will be payable by the Company with respect to the transactions contemplated by this Agreement. 
  
 (r) Absence of Certain Changes. Except as disclosed in the SEC Documents available on the EDGAR system, since December 31, 2004, there has
been no change or development that has had or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. 
  
 (s) No Material Non-Public Information. Except for the issuance of the Securities and the transactions contemplated by this Agreement and the
Company’s intended use of the net proceeds from the sale of the Notes (which such information shall be fully disclosed in the Current Report on Form 8-K filed pursuant to Section 4(g)(1) hereof), the Company has not provided the Buyers
with, and the Confidential Private Placement Memorandum does not contain, material non-public information. 
  
 (t) 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 Common Stock (as defined for purposes of Rule 13d-3 of the Exchange 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
Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. The Company acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2. 
  
 (u) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion of the Notes 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 is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other shareholders of the Company. 
  
 (v) Insolvency. 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 which 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 each Closing, will not be Insolvent (as defined below). For purposes of this Section 3(v), “Insolvent” means (i) the present fair saleable value of the Company’s assets is less
than the amount required to pay the 
  

 14 

 Company’s total debt, (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. 
  
 (w) Employee Relations. 
  
 (1) Except as disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs
any member of a union. The Company and its Subsidiaries believe that their relations with their employees are good. No executive officer of the Company (as defined in Rule 501(f) of the Securities Act) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer’s employment with the Company, except that Martin D. Brew, Treasurer and Chief Accounting Officer, and the Company have agreed that Mr. Brew will terminate his employment
with the Company effective April 1, 2006. 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. 
  
 (2)
The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, 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. 
  
 (x) 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 for such (i) as set forth in the SEC Documents or (ii) 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 facilities by the Company and its
Subsidiaries. 
  
 (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 has or could be reasonably
expected to have, individually or in the aggregate, a 
  

 15 

 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. 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) 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, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP 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. 
  
 (bb) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
with respect to the Company as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective with respect to the Company as of the date hereof, except where such noncompliance does not have
and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
 SECTION 4. Covenants. 
  
 (a) Obligations. Each party shall use commercially reasonable efforts to timely satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6 of this Agreement. 
  
 (b) Form D and Blue
Sky. The Company agrees to file timely a Form D with the Commission with respect to the Securities as required under Regulation D and to provide, upon request, a copy thereof to each Buyer. 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 timely filings and
reports relating to the offer and sale of the Securities required under applicable securities or 
  

 16 

 “Blue Sky” laws of the states of the United States following the Closing Date. The Company shall pay all fees
and expenses in connection with satisfying its obligations under this Section 4(b). 
  
 (c) Reporting Status. With a view to making available to the Investors (as that term is defined in the Registration Rights Agreement) the benefits of Rule 144 promulgated under the Securities Act or any similar
rule or regulation of the Commission that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”), the Company shall: (1) make and keep public information available, as
those terms are understood and defined in Rule 144; (2) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (3) furnish to each Investor, so
long as such Investor owns Registrable Securities (the “Reporting Period”), promptly upon request, (A) a written statement by the Company, if true, that it has complied with the applicable reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (B) a copy of the most recent annual or quarterly report of the Company and copies of such other reports and documents so filed by the Company, (C) the information required by Rule 144A(d)(4) (or any
successor rule) under the Securities Act, and (D) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration. 
  
 (d) Use of Proceeds. The Company intends to use the net proceeds from
the sale of the Notes as described in the Confidential Private Placement Memorandum. 
  
 (e) Reservation of Shares. The Company shall take all actions necessary to at all times have authorized, and reserved for the purpose of issuance, no less than one hundred ten percent (110%) of the number
of shares of Common Stock (the “Reservation Amount”) needed to provide for the issuance of the Conversion Shares upon conversion of all of the Notes without regard to any limitations on conversions. 
  
 (f) Listing. The Company shall promptly use its best efforts to secure
the listing of all of the Conversion Shares upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable under the terms of the Transaction Documents. So long as any Securities are outstanding, the Company shall maintain the Common
Stock’s authorization for quotation or listing on The New York Stock Exchange, Inc., the American Stock Exchange, Inc. or The Nasdaq National Market or SmallCap Market (the principal market on which the Common Stock is then traded, the
“Principal Market”). The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f). 
  
 (g) Filing of Form 8-K. Prior to 8:30 a.m. New York time on the Business Day following the date hereof, the Company shall issue a press release
announcing the transactions contemplated hereby and use reasonable best efforts to file, within one Business Day after the date hereof, a Current Report on Form 8-K with the Commission describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form 8-K (i) such press release, (ii) this Agreement and the Exhibits hereto, 
  

 17 

 (iii) the form of Note and (iv) the Registration Rights Agreement, each in the form required by the Exchange Act;
provided, however, that all references to the names of the Buyers shall be redacted from any press release filed in connection with the transactions contemplated hereby. “Business Day” means any day other than Saturday, Sunday or other day
on which commercial banks in the City of New York are required by law to remain closed. 
  
 (h) Tax Matters. If the Company shall be required to withhold or deduct any tax or other governmental charge from any payment made hereunder or under any Note to any Buyer, then, subject to the last sentence of
this Section 4(h), the Company shall pay to such Buyer such additional amounts as are necessary such that such Buyer actually receives the amount such Buyer would have received if no such withholding or deduction had been required. If any Buyer
is organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia (a “Non-United States Buyer”), such Buyer shall deliver to the Company either (a) two (2) copies of either
United States Internal Revenue Service Form W-8BEN or Form W-8ECI, or (b) in the case of a Non-United States Buyer claiming exemption from United States Federal withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder (the “Code”) with respect to payments of “portfolio interest”, a certificate in form and substance reasonably acceptable to the Company representing that such
Non-United States Buyer is not a bank for purposes of Section 881(c) of the Code, is not a ten percent (10%) shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Company and is not a controlled foreign
corporation related to the Company (within the meaning of Section 864(d)(4) of the Code), together with Internal Revenue Service Form W-8 or W-9, as applicable, in all cases such forms and other documents being properly completed and duly
executed by such Non-United States Buyer claiming complete exemption from United States Federal withholding tax on payments of interest by the Company (or accruals of original issue discount) under the Notes. In addition, each Buyer that is not
otherwise exempt from “back-up withholding” shall deliver to the Company properly completed and duly executed Internal Revenue Service Form W-8 or W-9 indicating that such Buyer is subject to “back-up withholding” for United
States Federal income tax purposes. The forms and other documents required to be delivered pursuant to the two preceding sentences shall be delivered within ten (10) days after the Closing Date. The Company shall not be required to pay any
additional amounts (x) to any Non-United States Buyer in respect of United States Federal withholding tax or (y) to any Buyer in respect of United States Federal “back-up withholding” tax to the extent that the obligation to pay
such additional amounts would not have arisen but for a failure by such Non-United States Buyer or Buyer, as the case may be, to comply with the provisions of this Section 4(h). 
  
 (i) Violation of Laws. 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 do not and would not reasonably be expected not to, either individually or in the aggregate, have a Material Adverse Effect. 
  
 (j) Limits on Additional Issuances. The Company shall not, in any
manner, until the later of (i) 90 days after the Closing or (ii) the date on which the Registration Statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement is declared effective by the Commission
(the “Effective Date”), issue or sell any Common Stock or rights, warrants or options to subscribe for or purchase Common Stock or any security directly or indirectly 
  

 18 

 convertible into or exchangeable or exercisable for Common Stock (the “Equity Limitation”). The Equity
Limitation shall not apply (i) to the issuance of Conversion Shares pursuant to the Notes, (ii) to the issuance of securities pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or
options, in each case outstanding on the date hereof, provided such securities, warrants and options are not amended after the date hereof, (iii) if holders representing a majority of the outstanding principal amount of the Notes give their
prior written consent to such issuance or sale, (iv) if the issuance is pursuant to employee benefits plans approved by the Company’s Board of Directors, (v) to the filing of a Registration Statement on Form S-8, (vi) if the
securities are issued for consideration other than cash in connection with a bona fide business acquisition by the Company whether by merger, consolidation, purchase of assets, sale or exchange of stock or otherwise, (vii) to the issuance of
securities in connection with the Jameson Stock Awards Program or (viii) if the issuance is in connection with a (A) commercial banking arrangement, (B) equipment financing, (C) sponsored research, (D) collaboration,
(E) technology licensing, (F) development agreement or (G) other strategic partnership; provided, however, that with respect to (C) through (G) hereof, the primary purpose of such transaction is not to raise equity capital.

  
 (k) CUSIP Numbers. The Company in issuing the
Securities shall use “CUSIP” numbers (if then generally in use), and shall use such “CUSIP” numbers in notices to holders as a convenience to holders thereof; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as contained in any notice to such holders and that reliance may be placed only on other identification numbers printed on such Securities, and any such Company action
referenced in such notice (including, without limitation, redemption or automatic conversion of Notes) shall not be affected by any defect in or omission of such numbers. 
  
 (l) Accounting Matters. The Company shall use its reasonable best efforts to cause to be delivered to the Buyers a
letter in form and substance reasonably acceptable to the Buyers and reasonably customary in scope and substance for comfort letters delivered by independent public accountants in connection with offerings similar to the Offering. 
  
 (m) Nonpublic Information. 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 a Buyer with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of the
Forms 8-K with the SEC pursuant to Section 4(g) hereof without the express written consent of such Buyer; provided, however that the foregoing shall not restrict in any way the distribution of any information to any Buyer by the Company or its
Subsidiaries and its and each of their respective officers, directors, employees and agents (i) as reasonably required by the terms of the Transaction Documents or (ii) in connection with any request made to any Buyer by or on behalf of
the Company to waive, amend or modify any provision of the Transaction Documents. 
  
 (n) 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

  

 19 

 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, and the Company has no knowledge of any facts that would establish that the
Buyers are 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. 
  
 (o) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to
issue certificates registered in the name of each Buyer or their respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by a Buyer to the Company upon conversion of the Notes and in accordance with their
respective terms (the “Irrevocable Transfer Agent Instructions”), substantially in the form attached hereto as Exhibit C. Prior to transfer or sale pursuant to a registration statement or Rule 144 under the Securities Act of
the Conversion Shares, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company represents and warrants that no instruction inconsistent with the Irrevocable Transfer Agent Instructions
referred to in this Section 4 will be given by the Company to its transfer agent and that the Securities shall be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Notes and the
Registration Rights Agreement. Subject to the terms of the Notes, if a Buyer provides the Company with an opinion of counsel, in form reasonably acceptable to the Company, to the effect that a sale, assignment or transfer of the Securities has been
made without registration under the Securities Act or that the Securities can be sold pursuant to Rule 144(k) without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, and provides
such representations that the Company shall reasonably request confirming compliance with the requirements of Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates, in such name and in such denominations as specified by such Buyer and without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby. 
  
 (p) If the Company is obligated pursuant to Section 2(g) to issue and deliver to a Buyer a Note or certificate representing shares of Common Stock without a Securities Act Legend and/or an Affiliate Legend and
the Company shall not have delivered such unlegended Note or certificate within ten (10) Business Days after the date of the request by Buyer for such unlegended Note or certificate, the Company shall pay liquidated damages to such Buyer,
(i) in the case of a Note, in the amount of one-half percent (0.5%) per month of the outstanding principal amount of such Note or (ii) in the case of a certificate representing shares of Common Stock, in the amount of one-half percent
(0.5%) per month of the sum of (A) the number of shares of Common Stock represented by such certificate multiplied by (B) the “Closing Sale Price” (as such term is defined in the Note) on the date of the request by Buyer for such
unlegended certificate. 
  

 20 

 (q) If a Buyer has elected to be governed by Section 2(k)(A) or Section 2(k)(B), the Company
shall, within two Business Days of receipt of a written request from such Buyer, inform such Buyer of the number of shares of Common Stock outstanding as of the most recent practicable date. The Company acknowledges that any Buyer may, in accordance
with Rule 13d-1(j) of the Exchange Act, in determining the number of shares of Common Stock outstanding, rely upon information in the Company’s most recent quarterly, annual or current report filed with the Commission. 
  
 SECTION 5. Conditions to the Company’s Obligation to Close. The
obligation of the Company to issue and sell the Notes to each respective 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 such Buyer with prior written notice thereof: 
  
 (a) Transaction Documents. Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the
Company. 
  
 (b) Payment of Purchase Price. Such Buyer
shall have delivered to the Company the purchase price for the Notes being purchased by such Buyer at the Closing, by wire transfer of immediately available funds pursuant to the wire instructions attached hereto as Schedule A. 
  
 (c) Representations and Warranties; Covenants. The representations and
warranties of such Buyer shall be true, correct and complete in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 2 above, in which case such
representations and warranties shall be true, correct and complete without further qualification) 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 (which shall be true, correct and complete as of such date)), and such Buyer shall have performed, satisfied and complied with in all material respects the covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Buyer at or prior to the Closing Date. 
  
 SECTION 6. Conditions to Each Buyer’s Obligation to Purchase. The several obligations of each Buyer hereunder to purchase its Notes from the Company 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: 
  
 (a) Transaction Documents. The Company shall
have executed each of the Transaction Documents and delivered the same to such Buyer. 
  
 (b) No Delisting of Common Stock. The Common Stock (i) shall be designated for quotation or listed on the Principal Market and (ii) shall not have been suspended by the Commission or the Principal
Market from trading on the Principal Market nor shall suspension 
  

 21 

 by the Commission or the Principal Market have been threatened either (A) in writing by the Commission or the
Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market. 
  
 (c) Representations and Warranties; Covenants. The representations and warranties of the Company shall be true, correct and complete in all
material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 of this Agreement, in which case such representations and warranties shall be true, correct and complete
without further qualification) 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 (which shall be true, correct and complete as of such date))
and the Company shall have performed, satisfied and complied with in all material respects 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 or Chief Financial Officer of the Company, dated as of the Closing Date, to the foregoing effect. 
  
 (d) Opinion of Counsel. The Company shall have delivered to such Buyer
the opinion of Conner & Winters, LLP, dated as of the Closing Date, in the form of Exhibit D attached hereto. 
  
 (e) Delivery of Notes. The Company shall have executed and delivered to such Buyer the Notes (in such denominations of not less than One Thousand
United States Dollars ($1,000) as such Buyer shall reasonably request) for the Notes being purchased by such Buyer at the Closing. 
  
 (f) Reservation of Common Stock. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Notes, the number of shares of Common Stock equal to the Reservation Amount (as defined in Section 4(e) of this Agreement). 
  
 (g) Irrevocable Transfer Agent Instructions. The Company shall have delivered the Irrevocable Transfer Agent
Instructions, in the form of Exhibit C attached hereto, to the Company’s transfer agent. 
  
 (h) Good Standing Certificates. The Company shall have delivered to JMP (i) a certificate evidencing the incorporation and good standing of
the Company in Georgia issued by the Secretary of State of the State of Georgia as of a recent date; and (ii) a certificate of good standing (or appropriate counterpart) from the appropriate governmental authority in each domestic jurisdiction
in which Subsidiaries are incorporated or organized as of a recent date. 
  
 (i) Secretary’s Certificate. The Company shall have delivered to such Buyer a secretary’s certificate, dated as of the Closing Date, certifying as to (i) adoption of the form of resolutions of
the Board of Directors of the Company consistent with Section 3(b) of this Agreement and in a form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at the Closing.

  
 (j) Filings; Authorizations. The Company shall have
made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Securities pursuant 
  

 22 

 to this Agreement in compliance with such laws, and shall have obtained all authorizations, approvals and permits
necessary to consummate the transactions contemplated by the Transaction Documents and such authorizations, approvals and permits shall be effective as of the Closing Date. 
  
 (k) No Injunctions. No temporary restraining order, preliminary or permanent injunction or other order or decree, and
no other legal restraint or prohibition shall exist which prevents or arguably prevents the consummation of the transactions contemplated by the Transaction Documents, nor shall any proceeding have been commenced or threatened with respect to the
foregoing. 
  
 (l) No Material Adverse Effect. Between the
time of execution of this Agreement and the Closing Date, (i) no Material Adverse Effect shall occur or become known (whether or not arising in the ordinary course of business) and (ii) no transaction which is material and unfavorable to
the Company shall have been entered into by the Company. 
  
 (m)
Minimum Offering. The Company shall have confirmed in writing to JMP that it will be issuing at least an aggregate of $20,000,000 principal amount of Notes to the Buyers on the Closing Date. 
  
 (n) Comfort Letter. The Company’s independent public accountants
shall have delivered to the Buyers a letter in form and substance reasonably acceptable to the Buyers and reasonably customary in scope and substance for comfort letters delivered by independent public accountants in connection with offerings
similar to the Offering. 
  
 (o) No Stop Orders. No stop
order or suspension of trading shall have been imposed by the Principal Trading Market, the Commission or any other governmental or regulatory body with respect to public trading in the Common Stock. 
  
 (p) Consents. The Company shall have obtained any consents listed on
Schedule 3(e). 
  
 SECTION 7. Indemnification. 

 
 (a) Indemnification by the Company. In consideration of each
Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and JMP’s agreement to act as exclusive placement agent and in addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold harmless JMP and each Buyer and each other holder of the Securities and all of their shareholders, 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 (collectively, “Claims”), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) an untrue statement or
alleged untrue statement of a material fact contained in the Confidential Private Placement Memorandum, or in any amendment or supplement thereto, or in any Blue Sky filings executed 
  

 23 

 by the Company or based on any information furnished in writing by the Company and filed in any jurisdiction in order to
qualify any or all of the Securities under (or obtain exemption from) the securities laws thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading or (ii) any breach of any representation, warranty, covenant or agreement made by the Company in 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 Claims which is permissible under applicable law. Subject to Section 7(b)
of this Agreement, the Company shall reimburse the Indemnitees, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with the investigating or defending any
such Claim. 
  
 (b) Procedures for Indemnification.
Promptly after an Indemnitee has knowledge of any Claim as to which such Indemnitee reasonably believes indemnity may be sought or promptly after such Indemnitee receives notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnitee shall, if a Claim in respect thereof is to be made against the Company under this Section 7, deliver to the Company a written notice of such Claim, and the Company shall have
the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall have the right to
retain its own counsel if, in the reasonable opinion of counsel retained by the Company, the representation by such counsel of the Indemnitee and the Company would be inappropriate due to actual or potential differing interests between such
Indemnitee and the Company; provided, further, that the Company shall not be responsible for the reasonable fees and expense of more than one (1) separate legal counsel for such Indemnitee. In the case of an Indemnitee, the legal counsel
referred to in the immediately preceding sentence shall be selected by the Buyers holding at least a majority in interest of the Securities to which the Claim relates. The Indemnitee shall cooperate fully with the Company in connection with any
negotiation or defense of any such action or Claim by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Claim. The Company shall keep the Indemnitee fully apprised at
all times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any Claim effected without its prior written consent; provided, however, that the Company shall not
unreasonably withhold, delay or condition its consent. The Company shall not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a full release from all liability in respect to such Claim, action and proceeding. The failure to deliver written notice to the Company as provided in this
Agreement shall not relieve the Company of any liability to the Indemnitee under this Section 7, except to the extent that the Company is materially prejudiced in its ability to defend such action. 
  
 (c) Survival of Representations and Warranties; Indemnification
Obligations. The representations and warranties of the Buyers and the Company set forth herein and the obligations of the Company under this Section 7 shall survive the transfer of the Securities by the Indemnitees. 
  

 24 

 SECTION 8. Miscellaneous. 
  
 (a) Governing Law; Jurisdiction; Waiver of 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 non-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. 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. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 

 
 (b) Counterparts. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other parties hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement. 
  
 (c) Headings. The headings of this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 
  
 (d) Entire Agreement. This Agreement, the Registration Rights Agreement, the Notes and the documents referenced
herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Registration Rights Agreement and the Notes supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. 
  

 25 

 (e) Consents. All consents and other determinations required to be made by Buyers pursuant to this
Agreement shall be made, unless otherwise specified in this Agreement, by Buyers holding at least a majority of the Conversion Shares, determined as if all of the Notes held by Buyers then outstanding have been converted into Conversion Shares
without regard to any limitations on conversion of the Notes; provided, that for these purposes any Securities owned directly or indirectly by the Company or any of its affiliates shall be deemed not to be outstanding. 
  
 (f) Waivers. No provision of this Agreement may be amended or waived
other than by an instrument in writing signed by the Company and Buyers holding at least a majority of the Conversion Shares, determined as if all of the Notes held by Buyers then outstanding have been converted into Conversion Shares without regard
to any limitations on the conversion of the Notes; provided, that for theses purposes any Securities owned directly or indirectly by the Company or any of its affiliates shall be deemed not to be outstanding. Notwithstanding the preceding sentence
to the contrary: (i) no amendment or waiver of the provisions of Section 1, Section 8(e) or Section 8(f) of this Agreement shall be effective without the approval of the holders of all outstanding Securities, (ii) no
amendment or waiver of the provisions of Section 2, Section 6, Section 7, Section 8(k), Section 8(l) or Section 8(m) of this Agreement shall be effective with respect to any holder of Securities unless it is approved by
such holder, and (iii) no amendment shall be effective to the extent that it applies to less than all of the holders of the Notes then outstanding. No consideration shall be offered or paid to any holder of any Securities to amend or consent to
a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is offered on identical terms to all of the holders of such Securities. Notwithstanding anything herein to the contrary, no amendment shall
(i) extend the maturity of the Notes, reduce the interest rate, extend the time for payment of interest thereon, or reduce the principal amount thereof or premium, if any, thereon, or reduce any amount payable on redemption or repurchase
thereof or affect any amounts due to any holder or (ii) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such amendment, without the consent of the holders of all Notes then outstanding. 

 
 (g) 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; or (iii) one
(1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 
  

 26 

 If to the Company: 
  
 Jameson Inns, Inc. 
 8 Perimeter Center East, Suite 8050 
 Atlanta, Georgia 30346 
 Telephone:  (770) 481-0305 
 Facsimile:    (770) 901-9203 
 Attention:    Craig R. Kitchin 
  
 with a copy to: 
  
 Conner & Winters, LLP 
 3700 First Place Tower 
 15 East Fifth Street 
 Tulsa, Oklahoma 74103 
 Telephone:  (918) 586-5711 
 Facsimile:    (918) 586-8548 
 Attention:    Lynnwood R. Moore, Jr.,
Esq. 
  
 If to JMP Securities LLC: 
  
 JMP Securities LLC 
 600 Montgomery Street, Suite 1100 
 San Francisco, California 94111 
 Telephone:  (415) 835-8900 
 Facsimile:    (415) 835-8920 
 Attention:    David J. Fullerton 
  
 with a copy to: 
  
 Gibson, Dunn & Crutcher LLP 
 1050 Connecticut Avenue NW 
 Washington, DC 20036 
 Telephone:  (202) 955-8500 
 Facsimile:    (202) 467-0539 
 Attention:    Brian Lane, Esq. 
  
 If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached hereto as Schedule 1, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, 
  
 or at 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. 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 or 
  

 27 

 (C) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 
  
 (h) 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 the 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. 
  
 (i) Third-Party
Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and, to the limited extent provided in Section 7, the Indemnitees, and is not for the benefit of, nor may
any provision hereof be enforced by, any other person other than JMP. 
  
 (j) 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. 
  
 (k) Successors and Assigns. This Agreement shall be binding upon the parties and their respective successors and assigns, including any subsequent
holders of the Securities, and shall inure to the benefit of those persons and to the extent provided in Section 8(i), JMP and the Indemnitees. 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 outstanding principal amount of the Notes including by merger or consolidation, except pursuant to a Change of Control (as defined in the Notes) with respect to which the Company is in
compliance with the terms of the Notes. Other than in connection with a sale pursuant to the Registration Rights Agreement, a Buyer may assign some or all of its rights and obligations hereunder without the consent of the Company; provided, however,
that the transferee has agreed in writing to be bound by the applicable provisions of this Agreement and provided, further, that such assignment shall be in connection with a transfer of all or a portion of the Notes held by such Buyer and subject
to the terms and conditions of the Notes, as applicable. 
  
 (l)
Publicity. The Company and JMP shall have the right to approve before issuance any press releases or any other public statements with respect to the transactions contemplated by the Transaction Documents; provided, however, that neither the
Company nor JMP shall have the right to issue a press release or other public statement referring to a Buyer or its affiliates without such Buyer’s prior written consent. JMP has the right to describe its services to the Company in connection
with the Offering and to reproduce the Company’s name and logo in JMP’s advertisements, marketing materials and equity research reports. 
  
 (m) 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 5 and 6 of this Agreement (and the nonbreaching party’s failure to waive such unsatisfied conditions), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching party at the close of 
  

 28 

 business on such date without liability of any party to any other party, and the Company or JMP, as the case may be,
shall return any and all funds paid hereunder to the applicable Buyer no later than the close of business on the Business Day following such termination. 
  
 (n) Placement Agent. The Company acknowledges that it has engaged JMP as sole placement agent in connection with the sale of the Notes. The
Company acknowledges that JMP’s fees shall be paid by wire transfer of immediately available funds at Closing. 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. 
  
 (o) 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 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 to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. 
  
 (p) Payment Set Aside. To the extent that the Company makes a payment or payments to any Buyer 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, 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. 
  

 29 

 IN WITNESS WHEREOF, the parties have caused this Securities Purchase Agreement to be duly executed
as of the date first written above. 
  

			
	“COMPANY”
	
	JAMESON INNS, INC.
		
	 By:
	 	 /s/ Thomas W. Kitchin

  
 [Signatures of
Buyers on Following Page] 

 [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] 
  

			
	“BUYER”
	
	

	(print full legal name of Buyer)
		
	By:	 	  

	 	 	(signature of authorized representative)
		
	Name:	 	  

		
	Its:	 	  

	
	  ̈       Buyer hereby elects to be subject to the 9.99% conversion limitation set forth in Section 2(k)(A)

	
	  ̈       Buyer hereby elects to be subject to the 4.99% conversion limitation set forth in Section 2(k)(B)

 SCHEDULE 1 
  
 SCHEDULE OF BUYERS 
  

					
	 	  	 Name of Buyer
 Contact Information for Buyer

	  	 Principal Amount of
 Notes

	 1.
	  	 	  	 
			
	 2.
	  	 	  	 
			
	 3.
	  	 	  	 

 EXHIBIT A 
  
 FORM OF NOTE 
  
 Filed as Exhibit 4.2 hereto 

 EXHIBIT B 
  
 FORM OF REGISTRATION RIGHTS AGREEMENT 
  
 Filed as Exhibit 4.1 hereto. 

 EXHIBIT C 
  
 FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS 
  
 September 30, 2005 
  
 VIA FEDERAL EXPRESS 
  
 Registrar and Transfer Company 
 P.O. Box 664 
 Cranford, New Jersey 07016 
  

	 	Re:	Reservation of Shares of Common Stock Pursuant to Sale by Jameson Inns, Inc., of up to $35,000,000 in Aggregate Principal Amount of 7.0% Convertible Senior Subordinated Notes due
2010 

  
 Ladies and Gentlemen:

  
 Jameson Inns, Inc., a Georgia corporation (the
“Company”), has agreed to sell to the buyers listed on Schedule A hereto (the “Buyers”), on the date hereof, Thirty-Five Million United States Dollars ($35,000,000) in aggregate principal amount of 7.0% Convertible Senior
Subordinated Notes due 2010 (the “Notes”), convertible into shares of the common stock, $0.10 par value per share (the “Common Stock”) of the Company pursuant to that certain Securities Purchase Agreement dated as of
September 29, 2005, by and among the Company and each Buyer (the “Securities Purchase Agreement”). Capitalized terms used herein without definition have the meanings assigned to them in the Securities Purchase Agreement. 

 
 You are hereby instructed to: 
  
 Establish as of the date of this letter a reserve of 13,898,918 shares of
Common Stock for issuance to holders of Notes upon conversion of their Notes (the “Conversion Share Reserve”). The Conversion Share Reserve shall be adjusted to appropriately reflect the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible into Common Stock), reorganization, recapitalization, reclassification, exchange or other like change with respect to Common Stock occurring on or after the date
hereof. 
  
 A registration statement on Form S-3 to register the
Common Stock issuable out of the Conversion Share Reserve (the “Registration Statement”) will be filed with the Securities and Exchange Commission (the “Commission”) on or before October 10, 2005. We will forward to you
copies of the filing promptly after it is declared or deemed effective by the Commission. 

 The certificates evidencing the shares of Common Stock issued out of the Conversion Share Reserve will
bear the restrictive legend set forth below: 
  
 THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY THE SECURITIES. 
  
 Certificates evidencing shares of
Common Stock held by or transferred to an “affiliate” (as defined in Rule 501(b) of Regulation D under the Securities Act) of the Company will bear the restrictive legend set forth below: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY
BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. 
  
 So long as you have previously received an opinion of the Company’s outside counsel (which the Company shall direct be delivered to you by such
outside counsel upon the effectiveness of the Registration Statement covering the resales of the Common Stock) stating that a Registration Statement covering the resales of the Common Stock has been declared effective by the Commission under the
Securities Act, the form of which is attached hereto as Exhibit I (the “Opinion”), the certificates representing the Common Stock sold pursuant to the Registration Statement shall not bear any legend restricting transfer of the Common
Stock thereby and should not be subject to any stop-transfer restriction. 
  
 We enclose the following additional documents: 
  

	 	1.	A copy of the Securities Purchase Agreement; and 

  

	 	2.	A capitalization table listing the Buyers and their respective beneficial ownership interests in the shares of Common Stock. 

  
 Please be advised that the Buyers have relied upon this instruction letter as
an inducement to enter into the Securities Purchase Agreement and, accordingly, each of the Buyers is a third party beneficiary to these instructions. 
  
 Please sign in the space provided below to evidence your acceptance and acknowledgment of your responsibilities under this letter. Please call me at
770-481-0305 if you require any further information. Thank you for your assistance. 

			
	Very truly yours,
	
	JAMESON INNS, INC.
		
	By:	 	  

		
	Its:	 	  

  
 Acknowledged and Agreed: 
  
 REGISTRAR AND TRANSFER COMPANY

  

	

			
	By:	 	  

		
	Its:	 	 

  
 cc: Mr. David J. Fullerton (w/o
encl.) 
  
 Enclosures 

 EXHIBIT I 
  

FORM OF NOTICE OF EFFECTIVENESS 
 OF
REGISTRATION STATEMENT 
  
 Registrar and Transfer
Company 
 P. O. Box 664 
 Cranford, NJ 07016 
  

	 	Re:	Jameson Inns, Inc. 

  
 Ladies and Gentlemen: 
  
 I am counsel to Jameson Inns, Inc., a Georgia corporation (the “Company”), and have represented the Company in connection with that
certain Securities Purchase Agreement, dated as of September 29, 2005 (the “Securities Purchase Agreement”), entered into by and among the Company and the buyers named therein (collectively, the “Holders”)
pursuant to which the Company issued to the Holders 7.0% Convertible Senior Subordinated Notes due 2010 convertible into shares of the Company’s Common Stock, par value $0.10 per share (the “Common Stock”). Pursuant to the
Securities Purchase Agreement, the Company has agreed, among other things, to register the resale of the Conversion Shares (as defined in the Securities Purchase Agreement) under the Securities Act of 1933, as amended (the “1933
Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on                     
    , 2005, the Company filed a Registration Statement on Form S-3 (File No. 333-                    ) (the
“Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each of the Holders as a selling stockholder thereunder. 
  
 In connection with the foregoing, I advise you that a member of the
SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and I have
no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the Registration Statement. 

 This letter shall serve as my standing notice to you that the Common Stock may be freely transferred by
the Holders pursuant to the Registration Statement so long as the Holders certify they have caused a prospectus to be delivered to the transferee. You need not require further letters from me to effect any future legend-free issuance or reissuance
of shares of Common Stock to the transferees of the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated September 30, 2005. This letter shall serve as my standing instructions with regard to this matter.

  

			
	Very truly yours,
	
	[COUNSEL]
		
	By:	 	  

  

	CC:    [LIST	NAMES OF HOLDERS] 

 EXHIBIT D 
  
 FORM OF COMPANY COUNSEL OPINION 
  
 1. The Company is a corporation validly existing in good standing under the laws of the State of Georgia, with all requisite
corporate power and authority to own, lease and operate its properties and assets, to conduct its business as described in the Confidential Private Placement Memorandum, and to enter into and perform its obligations under the Transaction Documents.

  
 2. The Subsidiaries are corporations, statutory business
trusts, partnerships or limited liability companies validly existing in good standing under the laws of their respective jurisdictions of incorporation, with all requisite corporate power and authority to own, lease and operate its properties and
assets, to conduct their businesses as described in the Confidential Private Placement Memorandum. 
  
 3. The execution, delivery and performance of the Transaction Documents have been duly authorized by all necessary corporate action on the part of the
Company and the Transaction Documents have been duly executed and delivered by the Company. 
  
 4. The Transaction Documents constitute the legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 
  
 5. The execution and delivery by the Company of the Transaction Documents do
not, and the Company’s performance of its obligations under the Transaction Documents will not, (i) violate the Company’s Articles of Incorporation or By-Laws, (ii) violate, breach or result in a default under, any
existing obligation of or restrictions on the Company under any other agreement listed in an exhibit to the Company’s most recent annual report on Form 10-K or any quarterly report on Form 10-Q filed since such annual report, (iii) breach
or otherwise violate any existing obligation of or restriction on the Company under any order, judgment or decree of any state or federal court or governmental authority binding on the Company, and known to us, or (iv) to our knowledge, violate
any current Georgia or New York federal statute, rule or regulation that we have recognized as applicable to the Company or to transactions of the type contemplated by the Transaction Documents. 
  
 6. The Notes have been duly authorized by all necessary corporate action on
the part of the Company and, upon payment for and delivery of the Notes in accordance with the Purchase Agreement, to our knowledge will be made and issued free of preemptive or similar rights. 
  
 7. The Conversion Shares have been duly authorized and reserved for issuance
upon conversion of the Notes by all necessary corporate action on the part of the Company and, upon conversion of the Notes and delivery of the Conversion Shares in accordance with the Notes, the Conversion Shares will be validly issued, fully paid
and nonassessable and, to our knowledge, free of preemptive or similar rights. 
  
 8. The offer and sale of the Securities by the Company will not be integrated with 

 
any prior or contemporaneous offers or sales by the Company for purposes of the Securities Act. The Company is currently offering shares under the Jameson
Stock Awards Program pursuant to a registration statement (file no. 333-119016) which was declared effective by the Commission on June 7, 2005. In this regard, we have reviewed the five criteria of integration set forth in Rule 502(a) of Regulation
D promulgated by the Commission under the Securities Act and considered their application to the Jameson Stock Awards Program and the offering of the Notes. We believe that notwithstanding that the two offerings are being made at or about the same
time and could be considered (under positions taken by Commission in certain of its no-action letters and other pronouncements) to involve the same class of securities, the offerings will not be integrated because they have different purposes,
involve different plans of financing and, with respect to the shares issued to participants in the Jameson Stock Awards Program in respect of hotel stay credits (which, we understand, represent all of the shares issued under that Program as of this
date involve different types of consideration. We believe that this conclusion is reasonable under the applicable facts and regulations, but our opinion is not binding upon the Commission or upon any courts or tribunals where any action or
proceeding may be initiated in which it is claimed that these offerings should be integrated. 
  
 9. No order, consent, permit or approval of any Georgia, New York or federal governmental authority that we have recognized as applicable and material to the Company or to the transactions of the type contemplated by
the Transaction Documents is required on the part of the Company for the execution and delivery of, and performance of its obligations under, the Transaction Documents except as may be required under applicable state and federal securities laws and
regulations applicable to the offer and sale of the Securities and by federal and state securities laws with respect to the Company’s obligations under the Registration Rights Agreement. 
  
 10. Assuming the accuracy of your representations in Section 2 of the
Securities Purchase Agreement and assuming that no general solicitation or advertising has been engaged in by JMP Securities LLC, the sales agent engaged by the Company to assist in the offering of the Notes, no registration under the Securities Act
is required for the purchase and sale of the Notes in the manner contemplated by the Purchase Agreement and the Confidential Private Placement Memorandum. Assuming that the exemption provided by Section 3(a)(9) of the Securities Act would be
available, no registration under the Securities Act will be required for the issuance of the Conversion Shares in the manner contemplated by the Notes. 
  
 11. We do not know of any contract or other document of a character required to be filed as an SEC Document which is not filed as required. 
  
 12. The SEC Documents incorporated by reference in the Confidential Private
Placement Memorandum, on the respective dates they were filed, appeared on their face to comply in all material respects with the requirements as to form for reports on Form 10-K, Form 10-Q, Form 8-K and Schedule 14-A, except that we express no
opinion concerning the financial statements and other financial or statistical information contained or incorporated by reference therein or the exhibits thereto. 
  
 In the course of acting as counsel for the Company in connection with the preparation by the Company of the Confidential
Private Placement Memorandum, we have participated in 

 
conferences with officers and representatives of the Company, the independent accountants of the Company, and representatives of JMP and their counsel, at
which time the contents of the Confidential Private Placement Memorandum and related matters were discussed. Although we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained
in the Confidential Private Placement Memorandum, based on such participation, no facts have come to our attention that would lead us to believe that the Confidential Private Placement Memorandum (except that we express no view with respect to the
financial statements, including the notes thereto, and schedules or other financial data included therein or the exhibits contained in the SEC Documents) as of the date thereof contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements therein not misleading. 

 SCHEDULE 3(a) 
  
 Subsidiaries 
  
 Jameson Alabama, Inc., an Alabama corporation 
 Jameson Properties, LLC, a Georgia limited liability company 
 Jameson Properties of Tennessee, L.P., a Tennessee limited partnership 
 Jameson Lodging, LLC, a Georgia limited liability company 
 SIE Corporation, an Indiana corporation 
 Jameson Outdoor Advertising Company, a Georgia corporation 
 Kitchin Hospitality, LLC, a
Georgia limited liability company 
 Jameson Franchising Company, LLC, a Georgia limited liability company 
 Jameson Inns Financing 01, LP, a Georgia limited partnership 
 Jameson Inns Financing 02, LP, a Georgia limited partnership 
 Jameson Management Company, a Georgia corporation 
 Jameson Inns Financing Trust I, a Georgia statutory business trust 

 SCHEDULE A 
  

Company Wire Instructions 

					
	SECTION 1.	  	Purchase and Sale of Notes	  	1
			
	SECTION 2.	  	Buyer’s Representations and Warranties	  	2
			
	SECTION 3.	  	Representations and Warranties of the Company	  	7
			
	SECTION 4.	  	Covenants	  	16
			
	SECTION 5.	  	Conditions to the Company’s Obligation to Close	  	21
			
	SECTION 6.	  	Conditions to Each Buyer’s Obligation to Purchase	  	21
			
	SECTION 7.	  	Indemnification	  	23
			
	SECTION 8.	  	Miscellaneous	  	25

  
 SCHEDULES 

 

			
	Schedule 3(a)	  	Subsidiaries
	Schedule A	  	Company Wire Instructions
	Schedule 3(e)	  	Consents

  
 EXHIBITS 
  

			
	Schedule 1	  	Schedule of Buyers
	Exhibit A	  	Form of Note
	Exhibit B	  	Form Registration Rights Agreement
	Exhibit C	  	Irrevocable Transfer Agent Instructions
	Exhibit D	  	Form of Opinion of Company Counsel
	Exhibit E	  	Schedule of Fees

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